Registration Statement

485BPOS 1 var-registrationstmt.htm PEA #26 AND 25 Registration Statement

File No. 2-89328
File No. 811-3957
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Post-Effective Amendment No. 26 [X]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Post-Effective Amendment No. 25 [X]
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(Check appropriate box or boxes)

VARIFLEX SEPARATE ACCOUNT (VARIFLEX)
(Exact Name of Registrant)

Security Benefit Life Insurance Company
(Name of Depositor)

One Security Benefit Place, Topeka, Kansas 66636-0001
(Address of Depositor's Principal Executive Offices)

Depositor's Telephone Number, Including Area Code:
(785) 438-3000

Copies to:

Amy J. Lee, Associate General Counsel Jeffrey S. Puretz, Esq.
Security Benefit Group, Inc. Dechert
One Security Benefit Place 1775 Eye Street N.W.
Topeka, KS 66636-0001 Washington, DC 20005
(Name and address of Agent for Service)

Approximate Date of Proposed Public Offering: May 1, 2002

It is proposed that this filing will become effective:

[ ] immediately upon filing pursuant to paragraph (b) of Rule 485

[X] on May 1, 2002, pursuant to paragraph (b) of Rule 485

[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485

[ ] on May 1, 2002, pursuant to paragraph (a)(1) of Rule 485

If appropriate, check the following box:

this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Title of securities being registered: Interests in a separate account under
individual and group flexible premium deferred variable annuity contracts.

VARIFLEX(R)
VARIABLE ANNUITY

ISSUED BY--
SECURITY BENEFIT LIFE INSURANCE COMPANY
ONE SECURITY BENEFIT PLACE, TOPEKA, KANSAS 66636-0001

1-800-888-2461
THE DATE OF THIS SUPPLEMENT IS MAY 1, 2002

This Supplement updates certain information in your Variflex Variable Annuity
prospectus. Please read this Supplement carefully. You should attach this
Supplement to your copy of the Prospectus and retain both for future reference.
You may obtain an additional copy of the Prospectus, free of charge, by calling
1-800-888-2461, extension 3112.

THE SUBSECTION ENTITLED "ANNUAL SBL FUND EXPENSES" IN THE "EXPENSE TABLE"
SECTION OF THE PROSPECTUS IS UPDATED BY REPLACING IT WITH THE FOLLOWING:

------------------------------------------------------------------------------------------
ANNUAL SBL FUND EXPENSES (as a percentage of each Series' average daily net assets)
------------------------------------------------------------------------------------------
BROKERAGE
PLAN
DISTRIBUTION TOTAL
ADVISORY (12b-1) OTHER SBL FUND
FEE FEES(1) EXPENSES EXPENSES
------------------------------------------------------------------------------------------
Equity (Series A) 0.75% 0.01% 0.07% 0.83%
------------------------------------------------------------------------------------------
Large Cap Value (Series B) 0.75% 0.10% 0.08% 0.93%
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Money Market (Series C) 0.50% 0.00% 0.08% 0.58%
------------------------------------------------------------------------------------------
Global (Series D) 1.00% 0.00% 0.20% 1.20%
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Diversified Income (Series E) 0.75% 0.00% 0.08% 0.83%
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Large Cap Growth (Series G) 1.00% 0.01% 0.22% 1.23%
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Enhanced Index (Series H) 0.75% 0.00% 0.16% 0.91%
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International (Series I) 1.10% 0.00% 1.15% 2.25%
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Mid Cap Growth (Series J) 0.75% 0.01% 0.08% 0.84%
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Global Strategic Income (Series K) 0.75% 0.00% 0.78% 1.53%
------------------------------------------------------------------------------------------
Capital Growth (Series L) 1.00% 0.00% 0.20% 1.20%
------------------------------------------------------------------------------------------
Global Total Return (Series M) 1.00% 0.00% 0.53% 1.53%
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Managed Asset Allocation (Series N) 1.00% 0.00% 0.25% 1.25%
------------------------------------------------------------------------------------------
Equity Income (Series O) 1.00% 0.04% 0.04% 1.08%
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High Yield (Series P) 0.75% 0.00% 0.11% 0.86%
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Small Cap Value (Series Q) 1.00% 0.00% 0.18% 1.18%
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Social Awareness (Series S) 0.75% 0.00% 0.08% 0.83%
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Technology (Series T) 1.00% 0.00% 0.46% 1.46%
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Mid Cap Value (Series V) 0.75% 0.02% 0.08% 0.85%
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Main Street Growth and Income(R)
(Series W) 1.00% 0.00% 0.25% 1.25%
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Small Cap Growth (Series X) 1.00% 0.00% 0.15% 1.15%
------------------------------------------------------------------------------------------
Select 25 (Series Y) 0.75% 0.00% 0.13% 0.88%
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1. Amounts included as distribution expenses under this caption are the amounts received
by the Fund's distributor under the Brokerage Plan in the last fiscal year in
connection with the purchase and sale of securities held by the Fund.
------------------------------------------------------------------------------------------

EXAMPLES -- The following examples show the expenses that you would pay at the
end of one, three, five or ten years. The examples assume that any waivers or
reimbursement of expenses currently in effect, remain in effect for the period
shown. The information presented applies if, at the end of those time periods,
the Contract is (1) surrendered, or (2) annuitized or otherwise not surrendered.
The examples show expenses based upon an allocation of $1,000 to each of the
Subaccounts and a hypothetical return of 5%.

YOU SHOULD NOT CONSIDER THE EXAMPLES BELOW A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN. THE
5% RETURN ASSUMED IN THE EXAMPLES IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ACTUAL RETURNS, WHICH MAY BE GREATER OR LESSER
THAN THE ASSUMED AMOUNT.

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THIS SUPPLEMENT SHOULD BE RETAINED FOR FUTURE REFERENCE.
--------------------------------------------------------------------------------

Example -- You would pay the expenses shown below assuming full withdrawal
of your Contract at the end of the applicable time period:

--------------------------------------------------------------------------------
1 3 5 10
YEAR YEARS YEARS YEARS
--------------------------------------------------------------------------------
Equity Subaccount $102 $126 $156 $248
--------------------------------------------------------------------------------
Large Cap Value Subaccount 103 129 161 258
--------------------------------------------------------------------------------
Money Market Subaccount 99 119 143 222
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Global Subaccount 106 137 174 285
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Diversified Income Subaccount 102 126 156 248
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Large Cap Growth Subaccount 106 138 176 288
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Enhanced Index Subaccount 103 129 160 256
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International Subaccount 116 166 224 384
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Mid Cap Growth Subaccount 102 127 156 249
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Global Strategic Income Subaccount 109 146 191 318
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Capital Growth Subaccount 106 137 174 285
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Global Total Return Subaccount 109 146 191 318
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Managed Asset Allocation Subaccount 106 138 177 290
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Equity Income Subaccount 104 133 168 273
--------------------------------------------------------------------------------
High Yield Subaccount 102 127 157 251
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Small Cap Value Subaccount 105 136 173 283
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Social Awareness Subaccount 102 126 156 248
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Technology Subaccount 108 144 187 311
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Mid Cap Value Subaccount 102 127 157 250
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Main Street Growth and Income(R) Subaccount 106 138 177 290
--------------------------------------------------------------------------------
Small Cap Growth Subaccount 105 135 172 280
--------------------------------------------------------------------------------
Select 25 Subaccount 102 128 158 253
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Example -- You would pay the expenses shown below assuming NO withdrawals
from your Contract:

--------------------------------------------------------------------------------
1 3 5 10
YEAR YEARS YEARS YEARS
--------------------------------------------------------------------------------
Equity Subaccount $22 $ 68 $116 $248
--------------------------------------------------------------------------------
Large Cap Value Subaccount 23 71 121 258
--------------------------------------------------------------------------------
Money Market Subaccount 19 60 103 222
--------------------------------------------------------------------------------
Global Subaccount 26 79 134 285
--------------------------------------------------------------------------------
Diversified Income Subaccount 22 68 116 248
--------------------------------------------------------------------------------
Large Cap Growth Subaccount 26 80 136 288
--------------------------------------------------------------------------------
Enhanced Index Subaccount 23 70 120 256
--------------------------------------------------------------------------------
International Subaccount 36 110 186 384
--------------------------------------------------------------------------------
Mid Cap Growth Subaccount 22 68 116 249
--------------------------------------------------------------------------------
Global Strategic Income Subaccount 29 89 151 318
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Capital Growth Subaccount 26 79 134 285
--------------------------------------------------------------------------------
Global Total Return Subaccount 29 89 151 318
--------------------------------------------------------------------------------
Managed Asset Allocation Subaccount 26 80 137 290
--------------------------------------------------------------------------------
Equity Income Subaccount 24 75 128 273
--------------------------------------------------------------------------------
High Yield Subaccount 22 69 117 251
--------------------------------------------------------------------------------
Small Cap Value Subaccount 25 78 133 283
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Social Awareness Subaccount 22 68 116 248
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Technology Subaccount 28 87 147 311
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Mid Cap Value Subaccount 22 68 117 250
--------------------------------------------------------------------------------
Main Street Growth and Income(R) Subaccount 26 80 137 290
--------------------------------------------------------------------------------
Small Cap Growth Subaccount 25 77 132 280
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Select 25 Subaccount 22 69 118 253
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THE SECTION ENTITLED "CONDENSED FINANCIAL INFORMATION" IS UPDATED BY REPLACING
IT WITH THE FOLLOWING:

CONDENSED FINANCIAL INFORMATION

The following condensed financial information presents accumulation unit values
for each of the years in the ten-year period ended December 31, 2001, as well as
ending accumulation units outstanding for Qualified and Non-Qualified Contracts
under the Subaccounts.

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QUALIFIED
--------------------------------------------
ACCUMULATION
BEGINNING END OF UNITS OUTSTANDING
SUBACCOUNT YEAR OF PERIOD PERIOD AT END OF PERIOD
--------------------------------------------------------------------------
Equity 2001 $66.40 $58.11 9,088,299
Subaccount 2000 77.04 66.40 10,078,355
1999 72.11 77.04 12,075,377
1998 58.19 72.11 11,996,953
1997 45.76 58.19 11,293,953
1996 37.75 45.76 10,310,079
1995 27.94 37.75 9,203,332
1994 28.75 27.94 7,723,910
1993 25.59 28.75 6,900,722
1992 23.30 25.59 6,640,177
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Large Cap Value 2001 57.34 53.47 7,427,804
Subaccount 2000 62.24 57.34 8,480,619
1999 61.86 62.24 12,276,284
1998 58.22 61.86 14,055,295
1997 46.58 58.22 15,086,547
1996 39.88 46.58 15,264,292
1995(c) 31.03 39.88 14,963,215
1994 32.37 31.03 14,312,801
1993 29.89 32.37 13,236,948
1992 28.47 29.89 11,381,462
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Money Market 2001 21.34 21.87 2,359,410
Subaccount 2000 20.38 21.34 2,127,226
1999 19.71 20.38 3,379,114
1998 18.97 19.71 3,068,671
1997 18.26 18.97 2,479,744
1996 17.59 18.26 3,252,140
1995 16.89 17.59 2,989,809
1994 16.48 16.89 3,578,026
1993 16.26 16.48 2,680,809
1992 15.94 16.26 2,373,251
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Global Subaccount 2001 28.12 24.38 11,806,980
2000 27.49 28.12 13,345,698
1999 18.11 27.49 12,753,536
1998 15.26 18.11 12,848,790
1997 14.51 15.26 12,804,601
1996 12.51 14.51 11,881,450
1995 11.42 12.51 10,236,349
1994 11.25 11.42 9,361,197
1993 8.65 11.25 5,863,967
1992 8.99 8.65 2,070,715
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Diversified 2001 25.66 27.17 2,412,919
Income Subaccount 2000 23.92 25.66 2,354,855
1999 25.16 23.92 3,698,583
1998 23.58 25.16 3,419,362
1997 21.69 23.58 3,446,850
1996 22.11 21.69 3,673,833
1995 18.87 22.11 3,912,046
1994 20.52 18.87 3,891,426
1993 18.44 20.52 3,731,587
1992 17.37 18.44 2,912,605
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Large Cap Growth 2001 7.91 6.61 808,629
Subaccount 2000(e) 10.00 7.91 24,399
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Enhanced Index 2001 9.88 8.50 1,925,639
Subaccount 2000 11.14 9.88 53,493
1999(d) 10.00 11.14 564,455
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International 2001 10.15 7.57 653,966
Subaccount 2000 12.89 10.15 11,181
1999(d) 10.00 12.89 95,066
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Mid Cap Growth 2001 45.95 38.63 7,902,865
Subaccount 2000 39.83 45.95 9,476,967
1999 24.90 39.83 6,970,985
1998 21.37 24.91 6,781,176
1997 18.03 21.37 6,738,379
1996 15.46 18.03 5,563,881
1995 13.10 15.46 4,387,739
1994 13.97 13.10 3,947,047
1993 12.44 13.97 2,131,858
1992(a) 10.00 12.44 455,105
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Global Strategic 2001 13.51 14.20 497,189
Income Subaccount 2000 13.19 13.51 298,376
1999 13.20 13.19 362,783
1998 12.50 13.20 398,409
1997 12.00 12.50 425,354
1996 10.69 12.00 306,339
1995(b) 10.00 10.69 129,589
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Capital Growth 2001 7.99 6.73 1,336,931
Subaccount 2000(e) 10.00 7.99 69,633
--------------------------------------------------------------------------
Global Total Return 2001 13.95 11.98 1,079,718
Subaccount 2000 15.78 13.95 1,197,345
1999 14.01 15.78 1,363,679
1998 12.59 14.01 1,545,270
1997 12.01 12.59 1,672,896
1996 10.64 12.01 1,274,106
1995(b) 10.00 10.64 611,652
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Managed Asset 2001 17.25 16.18 2,258,069
Allocation 2000 17.63 17.25 1,990,484
Subaccount 1999 16.26 17.63 2,289,208
1998 13.89 16.26 1,950,323
1997 11.87 13.89 1,057,271
1996 10.66 11.87 626,179
1995(b) 10.00 10.66 295,053
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Equity Income 2001 21.40 21.42 4,369,075
Subaccount 2000 19.19 21.40 4,034,469
1999 18.83 19.19 5,492,102
1998 17.49 18.83 5,369,499
1997 13.78 17.49 4,135,375
1996 11.62 13.78 2,016,966
1995(b) 10.00 11.62 604,325
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High Yield 2001 12.09 12.48 509,774
Subaccount 2000 12.43 12.09 2,576
1999 12.43 12.43 89,145
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Small Cap Value 2001 10.65 12.86 2,165,394
Subaccount 2000(e) 10.00 10.65 22,150
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Social Awareness 2001 29.38 25.24 3,950,615
Subaccount 2000 34.16 29.38 4,339,513
1999 29.50 34.16 4,298,149
1998 22.72 29.50 3,152,738
1997 18.75 22.72 2,531,119
1996 15.97 18.75 2,083,090
1995 12.65 15.97 1,615,845
1994 13.31 12.65 1,344,063
1993 12.04 13.31 993,233
1992 10.47 12.04 513,953
--------------------------------------------------------------------------
Technology 2001 6.08 4.56 1,896,347
Subaccount 2000(e) 10.00 6.08 97,027
--------------------------------------------------------------------------
Mid Cap Value 2001 23.29 25.58 3,062,821
Subaccount 2000 17.62 23.29 97,916
1999 14.89 17.62 577,404
--------------------------------------------------------------------------
Main Street Growth 2001 8.95 7.95 1,812,239
and Income(R) 2000(e) 10.00 8.95 28,963
Subaccount
--------------------------------------------------------------------------
Small Cap Growth 2001 17.57 12.52 3,216,970
Subaccount 2000 19.48 17.57 65,591
1999 10.31 19.48 992,293
--------------------------------------------------------------------------
Select 25 Subaccount 2001 10.17 9.05 2,961,348
2000 12.24 10.17 34,746
1999(d) 10.00 12.24 1,226,865
--------------------------------------------------------------------------

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NON-QUALIFIED
--------------------------------------------
ACCUMULATION UNITS
BEGINNING END OF OUTSTANDING AT END
SUBACCOUNT YEAR OF PERIOD PERIOD OF PERIOD
--------------------------------------------------------------------------
Equity 2001 $66.37 $58.09 1,816,980
Subaccount 2000 77.00 66.37 2,036,358
1999 72.07 77.00 2,537,119
1998 58.17 72.07 2,665,560
1997 45.74 58.17 2,652,767
1996 37.74 45.74 2,575,426
1995 27.92 37.74 2,306,163
1994 28.74 27.92 1,578,797
1993 25.58 28.74 1,483,618
1992 23.30 25.58 1,766,896
--------------------------------------------------------------------------
Large Cap Value 2001 57.29 53.43 1,741,418
Subaccount 2000 62.18 57.29 2,055,288
1999 61.81 62.18 2,867,661
1998 58.17 61.81 3,323,526
1997 46.54 58.17 3,653,913
1996 39.84 46.54 3,721,884
1995(c) 31.00 39.84 3,669,299
1994 32.34 31.00 3,515,364
1993 29.87 32.34 3,262,600
1992 28.44 29.87 2,560,986
--------------------------------------------------------------------------
Money Market 2001 21.34 21.87 1,092,929
Subaccount 2000 20.38 21.34 1,281,580
1999 19.71 20.38 1,790,781
1998 18.98 19.71 1,314,658
1997 18.26 18.98 1,089,550
1996 17.59 18.26 1,681,230
1995 16.89 17.59 1,469,153
1994 16.48 16.89 2,475,349
1993 16.26 16.48 1,913,212
1992 15.94 16.26 1,031,855
--------------------------------------------------------------------------
Global Subaccount 2001 28.12 24.38 2,685,983
2000 27.49 28.12 3,288,694
1999 18.11 27.49 3,373,269
1998 15.26 18.11 3,724,722
1997 14.51 15.26 3,730,734
1996 12.51 14.51 3,484,411
1995 11.42 12.51 3,140,486
1994 11.25 11.42 2,803,304
1993 8.65 11.25 2,150,932
1992 8.99 8.65 678,110
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Diversified 2001 25.64 27.15 896,039
Income Subaccount 2000 23.90 25.64 1,003,346
1999 25.14 23.90 1,121,142
1998 23.56 25.14 1,321,999
1997 21.67 23.56 1,535,471
1996 22.09 21.67 1,377,342
1995 18.85 22.09 1,325,159
1994 20.50 18.85 1,392,830
1993 18.42 20.50 1,290,268
1992 17.36 18.42 962,775
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Large Cap Growth 2001 7.91 6.61 222,143
Subaccount 2000(e) 10.00 7.91 673,725
--------------------------------------------------------------------------
Enhanced Index 2001 9.88 8.50 302,681
Subaccount 2000 11.14 9.88 2,181,834
1999(d) 10.00 11.14 148,669
--------------------------------------------------------------------------
International 2001 10.15 7.57 257,938
Subaccount 2000 12.89 10.15 717,135
1999(d) 10.00 12.89 27,983
--------------------------------------------------------------------------
Mid Cap Growth 2001 45.93 38.62 1,933,000
Subaccount 2000 39.81 45.93 1,270,378
1999 24.89 39.81 1,930,663
1998 21.36 24.89 2,140,621
1997 18.03 21.36 2,019,008
1996 15.46 18.03 1,559,302
1995 13.09 15.46 1,248,987
1994 13.96 13.09 1,211,099
1993 12.44 13.96 610,801
1992(a) 10.00 12.44 68,338
--------------------------------------------------------------------------
Global Strategic 2001 13.51 14.20 175,220
Income Subaccount 2000 13.19 13.51 151,984
1999 13.20 13.19 155,100
1998 12.49 13.20 180,061
1997 12.00 12.49 212,934
1996 10.69 12.00 178,818
1995(b) 10.00 10.69 74,528
--------------------------------------------------------------------------
Capital Growth 2001 7.99 6.73 163,517
Subaccount 2000(e) 10.00 7.99 1,182,612
--------------------------------------------------------------------------
Global Total Return 2001 13.95 11.97 345,102
Subaccount 2000 15.77 13.95 417,905
1999 14.01 15.77 501,463
1998 12.59 14.01 585,003
1997 12.00 12.59 687,020
1996 10.64 12.00 532,893
1995(b) 10.00 10.64 297,967
--------------------------------------------------------------------------
Managed Asset 2001 17.25 16.18 654,507
Allocation 2000 17.63 17.25 687,389
Subaccount 1999 16.26 17.63 742,405
1998 13.89 16.26 739,827
1997 11.87 13.89 459,560
1996 10.66 11.87 374,276
1995(b) 10.00 10.66 226,555
--------------------------------------------------------------------------
Equity Income 2001 21.39 21.42 1,080,433
Subaccount 2000 19.18 21.39 1,046,838
1999 18.83 19.18 1,379,765
1998 17.48 18.83 1,427,599
1997 13.78 17.48 1,257,818
1996 11.62 13.78 710,206
1995(b) 10.00 11.62 234,242
--------------------------------------------------------------------------
High Yield 2001 12.09 12.48 172,694
Subaccount 2000 12.43 12.09 301,772
1999 12.43 12.43 95,775
--------------------------------------------------------------------------
Small Cap Value 2001 10.65 12.86 601,352
Subaccount 2000(e) 10.00 10.65 231,015
--------------------------------------------------------------------------
Social Awareness 2001 29.41 25.25 992,868
Subaccount 2000 34.17 29.41 1,167,835
1999 29.51 34.17 1,188,307
1998 22.73 29.51 1,036,280
1997 18.75 22.73 904,831
1996 15.98 18.75 746,852
1995 12.66 15.98 612,235
1994 13.31 12.66 543,287
1993 12.04 13.31 389,861
1992 10.47 12.04 226,145
--------------------------------------------------------------------------
Technology 2001 6.08 4.56 430,690
Subaccount 2000(e) 10.00 6.08 1,432,636
--------------------------------------------------------------------------
Mid Cap Value 2001 23.29 25.58 703,426
Subaccount 2000 17.62 23.29 2,518,107
1999 14.89 17.62 189,495
--------------------------------------------------------------------------
Main Street Growth 2001 8.95 7.95 426,747
and Income(R) 2000(e) 10.00 8.95 1,268,805
Subaccount
--------------------------------------------------------------------------
Small Cap Growth 2001 17.57 12.52 806,870
Subaccount 2000 19.48 17.57 4,570,554
1999 10.31 19.48 319,874
--------------------------------------------------------------------------
Select 25 Subaccount 2001 10.17 9.05 609,728
2000 12.24 10.17 4,097,819
1999(d) 10.00 12.24 318,343
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(a) Mid Cap Growth Subaccount was first publicly offered on October 1, 1992.

(b) Global Strategic Income, Global Total Return, Managed Asset Allocation and
Equity Income Subaccounts were first publicly offered on June 1, 1995.

(c) Effective June 1, 1995, the investment objective of Large Cap Value
Subaccount was changed from seeking to provide income with secondary
emphasis on capital appreciation to seeking long-term growth of capital with
secondary emphasis on income and on January 2, 2001 the investment objective
was changed to seeking long-term growth of capital.

(d) Accumulation unit values for Enhanced Index, International and Select 25
Subaccounts are for the period May 3, 1999 (the date first publicly offered)
to December 31, 1999.

(e) Accumulation unit values for Large Cap Growth, Capital Growth, Small Cap
Value, Technology and Main Street Growth and Income(R) Subaccounts are for
the period May 1, 2000 (the date first publicly offered) to December 31,
2000.
--------------------------------------------------------------------------------

FINANCIAL STATEMENTS -- The consolidated financial statements of Security
Benefit Life Insurance Company and Subsidiaries at December 31, 2001 and 2000
and for each of the three years in the period ended December 31, 2001, and the
financial statements of the Separate Account at December 31, 2001 and for each
of the two years in the period ended December 31, 2001 are included in the
Statement of Additional Information.

VARIFLEX(R) VARIABLE ANNUITY

ISSUED BY: MAILING ADDRESS:
SECURITY BENEFIT LIFE INSURANCE COMPANY(R) SECURITY BENEFIT LIFE INSURANCE COMPANY
ONE SECURITY BENEFIT PLACE P.O. BOX 750497
TOPEKA, KANSAS 66636-0001 TOPEKA, KANSAS 66675-0497
1-800-888-2461
--------------------------------------------------------------------------------

This Prospectus describes the Variflex Variable Annuity--a flexible
purchase payment deferred variable annuity contract or single purchase payment
immediate variable annuity contract (the "Contract") offered by Security Benefit
Life Insurance Company ("Security Benefit"). The Contract is available for
individuals and groups as a non-tax qualified retirement plan. The Contract is
also available for individuals and groups in connection with a retirement plan
qualified under Section 401, 403(b), 408, 408A or 457 of the Internal Revenue
Code. The Contract is designed to give you flexibility in planning for
retirement and other financial goals.

You may allocate your purchase payments to one or more of the Subaccounts
that comprise a separate account of Security Benefit called Variflex, or to the
Fixed Account. Each Subaccount invests in a corresponding Series of SBL Fund.
The Subaccounts currently available under the Contract are:

o Equity (formerly Growth) o Global Total Return
o Large Cap Value o Managed Asset
(formerly Growth-Income) Allocation
o Money Market o Equity Income
o Global (formerly o High Yield
Worldwide Equity) o Small Cap Value
o Diversified Income (formerly o Social Awareness
High Grade Income) o Technology
o Large Cap Growth o Mid Cap Value
o Enhanced Index (formerly Value)
o International o Main Street Growth
o Mid Cap Growth and Income(R)
(formerly Mid Cap) o Small Cap Growth
o Global Strategic Income (formerly Small Cap)
o Capital Growth o Select 25

The Capital Growth, Enhanced Index, International, High Yield, Main Street
Growth and Income(R), Mid Cap Value, Select 25, Small Cap Growth, Small Cap
Value and Technology Subaccounts generally are not available to certain types of
the Contract, including Contracts issued for use with pension and profit sharing
plans, deferred compensation plans, SIMPLE IRA and 401(k) plans, Roth IRAs,
simplified employee pension plans and employer sponsored annuity purchase plans.
The Subaccounts will be available to all Contracts upon their conversion to
Security Benefit's new administration system. If you have questions about which
Subaccounts are available to you, please contact Security Benefit at the number
below.

Amounts allocated to the Fixed Account will accrue interest at rates that
are paid by Security Benefit as described in "The Fixed Account," page 29.
Contract Value in the Fixed Account is guaranteed by Security Benefit.

Amounts that you allocate to the Subaccounts under a Contract will vary
based on investment performance of the Subaccounts. No minimum amount of
Contract Value is guaranteed.

When you are ready to receive annuity payments, the Contract provides
several options for annuity payments. See "Annuity Options," page 28.

You may return a Contract according to the terms of its Free-Look Right.
See "Free-Look Right," page 23.

This Prospectus concisely sets forth information about the Contract and the
Separate Account that you should know before purchasing the Contract. The
"Statement of Additional Information," dated May 1, 2002, which has been filed
with the Securities and Exchange Commission contains certain additional
information. The Statement of Additional Information, as it may be supplemented
from time to time, is incorporated by reference into this Prospectus and is
available at no charge, by writing Security Benefit at One Security Benefit
Place, Topeka, Kansas 66636 or by calling 1-800-888-2461. The table of contents
of the Statement of Additional Information is set forth on page 45 of this
Prospectus.

The SEC maintains a web site (http://www.sec.gov) that contains the
Statement of Additional Information, material incorporated by reference and
other information regarding companies that file electronically with the SEC.

--------------------------------------------------------------------------------
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THE PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THIS PROSPECTUS IS ACCOMPANIED BY THE CURRENT PROSPECTUS FOR SBL FUND. YOU
SHOULD READ THE PROSPECTUSES CAREFULLY AND RETAIN THEM FOR FUTURE REFERENCE.

THE CONTRACT IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR GUARANTEED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. THE
VALUE OF YOUR CONTRACT WILL GO UP AND DOWN AND YOU COULD LOSE MONEY.

DATE: MAY 1, 2002

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
TABLE OF CONTENTS

Page

DEFINITIONS......................................... 5

SUMMARY............................................. 6
PURPOSE OF THE CONTRACT.......................... 6
THE SEPARATE ACCOUNT AND THE SBL FUND............ 6
FIXED ACCOUNT.................................... 6
PURCHASE PAYMENTS................................ 6
CONTRACT BENEFITS................................ 6
FREE-LOOK RIGHT.................................. 7
CHARGES AND DEDUCTIONS........................... 7
Contingent Deferred Sales Charge............... 7
Mortality and Expense Risk Charge.............. 7
Administration Charge.......................... 7
Premium Tax Charge............................. 7
Other Expenses................................. 7
CONTACTING SECURITY BENEFIT...................... 8

EXPENSE TABLE....................................... 8
CONTRACTUAL EXPENSES............................. 8
ANNUAL SEPARATE ACCOUNT EXPENSES................. 8
ANNUAL SBL FUND EXPENSES......................... 8
EXAMPLES......................................... 9

CONDENSED FINANCIAL INFORMATION..................... 11

INFORMATION ABOUT SECURITY BENEFIT, THE SEPARATE
ACCOUNT, AND SBL FUND............................ 14
SECURITY BENEFIT LIFE INSURANCE COMPANY.......... 14
PUBLISHED RATINGS................................ 14
SEPARATE ACCOUNT................................. 14
SBL FUND......................................... 14
Series A (Equity Series)....................... 15
Series B (Large Cap Value Series).............. 15
Series C (Money Market Series)................. 15
Series D (Global Series)....................... 15
Series E (Diversified Income Series)........... 15
Series G (Large Cap Growth Series)............. 15
Series H (Enhanced Index Series)............... 15
Series I (International Series)................ 15
Series J (Mid Cap Growth Series)............... 16
Series K (Global Strategic Income Series)...... 16
Series L (Capital Growth Series)............... 16
Series M (Global Total Return Series).......... 16
Series N (Managed Asset Allocation Series)..... 16
Series O (Equity Income Series)................ 16
Series P (High Yield Series)................... 16
Series Q (Small Cap Value Series).............. 16
Series S (Social Awareness Series)............. 16
Series T (Technology Series)................... 16
Series V (Mid Cap Value Series)................ 16
Series W (Main Street Growth
and Income(R)Series)......................... 17
Series X (Small Cap Growth Series)............. 17
Series Y (Select 25 Series).................... 17
THE INVESTMENT ADVISER........................... 17

THE CONTRACT........................................ 17
GENERAL.......................................... 17
TYPES OF VARIFLEX CONTRACTS...................... 18
Single Purchase Payment Immediate Annuity...... 18
Flexible Purchase Payment Deferred Annuity..... 18
Group Flexible Purchase
Payment Deferred Annuity..................... 18
APPLICATION FOR A CONTRACT....................... 18
PURCHASE PAYMENTS................................ 18
ALLOCATION OF PURCHASE PAYMENTS.................. 18
DOLLAR COST AVERAGING OPTION..................... 19
ASSET REALLOCATION OPTION........................ 19
TRANSFERS OF CONTRACT VALUE...................... 20
CONTRACT VALUE................................... 20
DETERMINATION OF CONTRACT VALUE.................. 21
FULL AND PARTIAL WITHDRAWALS..................... 21
SYSTEMATIC WITHDRAWALS........................... 22
FREE-LOOK RIGHT.................................. 23
DEATH BENEFIT.................................... 23
Death Benefit for Certain Florida Residents.... 24
Death Benefit for Group
Unallocated Contracts........................ 24
DISTRIBUTION REQUIREMENTS........................ 24
DEATH OF THE ANNUITANT........................... 24

CHARGES AND DEDUCTIONS.............................. 24
CONTINGENT DEFERRED SALES CHARGE................. 24
WITHDRAWAL CHARGE FOR
CERTAIN TEXAS PARTICIPANTS..................... 25
WAIVER OF WITHDRAWAL CHARGE...................... 25
MORTALITY AND EXPENSE RISK CHARGE................ 26
ADMINISTRATION CHARGE............................ 26
PREMIUM TAX CHARGE............................... 26
OTHER CHARGES.................................... 27
VARIATIONS IN CHARGES............................ 27
GUARANTEE OF CERTAIN CHARGES..................... 27
SBL FUND EXPENSES................................ 27

ANNUITY PERIOD...................................... 27
GENERAL.......................................... 27
ANNUITY OPTIONS.................................. 28
Option 1--Life Income.......................... 28
Option 2--Life Income with Guaranteed
Payment of 5, 10, 15 or 20 Years............. 28
Option 3--Life with Installment
Refund Option................................ 28
Option 4--Joint and Last Survivor.............. 28
Option 5--Payments for a Specified Period...... 28
Option 6--Payments of a Specified Amount....... 28
Option 7--Deposit Option....................... 29
Option 8--Age Recalculation.................... 29
Option 9--Period Certain....................... 29
Option 10--Joint and Contingent
Survivor Option.............................. 29
Value of Variable Annuity Payments:
Assumed Interest Rate........................ 29
SELECTION OF AN OPTION........................... 29

THE FIXED ACCOUNT................................... 29
INTEREST......................................... 30
DEATH BENEFIT.................................... 30
CONTRACT CHARGES................................. 30
TRANSFERS AND WITHDRAWALS
FROM THE FIXED ACCOUNT......................... 30
PAYMENTS FROM THE FIXED ACCOUNT.................. 31

MORE ABOUT THE CONTRACT............................. 31
OWNERSHIP........................................ 31
Joint Owners................................... 31
DESIGNATION AND CHANGE OF BENEFICIARY............ 31
DIVIDENDS........................................ 31
PAYMENTS FROM THE SEPARATE ACCOUNT............... 31
PROOF OF AGE AND SURVIVAL........................ 32
MISSTATEMENTS.................................... 32
LOANS............................................ 32
RESTRICTIONS ON WITHDRAWALS
FROM QUALIFIED PLANS........................... 33
RESTRICTIONS UNDER THE TEXAS
OPTIONAL RETIREMENT PROGRAM.................... 33

FEDERAL TAX MATTERS................................. 34
INTRODUCTION..................................... 34
TAX STATUS OF SECURITY BENEFIT
AND THE SEPARATE ACCOUNT....................... 34
General........................................ 34
Charge for Security Benefit Taxes.............. 34
Diversification Standards...................... 34
INCOME TAXATION OF ANNUITIES IN
GENERAL--NON-QUALIFIED PLANS................... 35
Surrenders or Withdrawals Prior to the
Annuity Commencement Date.................... 35
Surrenders or Withdrawals on or
after Annuity Commencement Date.............. 35
Penalty Tax on Certain
Surrenders and Withdrawals................... 35
ADDITIONAL CONSIDERATIONS........................ 36
Distribution-at-Death Rules.................... 36
Gift of Annuity Contracts...................... 36
Contracts Owned by Non-Natural Persons......... 36
Multiple Contract Rule......................... 36
Possible Tax Changes........................... 36
Transfers, Assignments or
Exchanges of a Contract...................... 36
QUALIFIED PLANS.................................. 37
Section 401.................................... 37
Section 403(b)................................. 38
Section 408 and 408A........................... 39
Simple Individual Retirement Annuities......... 39
Roth IRAs...................................... 40
Section 457.................................... 40
Rollovers...................................... 41
Tax Penalties.................................. 41
Withholding.................................... 42

OTHER INFORMATION................................... 42
VOTING OF SBL FUND SHARES........................ 42
SUBSTITUTION OF INVESTMENTS...................... 42
CHANGES TO COMPLY WITH LAW AND AMENDMENTS........ 43
REPORTS TO OWNERS................................ 43
TELEPHONE TRANSFER PRIVILEGES.................... 43
LEGAL PROCEEDINGS................................ 43
LEGAL MATTERS.................................... 43

PERFORMANCE INFORMATION............................. 44

ADDITIONAL INFORMATION.............................. 45
REGISTRATION STATEMENT........................... 45
FINANCIAL STATEMENTS............................. 45

STATEMENT OF ADDITIONAL INFORMATION................. 45

APPENDIX A - IRA Disclosure Statement
APPENDIX B - Roth IRA Disclosure Statement
APPENDIX C - Simple IRA Disclosure Statement

--------------------------------------------------------------------------------
YOU MAY NOT BE ABLE TO PURCHASE THE CONTRACT IN YOUR STATE. YOU SHOULD NOT
CONSIDER THIS PROSPECTUS TO BE AN OFFERING IF THE CONTRACT MAY NOT BE LAWFULLY
OFFERED IN YOUR STATE. YOU SHOULD ONLY RELY UPON INFORMATION CONTAINED IN THIS
PROSPECTUS OR THAT WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT.
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
DEFINITIONS

Various terms commonly used in this Prospectus are defined as follows:

ACCUMULATION PERIOD -- The period commencing on the Contract Date and
ending on the Annuity Commencement Date or, if earlier, when you terminate the
Contract, either through a full withdrawal, payment of charges, or payment of
the death benefit proceeds.

ACCUMULATION UNIT -- A unit of measure used to calculate Contract Value.

ANNUITANT -- The person that you designate to receive annuity payments. If
you designate Joint Annuitants, "Annuitant" means both Annuitants unless
otherwise stated.

ANNUITY -- A series of periodic income payments made by Security Benefit to
an Annuitant, Joint Annuitant, or Designated Beneficiary during the period
specified in the Annuity Option.

ANNUITY COMMENCEMENT DATE -- The date when annuity payments are to begin.

ANNUITY OPTIONS -- Options under the Contract that prescribe the provisions
under which a series of annuity payments are made.

ANNUITY PERIOD -- The period beginning on the Annuity Commencement Date
during which annuity payments are made.

CONTRACT -- Your individual Contract issued to you by Security Benefit or
your certificate under a Group Contract.

CONTRACT DATE -- The date shown as the Contract Date in a Contract. Annual
Contract anniversaries are measured from the Contract Date. It is usually the
date that your initial purchase payment is credited to the Contract.

CONTRACT DEBT-- The unpaid loan balance including loan interest.

CONTRACTOWNER OR OWNER-- The person entitled to the ownership rights under
the Contract and in whose name the Contract is issued. The term "Contractowner"
or "Owner" is used in this Prospectus to refer to the Owner of an individual
Contract or Participant under a Group Contract.

CONTRACT VALUE -- The total value of your Contract which includes amounts
allocated to the Subaccounts and the Fixed Account as well as any amount set
aside in the loan account to secure loans as of any Valuation Date.

CONTRACT YEAR -- Each twelve-month period measured from the Contract Date.

DESIGNATED BENEFICIARY -- The Designated Beneficiary is the first person on
the following list who is alive on the date of death of the Owner or the Joint
Owner: the Owner; the Joint Owner; the Primary Beneficiary; the Secondary
Beneficiary; the Annuitant; or if none of the above are alive, the Owner's
Estate. If you purchased your Contract prior to January 4, 1999, the Designated
Beneficiary is the Primary Beneficiary; the Secondary Beneficiary; or if none of
the above are alive, the Annuitant's estate.

FIXED ACCOUNT -- An account that is part of Security Benefit's General
Account to which you may allocate all or a portion of your Contract Value to be
held for accumulation at fixed rates of interest (which may not be less than 3%)
declared periodically by Security Benefit.

GENERAL ACCOUNT -- All assets of Security Benefit other than those
allocated to the Separate Account or to any other separate account of Security
Benefit.

GROUP CONTRACT -- A Contract issued to a group in connection with a
Qualified Plan or a non-tax qualified retirement plan.

HOME OFFICE-- The Annuity Administration Department of Security Benefit,
P.O. Box 750497, Topeka, Kansas 66675-0497.

HOSPITAL -- An institution that is licensed as such by the Joint Commission
of Accreditation of Hospitals, or any lawfully operated institution that
provides in-patient treatment of sick and injured persons through medical,
diagnostic and surgical facilities directed by physicians and 24 hour nursing
services.

PARTICIPANT -- A Participant under a Qualified Plan, a Group Contract or
both.

PURCHASE PAYMENT -- An amount paid to Security Benefit as consideration for
the Contract.

QUALIFIED SKILLED NURSING FACILITY -- A facility licensed by the state to
provide on a daily basis convalescent or chronic care for in-patients who, by
reason of infirmity or illness, are not able to care for themselves.

SBL FUND -- An open-end management investment company commonly referred to
as a mutual fund.

SEPARATE ACCOUNT -- Variflex, a separate account of Security Benefit that
consists of accounts, referred to as Subaccounts, each of which invests in a
corresponding Series of SBL Fund.

SUBACCOUNT -- A division of the Separate Account of Security Benefit which
invests in a corresponding series of SBL Fund. Currently, twenty-two Subaccounts
are available under the Contract.

VALUATION DATE -- Each date on which the Separate Account is valued, which
currently includes each day that the New York Stock Exchange is open for
trading. The New York Stock Exchange is closed on weekends and on the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.

VALUATION PERIOD -- A period used in measuring the investment experience of
each Subaccount of the Separate Account. The Valuation Period begins at the
close of one Valuation Date and ends at the close of the next succeeding
Valuation Date.

VARIFLEX CONTRACT-401(K) AND 408(K) -- A version of the Contract offered
prior to May 1, 1990, to plans qualified under Section 401(k) or 408(k)(6) of
the Internal Revenue Code. The differences between this Contract and the
currently offered versions of the Contract qualifying under Section 401(k) and
408(k)(6) of the code are noted where appropriate.

WITHDRAWAL VALUE -- The amount you will receive upon full withdrawal of the
Contract. It is equal to Contract Value less any Contract Debt, any applicable
withdrawal charge, a pro rata administration charge, and any uncollected premium
taxes.

SUMMARY

This summary provides a brief overview of the more significant aspects of
the Contract. Further detail is provided in this Prospectus, the Statement of
Additional Information, and the Contract. Unless the context indicates
otherwise, the discussion in this summary and the remainder of the Prospectus
relates to the portion of the Contract involving the Separate Account. The Fixed
Account is briefly described under "The Fixed Account," page 29 and in the
Contract.

PURPOSE OF THE CONTRACT -- The flexible purchase payment deferred variable
annuity contract or single purchase payment immediate variable annuity contract
(the "Contract") described in this Prospectus is designed to give you
flexibility in planning for retirement and other financial goals.

You may purchase the Contract as a non-tax qualified retirement plan for an
individual or group ("Non-Qualified Plan"). You may also purchase the Contract,
on a group or individual basis, in connection with a retirement plan qualified
under Section 401, 403(b), 408, 408A, or 457 of the Internal Revenue Code of
1986, as amended. These plans are sometimes referred to in this Prospectus as
"Qualified Plans."

THE SEPARATE ACCOUNT AND SBL FUND -- The Separate Account is currently divided
into twenty-two accounts referred to as Subaccounts. See "Separate Account,"
page 14. Each Subaccount invests exclusively in shares of a corresponding Series
of SBL Fund. The Series of SBL Fund, each of which has a different investment
objective or objectives, are as follows: Equity Series, Large Cap Value Series,
Money Market Series, Global Series, Diversified Income Series, Large Cap Growth
Series, Enhanced Index Series, International Series, Mid Cap Growth Series,
Global Strategic Income Series, Capital Growth Series, Global Total Return
Series, Managed Asset Allocation Series, Equity Income Series, High Yield
Series, Small Cap Value Series, Social Awareness Series, Technology Series, Mid
Cap Value Series, Main Street Growth and Income(R) Series, Small Cap Growth
Series and Select 25 Series. See "SBL Fund," page 14.

You may allocate all or part of your purchase payments to the Subaccounts.
Amounts that you allocate to the Subaccounts will increase or decrease in dollar
value depending on the investment performance of the Series of SBL Fund in which
such Subaccount invests. You bear the investment risk for amounts allocated to a
Subaccount.

FIXED ACCOUNT -- You may allocate all or part of your purchase payments to the
Fixed Account, which is part of Security Benefit's General Account. Amounts that
you allocate to the Fixed Account earn interest at rates determined at the
discretion of Security Benefit and are guaranteed to be at least an effective
annual rate of 3% (or higher for certain Contracts issued prior to January 4,
1999). See "The Fixed Account," page 29.

PURCHASE PAYMENTS -- The minimum initial purchase payment is $500 for a Contract
funding a Non-Qualified Plan or Group Unallocated Contract, $25 for a Contract
funding a Qualified Plan and $2,500 for a single purchase payment immediate
annuity. Thereafter, you may choose the amount and frequency of purchase
payments, except that the minimum subsequent purchase payment is $25. Subsequent
purchase payments are not permitted for a single purchase payment immediate
annuity. See "Purchase Payments," page 18.

CONTRACT BENEFITS -- You may transfer Contract Value among the Subaccounts and
to and from the Fixed Account, subject to certain restrictions as described in
"The Contract," page 17 and "The Fixed Account," page 29.

At any time before the Annuity Commencement Date, you may surrender a
Contract for its Withdrawal Value, and you may make partial withdrawals,
including systematic withdrawals, from Contract Value, subject to certain
restrictions described in "The Fixed Account," page 29. See "Full and Partial
Withdrawals," page 21 and "Federal Tax Matters," page 34 for more information
about withdrawals, including the 10% penalty tax that may be imposed upon full
and partial withdrawals (including systematic withdrawals) made prior to the
Owner attaining age 59 1/2.

The Contract provides for a death benefit upon the death of the Owner prior
to the Annuity Commencement Date. See "Death Benefit," page 23 for more
information. The Contract provides for several Annuity Options on either a
variable basis, a fixed basis, or both. Security Benefit guarantees annuity
payments under the fixed Annuity Options. See "Annuity Period," page 27.

FREE-LOOK RIGHT -- You may return the Contract within the Free-Look Period,
which is generally a ten-day period beginning when you receive the Contract. In
this event, Security Benefit will refund to you purchase payments allocated to
the Fixed Account plus the Contract Value in the Subaccounts plus any charges
deducted from Contract Value in the Subaccounts. Security Benefit will refund
purchase payments allocated to the Subaccounts rather than the Contract Value in
those states and circumstances where it is required to do so.

CHARGES AND DEDUCTIONS -- Security Benefit does not deduct sales load from
purchase payments before allocating them to Contract Value. Certain charges will
be deducted in connection with the Contract as described below.

CONTINGENT DEFERRED SALES CHARGE. If you withdraw Contract Value, Security
Benefit may deduct a contingent deferred sales charge (which may also be
referred to as a withdrawal charge). The amount of the withdrawal charge depends
on the Contract Year in which the withdrawal is made. We will waive the
withdrawal charge on the first withdrawal in any Contract Year after the first
Contract Year, to the extent that your withdrawal does not exceed the free
withdrawal amount. The free withdrawal amount in any Contract Year is 10% of
Contract Value as of the date of the first withdrawal in that Contract Year. You
forfeit any free withdrawal amount not used on the first withdrawal in a
Contract Year. The withdrawal charge does not apply to withdrawals of earnings.
The amount of the charge will depend on the Contract Year in which the
withdrawal is made, according to the following schedule:

--------------------------------------------------------
WITHDRAWAL CHARGE
--------------------------------------
CONTRACT THE VARIFLEX
YEAR CONTRACT CONTRACT-401(K) AND
408(K)
--------------------------------------------------------
1 8% 8%
2 7% 8%
3 6% 8%
4 5% 8%
5 4% 7%
6 3% 6%
7 2% 5%
8 1% 4%
9 and later 0% 0%
--------------------------------------------------------

The amount of the withdrawal charge assessed against your Contract will
never exceed 8% of purchase payments paid under the Contract. In addition, no
withdrawal charge will be assessed upon: (1) payment of death benefit proceeds;
(2) certain systematic withdrawals; or (3) annuity options that provide for
payments for life, or a period of at least seven years (five years for Contracts
issued prior to January 4, 1999). Subject to insurance department approval,
Security Benefit will also waive the withdrawal charge on a full or partial
withdrawal if the Owner has been confined to a Hospital or Qualified Skilled
Nursing Facility for 90 consecutive days or more.

A different withdrawal charge schedule applies if your Contract was issued
after August 14, 2000, under a Section 403(b) retirement plan sponsored by a
Texas institution of higher education (as defined in the Texas Education Code).
See "Contingent Deferred Sales Charge," page 24.

MORTALITY AND EXPENSE RISK CHARGE. Security Benefit deducts a daily charge
from the assets of each Subaccount for mortality and expense risks equal to an
annual rate of 1.2% of each Subaccount's average daily net assets. See
"Mortality and Expense Risk Charge," page 26.

ADMINISTRATION CHARGE. Security Benefit will deduct from your Contract
Value an administration charge of $30 on each annual contract anniversary. The
administration charge for the Variflex Contract - 401(k) and 408(k) is the
lesser of $30 or 2% of Contract Value as of each contract anniversary. The
charge will be deducted from the Contract Value in the Subaccounts and the Fixed
Account in the same proportion that the Contract Value is allocated among those
accounts. Security Benefit does not assess the administration charge against
Contract Value which has been applied under Annuity Options 1 through 4, 9 and
10. See "Administration Charge," page 26.

PREMIUM TAX CHARGE. Security Benefit assesses a premium tax charge to
reimburse itself for any premium taxes that it incurs with respect to your
Contract. This charge will usually be deducted on the Annuity Commencement Date
or upon full withdrawal if a premium tax was incurred by Security Benefit and is
not refundable. Partial withdrawals, including systematic withdrawals, may be
subject to a premium tax charge if a premium tax is incurred on the withdrawal
by Security Benefit and is not refundable. Security Benefit reserves the right
to deduct such taxes when due or anytime thereafter. Premium tax rates currently
range from 0% to 3.5%. See "Premium Tax Charge," page 26.

OTHER EXPENSES. Security Benefit pays the operating expenses of the
Separate Account. Investment advisory fees and operating expenses of SBL Fund
are paid by the Fund and are reflected in the net asset value of the Fund
shares. For a description of these charges and expenses, see the prospectus for
SBL Fund.

CONTACTING SECURITY BENEFIT -- You should direct all written requests, notices,
and forms required by the Contract, and any questions or inquiries to Security
Benefit Life Insurance Company, P.O. Box 750497, Topeka, Kansas 66675-0497 or by
phone by calling (785) 438-3112 or 1-800-888-2461, extension 3112.

EXPENSE TABLE

The purpose of this table is to assist you in understanding the various
costs and expenses that you will bear directly and indirectly if you allocate
Contract Value to the Subaccounts. The table reflects any contractual charges,
expenses of the Separate Account, and charges and expenses of SBL Fund. The
table does not reflect premium taxes that may be imposed by various
jurisdictions. See "Premium Tax Charge," page 26. The information contained in
the table is not generally applicable to amounts allocated to the Fixed Account.

For a complete description of a Contract's costs and expenses, see "Charges
and Deductions," page 24. For a more complete description of SBL Fund's costs
and expenses, see the SBL Fund prospectus, which accompanies this Prospectus.

-----------------------------------------------------------
CONTRACTUAL EXPENSES
-----------------------------------------------------------
Sales Load on Purchase Payments None
Contingent Deferred Sales Charge
(as a percentage of amount withdrawn
attributable to Purchase Payments) 8%(1)
Transfer Fee (per transfer) None
Annual Administration Charge $30(2)
-----------------------------------------------------------

-----------------------------------------------------------
ANNUAL SEPARATE ACCOUNT EXPENSES (as a percentage of each
Subaccount's average daily net assets)
-----------------------------------------------------------
Annual Mortality and Expense Risk Charge 1.20%
Total Separate Account Annual Expenses 1.20%
-----------------------------------------------------------

------------------------------------------------------------------------------------------
ANNUAL SBL FUND EXPENSES (as a percentage of each Series' average daily net assets)
------------------------------------------------------------------------------------------
BROKERAGE
PLAN
DISTRIBUTION TOTAL
ADVISORY (12b-1) OTHER SBL FUND
FEE FEES(2) EXPENSES EXPENSES
------------------------------------------------------------------------------------------
Equity (Series A) 0.75% 0.01% 0.07% 0.83%
------------------------------------------------------------------------------------------
Large Cap Value (Series B) 0.75% 0.10% 0.08% 0.93%
------------------------------------------------------------------------------------------
Money Market (Series C) 0.50% 0.00% 0.08% 0.58%
------------------------------------------------------------------------------------------
Global (Series D) 1.00% 0.00% 0.20% 1.20%
------------------------------------------------------------------------------------------
Diversified Income (Series E) 0.75% 0.00% 0.08% 0.83%
------------------------------------------------------------------------------------------
Large Cap Growth (Series G) 1.00% 0.01% 0.22% 1.23%
------------------------------------------------------------------------------------------
Enhanced Index (Series H) 0.75% 0.00% 0.16% 0.91%
------------------------------------------------------------------------------------------
International (Series I) 1.10% 0.00% 1.15% 2.25%
------------------------------------------------------------------------------------------
Mid Cap Growth (Series J) 0.75% 0.01% 0.08% 0.84%
------------------------------------------------------------------------------------------
Global Strategic Income (Series K) 0.75% 0.00% 0.78% 1.53%
------------------------------------------------------------------------------------------
Capital Growth (Series L) 1.00% 0.00% 0.20% 1.20%
------------------------------------------------------------------------------------------
Global Total Return (Series M) 1.00% 0.00% 0.53% 1.53%
------------------------------------------------------------------------------------------
Managed Asset Allocation (Series N) 1.00% 0.00% 0.25% 1.25%
------------------------------------------------------------------------------------------
Equity Income (Series O) 1.00% 0.04% 0.04% 1.08%
------------------------------------------------------------------------------------------
High Yield (Series P) 0.75% 0.00% 0.11% 0.86%
------------------------------------------------------------------------------------------
Small Cap Value (Series Q) 1.00% 0.00% 0.18% 1.18%
------------------------------------------------------------------------------------------
Social Awareness (Series S) 0.75% 0.00% 0.08% 0.83%
------------------------------------------------------------------------------------------
Technology (Series T) 1.00% 0.00% 0.46% 1.46%
------------------------------------------------------------------------------------------
Mid Cap Value (Series V) 0.75% 0.02% 0.08% 0.85%
------------------------------------------------------------------------------------------
Main Street Growth and Income(R)
(Series W) 1.00% 0.00% 0.25% 1.25%
------------------------------------------------------------------------------------------
Small Cap Growth (Series X) 1.00% 0.00% 0.15% 1.15%
------------------------------------------------------------------------------------------
Select 25 (Series Y) 0.75% 0.00% 0.13% 0.88%
------------------------------------------------------------------------------------------
1. The amount of the contingent deferred sales charge is determined by reference to the
Contract Year in which the withdrawal is made. Withdrawals in the first Contract Year
are subject to a charge of 8% declining to 0% in Contract Year 9 and later. The
contingent deferred sales charge schedule is different for the Variflex Contract -
401(k) and 408(k) and for a Contract issued to a Participant under a Section 403(b)
retirement plan sponsored by an institution of higher education as defined in the
Texas Education Code. See "Full and Partial Withdrawals," page 21 and "Contingent
Deferred Sales Charge," page 24 for more information.

2. The annual administration charge for the Variflex Contract - 401(k) and 408(k) is the
lesser of $30 or 2% of Contract Value.

3. Amounts included as distribution expenses under this caption are the amounts received
by the Fund's distributor under the Brokerage Plan in the last fiscal year in
connection with the purchase and sale of securities held by the Fund.
------------------------------------------------------------------------------------------

Example -- You would pay the expenses shown below assuming full withdrawal
of your Contract at the end of the applicable time period:

Example -- You would pay the expenses shown below assuming NO withdrawals
from your Contract:

--------------------------------------------------------------------------------
1 3 5 10
YEAR YEARS YEARS YEARS
--------------------------------------------------------------------------------
Equity Subaccount $22 $ 68 $116 $248
--------------------------------------------------------------------------------
Large Cap Value Subaccount 23 71 121 258
--------------------------------------------------------------------------------
Money Market Subaccount 19 60 103 222
--------------------------------------------------------------------------------
Global Subaccount 26 79 134 285
--------------------------------------------------------------------------------
Diversified Income Subaccount 22 68 116 248
--------------------------------------------------------------------------------
Large Cap Growth Subaccount 26 80 136 288
--------------------------------------------------------------------------------
Enhanced Index Subaccount 23 70 120 256
--------------------------------------------------------------------------------
International Subaccount 36 110 186 384
--------------------------------------------------------------------------------
Mid Cap Growth Subaccount 22 68 116 249
--------------------------------------------------------------------------------
Global Strategic Income Subaccount 29 89 151 318
--------------------------------------------------------------------------------
Capital Growth Subaccount 26 79 134 285
--------------------------------------------------------------------------------
Global Total Return Subaccount 29 89 151 318
--------------------------------------------------------------------------------
Managed Asset Allocation Subaccount 26 80 137 290
--------------------------------------------------------------------------------
Equity Income Subaccount 24 75 128 273
--------------------------------------------------------------------------------
High Yield Subaccount 22 69 117 251
--------------------------------------------------------------------------------
Small Cap Value Subaccount 25 78 133 283
--------------------------------------------------------------------------------
Social Awareness Subaccount 22 68 116 248
--------------------------------------------------------------------------------
Technology Subaccount 28 87 147 311
--------------------------------------------------------------------------------
Mid Cap Value Subaccount 22 68 117 250
--------------------------------------------------------------------------------
Main Street Growth and Income(R) Subaccount 26 80 137 290
--------------------------------------------------------------------------------
Small Cap Growth Subaccount 25 77 132 280
--------------------------------------------------------------------------------
Select 25 Subaccount 22 69 118 253
--------------------------------------------------------------------------------

Example - You would pay the expenses shown below assuming full withdrawal of
your Variflex Contract - 401(k) and 408(k) at the end of the applicable time
period:

--------------------------------------------------------------------------------
1 3 5 10
YEAR YEARS YEARS YEARS
--------------------------------------------------------------------------------
Equity Subaccount $102 $146 $186 $248
--------------------------------------------------------------------------------
Large Cap Value Subaccount 103 149 191 258
--------------------------------------------------------------------------------
Money Market Subaccount 99 139 173 222
--------------------------------------------------------------------------------
Global Subaccount 106 156 204 285
--------------------------------------------------------------------------------
Diversified Income Subaccount 102 146 186 248
--------------------------------------------------------------------------------
Large Cap Growth Subaccount 106 157 206 288
--------------------------------------------------------------------------------
Enhanced Index Subaccount 103 148 190 256
--------------------------------------------------------------------------------
International Subaccount 116 185 253 384
--------------------------------------------------------------------------------
Mid Cap Growth Subaccount 102 146 186 249
--------------------------------------------------------------------------------
Global Strategic Income Subaccount 109 165 221 318
--------------------------------------------------------------------------------
Capital Growth Subaccount 106 156 204 285
--------------------------------------------------------------------------------
Global Total Return Subaccount 109 165 221 318
--------------------------------------------------------------------------------
Managed Asset Allocation Subaccount 106 158 207 290
--------------------------------------------------------------------------------
Equity Income Subaccount 104 153 198 273
--------------------------------------------------------------------------------
High Yield Subaccount 102 147 187 251
--------------------------------------------------------------------------------
Small Cap Value Subaccount 105 156 203 283
--------------------------------------------------------------------------------
Social Awareness Subaccount 102 146 186 248
--------------------------------------------------------------------------------
Technology Subaccount 108 163 217 311
--------------------------------------------------------------------------------
Mid Cap Value Subaccount 102 146 187 250
--------------------------------------------------------------------------------
Main Street Growth and Income(R) Subaccount 106 158 207 290
--------------------------------------------------------------------------------
Small Cap Growth Subaccount 105 155 202 280
--------------------------------------------------------------------------------
Select 25 Subaccount 102 147 188 253
--------------------------------------------------------------------------------

Example -- You would pay the expenses shown below assuming NO withdrawals from
your Variflex Contract - 401(k) and 408(k):

--------------------------------------------------------------------------------
1 3 5 10
YEAR YEARS YEARS YEARS
--------------------------------------------------------------------------------
Equity Subaccount $22 $ 68 $116 $248
--------------------------------------------------------------------------------
Large Cap Value Subaccount 23 71 121 258
--------------------------------------------------------------------------------
Money Market Subaccount 19 60 103 222
--------------------------------------------------------------------------------
Global Subaccount 26 79 134 285
--------------------------------------------------------------------------------
Diversified Income Subaccount 22 68 116 248
--------------------------------------------------------------------------------
Large Cap Growth Subaccount 26 80 136 288
--------------------------------------------------------------------------------
Enhanced Index Subaccount 23 70 120 256
--------------------------------------------------------------------------------
International Subaccount 36 110 186 384
--------------------------------------------------------------------------------
Mid Cap Growth Subaccount 22 68 116 249
--------------------------------------------------------------------------------
Global Strategic Income Subaccount 29 89 151 318
--------------------------------------------------------------------------------
Capital Growth Subaccount 26 79 163 285
--------------------------------------------------------------------------------
Global Total Return Subaccount 29 89 151 318
--------------------------------------------------------------------------------
Managed Asset Allocation Subaccount 26 80 137 290
--------------------------------------------------------------------------------
Equity Income Subaccount 24 75 128 273
--------------------------------------------------------------------------------
High Yield Subaccount 22 69 117 251
--------------------------------------------------------------------------------
Small Cap Value Subaccount 25 78 133 283
--------------------------------------------------------------------------------
Social Awareness Subaccount 22 68 116 248
--------------------------------------------------------------------------------
Technology Subaccount 28 87 147 311
--------------------------------------------------------------------------------
Mid Cap Value Subaccount 22 68 117 250
--------------------------------------------------------------------------------
Main Street Growth and Income(R) Subaccount 26 80 137 290
--------------------------------------------------------------------------------
Small Cap Growth Subaccount 25 77 132 280
--------------------------------------------------------------------------------
Select 25 Subaccount 22 69 118 253
--------------------------------------------------------------------------------

CONDENSED FINANCIAL INFORMATION

--------------------------------------------------------------------------
QUALIFIED
--------------------------------------------
ACCUMULATION
BEGINNING END OF UNITS OUTSTANDING
SUBACCOUNT YEAR OF PERIOD PERIOD AT END OF PERIOD
--------------------------------------------------------------------------
Equity 2001 $66.40 $58.11 9,088,299
Subaccount 2000 77.04 66.40 10,078,355
1999 72.11 77.04 12,075,377
1998 58.19 72.11 11,996,953
1997 45.76 58.19 11,293,953
1996 37.75 45.76 10,310,079
1995 27.94 37.75 9,203,332
1994 28.75 27.94 7,723,910
1993 25.59 28.75 6,900,722
1992 23.30 25.59 6,640,177
--------------------------------------------------------------------------
Large Cap Value 2001 57.34 53.47 7,427,804
Subaccount 2000 62.24 57.34 8,480,619
1999 61.86 62.24 12,276,284
1998 58.22 61.86 14,055,295
1997 46.58 58.22 15,086,547
1996 39.88 46.58 15,264,292
1995(c) 31.03 39.88 14,963,215
1994 32.37 31.03 14,312,801
1993 29.89 32.37 13,236,948
1992 28.47 29.89 11,381,462
--------------------------------------------------------------------------
Money Market 2001 21.34 21.87 2,359,410
Subaccount 2000 20.38 21.34 2,127,226
1999 19.71 20.38 3,379,114
1998 18.97 19.71 3,068,671
1997 18.26 18.97 2,479,744
1996 17.59 18.26 3,252,140
1995 16.89 17.59 2,989,809
1994 16.48 16.89 3,578,026
1993 16.26 16.48 2,680,809
1992 15.94 16.26 2,373,251
--------------------------------------------------------------------------
Global Subaccount 2001 28.12 24.38 11,806,980
2000 27.49 28.12 13,345,698
1999 18.11 27.49 12,753,536
1998 15.26 18.11 12,848,790
1997 14.51 15.26 12,804,601
1996 12.51 14.51 11,881,450
1995 11.42 12.51 10,236,349
1994 11.25 11.42 9,361,197
1993 8.65 11.25 5,863,967
1992 8.99 8.65 2,070,715
--------------------------------------------------------------------------
Diversified 2001 25.66 27.17 2,412,919
Income Subaccount 2000 23.92 25.66 2,354,855
1999 25.16 23.92 3,698,583
1998 23.58 25.16 3,419,362
1997 21.69 23.58 3,446,850
1996 22.11 21.69 3,673,833
1995 18.87 22.11 3,912,046
1994 20.52 18.87 3,891,426
1993 18.44 20.52 3,731,587
1992 17.37 18.44 2,912,605
--------------------------------------------------------------------------
Large Cap Growth 2001 7.91 6.61 808,629
Subaccount 2000(e) 10.00 7.91 24,399
--------------------------------------------------------------------------
Enhanced Index 2001 $ 9.88 $ 8.50 1,925,639
Subaccount 2000 11.14 9.88 53,493
1999(d) 10.00 11.14 564,455
--------------------------------------------------------------------------
International 2001 10.15 7.57 653,966
Subaccount 2000 12.89 10.15 11,181
1999(d) 10.00 12.89 95,066
--------------------------------------------------------------------------
Mid Cap Growth 2001 45.95 38.63 7,902,865
Subaccount 2000 39.83 45.95 9,476,967
1999 24.90 39.83 6,970,985
1998 21.37 24.91 6,781,176
1997 18.03 21.37 6,738,379
1996 15.46 18.03 5,563,881
1995 13.10 15.46 4,387,739
1994 13.97 13.10 3,947,047
1993 12.44 13.97 2,131,858
1992(a) 10.00 12.44 455,105
--------------------------------------------------------------------------
Global Strategic 2001 13.51 14.20 497,189
Income Subaccount 2000 13.19 13.51 298,376
1999 13.20 13.19 362,783
1998 12.50 13.20 398,409
1997 12.00 12.50 425,354
1996 10.69 12.00 306,339
1995(b) 10.00 10.69 129,589
--------------------------------------------------------------------------
Capital Growth 2001 7.99 6.73 1,336,931
Subaccount 2000(e) 10.00 7.99 69,633
--------------------------------------------------------------------------
Global Total Return 2001 13.95 11.98 1,079,718
Subaccount 2000 15.78 13.95 1,197,345
1999 14.01 15.78 1,363,679
1998 12.59 14.01 1,545,270
1997 12.01 12.59 1,672,896
1996 10.64 12.01 1,274,106
1995(b) 10.00 10.64 611,652
--------------------------------------------------------------------------
Managed Asset 2001 17.25 16.18 2,258,069
Allocation 2000 17.63 17.25 1,990,484
Subaccount 1999 16.26 17.63 2,289,208
1998 13.89 16.26 1,950,323
1997 11.87 13.89 1,057,271
1996 10.66 11.87 626,179
1995(b) 10.00 10.66 295,053
--------------------------------------------------------------------------
Equity Income 2001 21.40 21.42 4,369,075
Subaccount 2000 19.19 21.40 4,034,469
1999 18.83 19.19 5,492,102
1998 17.49 18.83 5,369,499
1997 13.78 17.49 4,135,375
1996 11.62 13.78 2,016,966
1995(b) 10.00 11.62 604,325
--------------------------------------------------------------------------
High Yield 2001 12.09 12.48 509,774
Subaccount 2000 12.43 12.09 2,576
1999 12.43 12.43 89,145
--------------------------------------------------------------------------
Small Cap Value 2001 10.65 12.86 2,165,394
Subaccount 2000(e) 10.00 10.65 22,150
--------------------------------------------------------------------------
Social Awareness 2001 29.38 25.24 3,950,615
Subaccount 2000 34.16 29.38 4,339,513
1999 29.50 34.16 4,298,149
1998 22.72 29.50 3,152,738
1997 18.75 22.72 2,531,119
1996 15.97 18.75 2,083,090
1995 12.65 15.97 1,615,845
1994 13.31 12.65 1,344,063
1993 12.04 13.31 993,233
1992 10.47 12.04 513,953
--------------------------------------------------------------------------
Technology 2001 6.08 4.56 1,896,347
Subaccount 2000(e) 10.00 6.08 97,027
--------------------------------------------------------------------------
Mid Cap Value 2001 23.29 25.58 3,062,821
Subaccount 2000 17.62 23.29 97,916
1999 14.89 17.62 577,404
--------------------------------------------------------------------------
Main Street Growth 2001 8.95 7.95 1,812,239
and Income(R) 2000(e) $10.00 $ 8.95 28,963
Subaccount
--------------------------------------------------------------------------
Small Cap Growth 2001 17.57 12.52 3,216,970
Subaccount 2000 19.48 17.57 65,591
1999 10.31 19.48 992,293
--------------------------------------------------------------------------
Select 25 Subaccount 2001 10.17 9.05 2,961,348
2000 12.24 10.17 34,746
1999(d) 10.00 12.24 1,226,865
--------------------------------------------------------------------------

--------------------------------------------------------------------------
NON-QUALIFIED
--------------------------------------------
ACCUMULATION UNITS
BEGINNING END OF OUTSTANDING AT END
SUBACCOUNT YEAR OF PERIOD PERIOD OF PERIOD
--------------------------------------------------------------------------
Equity 2001 $66.37 $58.09 1,816,980
Subaccount 2000 77.00 66.37 2,036,358
1999 72.07 77.00 2,537,119
1998 58.17 72.07 2,665,560
1997 45.74 58.17 2,652,767
1996 37.74 45.74 2,575,426
1995 27.92 37.74 2,306,163
1994 28.74 27.92 1,578,797
1993 25.58 28.74 1,483,618
1992 23.30 25.58 1,766,896
--------------------------------------------------------------------------
Large Cap Value 2001 57.29 53.43 1,741,418
Subaccount 2000 62.18 57.29 2,055,288
1999 61.81 62.18 2,867,661
1998 58.17 61.81 3,323,526
1997 46.54 58.17 3,653,913
1996 39.84 46.54 3,721,884
1995(c) 31.00 39.84 3,669,299
1994 32.34 31.00 3,515,364
1993 29.87 32.34 3,262,600
1992 28.44 29.87 2,560,986
--------------------------------------------------------------------------
Money Market 2001 21.34 21.87 1,092,929
Subaccount 2000 20.38 21.34 1,281,580
1999 19.71 20.38 1,790,781
1998 18.98 19.71 1,314,658
1997 18.26 18.98 1,089,550
1996 17.59 18.26 1,681,230
1995 16.89 17.59 1,469,153
1994 16.48 16.89 2,475,349
1993 16.26 16.48 1,913,212
1992 15.94 16.26 1,031,855
--------------------------------------------------------------------------
Global Subaccount 2001 28.12 24.38 2,685,983
2000 27.49 28.12 3,288,694
1999 18.11 27.49 3,373,269
1998 15.26 18.11 3,724,722
1997 14.51 15.26 3,730,734
1996 12.51 14.51 3,484,411
1995 11.42 12.51 3,140,486
1994 11.25 11.42 2,803,304
1993 8.65 11.25 2,150,932
1992 8.99 8.65 678,110
--------------------------------------------------------------------------
Diversified 2001 25.64 27.15 896,039
Income Subaccount 2000 23.90 25.64 1,003,346
1999 25.14 23.90 1,121,142
1998 23.56 25.14 1,321,999
1997 21.67 23.56 1,535,471
1996 22.09 21.67 1,377,342
1995 18.85 22.09 1,325,159
1994 20.50 18.85 1,392,830
1993 18.42 20.50 1,290,268
1992 17.36 18.42 962,775
--------------------------------------------------------------------------
Large Cap Growth 2001 7.91 6.61 222,143
Subaccount 2000(e) 10.00 7.91 673,725
--------------------------------------------------------------------------
Enhanced Index 2001 $ 9.88 $ 8.50 302,681
Subaccount 2000 11.14 9.88 2,181,834
1999(d) 10.00 11.14 148,669
--------------------------------------------------------------------------
International 2001 10.15 7.57 257,938
Subaccount 2000 12.89 10.15 717,135
1999(d) 10.00 12.89 27,983
--------------------------------------------------------------------------
Mid Cap Growth 2001 45.93 38.62 1,933,000
Subaccount 2000 39.81 45.93 1,270,378
1999 24.89 39.81 1,930,663
1998 21.36 24.89 2,140,621
1997 18.03 21.36 2,019,008
1996 15.46 18.03 1,559,302
1995 13.09 15.46 1,248,987
1994 13.96 13.09 1,211,099
1993 12.44 13.96 610,801
1992(a) 10.00 12.44 68,338
--------------------------------------------------------------------------
Global Strategic 2001 13.51 14.20 175,220
Income Subaccount 2000 13.19 13.51 151,984
1999 13.20 13.19 155,100
1998 12.49 13.20 180,061
1997 12.00 12.49 212,934
1996 10.69 12.00 178,818
1995(b) 10.00 10.69 74,528
--------------------------------------------------------------------------
Capital Growth 2001 7.99 6.73 163,517
Subaccount 2000(e) 10.00 7.99 1,182,612
--------------------------------------------------------------------------
Global Total Return 2001 13.95 11.97 345,102
Subaccount 2000 15.77 13.95 417,905
1999 14.01 15.77 501,463
1998 12.59 14.01 585,003
1997 12.00 12.59 687,020
1996 10.64 12.00 532,893
1995(b) 10.00 10.64 297,967
--------------------------------------------------------------------------
Managed Asset 2001 17.25 16.18 654,507
Allocation 2000 17.63 17.25 687,389
Subaccount 1999 16.26 17.63 742,405
1998 13.89 16.26 739,827
1997 11.87 13.89 459,560
1996 10.66 11.87 374,276
1995(b) 10.00 10.66 226,555
--------------------------------------------------------------------------
Equity Income 2001 21.39 21.42 1,080,433
Subaccount 2000 19.18 21.39 1,046,838
1999 18.83 19.18 1,379,765
1998 17.48 18.83 1,427,599
1997 13.78 17.48 1,257,818
1996 11.62 13.78 710,206
1995(b) 10.00 11.62 234,242
--------------------------------------------------------------------------
High Yield 2001 12.09 12.48 172,694
Subaccount 2000 12.43 12.09 301,772
1999 12.43 12.43 95,775
--------------------------------------------------------------------------
Small Cap Value 2001 10.65 12.86 601,352
Subaccount 2000(e) 10.00 10.65 231,015
--------------------------------------------------------------------------
Social Awareness 2001 29.41 25.25 992,868
Subaccount 2000 34.17 29.41 1,167,835
1999 29.51 34.17 1,188,307
1998 22.73 29.51 1,036,280
1997 18.75 22.73 904,831
1996 15.98 18.75 746,852
1995 12.66 15.98 612,235
1994 13.31 12.66 543,287
1993 12.04 13.31 389,861
1992 10.47 12.04 226,145
--------------------------------------------------------------------------
Technology 2001 6.08 4.56 430,690
Subaccount 2000(e) 10.00 6.08 1,432,636
--------------------------------------------------------------------------
Mid Cap Value 2001 23.29 25.58 703,426
Subaccount 2000 17.62 23.29 2,518,107
1999 14.89 17.62 189,495
--------------------------------------------------------------------------
Main Street Growth 2001 8.95 7.95 426,747
and Income(R) 2000(e) $10.00 $ 8.95 1,268,805
Subaccount
--------------------------------------------------------------------------
Small Cap Growth 2001 17.57 12.52 806,870
Subaccount 2000 19.48 17.57 4,570,554
1999 10.31 19.48 319,874
--------------------------------------------------------------------------
Select 25 Subaccount 2001 10.17 9.05 609,728
2000 12.24 10.17 4,097,819
1999(d) 10.00 12.24 318,343
--------------------------------------------------------------------------
(a) Mid Cap Growth Subaccount was first publicly offered on October 1, 1992.

(b) Global Strategic Income, Global Total Return, Managed Asset Allocation and
Equity Income Subaccounts were first publicly offered on June 1, 1995.

(d) Accumulation unit values for Enhanced Index, International and Select 25
Subaccounts are for the period May 3, 1999 (the date first publicly offered)
to December 31, 1999.

INFORMATION ABOUT SECURITY BENEFIT, THE SEPARATE ACCOUNT, AND SBL FUND

SECURITY BENEFIT LIFE INSURANCE COMPANY -- Security Benefit is a life insurance
company organized under the laws of the State of Kansas. It was organized
originally as a fraternal benefit society and commenced business February 22,
1892. It became a mutual life insurance company under its present name on
January 2, 1950.

On July 31, 1998, Security Benefit converted from a mutual life insurance
company to a stock life insurance company ultimately controlled by Security
Benefit Mutual Holding Company, a Kansas mutual holding company. Membership
interests of persons who were Contractowners as of July 31, 1998 became
membership interests in Security Benefit Mutual Holding Company as of that date,
and persons who acquire policies from Security Benefit after that date
automatically become members in the mutual holding company.

Security Benefit offers life insurance policies and annuity contracts, as
well as financial and retirement services. It is admitted to do business in the
District of Columbia, and in all states except New York. As of the end of 2001,
the Company had total assets of approximately $7.9 billion. Together with its
subsidiaries, the Company has total funds under management of approximately $9.8
billion.

The Principal Underwriter for the Contracts is Security Distributors, Inc.
("SDI"), One Security Benefit Place, Topeka, Kansas 66636-0001. SDI is
registered as a broker/dealer with the SEC and is a wholly-owned subsidiary of
Security Benefit Group, Inc., a financial services holding company wholly owned
by Security Benefit.

PUBLISHED RATINGS -- Security Benefit may from time to time publish in
advertisements, sales literature and reports to Owners, the ratings and other
information assigned to it by one or more independent rating organizations such
as A.M. Best Company and Standard & Poor's. The purpose of the ratings is to
reflect the financial strength and/or claims-paying ability of Security Benefit
and should not be considered as bearing on the investment performance of assets
held in the Separate Account. Each year A.M. Best Company reviews the financial
status of thousands of insurers, culminating in the assignment of Best's
Ratings. These ratings reflect their current opinion of the relative financial
strength and operating performance of an insurance company in comparison to the
norms of the life/health insurance industry. In addition, the claims-paying
ability of Security Benefit as measured by Standard & Poor's Insurance Ratings
Services may be referred to in advertisements or sales literature or in reports
to Owners. These ratings are opinions of an operating insurance company's
financial capacity to meet the obligations of its insurance and annuity policies
in accordance with their terms. Such ratings do not reflect the investment
performance of the Separate Account or the degree of risk associated with an
investment in the Separate Account.

SEPARATE ACCOUNT -- Security Benefit established the Separate Account under
Kansas law on January 31, 1984. The Contract provides that the income, gains, or
losses of the Separate Account, whether or not realized, are credited to or
charged against the assets of the Separate Account without regard to other
income, gains, or losses of Security Benefit. Kansas law provides that assets in
a separate account attributable to the reserves and other liabilities under the
contracts may not be charged with liabilities arising from any other business
that the insurance company conducts if, and to the extent the contracts so
provide. The Contract contains such a provision. Security Benefit owns the
assets in the Separate Account and is required to maintain sufficient assets in
the Separate Account to meet all Separate Account obligations under the
Contracts. Security Benefit may transfer to its General Account assets that
exceed anticipated obligations of the Separate Account. All obligations arising
under the Contracts are general corporate obligations of Security Benefit.
Security Benefit may invest its own assets in the Separate Account for other
purposes, but not to support contracts other than variable annuity contracts,
and may accumulate in the Separate Account proceeds from Contract charges and
investment results applicable to those assets.

The Separate Account is currently divided into twenty-two Subaccounts. The
Contract provides that the income, gains and losses, whether or not realized,
are credited to, or charged against, the assets of each Subaccount without
regard to the income, gains or losses in the other Subaccounts. Each Subaccount
invests exclusively in shares of a specific Series of SBL Fund. Security Benefit
may in the future establish additional Subaccounts of the Separate Account,
which may invest in other Series of SBL Fund or in other securities, mutual
funds, or investment vehicles.

The Separate Account is registered with the SEC as a unit investment trust
under the Investment Company Act of 1940 (the "1940 Act"). Registration with the
SEC does not involve supervision by the SEC of the administration or investment
practices of the Separate Account or of Security Benefit.

SBL FUND -- SBL Fund is an open-end management investment company of the series
type. It is registered with the SEC under the 1940 Act. Such registration does
not involve supervision by the SEC of the investments or investment policy of
the Fund. SBL Fund currently has twenty-two separate portfolios ("Series"), each
of which pursues different investment objectives and policies.

Shares of the Fund currently are offered only for purchase by separate
accounts of Security Benefit to serve as an investment medium for variable life
insurance policies and variable annuity contracts issued by Security Benefit.
Thus, SBL Fund serves as an investment medium for both variable life insurance
policies and variable annuity contracts. This is called "mixed funding." Shares
of SBL Fund also may be sold in the future to separate accounts of other
insurance companies, both affiliated and not affiliated with Security Benefit.
This is called "shared funding." Security Benefit currently does not foresee any
disadvantages to Contractowners arising from either mixed or shared funding;
however, due to differences in tax treatment or other considerations, it is
theoretically possible that the interests of owners of various contracts for
which SBL Fund serves as an investment medium might at some time be in conflict.
However, Security Benefit, the Fund's Board of Directors, and any other
insurance companies that participate in SBL Fund in the future are required to
monitor events in order to identify any material conflicts that arise from the
use of the Fund for mixed and/or shared funding. SBL Fund's Board of Directors
is required to determine what action, if any, should be taken in the event of
such a conflict. If such a conflict were to occur, Security Benefit might be
required to withdraw the investment of one or more of its separate accounts from
SBL Fund. This might force the Fund to sell securities at disadvantageous
prices.

A summary of the investment objective of each Series of SBL Fund is set
forth below. We cannot assure that any Series will achieve its objective. More
detailed information is contained in the accompanying prospectus of SBL Fund,
including information on the risks associated with the investments and
investment techniques of each Series.

SBL FUND'S PROSPECTUS ACCOMPANIES THIS PROSPECTUS AND SHOULD BE READ
CAREFULLY BEFORE INVESTING.

SERIES A (EQUITY SERIES) -- Amounts that you allocate to the Equity Subaccount
are invested in Series A. The investment objective of Series A is to seek
long-term capital growth by investing at least 80% of its net assets in a
broadly diversified portfolio of equity securities, which may include ADRs and
convertible securities.

SERIES B (LARGE CAP VALUE SERIES) -- Amounts that you allocate to the Large Cap
Value Subaccount are invested in Series B. Series B seeks long-term growth of
capital by investing at least 80% of its net assets in large-capitalization
value companies. The Series' stock investments may include common stocks,
preferred stocks and convertible securities of both U.S. issuers and U.S.
dollar-denominated foreign issuers. Series B may temporarily invest in cash,
government bonds or money market securities.

SERIES C (MONEY MARKET SERIES) -- Amounts that you allocate to the Money Market
Subaccount are invested in Series C. The investment objective of Series C is to
provide as high a level of current income as is consistent with preserving
capital. It invests in high quality money market instruments with maturities of
not longer than thirteen months.

SERIES D (GLOBAL SERIES) -- Amounts that you allocate to the Global Subaccount
are invested in Series D. The investment objective of Series D is to seek
long-term growth of capital primarily through investment in common stocks and
equivalents of companies domiciled in foreign countries and the United States.

SERIES E (DIVERSIFIED INCOME SERIES) -- Amounts that you allocate to the
Diversified Income Subaccount are invested in Series E. The investment objective
of Series E is to provide current income with security of principal. Series E
seeks to achieve this investment objective by investing primarily in a
diversified portfolio of investment-grade debt securities. The debt securities
in which Series E invests will primarily be domestic securities, but may also
include dollar denominated foreign securities.

SERIES G (LARGE CAP GROWTH SERIES) -- Amounts that you allocate to the Large Cap
Growth Subaccount are invested in Series G. The investment objective of Series G
is to seek long-term capital growth by investing at least 80% of its net assets
in common stock and other equity securities of large capitalization companies
(defined as companies whose total market value is at least $5 billion at the
time of purchase).

SERIES H (ENHANCED INDEX SERIES) -- Amounts that you allocate to the Enhanced
Index Subaccount are invested in Series H. The investment objective of Series H
is to seek to outperform the S&P 500 Index through stock selection resulting in
different weightings of common stocks relative to the index.

SERIES I (INTERNATIONAL SERIES) -- Amounts that you allocate to the
International Subaccount are invested in Series I. The investment objective of
Series I is to seek long-term capital appreciation by investing primarily in
non-U.S. equity securities and other securities with equity characteristics.

SERIES J (MID CAP GROWTH SERIES) -- Amounts that you allocate to the Mid Cap
Growth Subaccount are invested in Series J. The investment objective of Series J
is to seek capital appreciation by investing at least 80% of its net assets in a
diversified portfolio of equity securities with market capitalizations of $10
billion or less at the time of investment.

SERIES K (GLOBAL STRATEGIC INCOME SERIES) -- Amounts that you allocate to the
Global Strategic Income Subaccount are invested in Series K. The investment
objective of Series K is to seek high current income and, as a secondary
objective, capital appreciation by investing in a combination of foreign and
domestic debt securities, including bonds, notes, debentures, preferred stock
and high-yield securities (commonly known as "junk bonds").

SERIES L (CAPITAL GROWTH SERIES) -- Amounts that you allocate to the Capital
Growth Subaccount are invested in Series L. The investment objective of Series L
is to seek growth of capital by pursuing aggressive investment policies
primarily in equity securities of U.S. companies.

SERIES M (GLOBAL TOTAL RETURN SERIES) -- Amounts that you allocate to the Global
Total Return Subaccount are invested in Series M. The investment objective of
Series M is to seek high total return consisting of capital appreciation and
current income. Series M seeks this objective through asset allocation and
security selection by investing in a diversified portfolio of global equity and
fixed income securities.

SERIES N (MANAGED ASSET ALLOCATION SERIES) -- Amounts that you allocate to the
Managed Asset Allocation Subaccount are invested in Series N. The investment
objective of Series N is to seek a high level of total return by investing
primarily in a diversified portfolio of debt and equity securities.

SERIES O (EQUITY INCOME SERIES) -- Amounts that you allocate to the Equity
Income Subaccount are invested in Series O. The investment objective of Series O
is to seek to provide substantial dividend income and also capital appreciation
by investing primarily in dividend-paying common stocks of established
companies.

SERIES P (HIGH YIELD SERIES) -- Amounts that you allocate to the High Yield
Subaccount are invested in Series P. The investment objective of Series P is to
seek high current income. Capital appreciation is a secondary objective. Series
P seeks its objectives by investing at least 80% of its net assets in higher
yielding, higher risk debt securities (commonly referred to as "junk bonds").

SERIES Q (SMALL CAP VALUE SERIES) -- Amounts that you allocate to the Small Cap
Value Subaccount are invested in Series Q. The investment objective of Series Q
is to seek capital growth by investing at least 80% of its net assets in
securities of small capitalization companies (defined as companies with a market
capitalization substantially similar to that of companies in the Russell 2500TM
Index at the time of investment).

SERIES S (SOCIAL AWARENESS SERIES) -- Amounts that you allocate to the Social
Awareness Subaccount are invested in Series S. The investment objective of
Series S is to seek capital appreciation by investing in a well-diversified
portfolio of equity securities that the Investment Adviser believes have
above-average earnings potential and which meet certain established social
criteria. The Series also may invest in companies that are included in the
Domini 400 Social IndexSM, which companies will be deemed to comply with the
Series' social criteria.

SERIES T (TECHNOLOGY SERIES) -- Amounts that you allocate to the Technology
Subaccount are invested in Series T. The investment objective of Series T is to
seek long-term capital appreciation by investing at least 80% of its net assets
in the equity securities of technology companies.

SERIES V (MID CAP VALUE SERIES) -- Amounts that you allocate to the Mid Cap
Value Subaccount are invested in Series V. The investment objective of Series V
is to seek long-term growth of capital by investing at least 80% of its net
assets in a diversified portfolio of equity securities with market
capitalizations of $10 billion or less at the time of investment. The Series
will invest in stocks that the Investment Adviser believes are undervalued
relative to assets, earnings, growth potential or cash flow.

SERIES W (MAIN STREET GROWTH AND INCOME(R) SERIES) -- Amounts that you allocate
to the Main Street Growth and Income(R) Subaccount are invested in Series W. The
investment objective of Series W is to seek high total return (which includes
growth in the value of its shares as well as current income) from equity and
debt securities.

SERIES X (SMALL CAP GROWTH SERIES) -- Amounts that you allocate to the Small Cap
Growth Subaccount are invested in Series X. The investment objective of Series X
is to seek long-term growth of capital by investing at least 80% of its net
assets in equity securities of domestic and foreign companies with market
capitalizations substantially similar to that of companies in the Russell 2000TM
Growth Index at the time of investment).

SERIES Y (SELECT 25 SERIES) -- Amounts that you allocate to the Select 25
Subaccount are invested in Series Y. The investment objective of Series Y is to
seek long-term growth of capital by concentrating its investments in a core
position of 20-30 common stocks of growth companies which have exhibited
consistent above average earnings growth.

THE INVESTMENT ADVISER -- Security Management Company, LLC, One Security Benefit
Place, Topeka, Kansas 66636, serves as Investment Adviser to each Series of SBL
Fund. The Investment Adviser is registered with the SEC as an investment
adviser. The Investment Adviser formulates and implements continuing programs
for the purchase and sale of securities in compliance with the investment
objectives, policies, and restrictions of each Series, and is responsible for
the day to day decisions to buy and sell securities for the Series except Large
Cap Value, Global, Enhanced Index, International, Global Strategic Income,
Capital Growth, Global Total Return, Managed Asset Allocation, Equity Income,
Small Cap Value, Technology, Main Street Growth and Income(R), and Small Cap
Growth Series. See the accompanying SBL Fund prospectus for details. The
Investment Adviser has engaged The Dreyfus Corporation, 200 Park Avenue, New
York, New York 10166, to provide investment advisory services to Large Cap Value
Series; OppenheimerFunds, Inc., 498 Seventh Avenue, New York, New York 10018, to
provide investment advisory services to Global Series and Main Street Growth and
Income(R) Series; Deutsche Asset Management, Inc., 280 Park Avenue, New York,
New York 10017 to provide investment advisory services to Enhanced Index Series
and International Series; Wellington Management Company LLP, 75 State Street,
Boston, Massachusetts 02109 to provide investment advisory services to Global
Strategic Income Series, Global Total Return Series and Technology Series; T.
Rowe Price Associates, Inc., 100 East Pratt Street, Baltimore, Maryland 21202 to
provide investment advisory services to Managed Asset Allocation Series and
Equity Income Series; Strong Capital Management Corporation, 100 Heritage
Reserve, Menomonee, Wisconsin 53051 to provide investment advisory services to
Small Cap Value Series and Small Cap Growth Series; and Alliance Capital
Management L.P., 1345 Avenue of the Americas, New York, New York 10105 to
provide investment advisory services to Capital Growth Series.

THE CONTRACT

GENERAL -- Security Benefit issues the Contract offered by this Prospectus. It
is a flexible purchase payment deferred variable annuity. It is also available
as a single purchase payment immediate variable annuity. To the extent that you
allocate all or a portion of your purchase payments to the Subaccounts, the
Contract is significantly different from a fixed annuity contract in that you
assume the risk of investment gain or loss under the Contract rather than
Security Benefit. When you are ready to begin receiving annuity payments, the
Contract provides several Annuity Options under which Security Benefit will pay
periodic annuity payments on a variable basis, a fixed basis or both, beginning
on the Annuity Commencement Date. The amount that will be available for annuity
payments will depend on the investment performance of the Subaccounts to which
you have allocated purchase payments and the amount of interest credited on
Contract Value that you have allocated to the Fixed Account.

The Contract is available for purchase by an individual or group as a
non-tax qualified retirement plan ("Non-Qualified Plan"). The Contract is also
eligible for purchase in connection with certain tax qualified retirement plans
that meet the requirements of Section 401, 403(b), 408, 408A, or 457 of the
Internal Revenue Code ("Qualified Plan"). Certain federal tax advantages are
currently available to retirement plans that qualify as (1) self-employed
individuals' retirement plans under Section 401, such as HR-10 and Keogh plans,
(2) pension or profit-sharing plans established by an employer for the benefit
of its employees under Section 401, (3) traditional and Roth individual
retirement accounts or annuities, including traditional IRAs established by an
employer under a simplified employees pension plan, or a SIMPLE IRA plan, under
Section 408, (4) annuity purchase plans of public school systems and certain
tax-exempt organizations under Section 403(b) or (5) deferred compensation plans
for employees established by a unit of a state or local government or by a
tax-exempt organization under Section 457. Joint Owners are permitted only on a
Contract issued pursuant to a Non-Qualified Plan.

TYPES OF VARIFLEX CONTRACTS -- Different types of the Contract are offered by
Security Benefit through this Prospectus. The types of the Contract vary in the
amount and timing of the minimum purchase payments, and in various other
respects. The different types of the Contract are described below:

SINGLE PURCHASE PAYMENT IMMEDIATE ANNUITY. This type of Contract is used
for an individual where a single purchase payment has been allocated to provide
for annuity payments to commence immediately.

FLEXIBLE PURCHASE PAYMENT DEFERRED ANNUITY. This type of Contract is used
for an individual where periodic purchase payments will be made with annuity
payments to commence at a later date.

GROUP FLEXIBLE PURCHASE PAYMENT DEFERRED ANNUITY CONTRACT. This type of
Contract is used when purchase payments under group plans are to be accumulated
until the retirement date of each Participant. Under a Group Allocated Contract,
Contract Value is established for each Participant for whom payments are being
made and the benefit at retirement will be determined by your Contract Value at
that time.

Under a Group Unallocated Contract, the purchase payments are not allocated
to the individual Participants but are credited to the Contractowner's account.
When a Participant becomes entitled to receive payments under the provisions of
the Plan, the appropriate amount of Contract Value may be withdrawn by the
Contractowner to provide the Participant with an annuity.

APPLICATION FOR A CONTRACT -- If you wish to purchase a Contract, you may submit
an application and an initial purchase payment to Security Benefit, as well as
any other form or information that Security Benefit may require. Security
Benefit reserves the right to reject an application or purchase payment for any
reason, subject to Security Benefit's underwriting standards and guidelines and
any applicable state or federal law relating to nondiscrimination.

The maximum age of an Owner or Annuitant for which a Contract will be
issued is age 80 (age 75 for Contracts issued in Florida). If there are Joint
Owners or Annuitants, the maximum issue age will be determined by reference to
the older Owner or Annuitant.

PURCHASE PAYMENTS -- The minimum initial purchase payment is $500 for a Contract
funding a Non-Qualified Plan or Group Unallocated Contract, $25 for a Contract
funding a Qualified Plan and $2,500 for single purchase payment immediate
annuity. Thereafter, you may choose the amount and frequency of purchase
payments, except that the minimum subsequent purchase payment is $25. Security
Benefit does not permit subsequent purchase payments for a single purchase
payment immediate annuity. Total purchase payments exceeding $1 million will not
be accepted without prior approval of Security Benefit.

Security Benefit will apply the initial purchase payment not later than the
end of the second Valuation Date after the Valuation Date it is received by
Security Benefit; provided that the purchase payment is preceded or accompanied
by an application that contains sufficient information to establish an account
and properly credit such purchase payment. The application form will be provided
by Security Benefit. If Security Benefit does not receive a complete
application, Security Benefit will notify you that it does not have the
necessary information to issue a Contract. If you do not provide the necessary
information to Security Benefit within five Valuation Dates after the Valuation
Date on which Security Benefit first receives the initial purchase payment or if
Security Benefit determines it cannot otherwise issue the Contract, Security
Benefit will return the initial purchase payment to you unless you consent to
Security Benefit retaining the purchase payment until the application is made
complete.

Security Benefit will credit subsequent purchase payments as of the end of
the Valuation Period in which they are received by Security Benefit at its Home
Office. Purchase payments after the initial purchase payment may be made at any
time prior to the Annuity Commencement Date, so long as the Owner is living.
Subsequent purchase payments under a Qualified Plan may be limited by the terms
of the plan and provisions of the Internal Revenue Code.

ALLOCATION OF PURCHASE PAYMENTS -- In an application for a Contract, you select
the Subaccounts or the Fixed Account to which purchase payments will be
allocated. Purchase payments will be allocated according to your instructions
contained in the application or more recent instructions received, if any,
except that no purchase payment allocation is permitted that would result in
less than $25 per payment being allocated to any one Subaccount or the Fixed
Account. The allocations must be a whole dollar or whole percentage. Available
allocation alternatives include the twenty-two Subaccounts and the Fixed
Account.

You may change the purchase payment allocation instructions by submitting a
proper written request to Security Benefit's Home Office. A proper change in
allocation instructions will be effective upon receipt by Security Benefit at
its Home Office and will continue in effect until you submit a change in
instructions to the company. You may make changes in your purchase payment
allocation and changes to an existing Dollar Cost Averaging or Asset
Reallocation Option by telephone provided the Telephone Transfer section of the
application or the proper form is completed, signed, and filed at Security
Benefit's Home Office. Changes in the allocation of future purchase payments
have no effect on existing Contract Value. You may, however, transfer Contract
Value among the Subaccounts and the Fixed Account in the manner described in
"Transfers of Contract Value," page 20.

DOLLAR COST AVERAGING OPTION -- Prior to the Annuity Commencement Date, you may
dollar cost average your Contract Value by authorizing Security Benefit to make
periodic transfers of Contract Value from any one Subaccount to one or more of
the other Subaccounts. Dollar cost averaging is a systematic method of investing
in which securities are purchased at regular intervals in fixed dollar amounts
so that the cost of the securities gets averaged over time and possibly over
various market cycles. The option will result in the transfer of Contract Value
from one Subaccount to one or more of the other Subaccounts. Amounts transferred
under this option will be credited at the price of the Subaccount as of the end
of the Valuation Dates on which the transfers are effected. Since the price of a
Subaccount's Accumulation Units will vary, the amounts transferred to a
Subaccount will result in the crediting of a greater number of units when the
price is low and a lesser number of units when the price is high. Similarly, the
amounts transferred from a Subaccount will result in a debiting of a greater
number of units when the price is low and a lesser number of units when the
price is high. Dollar cost averaging does not guarantee profits, nor does it
assure that you will not have losses.

An Asset Reallocation/Dollar Cost Averaging form is available upon request.
On the form, you must designate whether Contract Value is to be transferred on
the basis of a specific dollar amount, fixed period or earnings only, the
Subaccount or Subaccounts to and from which the transfers will be made, the
desired frequency of the transfers, which may be on a monthly or quarterly
basis, and the length of time during which the transfers shall continue or the
total amount to be transferred over time.

After Security Benefit has received a Dollar Cost Averaging Request in
proper form at its Home Office, Security Benefit will transfer Contract Value in
the amounts you designate from the Subaccount from which transfers are to be
made to the Subaccount or Subaccounts you have chosen. The minimum amount that
you may transfer each month or quarter to any one Subaccount is $25. Security
Benefit will effect each transfer on the date you specify or if no date is
specified, on the monthly or quarterly anniversary, whichever corresponds to the
period selected, of the date of receipt at the Home Office of a Dollar Cost
Averaging Request in proper form. Transfers will be made until the total amount
elected has been transferred, or until Contract Value in the Subaccount from
which transfers are made has been depleted. Amounts periodically transferred
under this option are not currently subject to any transfer charges.

You may instruct Security Benefit at any time to terminate the option by
written request to Security Benefit's Home Office. In that event, the Contract
Value in the Subaccount from which transfers were being made that has not been
transferred will remain in that Subaccount unless you instruct us otherwise. If
you wish to continue transferring on a dollar cost averaging basis after the
expiration of the applicable period, the total amount elected has been
transferred, or the Subaccount has been depleted, or after the Dollar Cost
Averaging Option has been canceled, a new Dollar Cost Averaging Request must be
completed and sent to the Home Office. Security Benefit requires that you wait
at least a month (or a quarter if transfers were made on a quarterly basis)
before reinstating Dollar Cost Averaging after it has been terminated for any
reason. Security Benefit may discontinue, modify, or suspend the Dollar Cost
Averaging Option at any time.

You may also dollar cost average Contract Value to or from the Fixed
Account, subject to certain restrictions described under "The Fixed Account,"
page 29.

ASSET REALLOCATION OPTION -- Prior to the Annuity Commencement Date, you may
authorize Security Benefit to automatically transfer Contract Value on a
quarterly, semiannual or annual basis to maintain a particular percentage
allocation among the Subaccounts. The Contract Value allocated to each
Subaccount will grow or decline in value at different rates during the selected
period. Asset Reallocation automatically reallocates the Contract Value in the
Subaccounts to the allocation you selected on a quarterly, semiannual or annual
basis, as you select. Asset Reallocation is intended to transfer Contract Value
from those Subaccounts that have increased in value to those Subaccounts that
have declined in value. Over time, this method of investing may help you buy low
and sell high. This investment method does not guarantee profits, nor does it
assure that you will not have losses.

To elect this option an Asset Reallocation Request in proper form must be
received by Security Benefit at its Home Office. An Asset Reallocation/Dollar
Cost Averaging form is available upon request. On the form, you must indicate
the applicable Subaccounts, the applicable time period and the percentage of
Contract Value to be allocated to each Subaccount.

Upon receipt of the Asset Reallocation Request, Security Benefit will
effect a transfer or, in the case of a new Contract, will allocate the initial
purchase payment, among the Subaccounts based upon the percentages that you
selected. If you are a participant in a group Contract qualified under Internal
Revenue Code Section 401, the Asset Reallocation Request will be effective on
the first Valuation Date of the calendar quarter following the receipt of the
request. Thereafter, Security Benefit will transfer Contract Value to maintain
that allocation on each quarterly, semiannual or annual anniversary, as
applicable, of the date of Security Benefit's receipt of the Asset Reallocation
Request in proper form. The amounts transferred will be credited at the price of
the Subaccount as of the end of the Valuation Date on which the transfer is
effected. Amounts periodically transferred under this option are not currently
subject to any transfer charges.

You may instruct Security Benefit at any time to terminate this option by
written request to Security Benefit's Home Office. In that event, the Contract
Value in the Subaccounts that has not been transferred will remain in those
Subaccounts regardless of the percentage allocation unless you instruct us
otherwise. If you wish to continue Asset Reallocation after it has been
canceled, a new Asset Reallocation/Dollar Cost Averaging form must be completed
and sent to Security Benefit's Home Office. Security Benefit may discontinue,
modify, or suspend, and reserves the right to charge a fee for the Asset
Reallocation Option at any time.

Contract Value allocated to the Fixed Account may be included in the Asset
Reallocation option, subject to certain restrictions described in "Transfers and
Withdrawals from the Fixed Account," page 30.

TRANSFERS OF CONTRACT VALUE -- Prior to the Annuity Commencement Date, you may
transfer Contract Value among the Subaccounts upon proper written request to
Security Benefit's Home Office. You may make transfers (other than transfers
pursuant to the Dollar Cost Averaging and Asset Reallocation Options) by
telephone if the Telephone Transfer section of the application or proper form
has been completed, signed and filed at Security Benefit's Home Office. The
minimum transfer amount is $500, or the amount remaining in a given Subaccount.
The minimum transfer amount does not apply to transfers under the Dollar Cost
Averaging or Asset Reallocation Options.

You may also transfer Contract Value from the Subaccounts to the Fixed
Account; however, transfers from the Fixed Account to the Subaccounts are
restricted as described in "The Fixed Account," page 29.

Security Benefit generally does not limit the frequency of transfers,
although Security Benefit reserves the right to limit the number of transfers to
14 in a Contract Year. Also, the Contract is not designed for professional
"market timing" organizations, or other organizations or individuals engaging in
a market timing strategy, making programmed transfers, frequent transfers or
transfers that are large in relation to the total assets of the Underlying Fund.
These kinds of strategies and transfer activities are disruptive to the
Underlying Funds in which the Subaccounts invest. If Security Benefit determines
that your transfer patterns among the Subaccounts are disruptive to the
Underlying Funds, Security Benefit may among other things, restrict the
availability of telephone transfers or other electronic transfers. We may also
refuse to act on transfer instructions of an agent acting under a power of
attorney who is acting on behalf of one or more owners. Also, certain of the
Underlying Funds may have in place limits on the number of transfers permitted
in a Contract Year, which limits are more restrictive than 14 per Contract Year.
Security Benefit reserves the right to limit the size and frequency of transfers
and to discontinue telephone and other electronic transfers.

CONTRACT VALUE -- The Contract Value is the sum of the amounts under your
Contract held in each Subaccount and the Fixed Account as well as any amount set
aside in the loan account to secure loans as of any Valuation Date.

On each Valuation Date, the amount of Contract Value allocated to any
particular Subaccount will be adjusted to reflect the investment experience of
that Subaccount. See "Determination of Contract Value," page 21. No minimum
amount of Contract Value is guaranteed. You bear the entire investment risk
relating to the investment performance of Contract Value allocated to the
Subaccounts.

DETERMINATION OF CONTRACT VALUE -- Your Contract Value will vary to a degree
that depends upon several factors, including investment performance of the
Subaccounts to which you have allocated Contract Value, payment of purchase
payments, the amount of any outstanding Contract Debt, partial withdrawals, and
the charges assessed in connection with the Contract. The amounts allocated to
the Subaccounts will be invested in shares of the corresponding Series of SBL
Fund. The investment performance of the Subaccounts will reflect increases or
decreases in the net asset value per share of the corresponding Series and any
dividends or distributions declared by a Series. Any dividends or distributions
from any Series of the Fund will be automatically reinvested in shares of the
same Series, unless Security Benefit, on behalf of the Separate Account, elects
otherwise.

Assets in the Subaccounts are divided into Accumulation Units, which are
accounting units of measure used to calculate the value of a Contractowner's
interest in a Subaccount. When you allocate purchase payments to a Subaccount,
your Contract is credited with Accumulation Units. The number of Accumulation
Units to be credited is determined by dividing the dollar amount allocated to
the particular Subaccount by the price for the Subaccount as of the end of the
Valuation Period in which the purchase payment is credited.

In addition, other transactions including loans, full or partial
withdrawals, transfers, and assessment of certain charges against the Contract
affect the number of Accumulation Units credited to a Contract. The number of
units credited or debited in connection with any such transaction is determined
by dividing the dollar amount of such transaction by the price of the affected
Subaccount. The price of each Subaccount is determined on each Valuation Date as
of the close of the New York Stock Exchange, normally 3:00 p.m. Central time.
Transactions received after that time on any Valuation Date will be effected at
the Accumulation Unit value determined on the following Valuation Date. The
price of each Subaccount may be determined earlier if trading on the New York
Stock Exchange is restricted or as permitted by the SEC.

The number of Accumulation Units credited to a Contract shall not be
changed by any subsequent change in the value of an Accumulation Unit, but the
dollar value of an Accumulation Unit may vary from Valuation Date to Valuation
Date depending upon the investment experience of the Subaccount and charges
against the Subaccount.

The price of each Subaccount's units initially was $10. The price of a
Subaccount on any Valuation Date takes into account the following: (1) the
investment performance of the Subaccount, which is based upon the investment
performance of the corresponding Series of SBL Fund, (2) any dividends or
distributions paid by the corresponding Series, (3) the charges, if any, that
may be assessed by Security Benefit for taxes attributable to the operation of
the Subaccount, and (4) the mortality and expense risk charge under the
Contract.

FULL AND PARTIAL WITHDRAWALS -- A Contractowner may make a partial withdrawal of
Contract Value, or surrender the Contract for its Withdrawal Value. A full or
partial withdrawal, including a systematic withdrawal, may be taken from
Contract Value at any time while the Owner is living and before the Annuity
Commencement Date, subject to limitations under the applicable plan for
Qualified Plans and applicable law. A full or partial withdrawal request will be
effective as of the end of the Valuation Period that a proper Withdrawal Request
form is received by Security Benefit at its Home Office. A proper Withdrawal
Request form must include the written consent of any effective assignee or
irrevocable Beneficiary, if applicable.

The proceeds received upon a full withdrawal will be the Contract's
Withdrawal Value. The Withdrawal Value is equal to the Contract Value as of the
end of the Valuation Period during which a proper Withdrawal Request form is
received by Security Benefit at its Home Office, less any outstanding Contract
Debt, any applicable withdrawal charge, a pro rata administration charge and any
uncollected premium taxes.

Security Benefit requires the signature of all Owners on any request for
withdrawal, and a guarantee of all such signatures to effect the transfer or
exchange of all or part of the Contract for another investment. The signature
guarantee must be provided by an eligible guarantor, such as a bank, broker,
credit union, national securities exchange or savings association. Security
Benefit further requires that any request to transfer or exchange all or part of
the Contract for another investment be made upon a transfer form provided by
Security Benefit which is available upon request.

A partial withdrawal may be requested for a specified percentage or dollar
amount of Contract Value. A request for a partial withdrawal will result in a
payment by Security Benefit of the amount specified in the partial withdrawal
request provided there is sufficient Contract Value to meet the request. Upon
payment, the Contract Value will be reduced by an amount equal to the payment
and any applicable withdrawal charge and premium tax. If a partial withdrawal is
requested after the first Contract Year that would leave the Withdrawal Value in
the Contract less than $2,000, Security Benefit reserves the right to treat the
partial withdrawal as a request for a full withdrawal. For Contracts issued
prior to January 4, 1999, if your withdrawal exceeds 90% of Contract Value,
Security Benefit may elect to treat your withdrawal as a full withdrawal.

Security Benefit will deduct the amount of a partial withdrawal from the
Contract Value in the Subaccounts and the Fixed Account, according to the
Contractowner's instructions to Security Benefit. If a Contractowner does not
specify the allocation, Security Benefit will deduct the withdrawal in the same
proportion that the Contract Value is allocated among the Subaccounts and the
Fixed Account.

A full or partial withdrawal, including a systematic withdrawal, may be
subject to a withdrawal charge if a withdrawal is made during the first eight
Contract Years and may be subject to a premium tax charge to reimburse Security
Benefit for any tax on premiums on a Contract that may be imposed by various
states and municipalities. Security Benefit may deduct a pro rata administration
charge upon a full withdrawal. See "Contingent Deferred Sales Charge," page 24,
"Administration Charge," page 26 and "Premium Tax Charge," page 26.

A full or partial withdrawal, including a systematic withdrawal, may result
in receipt of taxable income to the Owner and, if made prior to the Owner
attaining age 59 1/2, may be subject to a 10% penalty tax. In the case of
Contracts issued in connection with retirement plans that meet the requirements
of Section 401(a), 403, 408 or 457 of the Internal Revenue Code, reference
should be made to the terms of the particular Qualified Plan for any limitations
or restrictions on withdrawals. For more information, see "Restrictions on
Withdrawals from Qualified Plans," page 33. The tax consequences of a withdrawal
under the Contract should be carefully considered. See "Federal Tax Matters,"
page 34.

SYSTEMATIC WITHDRAWALS -- Security Benefit currently offers a feature under
which you may select systematic withdrawals. Under this feature, a Contractowner
may elect to receive systematic withdrawals while the Owner is living and before
the Annuity Commencement Date by sending a properly completed Request for
Scheduled Systematic Payments form to Security Benefit at its Home Office. This
option may be elected at any time after the first Contract Year, or during the
first Contract Year, if Contract Value is $40,000 or more at the time of
election. A Contractowner may designate the systematic withdrawal amount as a
percentage of Contract Value allocated to the Subaccounts and/or Fixed Account,
as a fixed period, as a specified dollar amount, as all earnings in the
Contract, or based upon the life expectancy of the Owner or the Owner and a
beneficiary. A Contractowner also may designate the desired frequency of the
systematic withdrawals, which may be monthly, quarterly, semiannually or
annually. The Contractowner may stop or modify systematic withdrawals upon
proper written request received by Security Benefit at its Home Office at least
30 days in advance of the requested date of termination or modification. A
proper request must include the written consent of any effective assignee or
irrevocable Beneficiary, if applicable.

Each systematic withdrawal must be at least $25. Upon payment, your
Contract Value will be reduced by an amount equal to the payment proceeds plus
any applicable withdrawal charge and premium tax. Any systematic withdrawal that
equals or exceeds the Withdrawal Value will be treated as a full withdrawal. In
no event will payment of a systematic withdrawal exceed the Withdrawal Value.
The Contract will automatically terminate if a systematic withdrawal causes the
Contract's Withdrawal Value to equal zero.

Security Benefit will effect each systematic withdrawal as of the end of
the Valuation Period during which the withdrawal is scheduled. The deduction
caused by the systematic withdrawal, including any applicable withdrawal charge,
will be allocated from the Contractowner's Contract Value in the Subaccounts and
the Fixed Account, as directed by the Contractowner. If a Contractowner does not
specify the allocation, the systematic withdrawal will be deducted from the
Contract Value in the Subaccounts and the Fixed Account in the same proportion
that the Contract Value is allocated among the Subaccounts and the Fixed
Account.

Systematic withdrawals generally are subject to any applicable withdrawal
charges. Systematic withdrawals may be made without a withdrawal charge provided
that you have not made a free withdrawal during the Contract Year and your
systematic withdrawals do not exceed an amount determined as follows: 10% of
Contract Value as of the Valuation Date the first systematic withdrawal request
is received during the Contract Year. Systematic withdrawals that exceed this
amount are subject to any applicable withdrawal charge.

Security Benefit may, at any time, discontinue, modify, or suspend
systematic withdrawals. You should consider carefully the tax consequences of a
systematic withdrawal, including the 10% penalty tax which may be imposed on
withdrawals made prior to the Owner attaining age 59 1/2. See "Federal Tax
Matters," page 34.

FREE-LOOK RIGHT -- You may return a Contract within the Free-Look Period, which
is generally a ten-day period beginning when you receive the Contract. Security
Benefit will then deem void the returned Contract and will refund to you any
purchase payments allocated to the Fixed Account plus the Contract Value in the
Subaccounts as of the end of the Valuation Period during which the returned
Contract is received by Security Benefit. Security Benefit will refund purchase
payments allocated to the Subaccounts rather than Contract Value in those states
and circumstances that require it to do so.

DEATH BENEFIT -- If the Owner (or Annuitant if you purchased your Contract prior
to January 4, 1999) dies prior to the Annuity Commencement Date, Security
Benefit will pay the death benefit proceeds to the Designated Beneficiary upon
receipt of due proof of the Owner's (or if applicable, the Annuitant's) death
and instructions regarding payment to the Designated Beneficiary. If there are
Joint Owners, the death benefit proceeds will be payable upon receipt of due
proof of death of either Owner prior to the Annuity Commencement Date and
instructions regarding payment.

If the surviving spouse of the deceased Owner is the sole Designated
Beneficiary, such spouse may elect to continue the Contract in force, subject to
certain limitations. See "Distribution Requirements," page 24. If the Owner is
not a natural person, the death benefit proceeds will be payable upon receipt of
due proof of death of the Annuitant prior to the Annuity Commencement Date and
instructions regarding payment. Additionally, if the Owner is not a natural
person, the amount of the death benefit will be based on the age of the oldest
Annuitant on the date the Contract was issued. If the death of the Owner occurs
on or after the Annuity Commencement Date, any death benefit will be determined
according to the terms of the Annuity Option. See "Annuity Options," page 28.

The death benefit proceeds will be the death benefit reduced by any
outstanding Contract Debt and any uncollected premium tax. If an Owner (or if
applicable, the Annuitant) dies during the Accumulation Period and the age of
each Owner (or Annuitant) was 75 or younger on the date the Contract was issued,
the amount of the death benefit will be the greatest of:

o The sum of all Purchase Payments, less any reductions caused by previous
withdrawals,

o The Contract Value on the date due proof of death and instructions
regarding payment are received by Security Benefit, or

o The stepped-up death benefit.

The stepped-up death benefit is:

o The largest death benefit on any Contract anniversary that is an exact
multiple of six and occurs prior to the oldest Owner (or if applicable, the
Annuitant) attaining age 76, plus

o Any Purchase Payments made since the applicable Contract anniversary, less

o Any withdrawals since the applicable anniversary.

For Contracts in effect for six Contract Years or more as of May 1, 1991, the
Contract anniversary immediately preceding May 1, 1991, is deemed to be the
sixth Contract anniversary for purposes of determining the stepped-up death
benefit.

If an Owner (or if applicable, an Annuitant) dies during the Accumulation
Period and the age of any Owner (or Annuitant) was 76 or greater on the date the
Contract was issued, the death benefit will be the greater of:

o The Contract Value on the date due proof of death and instructions
regarding payment are received by Security Benefit at its Home Office, or

o Total purchase payments reduced by any partial withdrawals.

The death benefit proceeds will be paid to the Designated Beneficiary in a
single sum or under one of the Annuity Options, as elected by the Designated
Beneficiary. If the Designated Beneficiary is to receive annuity payments under
an Annuity Option, there may be limits under applicable law on the amount and
duration of payments that the Beneficiary may receive, and requirements
respecting timing of payments. A tax adviser should be consulted in considering
Annuity Options. See "Federal Tax Matters," page 34 and "Distribution
Requirements," page 24 for a discussion of the tax consequences in the event of
death.

DEATH BENEFIT FOR CERTAIN FLORIDA RESIDENTS. If you were a resident of
Florida and purchased your Contract prior to January 4, 1999, your death benefit
is as follows. If the Annuitant is 75 or younger as of the date of his or her
death, the death benefit is the greatest of: (1) the sum of all purchase
payments reduced by any partial withdrawals; (2) the Contract Value as of the
date due proof of death and instructions regarding payment are received by
Security Benefit at its Home Office; or (3) the largest Contract Value on any
Contract anniversary that is an exact multiple of six, less any partial
withdrawals since that anniversary. If the Annuitant is 76 or older as of the
date of his or her death, the death benefit is the Contract Value as of the date
due proof of death and instructions regarding payment are received by Security
Benefit at its Home Office, less any applicable withdrawal charge. Security
Benefit currently waives the withdrawal charge applicable to the death benefit.

DEATH BENEFIT FOR GROUP UNALLOCATED CONTRACTS. The death benefit under a
group unallocated contract is determined by reference to the terms of the
Qualified Plan. The Contractowner must inform Security Benefit of the amount of
the death benefit, and its payment will be treated as a partial withdrawal.
Security Benefit will not impose a withdrawal charge upon such a withdrawal and
it will not be considered a free withdrawal under the Contract.

DISTRIBUTION REQUIREMENTS -- For Contracts issued in connection with
Non-Qualified Plans, the federal tax laws require that Security Benefit pay a
death benefit upon the death of the Owner, and Security Benefit will do so under
all Contracts, including those issued prior to January 4, 1999. If the surviving
spouse of the deceased Owner is the sole Designated Beneficiary, such spouse may
elect to continue this Contract in force until the earliest of the spouse's
death or the Annuity Commencement Date or receive the death benefit proceeds.

For any Designated Beneficiary other than a surviving spouse, only those
options may be chosen that provide for complete distribution of such Owner's
interest in the Contract within five years of the death of the Owner. If the
Designated Beneficiary is a natural person, that person alternatively can elect
to begin receiving annuity payments within one year of the Owner's death over a
period not extending beyond his or her life or life expectancy. If the Owner of
the Contract is not a natural person, these distribution rules are applicable
upon the death of or a change in the primary Annuitant.

For Contracts issued in connection with Qualified Plans, the terms of the
particular Qualified Plan and the Internal Revenue Code should be reviewed with
respect to limitations or restrictions on distributions following the death of
the Owner or Annuitant. Because the rules applicable to Qualified Plans are
extremely complex, a competent tax adviser should be consulted.

DEATH OF THE ANNUITANT -- For Contracts issued currently, if the Annuitant dies
prior to the Annuity Commencement Date, and the Owner is a natural person and is
not the Annuitant, no death benefit proceeds will be payable under the Contract.
The Owner may name a new Annuitant within 30 days of the Annuitant's death. If a
new Annuitant is not named, Security Benefit will designate the Owner as
Annuitant. On the death of the Annuitant after the Annuity Commencement Date,
any guaranteed payments remaining unpaid will continue to be paid to the
Designated Beneficiary pursuant to the Annuity Option in force at the date of
death. See "Death Benefit," page 23 for a discussion of the death benefit in the
event of the Annuitant's death for Contracts issued prior to January 4, 1999.

CHARGES AND DEDUCTIONS

CONTINGENT DEFERRED SALES CHARGE -- Security Benefit does not deduct sales
charges from purchase payments before allocating them to your Contract Value.
However, except as set forth below, Security Benefit may assess a contingent
deferred sales charge (which may also be referred to as a withdrawal charge) on
a full or partial withdrawal, including systematic withdrawals, depending upon
the Contract Year in which the withdrawal is made.

Security Benefit will waive the withdrawal charge on the first withdrawal
in any Contract Year after the first Contract Year, to the extent that such
withdrawal does not exceed the Free Withdrawal amount. The Free Withdrawal
amount in any Contract Year is equal to 10% of Contract Value as of the date of
the first withdrawal in that Contract Year. You forfeit any Free Withdrawal
amount not used on the first withdrawal in a Contract Year. The withdrawal
charge generally applies to the amount of any withdrawal that exceeds the Free
Withdrawal amount.

If your Contract is funding a charitable remainder trust, the free
withdrawal is available beginning in the first Contract Year, and you may make
periodic free withdrawals provided that the total free withdrawals in any
Contract Year do not exceed the Free Withdrawal amount discussed above.

For Group Unallocated Contracts, the free withdrawal is available after the
first Contract Year. The first withdrawal in each calendar month under such a
Contract is free to the extent that total free withdrawals in any Contract Year
do not exceed 10% of Contract Value as of the beginning of that Contract Year.

The withdrawal charge does not apply to withdrawals of earnings. For the
purpose of determining any withdrawal charge, Security Benefit deems any
withdrawals that are subject to the withdrawal charge to be made first from
purchase payments and then from earnings. Free Withdrawal amounts do not reduce
purchase payments for the purpose of determining future withdrawal charges. The
amount of the charge will depend on the Contract Year in which the withdrawal is
made according to the following schedule:

----------------------------------------------------------
WITHDRAWAL CHARGE
--------------------------------------
CONTRACT YEAR THE VARIFLEX
CONTRACT CONTRACT-401(K) AND
408(K)
----------------------------------------------------------
1 8% 8%
2 7% 8%
3 6% 8%
4 5% 8%
5 4% 7%
6 3% 6%
7 2% 5%
8 1% 4%
9 and later 0% 0%
----------------------------------------------------------

In no event will the amount of any withdrawal charge, when added to such
charge previously assessed against any amount withdrawn from the Contract,
exceed 8% of purchase payments paid under the Contract. In addition, no
withdrawal charge will be imposed upon: (1) payment of death benefit proceeds;
or (2) annuity options that provide for payments for life, or a period of at
least 7 years (5 years if you purchased your Contract prior to January 4, 1999).
Subject to insurance department approval, the withdrawal charge also will be
waived on a full or partial withdrawal if the Owner has been confined to a
hospital or qualified skilled nursing facility for 90 consecutive days or more.
See "Waiver of Withdrawal Charge," page 25. Security Benefit will assess the
withdrawal charge against the Subaccounts and the Fixed Account in the same
proportion as the withdrawal proceeds are allocated.

Security Benefit pays sales commissions to broker-dealers and other
expenses associated with the promotion and sales of the Contracts. The
withdrawal charge is designed to reimburse Security Benefit for these costs,
although it is expected that actual expenses will be greater than the amount of
the charge. To the extent that all sales expenses are not recovered from the
charge, such expenses may be recovered from other charges, including amounts
derived indirectly from the charge for mortality and expense risk.
Broker-dealers may receive aggregate commissions of up to 6% of aggregate
purchase payments and an annual trail commission of up to 0.25% of Contract
Value. Security Benefit also may pay override payments, expense allowances,
bonuses, wholesaler fees and training allowances. Registered representatives
earn commissions from the broker-dealers with which they are affiliated and such
arrangements will vary. In addition, registered representatives may be eligible,
under programs adopted by Security Benefit to receive non-cash compensation such
as expense-paid due diligence trips and educational seminars. No compensation
will be offered to the extent it is prohibited by the laws of any state or
self-regulatory agency, such as the NASD.

WITHDRAWAL CHARGE FOR CERTAIN TEXAS PARTICIPANTS -- Notwithstanding the
withdrawal charges set forth above, if your Contract was issued after August 14,
2000, under a Section 403(b) retirement plan sponsored by a Texas institution of
higher education (as defined in the Texas Education Code), your withdrawal
charge schedule is as follows:

------------------- --- -----------------------
CONTRACT YEAR WITHDRAWAL CHARGE
------------------- --- -----------------------
1 7%
2 7%
3 6%
4 5%
5 4%
6 3%
7 2%
8 and later 0%
------------------- --- -----------------------

WAIVER OF WITHDRAWAL CHARGE -- Security Benefit will waive the withdrawal charge
in the event of confinement to a hospital or nursing facility, provided the
following conditions are met: (1) the Contractowner has been confined to a
"hospital" or "qualified skilled nursing facility" (as defined on page 5) for at
least 90 consecutive days prior to the date of the withdrawal; (2) the
Contractowner is so confined when Security Benefit receives the waiver request
and became so confined after the date the Contract was issued; and (3) the
request for waiver submitted to Security Benefit is accompanied by a properly
completed claim form which may be obtained from Security Benefit and a written
physician's statement acceptable to Security Benefit certifying that such
confinement is a medical necessity and is due to illness or infirmity.

Security Benefit reserves the right to have the Contractowner examined by a
physician of its choice and at its expense to determine if the Contractowner is
eligible for a waiver. The waiver is not available in certain states pending
department of insurance approval. If the waiver is later approved by the
insurance department of a state, Security Benefit intends to make the waiver
available to all Contractowners in that state at that time, but there can be no
assurance that the waiver will be approved. Prospective Contractowners should
contact their agent concerning availability of the waiver in their state.

MORTALITY AND EXPENSE RISK CHARGE -- Security Benefit deducts a daily charge
from the assets of each Subaccount for mortality and expense risks assumed by
Security Benefit under the Contract. The charge is equal to an annual rate of
1.2% of each Subaccount's average daily net assets. This amount is intended to
compensate Security Benefit for certain mortality and expense risks Security
Benefit assumes in offering and administering the Contract and in operating the
Subaccounts.

The expense risk is the risk that Security Benefit's actual expenses in
issuing and administering the Contract and operating the Subaccounts will be
more than the charges assessed for such expenses. The mortality risk borne by
Security Benefit is the risk that Annuitants, as a group, will live longer than
Security Benefit's actuarial tables predict. In this event, Security Benefit
guarantees that annuity payments will not be affected by a change in mortality
experience that results in the payment of greater annuity income than assumed
under the Annuity Options in the Contract. Security Benefit also assumes a
mortality risk in connection with the death benefit under the Contract.

Security Benefit may ultimately realize a profit from this charge to the
extent it is not needed to cover mortality and administrative expenses, but
Security Benefit may realize a loss to the extent the charge is not sufficient.
Security Benefit may use any profit derived from this charge for any lawful
purpose, including distribution expenses.

ADMINISTRATION CHARGE -- Security Benefit will deduct from your Contract Value
an administration charge of $30 (or if less, 2% of Contract Value for the
Variflex Contract - 401(k) and 408(k)). The administration charge is not
assessed against Contract Value that has been applied under Annuity Options 1
through 4, 9 and 10. Security Benefit deducts the administration charge on each
annual contract anniversary, but will waive the charge if your Contract Value is
$25,000 or more, and your Contract has been in force eight or more years, as of
that date. Security Benefit will deduct the administration charge from your
Contract Value in the same proportion that the Contract Value is allocated among
the Subaccounts.

Security Benefit will deduct a pro rata administration charge upon:

o A full withdrawal of Contract Value

o Payment of a death benefit

o The Annuity Commencement Date if one of Annuity Options 1 through 4, 9 or
10 is elected

o The first deduction of the administration charge if the Contract has been
in force for less than a full calendar year

The purpose of this charge is to reimburse Security Benefit for the expenses
associated with administration of the Contract. Security Benefit does not expect
to profit from this charge.

PREMIUM TAX CHARGE -- Various states and municipalities impose a tax on premiums
received by insurance companies on annuity contracts. Whether or not a premium
tax is imposed will depend upon, among other things, the Owner's state of
residence, the Annuitant's state of residence, and the insurance tax laws and
Security Benefit's status in a particular state. Security Benefit assesses a
premium tax charge to reimburse itself for premium taxes that it incurs in
connection with a Contract. Security Benefit currently deducts this charge upon
the Annuity Commencement Date or upon full or partial withdrawal if a premium
tax was incurred and is not refundable. Security Benefit reserves the right to
deduct premium taxes when due or any time thereafter. Premium tax rates
currently range from 0% to 3.5%, but are subject to change by a governmental
entity.

OTHER CHARGES -- Security Benefit may charge the Separate Account or the
Subaccounts for the federal, state, or local taxes incurred by Security Benefit
that are attributable to the Separate Account or the Subaccounts, or to the
operations of Security Benefit with respect to the Contract, or that are
attributable to payment of premiums or acquisition costs under the Contract. No
such charge is currently assessed. See "Tax Status of Security Benefit and the
Separate Account," page 34 and "Charge for Security Benefit Taxes," page 34.

VARIATIONS IN CHARGES -- Security Benefit may reduce or waive the amount of the
contingent deferred sales charge and administration charge for a Contract where
the expenses associated with the sale of the Contract or the administrative and
maintenance costs associated with the Contract are reduced for reasons such as
the amount of the initial purchase payment or projected purchase payments or the
Contract is sold in connection with a group or sponsored arrangement. Security
Benefit may also reduce or waive the contingent deferred sales charge and
administration charge on Contracts sold to directors, officers and bona fide
full-time employees of Security Benefit and its affiliated companies; the
spouses, grandparents, parents, children, grandchildren and sibling of such
directors, officers and employees and their spouses; and salespersons (and their
spouses and minor children) who are licensed with Security Benefit to sell
variable annuities.

GUARANTEE OF CERTAIN CHARGES -- Security Benefit guarantees that the charge for
mortality and expense risks will not exceed an annual rate of 1.2% of each
Subaccount's average daily net assets and the administration charge will not
exceed $30 per year.

SBL FUND EXPENSES -- Each Subaccount of the Separate Account purchases shares at
the net asset value of the corresponding Series of SBL Fund. Each Series' net
asset value reflects the investment advisory fee and other expenses that are
deducted from the assets of the Series. These fees and expenses are not deducted
from the Subaccounts, but are paid from the assets of the corresponding Series.
As a result, the Owner indirectly bears a pro rata portion of such fees and
expenses. The advisory fees and other expenses, if any, which are more fully
described in SBL Fund's prospectus, are not specified or fixed under the terms
of the Contract.

ANNUITY PERIOD

GENERAL -- You select the Annuity Commencement Date at the time of application.
If you purchase a single purchase payment immediate annuity, your annuity
payments will commence immediately. Otherwise, your Annuity Commencement Date
may not be prior to the third annual Contract Anniversary (ninth annual Contract
Anniversary for Contracts issued in Oregon after August 31, 1999) and may not be
deferred beyond the Annuitant's 95th birthday (90th birthday for Contracts
issued prior to January 4, 1999). The terms of a Qualified Plan and the laws of
certain states may require that you start annuity payments at an earlier age. If
you do not select an Annuity Commencement Date, the Annuity Commencement Date
will be the later of the Annuitant's 65th birthday or the tenth annual Contract
Anniversary. See "Selection of an Option," page 29. If there are Joint
Annuitants, the birthdate of the older Annuitant will be used to determine the
latest Annuity Commencement Date.

On the Annuity Commencement Date, the proceeds under the Contract will be
applied to provide an annuity under one of the options described below. Each
option is available in two forms--either as a variable annuity for use with the
Subaccounts or as a fixed annuity for use with the Fixed Account. A combination
variable and fixed annuity is also available. Variable annuity payments will
fluctuate with the investment performance of the applicable Subaccounts while
fixed annuity payments will not. Unless you direct otherwise, proceeds derived
from Contract Value allocated to the Subaccounts will be applied to purchase a
variable annuity and proceeds derived from Contract Value allocated to the Fixed
Account will be applied to purchase a fixed annuity. The proceeds under the
Contract will be equal to your Contract Value in the Subaccounts and the Fixed
Account as of the Annuity Commencement Date, reduced by any applicable premium
taxes, any outstanding Contract Debt, and for Options 1 through 4, 9 and 10, a
pro rata administration charge.

The Contracts provide for several Annuity Options. Security Benefit may
make other Annuity Options available upon request. Although Options 1 through 10
may not be described, or are numbered differently, in some Contracts, Security
Benefit makes these Options available to all Contractowners, except that Option
9 is not available under certain forms of the Contract. Annuity payments under
Annuity Options 1 through 4, 9 and 10 are based upon annuity rates that vary
with the Annuity Option selected. In the case of Options 1 through 4 and 10, the
annuity rates will vary based on the age and sex of the Annuitant, except that
unisex rates are available where required by law. The annuity rates reflect your
life expectancy based upon your age as of the Annuity Commencement Date and your
gender, unless unisex rates apply. The annuity rates are based upon the 1983(a)
mortality table and are adjusted to reflect an assumed interest rate of 3.5%,
compounded annually. In the case of Options 5 through 8 as described below,
annuity payments are based upon Contract Value without regard to annuity rates.
If no Annuity Option has been selected, annuity payments will be made to the
Annuitant under an automatic option which shall be an annuity payable during the
lifetime of the Annuitant with payments guaranteed to be made for 10 years under
Option 2.

Annuity Options 1 through 4 and 10 provide for annuity payments to be made
during the lifetime of the Annuitant. Annuity payments under such options cease
in the event of the Annuitant's death, unless the option provides for a
guaranteed minimum number of payments, for example a life income with guaranteed
payments of 5, 10, 15 or 20 years. The level of annuity payments will be greater
for shorter guaranteed periods and less for longer guaranteed periods.
Similarly, payments will be greater for life annuities than for joint and
survivor annuities, because payments for life annuities are expected to be made
for a shorter period.

You may elect to receive annuity payments on a monthly, quarterly,
semiannual, or annual basis, although no payments will be made for less than $50
($25 for Contracts issued prior to January 4,1999). If the frequency of payments
selected would result in payments of less than $50 (or $25 if applicable),
Security Benefit reserves the right to change the frequency.

You may designate or change an Annuity Commencement Date, Annuity Option,
or Annuitant, provided proper written notice is received by Security Benefit at
its Home Office at least 30 days prior to the Annuity Commencement Date set
forth in the Contract. The date selected as the new Annuity Commencement Date
must be at least 30 days after the date written notice requesting a change of
Annuity Commencement Date is received at Security Benefit's Home Office.

Once annuity payments have commenced under Annuity Options 1 through 4 and
10, an Annuitant or Owner cannot change the Annuity Option and cannot surrender
his or her annuity and receive a lump sum settlement in lieu thereof. Under
Annuity Options 5 through 8, full or partial withdrawals may be made after the
Annuity Commencement Date, subject to any applicable withdrawal charge. The
Contract specifies annuity tables for Annuity Options 1 through 4, 9 and 10,
described below. The tables contain the guaranteed minimum dollar amount (per
$1,000 applied) of the FIRST annuity payment for a variable annuity and each
annuity payment for a fixed annuity.

ANNUITY OPTIONS--

OPTION 1 -- LIFE INCOME. Periodic annuity payments will be made during the
lifetime of the Annuitant. It is possible under this Option for any Annuitant to
receive only one annuity payment if the Annuitant's death occurred prior to the
due date of the second annuity payment, two if death occurred prior to the due
date of the third annuity payment, etc. THERE IS NO MINIMUM NUMBER OF PAYMENTS
GUARANTEED UNDER THIS OPTION. PAYMENTS WILL CEASE UPON THE DEATH OF THE
ANNUITANT REGARDLESS OF THE NUMBER OF PAYMENTS RECEIVED.

OPTION 2 -- LIFE INCOME WITH GUARANTEED PAYMENTS OF 5, 10, 15 OR 20 YEARS.
Periodic annuity payments will be made during the lifetime of the Annuitant with
the promise that if, at the death of the Annuitant, payments have been made for
less than a stated period, which may be five, ten, fifteen or twenty years, as
elected by the Owner, annuity payments will be continued during the remainder of
such period to the Designated Beneficiary.

OPTION 3 -- LIFE WITH INSTALLMENT REFUND OPTION. Periodic annuity payments
will be made during the lifetime of the Annuitant with the promise that, if at
the death of the Annuitant, the number of payments that has been made is less
than the number determined by dividing the amount applied under this Option by
the amount of the first annuity payment, annuity payments will continue to the
Designated Beneficiary until that number of payments has been made.

OPTION 4 -- JOINT AND LAST SURVIVOR. Periodic annuity payments will be made
during the lifetime of either Annuitant. It is possible under this Option for
only one annuity payment to be made if both Annuitants died prior to the second
annuity payment due date, two if both died prior to the third annuity payment
due date, etc. AS IN THE CASE OF OPTION 1, THERE IS NO MINIMUM NUMBER OF
PAYMENTS GUARANTEED UNDER THIS OPTION. PAYMENTS CEASE UPON THE DEATH OF THE LAST
SURVIVING ANNUITANT, REGARDLESS OF THE NUMBER OF PAYMENTS RECEIVED.

OPTION 5 -- PAYMENTS FOR SPECIFIED PERIOD. Periodic annuity payments will
be made for a fixed period, which may be from five to twenty years, as elected
by the Owner, with the guarantee that, if, at the death of all Annuitants,
payments have been made for less than the selected fixed period, the remaining
unpaid payments will be paid to the Designated Beneficiary.

OPTION 6 -- PAYMENTS OF A SPECIFIED AMOUNT. Periodic annuity payments of
the amount elected by the Owner will be made until Contract Value is exhausted,
with the guarantee that, if, at the death of all Annuitants, all guaranteed
payments have not yet been made, the remaining unpaid payments will be paid to
the Designated Beneficiary.

OPTION 7 -- DEPOSIT OPTION. The amount due under the Contract on the
Annuity Commencement Date may be left on deposit with Security Benefit in its
General Account with interest at the rate of not less than 2% per year. Interest
will be paid annually, semiannually, quarterly or monthly as you elect. This
Option is not available under Contracts used in connection with Qualified Plans.

OPTION 8 -- AGE RECALCULATION. Periodic annuity payments will be made based
upon the Annuitant's life expectancy, or the joint life expectancy of the
Annuitant and his or her beneficiary, at the Annuitant's attained age (and the
beneficiary's attained or adjusted age, if applicable) each year. The payments
are computed by reference to government actuarial tables and are made until
Contract Value is exhausted. Upon the Annuitant's death, any Contract Value will
be paid to the Designated Beneficiary.

OPTION 9 -- PERIOD CERTAIN. Periodic annuity payments will be made for a
stated period which may be five, ten, fifteen or twenty years, as elected by the
Owner. If the Annuitant dies prior to the end of the period, the remaining
payments will be made to the Designated Beneficiary.

OPTION 10 -- JOINT AND CONTINGENT SURVIVOR OPTION. Periodic annuity
payments will be made during the life of the primary Annuitant. Upon the death
of the primary Annuitant, payments will be made to the contingent Annuitant
during his or her life. If the contingent Annuitant is not living upon the death
of the primary Annuitant, no payments will be made to the contingent Annuitant.
It is possible under this Option for only one annuity payment to be made if both
Annuitants died prior to the second annuity payment due date, two if both died
prior to the third annuity payment due date, etc. AS IN THE CASE OF OPTIONS 1
AND 4, THERE IS NO MINIMUM NUMBER OF PAYMENTS GUARANTEED UNDER THIS OPTION.
PAYMENTS CEASE UPON THE DEATH OF THE LAST SURVIVING ANNUITANT, REGARDLESS OF THE
NUMBER OF PAYMENTS RECEIVED.

VALUE OF VARIABLE ANNUITY PAYMENTS: ASSUMED INTEREST RATE. The annuity
tables in the Contract which are used to calculate variable annuity payments for
Annuity Options 1 through 4, 9 and 10 are based on an "assumed interest rate" of
3 1/2%, compounded annually. Variable annuity payments generally increase or
decrease from one annuity payment date to the next based upon the performance of
the applicable Subaccounts during the interim period adjusted for the assumed
interest rate. If the performance of the Subaccount selected is equal to the
assumed interest rate, the annuity payments will remain constant. If the
performance of the Subaccounts is greater than the assumed interest rate, the
annuity payments will increase and if it is less than the assumed interest rate,
the annuity payments will decline. A higher assumed interest rate would mean a
higher initial annuity payment but the amount of the annuity payment would
increase more slowly in a rising market (or the amount of the annuity payment
would decline more rapidly in a declining market). A lower assumption would have
the opposite effect.

SELECTION OF AN OPTION -- You should carefully review the Annuity Options with
your financial or tax advisers. For Contracts used in connection with a
Qualified Plan, reference should be made to the terms of the particular plan and
the requirements of the Internal Revenue Code for pertinent limitations
respecting annuity payments and other matters. For instance, Qualified Plans
generally require that annuity payments begin no later than April 1 of the
calendar year following the year in which the Annuitant reaches age 70 1/2. In
addition, under Qualified Plans, the period elected for receipt of annuity
payments under Annuity Options (other than Life Income) generally may be no
longer than the joint life expectancy of the Annuitant and beneficiary in the
year that the Annuitant reaches age 70 1/2, and must be shorter than such joint
life expectancy if the beneficiary is not the Annuitant's spouse and is more
than ten years younger than the Annuitant. For Non-Qualified Plans, SBL does not
allow annuity payments to be deferred beyond the Annuitant's 95th birthday (90th
birthday for Contracts issued prior to January 4, 1999).

THE FIXED ACCOUNT

You may allocate all or a portion of your purchase payments and transfer
Contract Value to the Fixed Account. Amounts allocated to the Fixed Account
become part of Security Benefit's General Account, which supports Security
Benefit's insurance and annuity obligations. The General Account is subject to
regulation and supervision by the Kansas Department of Insurance and is also
subject to the insurance laws and regulations of other jurisdictions in which
the Contract is distributed. In reliance on certain exemptive and exclusionary
provisions, interests in the Fixed Account have not been registered as
securities under the Securities Act of 1933 (the "1933 Act") and the Fixed
Account has not been registered as an investment company under the Investment
Company Act of 1940 (the "1940 Act"). Accordingly, neither the Fixed Account nor
any interests therein are generally subject to the provisions of the 1933 Act or
the 1940 Act. Security Benefit has been advised that the staff of the SEC has
not reviewed the disclosure in this Prospectus relating to the Fixed Account.
This disclosure, however, may be subject to certain generally applicable
provisions of the federal securities laws relating to the accuracy and
completeness of statements made in the Prospectus. This Prospectus is generally
intended to serve as a disclosure document only for aspects of a Contract
involving the Separate Account and contains only selected information regarding
the Fixed Account. For more information regarding the Fixed Account, see "The
Contract," page 17.

Amounts allocated to the Fixed Account become part of the General Account
of Security Benefit, which consists of all assets owned by Security Benefit
other than those in the Separate Account and other separate accounts of Security
Benefit. Subject to applicable law, Security Benefit has sole discretion over
investment of the assets of its General Account.

INTEREST -- Contract Value allocated to the Fixed Account earns interest at a
fixed rate or rates that are paid by Security Benefit. The Contract Value in the
Fixed Account earns interest at an interest rate that is guaranteed to be at
least an annual effective rate of 3% which will accrue daily ("Guaranteed
Rate"). Such interest will be paid regardless of the actual investment
experience of the Fixed Account. In addition, Security Benefit may in its
discretion pay interest at a rate ("Current Rate") that exceeds the Guaranteed
Rate. Security Benefit will determine the Current Rate, if any, from time to
time.

Contract Value allocated or transferred to the Fixed Account will earn
interest at the Current Rate, if any, in effect on the date such portion of
Contract Value is allocated or transferred to the Fixed Account. Contract Value
allocated or transferred to the Fixed Account at one point in time may be
credited with a different Current Rate than amounts allocated or transferred to
the Fixed Account at another point in time. For example, amounts allocated to
the Fixed Account in June may be credited with a different current rate than
amounts allocated to the Fixed Account in July. Therefore, at any time, various
portions of your Contract Value in the Fixed Account may be earning interest at
different Current Rates depending upon the point in time such portions were
allocated or transferred to the Fixed Account. Security Benefit bears the
investment risk for the Contract Value allocated to the Fixed Account and for
paying interest at the Guaranteed Rate on amounts allocated to the Fixed
Account.

For purposes of determining the interest rates to be credited on Contract
Value in the Fixed Account, withdrawals, loans or transfers from the Fixed
Account will be deemed to be taken from purchase payments and Contract Value
allocated to the Fixed Account on a first in, first out basis. Any interest
attributable to such amounts shall be deemed to be taken before the amount of
the purchase payment or other Contract Value allocated to the Fixed Account. For
more information about transfers and withdrawals from the Fixed Account, see the
discussion of the Fixed Account options below. For more information about
transfers and withdrawals from the Fixed Account, see "Transfers and Withdrawals
From the Fixed Account," below.

DEATH BENEFIT -- The death benefit under the Contract will be determined in the
same fashion for a Contract that has Contract Value allocated to the Fixed
Account as for a Contract that has Contract Value allocated to the Subaccounts.
See "Death Benefit," page 23.

CONTRACT CHARGES -- Premium taxes, withdrawal charges and the administration
charge will be the same for Contractowners who allocate purchase payments or
transfer Contract Value to the Fixed Account as for those who allocate purchase
payments or transfer Contract Value to the Subaccounts. The charge for mortality
and expense risks will not be assessed against the Fixed Account, and any
amounts that Security Benefit pays for income taxes allocable to the Subaccounts
will not be charged against the Fixed Account. In addition, you will not pay
directly or indirectly the investment advisory fees and operating expenses of
SBL Fund to the extent Contract Value is allocated to the Fixed Account;
however, you also will not participate in the investment experience of the
Subaccounts.

TRANSFERS AND WITHDRAWALS FROM THE FIXED ACCOUNT -- You may transfer amounts
from the Subaccounts to the Fixed Account and from the Fixed Account to the
Subaccounts, subject to the following limitations. Transfers from the Fixed
Account are limited in a Contract Year to not more than the greatest of:

1. $5,000,

2. one-third of the Contract Value allocated to the Fixed Account at the time
of the first transfer from the Fixed Account in the Contract Year, or

3. 120% of the amount transferred from the Fixed Account during the previous
Contract Year.

Security Benefit reserves the right for a period of time to allow transfers from
the Fixed Account in amounts that exceed the limits set forth above ("Waiver
Period"). In any Contract Year following such a Waiver Period, the total dollar
amount that may be transferred from the Fixed Account is the greatest of: (1)
above; (2) above; or (3) 120% of the lesser of: (i) the dollar amount
transferred from the Fixed Account in the previous Contract Year; or (ii) the
maximum dollar amount that would have been allowed in the previous Contract Year
under the transfer provisions above absent the Waiver Period.

The minimum amount that you may transfer from the Fixed Account to the
Subaccounts is the lesser of (i) $500 or (ii) the amount of Contract Value
allocated to the Fixed Account. Transfer of Contract Value pursuant to the Asset
Reallocation Option is not currently subject to any minimums. The minimum
transfer under the Dollar Cost Averaging Option is $25. The Company reserves the
right to limit the number of transfers permitted each Contract Year to 14
transfers and to limit the amount that may be subject to transfer.

You may also make full or partial withdrawals to the same extent as if you
had allocated Contract Value to the Subaccounts. However, no partial withdrawal
request will be processed which would result in the withdrawal of Contract Value
from the Loan Account. See "Full and Partial Withdrawals," page 21 and
"Systematic Withdrawals," page 22. In addition, to the same extent as
Contractowners with Contract Value in the Subaccounts, the Owner of a Contract
used in connection with a Qualified Plan may obtain a loan if so permitted under
the terms of the Qualified Plan. See "Loans," page 32.

PAYMENTS FROM THE FIXED ACCOUNT -- Full and partial withdrawals, loans, and
transfers from the Fixed Account may be delayed for up to six months after a
written request in proper form is received by Security Benefit at its Home
Office. During the period of deferral, interest at the applicable interest rate
or rates will continue to be credited to the amounts allocated to the Fixed
Account. However, payment of any amounts will not be deferred if they are to be
used to pay premiums on any policies or contracts issued by Security Benefit.

MORE ABOUT THE CONTRACT

OWNERSHIP -- The Contractowner is the person named as such in the application or
in any later change shown in Security Benefit's records. While living, the
Contractowner alone has the right to receive all benefits and exercise all
rights that the Contract grants or Security Benefit allows, subject to any
limitations under your Qualified Plan. The Owner may be an entity that is not a
living person such as a trust or corporation referred to herein as "Non-natural
Persons." See "Federal Tax Matters," page 34.

JOINT OWNERS. The Joint Owners will be joint tenants with rights of
survivorship and upon the death of an Owner, the surviving Owner shall be the
sole Owner. Any Contract transaction requires the signature of all persons named
jointly.

DESIGNATION AND CHANGE OF BENEFICIARY -- The Designated Beneficiary is the
person having the right to the death benefit, if any, payable upon the death of
the Owner or Joint Owner (or if applicable, the Annuitant) during the
Accumulation Period. The Designated Beneficiary is the first person on the
following list who is alive on the date of death of the Owner or the Joint
Owner: the Owner; the Joint Owner; the Primary Beneficiary; the Secondary
Beneficiary; the Annuitant; or if none of the above are alive, the Owner's
estate. If you purchased your Contract prior to January 4, 1999, the Designated
Beneficiary is the first person on the following list who is alive on the date
of death of the Annuitant: the Primary Beneficiary, the Secondary Beneficiary or
if none of the above are alive, the Annuitant's estate. The Primary Beneficiary
is the individual named as such in the application or any later change shown in
Security Benefit's records. Careful consideration should be given to the manner
in which the Contract is registered, as well as the designation of the Primary
Beneficiary. The Contractowner may change the Primary Beneficiary at any time
while the Contract is in force by written request on forms provided by Security
Benefit and received by Security Benefit at its Home Office. The change will not
be binding on Security Benefit until it is received and recorded at its Home
Office. The change will be effective as of the date the form is signed subject
to any payments made or other actions taken by Security Benefit before the
change is received and recorded. A Secondary Beneficiary may be designated. The
Owner may designate a permanent Beneficiary whose rights under the Contract
cannot be changed without his or her consent.

Reference should be made to the terms of a particular Qualified Plan and
any applicable law for any restrictions or limitations on the designation of a
Beneficiary. Many qualified plans do not allow the designation of any primary
beneficiary except a spouse unless the spouse consents and the consent is
witnessed by a plan representative or a Notary Public.

DIVIDENDS -- The Contract may share in the surplus earnings of Security Benefit.
However, the current dividend scale is zero and Security Benefit does not
anticipate that dividends will be paid. Certain states will not permit the
Contract to be issued as a dividend-paying policy.

PAYMENTS FROM THE SEPARATE ACCOUNT -- Security Benefit will pay any full or
partial withdrawal benefit or death benefit proceeds from Contract Value
allocated to the Subaccounts, and will effect a transfer between Subaccounts or
from a Subaccount to the Fixed Account on the Valuation Date a proper request is
received at Security Benefit's Home Office. However, Security Benefit can
postpone the calculation or payment of such a payment or transfer of amounts
from the Subaccounts to the extent permitted under applicable law, which is
currently permissible only for any period:

o During which the New York Stock Exchange is closed other than customary
weekend and holiday closings,

o During which trading on the New York Stock Exchange is restricted as
determined by the SEC,

o During which an emergency, as determined by the SEC, exists as a result of
which (i) disposal of securities held by the Separate Account is not
reasonably practicable, or (ii) it is not reasonably practicable to
determine the value of the assets of the Separate Account, or

o For such other periods as the SEC may by order permit for the protection of
investors.

PROOF OF AGE AND SURVIVAL -- Security Benefit may require proof of age or
survival of any person on whose life annuity payments depend.

MISSTATEMENTS -- If you misstate the age or sex of an Annuitant or age of an
Owner, the correct amount paid or payable by Security Benefit under the Contract
shall be such as the Contract Value would have provided for the correct age or
sex (unless unisex rates apply).

LOANS -- If you own a Contract issued in connection with a retirement plan that
is qualified under Section 403(b) of the Internal Revenue Code, you may borrow
money under your Contract using the Contract Value as the only security for the
loan. You may obtain a loan by submitting a proper written request to Security
Benefit. A loan must be taken prior to the Annuity Commencement Date. The
minimum loan that may be taken is $1,000 ($500 for Contracts issued in New
Jersey). The maximum amount of all loans on all contracts combined is generally
equal to the lesser of: (1) $50,000 reduced by the excess of: (a) the highest
outstanding loan balance within the preceding 12-month period ending on the day
before the date the loan is made; over (b) the outstanding loan balance on the
date the loan is made; or (2) 50% of the Contract Value or $10,000, whichever is
greater. The Internal Revenue Code requires aggregation of all loans made to an
individual employee under a single employer plan. However, since Security
Benefit has no information concerning outstanding loans with other providers, we
will only use information available under annuity contracts issued by us, and
you will be responsible for determining your loan limits considering loans from
other providers. Reference should be made to the terms of your particular
Qualified Plan for any additional loan restrictions.

When an eligible contractowner takes a loan, Contract Value in an amount
equal to the loan amount is transferred from the Subaccounts and/or the Fixed
Account into an account called the "Loan Account." Amounts allocated to the Loan
Account earn 3%, the minimum rate of interest guaranteed under the Fixed
Account. In addition, 10% of the loaned amount will be held in the Fixed Account
as security for the loan and will earn the Current Rate.

Interest will be charged for the loan and will accrue on the loan balance
from the effective date of any loan. The loan interest rate will be 5% (5.5% if
your Contract was issued prior to January 4, 1999). Because the Contract Value
maintained in the Loan Account (which will earn 3%) will always be equal in
amount to the outstanding loan balance, the net cost of a loan is 2%.

Loans must be repaid within five years, unless the loan is to be used to
acquire your principal residence, in which case the loan must be repaid within
30 years. You must make loan repayments on at least a quarterly basis, and you
may prepay your loan at any time. Upon receipt of a loan payment, Security
Benefit will transfer Contract Value from the Loan Account to the Fixed Account
and/or the Subaccounts according to your current instructions with respect to
purchase payments in an amount equal to the amount by which the payment reduces
the amount of the loan outstanding.

If you do not make any required loan payment within 30 days of the due date
for loans with a monthly repayment schedule or within 90 days of the due date
for loans with a quarterly repayment schedule, your total outstanding loan
balance will be deemed to be in default for tax reporting purposes. The entire
loan balance, with any accrued interest, will be reported as income to the
Internal Revenue Service ("IRS"). Security Benefit may agree to extend these
deadlines for late payments within any limits imposed by IRS regulations. Once a
loan has gone into default, regularly scheduled payments will not be accepted.
No new loans will be allowed while a loan is in default. Interest will continue
to accrue on a loan in default. Contract Value equal to the amount of the
accrued interest will be transferred to the Loan Account. If a loan continues to
be in default, the total outstanding balance may be deducted from Contract Value
upon the Contractowner's attaining age 59 1/2. The Contract will be
automatically terminated if the outstanding loan balance on a loan in default
equals or exceeds the Withdrawal Value. The proceeds from the Contract will be
used to repay the debt and any applicable withdrawal charge. Because of the
adverse tax consequences associated with defaulting on a loan, you should
carefully consider your ability to repay the loan and should consult with a tax
advisor before requesting a loan.

While the amount to secure the loan is held in the Loan Account, you forego
the investment experience of the Subaccounts and the Current Rate of interest on
the Fixed Account. Outstanding Contract Debt will reduce the amount of proceeds
paid upon full withdrawal, upon payment of the death benefit, and upon
annuitization. In addition, no partial withdrawal will be processed which would
result in the withdrawal of Contract Value from the Loan Account.

In the event that you elect to exchange your Contract for a contract of
another company, you need to either pay off your loan prior to the exchange or
incur tax consequences in that you will be deemed to have received a taxable
distribution in the amount of the outstanding loan balance.

You should consult with your tax adviser on the effect of a loan.

Loans are not available in certain states pending department of insurance
approval. If loans are later approved by the insurance department of a state,
Security Benefit intends to make loans available to all Owners of 403(b)
contracts in that state at that time, but there can be no assurance that loans
will be approved. Prospective Contractowners should contact their agent
concerning availability of loans in their state.

RESTRICTIONS ON WITHDRAWALS FROM QUALIFIED PLANS -- Generally, a Qualified Plan
may not provide for the distribution or withdrawal of amounts accumulated under
the Plan until after a fixed number of years, the attainment of a stated age or
upon the occurrence of a specific event such as hardship, disability,
retirement, death or termination of employment. Therefore, if you own a Contract
purchased in connection with a Qualified Plan, you may not be entitled to make a
full or partial withdrawal, as described in this Prospectus, unless one of the
above-described conditions has been satisfied. For this reason, you should refer
to the terms of your particular Qualified Plan, the Internal Revenue Code and
other applicable law for any limitation or restriction on distributions and
withdrawals, including the 10% penalty tax that may be imposed in the event of a
distribution from a Qualified Plan before the participant reaches age 59 1/2.
See the discussion under "Tax Penalties," page 41.

Section 403(b) imposes restrictions on certain distributions from
tax-sheltered annuity contracts meeting the requirements of Section 403(b). The
restrictions apply to tax years beginning on or after January 1, 1989. Section
403(b) requires that distributions from Section 403(b) tax-sheltered annuities
that are attributable to your contributions made after December 31, 1988 under a
salary reduction agreement begin only after you (i) reach age 59 1/2, (ii)
separate from service, (iii) die, (iv) become disabled, or (v) incur a hardship.
Furthermore, we may not distribute to you on account of hardship gains accrued
after December 31, 1988 attributable to such contributions. Hardship, for this
purpose, is generally defined as an immediate and heavy financial need, such as
paying for medical expenses, the purchase of a residence, paying certain tuition
expenses, or paying amounts needed to avoid eviction or foreclosure that may
ONLY be met by the distribution. You should be aware that Internal Revenue
Service regulations do not allow you to make any contributions to your 403(b)
annuity contract for a period of six months after a hardship distribution.

If you own a Contract purchased as a Section 403(b) tax-sheltered annuity
contract, you will not be entitled to make a full or partial withdrawal, as
described in this Prospectus, in order to receive proceeds from the Contract
attributable to your contributions under a salary reduction agreement or any
gains credited to such Contract after December 31, 1988 unless one of the above
conditions has been satisfied. In the case of transfers of amounts accumulated
in a different Section 403(b) contract to this Contract under a Section 403(b)
program, the withdrawal constraints described above would not apply to the
amount transferred to the Contract designated as attributable to your December
31, 1988 account balance under the old contract, provided the amounts
transferred between contracts qualified as a tax-free exchange under the
Internal Revenue Code. You may be able to transfer your Contract's Withdrawal
Value to certain other investment alternatives meeting the requirements of
Section 403(b) that are available under your employer's Section 403(b)
arrangement.

The distribution or withdrawal of amounts under a Contract purchased in
connection with a Qualified Plan may result in the receipt of taxable income to
the Owner or Annuitant and in some instances may also result in a penalty tax.
Therefore, you should carefully consider the tax consequences of a distribution
or withdrawal under a Contract and you should consult a competent tax adviser.
See "Federal Tax Matters," page 34.

RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT -- If you are a Participant in
the Texas Optional Retirement Program, your Contract is subject to restrictions
required under the Texas Government Code. In accordance with those restrictions,
you will not be permitted to make withdrawals prior to your retirement, death or
termination of employment in a Texas public institution of higher education.

FEDERAL TAX MATTERS

INTRODUCTION -- The Contract described in this Prospectus is designed for use by
individuals and groups as a non-tax qualified retirement plan and for
individuals and groups which are Qualified Plans under the provisions of the
Internal Revenue Code ("Code"). The ultimate effect of federal income taxes on
the amounts held under a Contract, on annuity payments, and on the economic
benefits to the Owner, the Annuitant, and the Beneficiary or other payee will
depend upon the type of retirement plan, if any, for which the Contract is
purchased, the tax and employment status of the individuals involved and a
number of other factors. The discussion contained herein and in the Statement of
Additional Information is general in nature and is not intended to be an
exhaustive discussion of all questions that might arise in connection with a
Contract. It is based upon Security Benefit's understanding of the present
federal income tax laws as currently interpreted by the Internal Revenue Service
("IRS"), and is not intended as tax advice. No representation is made regarding
the likelihood of continuation of the present federal income tax laws or of the
current interpretations by the IRS or the courts. Future legislation may affect
annuity contracts adversely. Moreover, no attempt has been made to consider any
applicable state or other laws. Because of the inherent complexity of the tax
laws and the fact that tax results will vary according to the particular
circumstances of the individual involved and, if applicable, the Qualified Plan,
you should consult with a qualified tax adviser regarding the purchase of a
Contract, the selection of an Annuity Option under a Contract, the receipt of
annuity payments under a Contract or any other transaction involving a Contract.
SECURITY BENEFIT DOES NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF, OR TAX
CONSEQUENCES ARISING FROM, ANY CONTRACT OR ANY TRANSACTION INVOLVING THE
CONTRACT.

TAX STATUS OF SECURITY BENEFIT
AND THE SEPARATE ACCOUNT --

GENERAL. Security Benefit intends to be taxed as a life insurance company
under Part I, Subchapter L of the Code. Because the operations of the Separate
Account form a part of Security Benefit, Security Benefit will be responsible
for any federal income taxes that become payable with respect to the income of
the Separate Account and its Subaccounts.

CHARGE FOR SECURITY BENEFIT TAXES. A charge may be made for any federal
taxes incurred by Security Benefit that are attributable to the Separate
Account, the Subaccounts or to the operations of Security Benefit with respect
to the Contracts or attributable to payments, premiums, or acquisition costs
under the Contracts. Security Benefit will review the question of a charge to
the Separate Account, the Subaccounts or the Contracts for Security Benefit's
federal taxes periodically. Charges may become necessary if, among other
reasons, the tax treatment of Security Benefit or of income and expenses under
the Contracts is ultimately determined to be other than what Security Benefit
currently believes it to be, if there are changes made in the federal income tax
treatment of variable annuities at the insurance company level, or if there is a
change in Security Benefit's tax status.

Under current laws, Security Benefit may incur state and local taxes (in
addition to premium taxes) in several states. At present, these taxes are not
significant. If there is a material change in applicable state or local tax
laws, Security Benefit reserves the right to charge the Separate Account or the
Subaccounts for such taxes, if any, attributable to the Separate Account or
Subaccounts.

DIVERSIFICATION STANDARDS. Each Series of SBL Fund will be required to
adhere to regulations adopted by the Treasury Department pursuant to Section
817(h) of the Code prescribing asset diversification requirements for investment
companies whose shares are sold to insurance company separate accounts funding
variable contracts. Pursuant to these regulations, on the last day of each
calendar quarter (or on any day within 30 days thereafter), no more than 55% of
the total assets of a Series may be represented by any one investment, no more
than 70% may be represented by any two investments, no more than 80% may be
represented by any three investments, and no more than 90% may be represented by
any four investments. For purposes of Section 817(h), securities of a single
issuer generally are treated as one investment but obligations of the U.S.
Treasury and each U.S. Governmental agency or instrumentality generally are
treated as securities of separate issuers. The Separate Account, through the
Series, intends to comply with the diversification requirements of Section
817(h).

In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate account used to support their contracts. In those circumstances, income
and gains from the separate account assets would be includable in the variable
contractowner's gross income. The IRS has stated in published rulings that a
variable contractowner will be considered the owner of separate account assets
if the contractowner possesses incidents of ownership in those assets, such as
the ability to exercise investment control over the assets. The Treasury
Department also announced, in connection with the issuance of regulations
concerning diversification, that those regulations "do not provide guidance
concerning the circumstances in which investor control of the investments of a
segregated asset account may cause the investor (i.e., the contractowner),
rather than the insurance company, to be treated as the owner of the assets in
the account." This announcement also stated that guidance would be issued by way
of regulations or rulings on the "extent to which policyholders may direct their
investments to particular subaccounts without being treated as owners of the
underlying assets." Guidance issued to date has no application to the Contract.

The ownership rights under the Contract are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that policyowners were not owners of separate account assets. For
example, the Contractowner has additional flexibility in allocating purchase
payments and Contract Values. These differences could result in a Contractowner
being treated as the owner of a pro rata portion of the assets of the Separate
Account. In addition, Security Benefit does not know what standards will be set
forth, if any, in the regulations or rulings which the Treasury Department has
stated it expects to issue. Security Benefit therefore reserves the right to
modify the Contract, as it deems appropriate, to attempt to prevent a
Contractowner from being considered the owner of a pro rata share of the assets
of the Separate Account. Moreover, in the event that regulations or rulings are
adopted, there can be no assurance that the Subaccounts will be able to operate
as currently described in the Prospectus, or that SBL Fund will not have to
change any Series' investment objective or investment policies.

INCOME TAXATION OF ANNUITIES IN GENERAL--NON-QUALIFIED PLANS -- Section 72 of
the Code governs the taxation of annuities. In general, a Contractowner is not
taxed on increases in value under an annuity contract until some form of
distribution is made under the contract. However, the increase in value may be
subject to tax currently under certain circumstances. See "Contracts Owned by
Non-Natural Persons," page 36 and "Diversification Standards," page 34.
Withholding of federal income taxes on all distributions may be required unless
a recipient who is eligible elects not to have any amounts withheld and properly
notifies Security Benefit of that election.

SURRENDERS OR WITHDRAWALS PRIOR TO THE ANNUITY COMMENCEMENT DATE. Code
Section 72 provides that amounts received upon a total or partial withdrawal
(including systematic withdrawals) from a Contract prior to the Annuity
Commencement Date generally will be treated as gross income to the extent that
the cash value of the Contract immediately before the withdrawal (determined
without regard to any surrender charge in the case of a partial withdrawal)
exceeds the "investment in the contract." The "investment in the contract" is
that portion, if any, of purchase payments paid under a Contract less any
distributions received previously under the Contract that are excluded from the
recipient's gross income. The taxable portion is taxed at ordinary income tax
rates. For purposes of this rule, a pledge or assignment of a contract is
treated as a payment received on account of a partial withdrawal of a Contract.

SURRENDERS OR WITHDRAWALS ON OR AFTER THE ANNUITY COMMENCEMENT DATE. Upon a
complete surrender, the receipt is taxable to the extent that the cash value of
the Contract exceeds the investment in the Contract. The taxable portion of such
payments will be taxed at ordinary income tax rates.

For fixed annuity payments, the taxable portion of each payment generally
is determined by using a formula known as the "exclusion ratio," which
establishes the ratio that the investment in the Contract bears to the total
expected amount of annuity payments for the term of the Contract. That ratio is
then applied to each payment to determine the non-taxable portion of the
payment. The remaining portion of each payment is taxed at ordinary income
rates. For variable annuity payments, the taxable portion of each payment is
determined by using a formula known as the "excludable amount," which
establishes the non-taxable portion of each payment. The non-taxable portion is
a fixed dollar amount for each payment, determined by dividing the investment in
the Contract by the number of payments to be made. The remainder of each
variable annuity payment is taxable. Once the excludable portion of annuity
payments to date equals the investment in the Contract, the balance of the
annuity payments will be fully taxable.

PENALTY TAX ON CERTAIN SURRENDERS AND WITHDRAWALS. With respect to amounts
withdrawn or distributed before the taxpayer reaches age 59 1/2, a penalty tax
is imposed equal to 10% of the portion of such amount which is includable in
gross income. However, the penalty tax is not applicable to withdrawals: (i)
made on or after the death of the owner (or where the owner is not an
individual, the death of the "primary annuitant," who is defined as the
individual the events in whose life are of primary importance in affecting the
timing and amount of the payout under the Contract); (ii) attributable to the
taxpayer's becoming totally disabled within the meaning of Code Section
72(m)(7); (iii) which are part of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or life
expectancy) of the taxpayer, or the joint lives (or joint life expectancy) of
the taxpayer and his or her beneficiary; (iv) from certain qualified plans; (v)
under a so-called qualified funding asset (as defined in Code Section 130(d));
(vi) under an immediate annuity contract; or (vii) which are purchased by an
employer on termination of certain types of qualified plans and which are held
by the employer until the employee separates from service.

If the penalty tax does not apply to a surrender or withdrawal as a result
of the application of item (iii) above, and the series of payments are
subsequently modified (other than by reason of death or disability), the tax for
the first year in which the modification occurs will be increased by an amount
(determined by the regulations) equal to the tax that would have been imposed
but for item (iii) above, plus interest for the deferral period, if the
modification takes place (a) before the close of the period which is five years
from the date of the first payment and after the taxpayer attains age 59 1/2, or
(b) before the taxpayer reaches age 59 1/2.

ADDITIONAL CONSIDERATIONS--

DISTRIBUTION-AT-DEATH RULES. In order to be treated as an annuity contract,
a contract must provide the following two distribution rules: (a) if any owner
dies on or after the Annuity Commencement Date, and before the entire interest
in the Contract has been distributed, the remainder of the owner's interest will
be distributed at least as quickly as the method in effect on the owner's death;
and (b) if any owner dies before the Annuity Commencement Date, the entire
interest in the Contract must generally be distributed within five years after
the date of death, or, if payable to a designated beneficiary, must be
annuitized over the life of that designated beneficiary or over a period not
extending beyond the life expectancy of that beneficiary, commencing within one
year after the date of death of the owner. If the sole designated beneficiary is
the spouse of the deceased owner, the Contract (together with the deferral of
tax on the accrued and future income thereunder) may be continued in the name of
the spouse as owner.

Generally, for purposes of determining when distributions must begin under
the foregoing rules, where an owner is not an individual, the primary annuitant
is considered the owner. In that case, a change in the primary annuitant will be
treated as the death of the owner. Finally, in the case of joint owners, the
distribution-at-death rules will be applied by treating the death of the first
owner as the one to be taken into account in determining generally when
distributions must commence, unless the sole Designated Beneficiary is the
deceased owner's spouse.

GIFT OF ANNUITY CONTRACTS. Generally, gifts of non-tax qualified Contracts
prior to the Annuity Commencement Date will trigger tax on the gain on the
Contract, with the donee getting a stepped-up basis for the amount included in
the donor's income. The 10% penalty tax and gift tax also may be applicable.
This provision does not apply to transfers between spouses or incident to a
divorce.

CONTRACTS OWNED BY NON-NATURAL PERSONS. If the Contract is held by a
non-natural person (for example, a corporation) the income on that Contract
(generally the increase in net surrender value less the purchase payments) is
includable in taxable income each year. The rule does not apply where the
Contract is acquired by the estate of a decedent, where the Contract is held by
certain types of retirement plans, where the Contract is a qualified funding
asset for structured settlements, where the Contract is purchased on behalf of
an employee upon termination of a qualified plan, and in the case of an
immediate annuity. An annuity contract held by a trust or other entity as agent
for a natural person is considered held by a natural person.

MULTIPLE CONTRACT RULE. For purposes of determining the amount of any
distribution under Code Section 72(e) (amounts not received as annuities) that
is includable in gross income, all Non-Qualified annuity contracts issued by the
same insurer to the same Contractowner during any calendar year are to be
aggregated and treated as one contract. Thus, any amount received under any such
contract prior to the contract's Annuity Commencement Date, such as a partial
surrender, dividend, or loan, will be taxable (and possibly subject to the 10%
penalty tax) to the extent of the combined income in all such contracts.

In addition, the Treasury Department has broad regulatory authority in
applying this provision to prevent avoidance of the purposes of this rule. It is
possible that, under this authority, the Treasury Department may apply this rule
to amounts that are paid as annuities (on and after the Annuity Commencement
Date) under annuity contracts issued by the same company to the same owner
during any calendar year. In this case, annuity payments could be fully taxable
(and possibly subject to the 10% penalty tax) to the extent of the combined
income in all such contracts and regardless of whether any amount would
otherwise have been excluded from income because of the "exclusion ratio" under
the contract.

POSSIBLE TAX CHANGES. In recent years, legislation has been proposed that
would have adversely modified the federal taxation of certain annuities. There
is always the possibility that the tax treatment of annuities could change by
legislation or other means (such as IRS regulations, revenue rulings, and
judicial decisions). Moreover, although unlikely, it is also possible that any
legislative change could be retroactive (that is, effective prior to the date of
such change).

TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A CONTRACT. A transfer of ownership
of a Contract, the designation of an Annuitant, payee or other beneficiary who
is not also the Owner, the selection of certain Annuity Commencement Dates or
the exchange of a Contract may result in certain tax consequences to the Owner
that are not discussed herein. An Owner contemplating any such transfer,
assignment, selection or exchange should contact a competent tax adviser with
respect to the potential effects of such a transaction.

QUALIFIED PLANS -- The Contract may be used with Qualified Plans that meet the
requirements of Section 401, 403(b), 408, 408(A) or 457 of the Code. If you are
purchasing the Contract as an investment vehicle for one of these Qualified
Plans, you should consider that the Contract does not provide any additional tax
advantages beyond that already available through the Qualified Plan. However,
the Contract does offer features and benefits in addition to providing tax
deferral that other investments may not offer, including death benefit
protection for your beneficiaries and annuity options which guarantee income for
life. You should consult with your financial professional as to whether the
overall benefits and costs of the Contract are appropriate considering your
circumstances.

The tax rules applicable to participants in such Qualified Plans vary
according to the type of plan and the terms and conditions of the plan itself.
No attempt is made herein to provide more than general information about the use
of the Contract with the various types of Qualified Plans. These Qualified Plans
may permit the purchase of the Contracts to accumulate retirement savings under
the plans. Adverse tax or other legal consequences to the plan, to the
participant or to both may result if this Contract is assigned or transferred to
any individual as a means to provide benefit payments, unless the plan complies
with all legal requirements applicable to such benefits prior to transfer of the
Contract. Contractowners, Annuitants, and beneficiaries, are cautioned that the
rights of any person to any benefits under such Qualified Plans may be subject
to the terms and conditions of the plans themselves or limited by applicable
law, regardless of the terms and conditions of the Contract issued in connection
therewith. For example, Security Benefit may accept beneficiary designations and
payment instructions under the terms of the Contract without regard to any
spousal consents that may be required under the plan or the Employee Retirement
Income Security Act of 1974 (ERISA). Consequently, a Contractowner's beneficiary
designation or elected payment option may not be enforceable.

The amounts that may be contributed to Qualified Plans are subject to
limitations that vary depending on the type of Plan. In addition, early
distributions from most Qualified Plans may be subject to penalty taxes, or for
certain plans, could cause the Plan to be disqualified. Furthermore,
distributions from most Qualified Plans are subject to certain minimum
distribution rules. Failure to comply with these rules could result in
disqualification of the Plan or subject the Owner or Annuitant to penalty taxes.
As a result, the minimum distribution rules may limit the availability of
certain Annuity Options to certain Annuitants and their beneficiaries. These
requirements may not be incorporated into Security Benefit's Contract
administration procedures. Owners, participants and beneficiaries are
responsible for determining that contributions, distributions and other
transactions with respect to the Contracts comply with applicable law.

The following are brief descriptions of the various types of Qualified
Plans and the use of the Contract therewith:

SECTION 401. Code Section 401 permits employers to establish various types
of retirement plans (e.g., pension, profit sharing and 401(k) plans) for their
employees. For this purpose, self-employed individuals (proprietors or partners
operating a trade or business) are treated as employees and therefore eligible
to participate in such plans. Retirement plans established in accordance with
Section 401 may permit the purchase of Contracts to provide benefits thereunder.

In order for a retirement plan to be "qualified" under Code Section 401, it
must: (i) meet certain minimum standards with respect to participation, coverage
and vesting; (ii) not discriminate in favor of "highly compensated" employees;
(iii) provide contributions or benefits that do not exceed certain limitations;
(iv) prohibit the use of plan assets for purposes other than the exclusive
benefit of the employees and their beneficiaries covered by the plan; (v)
provide for distributions that comply with certain minimum distribution
requirements; (vi) provide for certain spousal survivor benefits; and (vii)
comply with numerous other qualification requirements.

A retirement plan qualified under Code Section 401 may be funded by
employer contributions, employee contributions or a combination of both. Plan
participants are normally not subject to tax on employer contributions until
such amounts are actually distributed from the plan. Depending upon the terms of
the particular plan, employee contributions may be made on a pre-tax or
after-tax basis. In addition, plan participants are not taxed on plan earnings
derived from either employer or employee contributions until such earnings are
distributed.

Each employee's interest in a retirement plan qualified under Code Section
401 must generally be distributed or begin to be distributed not later than
April 1 of the calendar year following the later of the calendar year in which
the employee reaches age 70 1/2 or retires ("required beginning date"). The
required beginning date for 5% owners is April 1 of the calendar year following
the year in which the owner attains age 70 1/2. Periodic distributions must not
extend beyond the life of the employee or the lives of the employee and a
designated beneficiary (or over a period extending beyond the life expectancy of
the employee or the joint life expectancy of the employee and a designated
beneficiary).

If an employee dies before reaching his or her required beginning date, the
employee's entire interest in the plan must generally be distributed to a
designated beneficiary before the close of the calendar year following the year
of the employee's death and be made over the life of the beneficiary (or over a
period not extending beyond the life expectancy of the beneficiary). If the
designated beneficiary is the employee's surviving spouse, distributions may be
delayed until the employee would have reached age 70 1/2. If there is no
designated beneficiary, or if distributions are not timely commenced, the entire
account must be distributed by the end of the fifth full calendar year following
the employee's death.

If an employee dies after reaching his or her required beginning date, the
employee's interest in the plan must generally be distributed at least as
rapidly as under the method of distribution in effect at the time of the
employee's death.

Annuity payments distributed from a retirement plan qualified under Code
Section 401 are taxable under Section 72 of the Code. Section 72 provides that
the portion of each payment attributable to contributions that were taxable to
the employee in the year made, if any, is excluded from gross income as a return
of the employee's investment. The portion so excluded is determined by dividing
the employee's investment in the plan by (1) the number of anticipated payments
determined under a table set forth in Section 72 of the Code or (2) in the case
of a contract calling for installment payments, the number of monthly annuity
payments under such contract. The portion of each payment in excess of the
exclusion amount is taxable as ordinary income. Once the employee's investment
has been recovered, the full annuity payment will be taxable. If the employee
should die prior to recovering his entire investment, the unrecovered investment
will be allowed as a deduction on his final return. If the employee made no
contributions that were taxable when made, the full amount of each annuity
payment is taxable to him as ordinary income.

A "lump-sum" distribution from a retirement plan qualified under Code
Section 401 may be eligible for favorable tax treatment. A "lump-sum"
distribution means the distribution within one taxable year of the balance to
the credit of the employee which becomes payable: (i) on account of the
employee's death, (ii) after the employee attains age 59 1/2, (iii) on account
of the employee's termination of employment (in the case of a common law
employee only) or (iv) after the employee has become disabled (in the case of a
self-employed person only).

As a general rule, a lump-sum distribution is fully taxable as ordinary
income except for an amount equal to the employee's investment, if any, which is
recovered tax-free. However, ten-year averaging and capital-gains treatment may
be available to an employee who reached age 50 before 1986.

Distributions from a retirement plan qualified under Code Section 401 may
be eligible for a tax-free rollover to another eligible retirement plan,
including an individual retirement account or annuity (IRA). See "Rollovers,"
page 41.

SECTION 403(B). Code Section 403(b) permits public school employees and
employees of certain types of charitable, educational and scientific
organizations specified in Section 501(c)(3) of the Code to purchase annuity
contracts, and, subject to certain limitations, to exclude the amount of
purchase payments from gross income for tax purposes. The Contract may be
purchased in connection with a Section 403(b) annuity program.

Section 403(b) annuities must generally be provided under a plan which
meets certain minimum participation, coverage, and nondiscrimination
requirements. Section 403(b) annuities are generally subject to minimum
distribution requirements similar to those applicable to retirement plans
qualified under Section 401 of the Code. See "Section 401," page 37.

A Section 403(b) annuity contract may be purchased with employer
contributions, employee contributions or a combination of both. An employee's
rights under a Section 403(b) contract must be nonforfeitable. Prior to 2002
numerous limitations applied to the amount of contributions that could be made
to a Section 403(b) annuity contract. These limitations were referred to as the
"maximum exclusion allowance". Beginning in 2002, the "maximum exclusion
allowance" limitation on Section 403(b) annuity contributions is repealed. The
new applicable limit is similar to the limits on contributions to qualified
retirement plans and depends upon, among other things, whether the annuity
contract is purchased with employer or employee contributions.

Amounts used to purchase Section 403(b) annuities generally are excludable
from the taxable income of the employee. As a result, all distributions from
such annuities are normally taxable in full as ordinary income to the employee.

A Section 403(b) annuity contract must prohibit the distribution of
employee contributions (including earnings thereon) until the employee: (i)
attains age 59 1/2, (ii) terminates employment; (iii) dies; (iv) becomes
disabled; or (v) incurs a financial hardship (earnings may not be distributed in
the event of hardship).

Distributions from a Section 403(b) annuity contract may be eligible for a
tax-free rollover to another eligible retirement plan, including an individual
retirement account or annuity (IRA). See "Rollovers," page 41.

SECTIONS 408 AND 408A. INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the
Code permits eligible individuals to establish individual retirement programs
through the purchase of Individual Retirement Annuities ("traditional IRAs").
The Contract may be purchased as an IRA. The IRAs described in this paragraph
are called "traditional IRAs" to distinguish them from "Roth IRAs" which became
available in 1998. (Roth IRAs are described on page 40.)

IRAs are subject to limitations on the amount that may be contributed, the
persons who may be eligible and on the time when distributions must commence.
Depending upon the circumstances of the individual, contributions to a
traditional IRA may be made on a deductible or non-deductible basis. IRAs may
not be transferred, sold, assigned, discounted or pledged as collateral for a
loan or other obligation. The annual premium for an IRA may not be fixed and may
not exceed (except in the case of a rollover contribution) 100% of the
individual's taxable compensation or the applicable dollar amount as shown in
the table below:

-------------------------- -----------------
TAX YEAR AMOUNT
-------------------------- -----------------
2002-2004 $3,000
2005-2007 $4,000
2008 and thereafter $5,000
-------------------------- -----------------

Any refund of premium must be applied to the payment of future premiums or the
purchase of additional benefits. If an individual is age 50 or over, the
individual may make an additional catch-up contribution to a traditional IRA of
$500 during the tax years of 2002-2005, or $1,000 for the 2006 tax year or any
tax year thereafter. However, if the individual is covered by an employer
retirement plan, the amount of the contribution to a traditional IRA which may
be deducted will be reduced or eliminated if the individual's modified adjusted
gross income exceeds certain amounts ($54,000 for a married couple filing a
joint return and $34,000 for a single taxpayer in 2002, $60,000 for a married
couple filing a joint return and $40,000 for a single taxpayer in 2003). If the
individual's spouse is covered by an employer retirement plan but the individual
is not, the individual may be able to deduct those contributions to a
traditional IRA; however, the deduction will be reduced or eliminated if the
adjusted gross income on a joint return exceeds $150,000.

Sale of the Contract for use with IRAs may be subject to special
requirements imposed by the IRS. Purchasers of the Contract for such purposes
will be provided with such supplementary information as may be required by the
IRS or other appropriate agency, and will have the right to revoke the Contract
under certain circumstances. See the IRA Disclosure Statement that accompanies
this Prospectus.

In general, traditional IRAs are subject to minimum distribution
requirements similar to those applicable to retirement plans qualified under
Section 401 of the Code; however, the required beginning date for traditional
IRAs is generally the date that the Contractowner reaches age 70 1/2--the
Contractowner's retirement date, if any, will not affect his or her required
beginning date. See "Section 401," page 37. Distributions from IRAs are
generally taxed under Code Section 72. Under these rules, a portion of each
distribution may be excludable from income. The amount excludable from the
individual's income is the amount of the distribution which bears the same ratio
as the individual's nondeductible contributions bears to the expected return
under the IRA.

Distributions of deductible, pre-tax contributions and earnings from a
traditional IRA may be eligible for a tax-free rollover to an eligible
retirement plan, including another traditional IRA. In certain cases, a
distribution of non-deductible contributions or other after-tax amounts from a
traditional IRA may be eligible to be rolled over to another traditional IRA.
See "Rollovers," page 41.

SIMPLE INDIVIDUAL RETIREMENT ANNUITIES. Certain employers with no more than
100 employees may establish a Savings Incentive Match Plan for Employees of
Small Employers (SIMPLE plans). Depending upon the type of SIMPLE plan,
employers may deposit the plan contributions into a single trust or into SIMPLE
Individual Retirement Annuities ("SIMPLE IRA") established by each participant.

Information on eligibility to participate in an employer's SIMPLE Plan will
be included in the summary description of the plan furnished to the participants
by their employer. Contributions to a SIMPLE IRA may be either salary deferral
contributions or employer contributions. On a pre-tax basis, participants may
elect to contribute through salary deferrals based on a stated percentage of the
employee's compensation. Such salary deferrals are limited to the applicable
dollar amount per year as shown in the table below:

-------------------------- ------------------------
TAX YEAR DEFERRED AMOUNT
-------------------------- ------------------------
2002 $7,000
2003 $8,000
2004 $9,000
2005 and thereafter $10,000
-------------------------- ------------------------

The $10,000 limit will be adjusted for inflation in $500 increments for tax
years beginning after the 2005 tax year. If an individual is age 50 or over,
catch-up contributions can be made to the SIMPLE IRA during the tax years and at
the rates set forth in the table below:

-------------------------- ------------------------
TAX YEAR ADDITIONAL
CATCH UP AMOUNT
-------------------------- ------------------------

2002 $ 500
2003 $1,000
2004 $1,500
2005 $2,000
2006 and thereafter $2,500
-------------------------- ------------------------

The $2,500 limit will be adjusted for inflation in $500 increments for tax years
beginning after the 2006 tax year. Elective deferrals are included in employees'
gross income only for Social Security, Unemployment and Medicare tax purposes
(i.e., they are not included in wages for federal income tax purposes). In
addition to elective deferrals by employees, under a SIMPLE IRA plan, employers
must make either: (i) matching contributions equal to each employee's elective
deferral, up to a maximum of 3% of the employee's compensation (subject to
reduction and to certain limits), or (ii) nonelective contributions of 2% of
compensation for each eligible employee (subject to reduction and to certain
limits). Employer contributions to SIMPLE IRAs are excluded from employees'
gross income and are deductible by the employer. SIMPLE IRAs generally are
subject to the same distribution and rollover rules that apply to Traditional
IRAs. However, a rollover from a SIMPLE IRA can only be made to another SIMPLE
IRA until the employee has participated in the SIMPLE IRA plan for at least two
years. After two years, a rollover may be made to any eligible retirement plan.

In general, SIMPLE IRAs are subject to minimum distribution requirements
similar to those applicable to retirement plans qualified under Section 401 of
the Code; however, the required beginning date for SIMPLE IRAs is generally the
date that the contractowner reaches age 70 1/2. The Contractowner's retirement
date will not affect his or her required beginning date. Amounts contributed to
SIMPLE IRAs generally are excludable from the taxable income of the participant.
As a result, all distributions from such annuities are normally taxable in full
as ordinary income to the participant.

The IRS has not reviewed the Contract for qualification as a SIMPLE IRA,
and has not addressed in a ruling of general applicability whether the death
benefit provision such as the provision in the Contract comports with SIMPLE IRA
qualification requirements.

ROTH IRAS. Section 408A of the Code permits eligible individuals to
establish a Roth IRA. The Contract may be purchased as a Roth IRA. Contributions
to a Roth IRA are not deductible, but withdrawals that meet certain requirements
are not subject to federal income tax on either the original contributions or
any earnings. Sale of the Contract for use with Roth IRAs may be subject to
special requirements imposed by the IRS. Purchasers of the Contract for such
purposes will be provided with such supplementary information as may be required
by the IRS or other appropriate agency, and will have the right to revoke the
Contract under certain requirements. Unlike a traditional IRA, Roth IRAs are not
subject to minimum required distribution rules during the Contractowner's
lifetime. Generally, however, the amount remaining in a Roth IRA after the
Contractowner's death must begin to be distributed by the end of the first
calendar year after death, and made over a beneficiary's life expectancy. If
there is no beneficiary, or if distributions are delayed, the amount must be
distributed by the end of the fifth full calendar year after death of the
Contractowner.

The IRS has not reviewed the Contract for qualification as a Roth IRA and
has not addressed in a ruling of general applicability whether a death benefit
provision such as the provision in the Contract comports with Roth IRA
qualification requirements.

SECTION 457. Section 457 of the Code permits employees of state and local
governments and units and agencies of state and local governments, such as
schools, as well as tax-exempt organizations to defer a portion of their
compensation without paying current taxes if those employees are participants in
an eligible deferred compensation plan. A Section 457 plan may permit the
purchase of Contracts to provide benefits thereunder.

Although a participant under a Section 457 plan may be permitted to direct
or choose methods of investment, in the case of a tax-exempt employer sponsor,
all amounts deferred under the plan and any income thereon remain solely the
property of the employer and subject to the claims of its general creditors,
until paid to the participant. The assets of a Section 457 plan maintained by a
state or local government employer must be held in trust (or custodial account
or an annuity contract) for the exclusive benefit of plan participants. A
Section 457 plan must not permit the distribution of a participant's benefits
until the participant attains age 70 1/2, terminates employment or incurs an
"unforeseeable emergency."

Section 457 plans are generally subject to minimum distribution
requirements similar to those applicable to retirement plans qualified under
Section 401 of the Code. See "Section 401," page 37. Since under a Section 457
plan, contributions are generally excludable from the taxable income of the
employee, the full amount received will usually be taxable as ordinary income
when annuity payments commence or other distributions are made. Distributions
from a Section 457 plan for a tax-exempt employer, are not eligible for tax-free
rollovers. Beginning in 2002, distributions from a governmental 457 plan may be
rolled over to another eligible retirement plan including an individual
retirement account or annuity (IRA).

ROLLOVERS. A "rollover" is the tax-free transfer of a distribution from one
"eligible retirement plan" to another. Distributions which are rolled over are
not included in the individual's gross income until some future time.

If any portion of the balance to the credit of an employee in a Section 401
plan, Section 403(b) plan or governmental Section 457 plan is paid to the
participant in an "eligible rollover distribution" and the participant transfers
any portion of the amount received to an eligible retirement plan, then the
amount so transferred is not includable in income. Also, pre-tax distributions
from an IRA may be rolled over to another eligible retirement plan. An "eligible
rollover distribution" generally means any distribution that is not one of a
series of periodic payments made for the life of the distributee or for a
specified period of at least ten years. In addition, a required minimum
distribution and certain corrective distributions, will not qualify as an
eligible rollover distribution. A rollover must be made directly between plans
within 60 days after receipt of the distribution.

An "eligible retirement plan" will be another retirement plan qualified
under Code Section 401, a Section 403(b) plan, a traditional individual
retirement account or annuity under Code Section 408, or governmental deferred
compensation plan under Code Section 457.

A Section 401 plan, a Section 403(b) plan or a governmental 457 plan must
generally provide a participant receiving an eligible rollover distribution, the
option to have the distribution transferred directly to another eligible
retirement plan.

TAX PENALTIES. PREMATURE DISTRIBUTION TAX. Distributions from a Qualified
Plan before the participant reaches age 59 1/2 are generally subject to an
additional tax equal to 10% of the taxable portion of the distribution. The 10%
penalty tax does not apply to distributions: (i) made on or after the death of
the employee; (ii) attributable to the employee's disability; (iii) which are
part of a series of substantially equal periodic payments made (at least
annually) for the life (or life expectancy) of the employee or the joint lives
(or joint life expectancy) of the employee and a designated beneficiary and
which, for Qualified Plans other than IRAs, begin after the employee terminates
employment; (iv) made to an employee after termination of employment after
reaching age 55; (v) made to pay for certain medical expenses; (vi) that are
exempt withdrawals of an excess contribution; (vii) that is rolled over or
transferred in accordance with Code requirements; or (viii) that is transferred
pursuant to a decree of divorce or separate maintenance or written instrument
incident to such a decree.

The exception to the 10% penalty tax described in item (iv) above is not
applicable to IRAs. However, distributions from an IRA to unemployed individuals
can be made without application of the 10% penalty tax to pay health insurance
premiums in certain cases. In addition, the 10% penalty tax is generally not
applicable to distributions from a Section 457 plan. There are two additional
exceptions to the 10% penalty tax on withdrawals from IRAs before age 59 1/2:
withdrawals made to pay "qualified" higher education expenses and withdrawals
made to pay certain "eligible first-time home buyer expenses."

MINIMUM DISTRIBUTION TAX. If the amount distributed from a Qualified Plan
is less than the minimum required distribution for the year, the participant is
subject to a 50% tax on the amount that was not properly distributed.

WITHHOLDING. Periodic distributions (e.g., annuities and installment
payments) from a Qualified Plan that will last for a period of ten or more years
are generally subject to voluntary income tax withholding. The amount withheld
on such periodic distributions is determined at the rate applicable to wages.
The recipient of a periodic distribution may generally elect not to have
withholding apply.

Nonperiodic distributions (e.g., lump sums and annuities or installment
payments of less than ten years) from a Qualified Plan (other than IRAs and
tax-exempt Section 457 plans) are generally subject to mandatory 20% income tax
withholding. However, no withholding is imposed if the distribution is
transferred directly to another eligible Qualified Plan. Nonperiodic
distributions from an IRA are subject to income tax withholding at a flat 10%
rate. The recipient of such a distribution may elect not to have withholding
apply.

The above description of the federal income tax consequences of the
different types of Qualified Plans which may be funded by the Contract offered
by this Prospectus is only a brief summary and is not intended as tax advice.
The rules governing the provisions of Qualified Plans are extremely complex and
often difficult to comprehend. Anything less than full compliance with the
applicable rules, all of which are subject to change, may have adverse tax
consequences. A prospective Contractowner considering adoption of a Qualified
Plan and purchase of a Contract in connection therewith should first consult a
qualified and competent tax adviser, with regard to the suitability of the
Contract as an investment vehicle for the Qualified Plan.

OTHER INFORMATION

VOTING OF SBL FUND SHARES -- You indirectly (through the Separate Account)
purchase shares of the Series of SBL Fund when you allocate purchase payments to
the Subaccounts. The Company owns shares of the Fund in the Separate Account for
your benefit. Under current law, the Company will vote shares of the Fund held
in the Subaccounts in accordance with voting instructions received from Owners
having the right to give such instructions. You will have the right to give
voting instructions to the extent that you have Account Value allocated to the
particular Subaccount. The Company will vote all shares it owns through the
Subaccount in the same proportion as the shares for which it receives voting
instructions from Owners. The Company votes shares in accordance with its
current understanding of the federal securities laws. If the Company later
determines that it may vote shares of the Fund in its own right, it may elect to
do so.

Unless otherwise required by applicable law, the number of shares of a
particular Series as to which you may give voting instructions to the Company is
determined by dividing your Account Value in the corresponding Subaccount on a
particular date by the net asset value per share of that Series as of the same
date. Fractional votes will be counted. The number of votes as to which voting
instructions may be given will be determined as of the date established by the
Fund for determining shareholders eligible to vote at the meeting of the Fund.
If required by the SEC, the Company reserves the right to determine in a
different fashion the voting rights attributable to the shares of the Fund.
Voting instructions may be cast in person or by proxy.

SUBSTITUTION OF INVESTMENTS -- Security Benefit reserves the right, subject to
compliance with the law as then in effect, to make additions to, deletions from,
substitutions for, or combinations of the securities that are held by the
Separate Account or any Subaccount or that the Separate Account or any
Subaccount may purchase. If shares of any or all of the Series of SBL Fund
should no longer be available for investment, or if Security Benefit management
believes further investment in shares of any or all of the Series of SBL Fund
should become inappropriate in view of the purposes of the Contract, Security
Benefit may substitute shares of another Series of SBL Fund or of a different
fund for shares already purchased, or to be purchased in the future under the
Contract. Security Benefit may also purchase, through the Subaccount, other
securities for other classes or contracts, or permit a conversion between
classes of contracts on the basis of requests made by Owners.

In connection with a substitution of any shares attributable to an Owner's
interest in a Subaccount or the Separate Account, Security Benefit will, to the
extent required under applicable law, provide notice, seek Owner approval, seek
prior approval of the SEC, and comply with the filing or other procedures
established by applicable state insurance regulators.

Security Benefit also reserves the right to establish additional
Subaccounts of the Separate Account that would invest in a new Series of SBL
Fund or in shares of another investment company, a series thereof, or other
suitable investment vehicle. Security Benefit may establish new Subaccounts in
its sole discretion, and will determine whether to make any new Subaccount
available to existing Owners. Security Benefit may also eliminate or combine one
or more Subaccounts if, in its sole discretion, marketing, tax, or investment
conditions so warrant.

Subject to compliance with applicable law, Security Benefit may transfer
assets to the General Account. Security Benefit also reserves the right, subject
to any required regulatory approvals, to transfer assets of any Subaccount to
another separate account or Subaccount.

In the event of any such substitution or change, Security Benefit may, by
appropriate endorsement, make such changes in these and other contracts as may
be necessary or appropriate to reflect such substitution or change. If Security
Benefit believes it to be in the best interests of persons having voting rights
under the Contracts, the Separate Account may be operated as a management
investment company under the 1940 Act or any other form permitted by law. The
Separate Account may be deregistered under that Act in the event such
registration is no longer required, or it may be combined with other separate
accounts of Security Benefit or an affiliate thereof. Subject to compliance with
applicable law, Security Benefit also may combine one or more Subaccounts and
may establish a committee, board, or other group to manage one or more aspects
of the operation of the Separate Account.

CHANGES TO COMPLY WITH LAW AND AMENDMENTS -- Security Benefit reserves the
right, without the consent of Owners, to suspend sales of the Contract as
presently offered and to make any change to the provisions of the Contracts to
comply with, or give Owners the benefit of, any federal or state statute, rule,
or regulation, including but not limited to requirements for annuity contracts
and retirement plans under the Internal Revenue Code and regulations thereunder
or any state statute or regulation. In addition, upon 30 days notice to the
holder of a Group Contract, Security Benefit may make other changes to a Group
Contract that will apply only to individuals who become participants after the
effective date of the change.

REPORTS TO OWNERS -- Security Benefit will send you annually a statement setting
forth a summary of the transactions that occurred during the year, and
indicating the Contract Value as of the end of each year. In addition, the
statement will indicate the allocation of Contract Value among the Fixed Account
and the Subaccounts and any other information required by law. Security Benefit
will also send confirmations upon purchase payments, transfers, loans, loan
repayments, and full and partial withdrawals. Security Benefit may confirm
certain transactions on a quarterly basis. These transactions include purchases
made automatically from your bank account or pursuant to a salary reduction
arrangement, transfers under the Dollar Cost Averaging and Asset Reallocation
Options, systematic withdrawals and annuity payments.

You will also receive an annual and semiannual report containing financial
statements for SBL Fund, which will include a list of the portfolio securities
of each Series, as required by the 1940 Act, and/or such other reports as may be
required by federal securities laws.

TELEPHONE TRANSFER PRIVILEGES -- You may request a transfer of Contract Value
and may make changes to an existing Dollar Cost Averaging or Asset Reallocation
option by telephone if the Telephone Transfer section of the application or the
proper form has been completed, signed, and filed at Security Benefit's Home
Office. Security Benefit has established procedures to confirm that instructions
communicated by telephone are genuine and will not be liable for any losses due
to fraudulent or unauthorized instructions provided it complies with its
procedures. Security Benefit's procedures require that any person requesting a
transfer by telephone provide the account number and the Owner's tax
identification number and such instructions must be received on a recorded line.
Security Benefit reserves the right to deny any telephone transfer request. If
all telephone lines are busy (which might occur, for example, during periods of
substantial market fluctuations), you may not be able to request transfers by
telephone and would have to submit written requests.

By authorizing telephone transfers, you authorize Security Benefit to
accept and act upon telephonic instructions for transfers involving your
Contract. You agree that neither Security Benefit, any of its affiliates, nor
SBL Fund, will be liable for any loss, damages, cost, or expense (including
attorneys' fees) arising out of any telephone requests; provided that Security
Benefit effects such request in accordance with its procedures. As a result of
this policy on telephone requests, you bear the risk of loss arising from the
telephone transfer privilege. Security Benefit may discontinue, modify, or
suspend the telephone transfer privilege at any time.

LEGAL PROCEEDINGS -- There are no legal proceedings pending to which the
Separate Account is a party, or which would materially affect the Separate
Account.

LEGAL MATTERS -- Amy J. Lee, Esq., Associate General Counsel, Security Benefit,
has passed upon legal matters in connection with the issue and sale of the
Contracts described in this Prospectus, Security Benefit's authority to issue
the Contracts under Kansas law, and the validity of the forms of the Contracts
under Kansas law.

PERFORMANCE INFORMATION

Performance information for the Subaccounts, including the yield and
effective yield of the Money Market Subaccount, the yield of the remaining
Subaccounts, and the total return of all Subaccounts may appear in
advertisements, reports, and promotional literature to current or prospective
Owners.

Current yield for the Money Market Subaccount will be based on income
received by a hypothetical investment over a given 7-day period (less expenses
accrued during the period), and then "annualized" (i.e., assuming that the 7-day
yield would be received for 52 weeks, stated in terms of an annual percentage
return on the investment). "Effective yield" for the Money Market Subaccount is
calculated in a manner similar to that used to calculate yield, but reflects the
compounding effect of earnings.

For the remaining Subaccounts, quotations of yield will be based on all
investment income per Accumulation Unit earned during a given 30-day period,
less expenses accrued during the period ("net investment income"), and will be
computed by dividing net investment income by the value of an Accumulation Unit
on the last day of the period. Quotations of average annual total return for any
Subaccount will be expressed in terms of the average annual compounded rate of
return on a hypothetical investment in a Contract over a period of one, five,
and ten years (or, if less, up to the life of the Subaccount), and will reflect
the deduction of the administration charge, mortality and expense risk charge
and contingent deferred sales charge and may simultaneously be shown for other
periods.

Quotations of yield and effective yield do not reflect deduction of the
contingent deferred sales charge, and total return figures may be quoted that do
not reflect deduction of the charge. If reflected, the performance figures
quoted would be lower. Such performance information will be accompanied by total
return figures that reflect deduction of the contingent deferred sales charge
that would be imposed if Contract Value were withdrawn at the end of the period
for which total return is quoted.

Although the Contracts were not available for purchase until June 8, 1984,
the underlying investment vehicle of the Separate Account, SBL Fund, has been in
existence since May 26, 1977. Performance information for the Subaccounts may
also include quotations of total return for periods beginning prior to the
availability of the Contracts that incorporate the performance of SBL Fund.

Performance information for a Subaccount may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index ("S&P
500"), Dow Jones Industrial Average ("DJIA"), Donaghue Money Market
Institutional Averages, the Lehman Brothers Government Corporate Index, the
Morgan Stanley Capital International's EAFE Index or other indices measuring
performance of a pertinent group of securities so that investors may compare a
Subaccount's results with those of a group of securities widely regarded by
investors as representative of the securities markets in general or
representative of a particular type of security: (ii) other variable annuity
separate accounts or other investment products tracked by Lipper Analytical
Services, a widely used independent research firm which ranks mutual funds and
other investment companies by overall performance, investment objectives, and
assets, or tracked by other ratings services, companies, publications, or
persons who rank separate accounts or other investment products on overall
performance or other criteria; and (iii) the Consumer Price Index (measure for
inflation) to assess the real rate of return from an investment in the Contract.
Unmanaged indices may assume the reinvestment of dividends but generally do not
reflect deductions for administrative and management costs and expenses.

Performance information for any Subaccount reflects only the performance of
a hypothetical Contract under which Contract Value is allocated to a Subaccount
during a particular time period on which the calculations are based. Performance
information should be considered in light of the investment objectives and
policies, characteristics, and quality of the Series in which the Subaccount
invests, and the market conditions during the given time period, and should not
be considered as a representation of what may be achieved in the future. For a
description of the methods used to determine yield and total return for the
Subaccounts, see the Statement of Additional Information.

Reports and promotional literature may also contain other information
including (i) the ranking of any Subaccount derived from rankings of variable
annuity separate accounts or other investment products tracked by Lipper
Analytical Services or by other rating services, companies, publications, or
other persons who rank separate accounts or other investment products on overall
performance or other criteria, (ii) the effect of tax-deferred compounding on a
Subaccount's investment returns, or returns in general, which may be illustrated
by graphs, charts, or otherwise, and which may include a comparison, at various
points in time, of the return from an investment in a Contract (or returns in
general) on a tax-deferred basis (assuming one or more tax rates) with the
return on a taxable basis, and (iii) Security Benefit's rating or a rating of
Security Benefit's claim-paying ability as determined by firms that analyze and
rate insurance companies and by nationally recognized statistical rating
organizations.

ADDITIONAL INFORMATION

REGISTRATION STATEMENT -- A Registration Statement under the 1933 Act has been
filed with the SEC relating to the offering described in this Prospectus. This
Prospectus does not include all the information included in the Registration
Statement, certain portions of which, including the Statement of Additional
Information, have been omitted pursuant to the rules and regulations of the SEC.
The omitted information may be obtained at the SEC's principal office in
Washington, DC, upon payment of the SEC's prescribed fees and may also be
obtained from the SEC's web site (http://www.sec.gov).

FINANCIAL STATEMENTS -- The consolidated financial statements of Security
Benefit Life Insurance Company and Subsidiaries at December 31, 2001 and 2000,
and for each of the three years in the period ended December 31, 2001, and the
financial statements of the Separate Account at December 31, 2001, and for each
of the two years in the period ended December 31, 2001 are included in the
Statement of Additional Information.

STATEMENT OF ADDITIONAL INFORMATION

The Statement of Additional Information contains more specific information
and financial statements relating to Security Benefit Life Insurance Company and
Subsidiaries. The Table of Contents of the Statement of Additional Information
is set forth below:

TABLE OF CONTENTS--

Page

THE CONTRACT........................................ 3
Valuation of Accumulation Units.................. 3
Computation of Variable Annuity Payments......... 3
Illustration..................................... 3
Variations in Charges............................ 4
Termination of Contract.......................... 4
Group Contracts.................................. 4
PERFORMANCE INFORMATION............................. 4
PERMISSIBLE ADVERTISING INFORMATION................. 6
LIMITS ON PURCHASE PAYMENTS
PAID UNDER TAX QUALIFIED
RETIREMENT PLANS................................. 8
Section 401...................................... 8
Section 403(b)................................... 8
Section 408 and 408A............................. 8
Section 457...................................... 9
ASSIGNMENT.......................................... 9
DISTRIBUTION OF THE CONTRACTS....................... 9
SAFEKEEPING OF VARIFLEX ACCOUNT ASSETS.............. 9
STATE REGULATION.................................... 9
EXPERTS............................................. 10
FINANCIAL STATEMENTS................................ 10

SECURITY BENEFIT LIFE INSURANCE COMPANY(R)
A Member of The Security Benefit Group of Companies(SM)
One Security Benefit Place, Topeka, Kansas 66636-0001

VARIFLEX(R)

VARIABLE ANNUITY CONTRACTS

STATEMENT OF ADDITIONAL INFORMATION MAY 1, 2002 RELATING TO THE PROSPECTUS DATED
MAY 1, 2002, AS IT MAY BE SUPPLEMENTED FROM TIME TO TIME (785) 438-3112 (800)
888-2461

--------------------------------------------------------------------------------

SECURITY BENEFIT LIFE INSURANCE COMPANY

A Member of The Security Benefit Group of Companies
One Security Benefit Place, Topeka, Kansas 66636-0001

VARIFLEX
VARIABLE ANNUITY CONTRACTS

STATEMENT OF
ADDITIONAL INFORMATION

May 1, 2002

This Statement of Additional Information expands upon subjects discussed in the
current Prospectus for the Variflex Variable Annuity Contracts (the "Contract")
offered by Security Benefit Life Insurance Company ("Security Benefit"). You may
obtain a copy of the Prospectus dated May 1, 2002, by calling (785) 438-3112, or
writing to Security Benefit Life Insurance Company, One Security Benefit Place,
Topeka, Kansas 66636-0001. Terms used in the current Prospectus for the Contract
are incorporated in this Statement.

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACT.

TABLE OF CONTENTS

Page

The Contract............................................... 3
Valuation of Accumulation Units......................... 3
Computation of Variable Annuity Payments................ 3
Illustration............................................ 3
Variations in Charges................................... 4
Termination of Contract................................. 4
Group Contracts......................................... 4
Performance Information.................................... 4

Permissible Advertising Information ....................... 6

Limits on Purchase Payments Paid
Under Tax-Qualified Retirement Plans.................... 8
Section 401............................................. 8
Section 403(b).......................................... 8
Sections 408 and 408A................................... 9
Section 457............................................. 9
Assignment................................................. 10
Distribution of the Contracts.............................. 10
Safekeeping of Variflex Account Assets..................... 10
State Regulation........................................... 10
Experts.................................................... 10
Financial Statements....................................... 10

--------------------------------------------------------------------------------
THE CONTRACT

The following provides additional information about the Contracts which
supplements the description in the Prospectus and which may be of interest to
some Contractowners.

VALUATION OF ACCUMULATION UNITS -- The objective of a Variable Annuity is to
provide level payments during periods when the market is relatively stable and
to reflect as increased payments only the excess investment results following
from inflation or an increase in productivity.

The Accumulation Unit value for a Subaccount on any day is equal to (a) divided
by (b), where (a) is the net asset value of the underlying Fund shares of the
Subaccount less the mortality and expense risk charge and any deduction for
provision for federal income taxes and (b) is the number of Accumulation Units
of that Subaccount at the beginning of that day.

The value of a Contract on any Valuation Date during the Accumulation Period can
be determined by subtracting (b) from (a), where (a) is determined by
multiplying the total number of Accumulation Units of each Subaccount within
Variflex credited to the Contract by the applicable Accumulation Unit value of
each such Subaccount, and (b) is any pro rata administration charge. During the
Accumulation Period, all cash dividends and other cash distributions made to
each Subaccount will be reinvested in additional shares of the corresponding
Series of SBL Fund.

COMPUTATION OF VARIABLE ANNUITY PAYMENTS--

DETERMINATION OF AMOUNT OF FIRST ANNUITY PAYMENT. For Annuities under options 1
through 4, 9 and 10, the Contracts specify tables indicating the dollar amount
of the first monthly payment under each optional form of Annuity for each $1,000
applied. The total first monthly annuity payment is determined by multiplying
the value of your Contract (expressed in thousands of dollars) by the amount of
the first monthly payment per $1,000 of value, in accordance with the tables
specified in your Contract. The value of your Contract for the purpose of
establishing the first periodic payment under options 1, 2, 3, 4 or similar life
contingent payment options mutually agreed upon is equal to the number of
Accumulation Units applied to the option times the Accumulation Unit value as of
the close of the Annuity Commencement Date (or for Contracts issued prior to
January 4, 1999, as of the end of the second day preceding the Annuity
Commencement Date). For Annuities under these options, any pro rata
administration charge is assessed prior to the first annuity payment under such
option. For Annuities under options 5 through 8 or other mutually agreed upon
non-life contingent payment option, the value of your Contract for the purpose
of the first and subsequent periodic payments is based on the Accumulation Unit
value as of the end of the day the annuity payment is made.

AMOUNT OF THE SECOND AND SUBSEQUENT ANNUITY PAYMENTS. For Variable Annuities
under options 1 through 4, 9 and 10, the amount of the first monthly annuity
payment determined as described above is divided by the applicable value of an
Annuity Unit (see below) as of the close of the Annuity Commencement Date to
determine the number of Annuity Units represented by the first payment. This
number of Annuity Units remains fixed during the Annuity Period, unless Annuity
Units are transferred among Subaccounts. The dollar amount of the annuity
payment is determined by multiplying the fixed number of Annuity Units by the
Annuity Unit value for the day the payment is due.

ANNUITY UNIT. The value of an Annuity Unit originally was set at $1.00. The
value of an Annuity Unit for any subsequent day is determined by multiplying the
value for the immediately preceding day by the product of (a) the Net Investment
Factor for the day for which the value is being calculated and (b) .9999057540,
the interest neutralization factor (the factor required to neutralize the
assumed interest rate of 3 1/2% built into the annuity rates specified in the
Contract). The Net Investment Factor of any Subaccount is determined by
subtracting 0.00003307502, the mortality and expense risk charge, from the ratio
of (a) to (b) where (a) is the value of a share of the underlying Series of SBL
Fund at the end of the day plus the value of any dividends or other
distributions attributable to such share during a day and minus any applicable
income tax liabilities as determined by Security Benefit, and (b) is the value
of a share of the underlying Series of SBL Fund at the end of the previous day.

ILLUSTRATION -- The Annuity Unit and the Annuity payment may be illustrated by
the following hypothetical example: Assume an Annuitant at the Annuity
Commencement Date has credited to his or her Contract 4,000 Accumulation Units
and that the value of an Accumulation Unit was $5.13, producing a total value
for the Contract of $20,520. Any premium taxes due would reduce the total value
of the Contract that could be applied towards the Annuity; however, in this
illustration it is assumed no premium taxes are applicable. Assume also the
Annuitant elects an option for which the annuity table specified in the Contract
indicates the first monthly payment is $6.40 per $1,000 of value applied; the
resulting first monthly payment would be 20.520 multiplied by $6.40 or $131.33.

Assume the Annuity Unit value for the day on which the first payment was due was
$1.0589108749. When this is divided into the first monthly payment the number of
Annuity Units represented by that payment is 124.0236578101. The value of the
same number of Annuity Units will be paid in each subsequent month.

Assume further the value of a Subaccount share was $5.15 at the end of the day
preceding the date of the second annuity payment, that it was $5.17 at the end
of the due date of the second Annuity payment and that there was no cash income
during such second day. The Net Investment Factor for that second day was
1.0038504201 ($5.17 divided by $5.15 minus .00003307502). Multiplying this
factor by 0.9999057540 to neutralize the assumed interest rate (the 3 1/2% per
annum built into the number of Annuity Units as determined above) produces a
result of 1.0037558112. The Annuity Unit value for the valuation period is
therefore 1.0639727137 which is 1.0037558112 x $1.0599915854 (the value at the
beginning of the day).

The current monthly payment is then determined by multiplying the number of
Annuity Units by the current Annuity Unit value or 124.0236578101 times
$1.0639727137 which produces a current monthly payment of $131.96.

VARIATIONS IN CHARGES -- The contingent deferred sales charges or other charges
or deductions may be reduced or waived for sales of Variflex Contracts where the
expenses associated with the sale of the Contract or the administrative and
maintenance costs associated with the Contract are reduced for reasons such as
the amount of the initial purchase payment, the amounts of projected purchase
payments, or that the Contract is sold in connection with a group or sponsored
arrangement. Security Benefit will only reduce or waive such charges where
expenses associated with the sale of the Contract or the costs associated with
administering and maintaining the Contract are reduced.

Directors, officers and bona fide full-time employees of Security Benefit Life
Insurance Company, or its subsidiaries or SBL Fund; the spouses, grandparents,
parents, children, grandchildren and siblings of such directors, officers and
employees and their spouses; any trust, pension, profit-sharing or other benefit
plan established by any of the foregoing corporations for persons described
above; and salespersons (and their spouses and minor children) who are licensed
with Security Benefit to sell variable annuities are permitted to purchase
contracts with substantial reduction of the contingent deferred sales charges or
other administrative charges or deductions. Contracts so purchased are for
investment purposes only and may not be resold except to Security Benefit. No
sales commission will be paid on such contracts.

TERMINATION OF CONTRACT -- Security Benefit reserves the right to terminate any
Group Unallocated Contract under the following circumstances: (1) the Contract
Value is less than $10,000 after the end of the first Contract Year, or $20,000
after the end of the third Contract Year; (2) the Qualified Plan pursuant to
which the Contract is issued is terminated for any reason or becomes
disqualified under Section 401 or 403 of the Internal Revenue Code; or (3) for
any reason after the eighth Contract Year. For Contracts issued on or after
January 4, 1999, Security Benefit also reserves the right to terminate a
Contract if Account Value is less then $2,000 at any time after the first
Contract Year and prior to the Annuity Commencement Date. For Contracts issued
prior to January 4, 1999, Security Benefit may terminate a Contract if the
following conditions exist during the Accumulation Period: (1) no purchase
payments have been received by Security Benefit for the Contract for two full
years; (2) the combined value of the Contract in the Separate and Fixed Accounts
is less than $2,000; and (3) the value of the Contract which is allocated to the
Fixed Account, projected to the maturity date, would produce installments of
less than $20 per month using contractual guarantees. Termination of a Contract
may have adverse tax consequences. (See the Prospectus at "Full and Partial
Withdrawals," page 19, "Distribution Requirements," page 22, and "Federal Tax
Matters," page 32.)

GROUP CONTRACTS -- In the case of Group Allocated Contract, a master group
contract is issued to the employer or other organization, or to the trustee, who
is the Contractowner. The master group contract covers all Participants. Where
funds are allocated to a Participant Account, each participant receives a
certificate which summarizes the provisions of the master group contract and
evidences participation in the Plan established by the organization. A Group
Unallocated Contract is a contract between the Contractowner and the insurance
company and individual accounts are not established for Participants.

PERFORMANCE INFORMATION

Performance information for the Subaccounts of the Variflex Separate Account may
appear in advertisements, sales literature or reports to Contractowners or
prospective purchasers. Performance information in advertisements or sales
literature may be expressed as yield and effective yield of the Money Market
Subaccount, and yield, average annual total return and total return of all
Subaccounts except the Money Market Subaccount. Current yield for the Money
Market Subaccount will be based on the change in the value of a hypothetical
investment (exclusive of capital changes and income other than investment
income) over a particular seven-day period, less a hypothetical charge
reflecting deductions from Contractowner accounts during the period (the "base
period"), and stated as a percentage of the investment at the start of the base
period (the "base period return"). The base period return is then annualized by
multiplying by 365/7, with the resulting yield figure carried to at least the
nearest hundredth of 1%. "Effective yield" for the Money Market Subaccount
assumes that all dividends received during an annual period have been
reinvested. Calculation of "effective yield" begins with the same "base period
return" used in the calculation of yield, which is then annualized to reflect
weekly compounding pursuant to the following formula:

Effective Yield = ((Base Period Return + 1)^365/7) - 1

For the seven-day period ended December 31, 2001, the yield of the Money Market
Subaccount was 0.15% and the effective yield of the Money Market Subaccount was
0.15%.

Quotations of yield for the Subaccounts, other than the Money Market Subaccount,
will be based on all investment income per Accumulation Unit earned during a
particular 30-day period, less expenses accrued during the period ("net
investment income"), and will be computed by dividing net investment income by
the value of the Accumulation Unit on the last day of the period, according to
the following formula:

YIELD = 2[(a-b + 1)^6 - 1]
---
cd

where a = net investment income earned during the period by the Series of
the Fund attributable to shares owned by the Subaccount,

b = expenses accrued for the period (net of any reimbursements),

c = the average daily number of Accumulation Units outstanding
during the period that were entitled to receive dividends, and

d = the maximum offering price per Accumulation Unit on the last day
of the period.

For the 30-day period ended December 31, 2001, the yield for the Diversified
Income Subaccount was 5.45%.

Quotations of average annual total return for any Subaccount of the Separate
Account will be expressed in terms of the average annual compounded rate of
return of a hypothetical investment in the Subaccount over certain periods that
will include periods of 1, 5 and 10 years (up to the life of the Subaccount),
calculated pursuant to the following formula:

P(1 + T)^n = ERV

(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV = the ending redeemable value of
a hypothetical $1,000 payment made at the beginning of the period). Such total
return figures reflect the deduction of the applicable contingent deferred sales
charge and other recurring Variflex fees and charges on an annual basis,
including charges for mortality and expense risk and the annual administration
charge, although other quotations may be simultaneously given that do not assume
a surrender and do not take into account deduction of a contingent deferred
sales charge or the annual administration charge.

For the 1-, 5- and 10-year periods ended December 31, 2001, the average annual
total return for the Subaccounts was the following:

------------------------------------------------------------------
AVERAGE ANNUAL RETURN (With Contingent Deferred Sales Charge
and Administration Charge)
-----------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
------------------------------------------------------------------
Equity Subaccount (22.23)% 1.95% 7.63%
------------------------------------------------------------------
Large Cap Value Subaccount (16.97)% (0.51)% 4.22%
------------------------------------------------------------------
Global Subaccount (23.00)% 8.09% 8.29%
------------------------------------------------------------------
Diversified Income Subaccount (5.11)% 1.06% 1.84%
------------------------------------------------------------------
Large Cap Growth Subaccount (25.98)% (28.19)%(8) ---
------------------------------------------------------------------
Enhanced Index Subaccount (23.69)% (10.83)%(7) ---
------------------------------------------------------------------
International Subaccount (34.08)% (14.67)%(7) ---
------------------------------------------------------------------
Mid Cap Growth Subaccount (25.42)% 14.00% 13.94%(1)
------------------------------------------------------------------
Global Strategic
Income Subaccount (6.13)% (0.26)% 2.59%(2)
------------------------------------------------------------------
Capital Growth Subaccount (25.27)%(8) (27.36)%(8) ---
------------------------------------------------------------------
Global Total Return Subaccount (23.70)% (3.57)% (0.04)%(2)
------------------------------------------------------------------
Managed Asset
Allocation Subaccount (16.52)% 3.32% 5.05%(2)
------------------------------------------------------------------
Equity Income Subaccount (10.67)% 6.27% 10.09%(2)
------------------------------------------------------------------
High Yield Subaccount (7.77)% (4.74)%(6) ---
------------------------------------------------------------------
Small Cap Value Subaccount (9.75)%(8) 9.89%(8) ---
------------------------------------------------------------------
Social Awareness Subaccount (23.78)% 3.26% 7.21%
------------------------------------------------------------------
Technology Subaccount (33.76)%(8) (43.56)%(8) ---
------------------------------------------------------------------
Mid Cap Value Subaccount (1.22)% 15.69%(6) ---
------------------------------------------------------------------
Main Street Growth and
Income(R)Subaccount (20.95)%(8) (19.24)%(8) ---
------------------------------------------------------------------
Small Cap Growth Subaccount (37.17)% 2.12%(6) ---
------------------------------------------------------------------
Select 25 Subaccount (20.89)% (8.53)%(7) ---
------------------------------------------------------------------
1. From October 1, 1992 (Subaccount date of inception) to December 31, 2001.
2. From June 1, 1995 (Subaccount date of inception) to December 31, 2001.
3. From August 5, 1996 (underlying Series date of inception) to December 31,
2001.
4. From May 1, 1997 (underlying Series date of inception) to December 31, 2001.
5. From October 15, 1997 (underlying Series date of inception) to December 31,
2001.
6. From January 4, 1999 (Subaccount date of inception) to December 31, 2001.
7. From May 3, 1999 (Subaccount date of inception) to December 31, 2001.
8. From May 1, 2000 (Subaccount date of inception) to December 31, 2001.

-----------------------------------------------------------------

AVERAGE ANNUAL RETURN (Without Contingent Deferred Sales Charge
and Administration Charge)
-----------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
-----------------------------------------------------------------
Equity Subaccount (12.47)% 4.90% 9.57%
-----------------------------------------------------------------
Large Cap Value Subaccount (6.75)% 2.80% 6.51%
-----------------------------------------------------------------
Global Subaccount (13.30)% 10.94% 10.49%
-----------------------------------------------------------------
Diversified Income Subaccount 5.88% 4.61% 4.58%
-----------------------------------------------------------------
Large Cap Growth Subaccount (16.54)%(8) (21.97)%(8) ---
-----------------------------------------------------------------
Enhanced Index Subaccount (14.06)% (5.92)%(7) ---
-----------------------------------------------------------------
International Subaccount (25.35)% (9.93)%(7) ---
-----------------------------------------------------------------
Mid Cap Growth Subaccount (15.93)% 16.46% 15.73%(1)
-----------------------------------------------------------------
Global Strategic
Income Subaccount 4.87% 3.42% 5.47%(2)
-----------------------------------------------------------------
Capital Growth Subaccount (15.77)%(8) (21.13)%(8) ---
-----------------------------------------------------------------
Global Total Return Subaccount (14.06)% (0.05)% 2.78%(2)
-----------------------------------------------------------------
Managed Asset
Allocation Subaccount (6.26)% 6.39% 7.58%(2)
-----------------------------------------------------------------
Equity Income Subaccount 0.09% 9.22% 12.27%(2)
-----------------------------------------------------------------
High Yield Subaccount 3.23% 3.30% 4.18%(3)
-----------------------------------------------------------------
Small Cap Value Subaccount 20.75% 16.27%(8) ---
-----------------------------------------------------------------
Social Awareness Subaccount (14.15)% 6.12% 9.20%
-----------------------------------------------------------------
Technology Subaccount (25.00)%(8) (37.54)%(8) ---
-----------------------------------------------------------------
Mid Cap Value Subaccount 9.78% 22.28%(4) ---
-----------------------------------------------------------------
Main Street Growth and
Income(R)Subaccount (11.07)%(8) (12.85)%(8) ---
-----------------------------------------------------------------
Small Cap Growth Subaccount (28.70)% 5.48%(5) ---
-----------------------------------------------------------------
Select 25 Subaccount (11.01)% (3.68)%(7) ---
-----------------------------------------------------------------
1. From October 1, 1992 (Subaccount date of inception) to December 31, 2001.
2. From June 1, 1995 (Subaccount date of inception) to December 31, 2001.
3. From August 5, 1996 (underlying Series date of inception) to December 31,
2001.
4. From May 1, 1997 (underlying Series date of inception) to December 31, 2001.
5. From October 15, 1997 (underlying Series date of inception) to December 31,
2001.
6. From January 4, 1999 (Subaccount date of inception) to December 31, 2001.
7. From May 3, 1999 (Subaccount date of inception) to December 31, 2001.
8. From May 1, 2000 (Subaccount date of inception) to December 31, 2001.

-----------------------------------------------------------------

Quotations of total return for any Subaccount of the Separate Account will be
based on a hypothetical investment in an Account over a certain period and will
be computed by subtracting the initial value of the investment from the ending
value and dividing the remainder by the initial value of the investment. Such
quotations of total return will reflect the deduction of all applicable charges
to the contract and the separate account (on an annual basis) except the
administration charge and the applicable contingent deferred sales charge.

Although Variflex Contracts were not available for purchase until June 8, 1984,
the underlying investment vehicle of Variflex, the SBL Fund, has been in
existence since May 26, 1977. Performance information for Variflex may also
include quotations of average annual total return and total return for periods,
beginning prior to the availability of the Contract, that incorporate the
performance of the SBL Fund. Any quotation of performance that pre-dates the
date of inception of the Variflex Separate Account (or a Subaccount thereof as
applicable) will be accompanied by average annual total return reflecting the
deduction of the applicable contingent deferred sales charge and other Variflex
fees and charges since the date of inception of the Subaccount.

Performance information for any Subaccount reflects only the performance of a
hypothetical investment in the Subaccount during the particular time period on
which the calculations are based. Performance information should be considered
in light of the investment objectives and policies, characteristics and quality
of the portfolio of the series of the Fund in which the Subaccount of the
Separate Account invests, and the market conditions during the given time
period, and should not be considered as a representation of what may be achieved
in the future.

PERMISSIBLE ADVERTISING INFORMATION

From time to time, the Separate Account may, in addition to any other
permissible information, include the following types of information in
advertisements, sales literature, reports to contractowners or other investor
communications ("advertisements") (1) discussions of general economic or
financial principles (such as the effects of compounding and the benefits of
dollar-cost averaging); (2) discussions about past, current or possible
economic, market and political trends and events; (3) presentations of
statistical data to supplement such discussions; (4) published evaluations by
nationally recognized ranking services and financial or business publications or
other media including reprints of, or selections from, such publications; (5)
descriptions and updates concerning a Subaccount's strategies, and past or
anticipated portfolio investments; (6) analysis of its investments by industry,
country, credit quality and other characteristics; (7) the general biography or
work experience of the portfolio manager of a Subaccount including information
about awards received by the portfolio manager, mentions of the manager in the
media, or announcements of the portfolio manager's appearance on television or
radio programs, or presentations at conferences or trade shows; (8) portfolio
manager commentary or market updates; (9) investment philosophy and the research
methodology underlying stock selection or a Subaccount's investment objective;
(10) a discussion of the risk/return continuum relating to different
investments; (11) discussions on general principles of investing such as asset
allocation, diversification and risk tolerance; (12) testimonials describing the
experience of persons who have invested in a Subaccount; (13) discussions about
retirement and investing for retirement; (14) data concerning the projected cost
of a college education in future years based on current or recent costs of
college and an assumed rate of increase for such costs; (15) information
regarding the relative reliance in recent years on personal savings for
retirement income versus reliance on Social Security benefits and company
sponsored retirement plans; and (16) other information of interest to investors.
Advertisements may include information about the Subaccount's underlying
portfolio in addition to, or in place of, information about the Subaccount
itself.

Advertisements may also include a Subaccount's performance, goals, risks and
expenses compared with (a) various indexes so that investors may compare a
Subaccount's results with those of a group of unmanaged securities widely
regarded by investors as representative of the securities markets in general;
(b) other subaccounts tracked by the Variable Annuity Research and Data Service
("VARDS"), Lipper Analytical Services Inc., Morningstar or another independent
research firm which ranks separate accounts or subaccounts by overall
performance, investment objectives, and assets, or tracked by other services,
companies, publications, or persons who rank separate accounts or subaccounts on
overall performance or other criteria; (c) the Consumer Price Index (measure for
inflation) to assess the real rate of return from an investment in a Subaccount;
(d) other statistics such as gross national product or gross domestic product of
the United States or other countries or regions, net import and export figures
derived from governmental publications (e.g., The Survey of Current Business) or
other independent parties (e.g., the Investment Company Institute), may be used
to illustrate investment attributes to a Subaccount or the general economic,
business, investment, or financial environment in which a Subaccount operates;
(e) various financial, economic and market statistics developed by brokers,
dealers and other persons may be used to illustrate aspects of a Subaccount's
performance; (f) the sectors or industries in which a Subaccount invests may be
compared to relevant indexes or surveys (e.g., S&P Industry Surveys) in
order to evaluate the Subaccount's historic performance or current or potential
value with respect to the particular industry or sector; (g) a hypothetical or
model portfolio or (h) other subaccounts or variable annuities. The Separate
Account may also discuss and compare in advertising the relative performance of
various types of investment instruments including, but not limited to,
certificates of deposit, ordinary interest savings accounts, other forms of
fixed or variable time deposits, qualified retirement plans, stocks, Treasury
securities, and bonds, over various time periods and covering various holding
periods. Such comparisons may compare these investment categories to each other
or to changes in the Consumer Price Index. In addition, the Separate Account may
quote various measures of volatility and benchmark correlation in advertising
and other materials and may compare these measures to those of indexes, other
subaccounts or types of investments.

The Separate Account's advertisements may also include rankings or ratings of
Security Benefit and of the investor services provided by Security Benefit to
contractowners other than performance rankings of a Subaccount itself. Those
ratings or rankings of investor services by third parties may include
comparisons of their services to those provided by other variable annuity
providers selected by the rating or ranking services. They may be based upon the
opinions of the rating or ranking service itself, using its research or
judgment, or based upon surveys of investors, brokers, contractowners or others.

The Separate Account, in its advertisements, may refer to pending legislation
from time to time and the possible impact of such legislation on investors,
investment strategy and related matters. This would include any tax proposals
and their effect on marginal tax rates and tax-equivalent yields.

From time to time, advertisements may include general information about the
services and products offered by the Security FundsSM, Security Distributors,
Inc., and Security Benefit Life Insurance Company and its subsidiaries. For
example, such advertisements may include statistical information about those
entities including, but not limited to, the number of current shareholder
accounts, the amount of assets under management, sales information, the
distribution channels through which the entities' products are available,
marketing efforts and statements about this information by the entities'
officers, directors and employees. Advertisements may also include performance
information for such products.

All performance information that the Separate Account advertises is historical
in nature and is not intended to represent or guarantee future results. The
value of accumulation units when redeemed may be more or less than their
original cost. Performance information may be quoted numerically or presented in
a table, graph or other illustration. A Subaccount's returns and unit price are
not guaranteed or insured by the FDIC or any other agency and will fluctuate
daily, while bank depository obligations may be insured by the FDIC and may
provide fixed rates of return.

In connection with a ranking, the Separate Account may provide additional
information, such as the particular category to which it is related, the number
of subaccounts in the category, the criteria upon which the ranking is based,
and the effect of sales charges, fee waivers and/or expense reimbursements. In
assessing comparisons of performance, you should keep in mind that the
composition of the investments in the reported indexes and averages is not
identical to a Subaccount's portfolio, the indexes and averages are generally
unmanaged, and the items included in the calculations of the averages may not be
identical to the formula used by the Separate Account to calculate its figures.
For example, unmanaged indexes may assume reinvestment of dividends but
generally do not reflect deductions for administrative and management costs. In
addition, there can be no assurance that a Subaccount will continue its
performance as compared to these other averages. When comparing a Subaccount's
performance with that of other alternatives, investors should understand that an
investment in a Subaccount may be subject to greater market risks than are
certain other types of investments.

LIMITS ON PURCHASE PAYMENTS
PAID UNDER TAX-QUALIFIED
RETIREMENT PLANS

SECTION 401 -- The applicable annual limits on purchase payments for a Contract
used in connection with a retirement plan that is qualified under Section 401 of
the Internal Revenue Code depend upon the type of plan. Total purchase payments
on behalf of a participant to all defined contribution plans maintained by an
employer are limited under Section 415(c) of the Internal Revenue Code to the
lesser of (a) $40,000, or (b) 100% of the participant's annual compensation.
Salary reduction contributions to a cash-or-deferred (401(k)) arrangement under
a profit sharing plan are subject to additional annual limits under Section
402(g). Contributions to a defined benefit pension plan are actuarially
determined based upon the amount of benefits the participants will receive under
the plan formula. The maximum annual benefit any individual may receive under an
employer's defined benefit plan is limited under Section 415(b) of the Internal
Revenue Code. Rollover contributions are not subject to the annual limitations
described above.

SECTION 403(B) -- Contributions to 403(b) annuities are excludable from an
employee's gross income if they do not exceed the limits under Sections 402(g)
and 415 of the Code. The applicable limit will depend upon whether the annuities
are purchased with employer or employee contributions. Rollover contributions
are not subject to these annual limits. The maximum exclusion allowance (MEA)
limit under Section 403(b)(2) of the Code was repealed effective in 2002.

Section 402(g) generally limits an employee's annual salary reduction
contributions to a 403(b) annuity and any 401(k) arrangement equal to the
applicable dollar amount shown in the table below:

-------------------------- -------------------------
TAX YEAR DEFERRED AMOUNT
-------------------------- -------------------------
2002 $11,000
2003 $12,000
2004 $13,000
2005 $14,000
2006 and thereafter $15,000
-------------------------- -------------------------

The $15,000 limit will be adjusted for inflation in $500 increments for tax
years beginning after the 2006 tax year. If an individual is age 50 or over,
catch-up contributions can be made to a 403(b) annuity during the tax years and
at the rates set forth in the table below:

---------------------------- -------------------------
TAX YEAR ADDITIONAL
CATCH-UP AMOUNT
---------------------------- -------------------------
2002 $1,000
2003 $2,000
2004 $3,000
2005 $4,000
2006 and thereafter $5,000
---------------------------- -------------------------

The $5,000 limit will be adjusted for inflation in $500 increments for tax years
beginning after the 2006 tax year. The limit will be reduced by salary reduction
contributions to other 403(b) or 401(k) arrangements. An employee under a 403(b)
annuity with at least 15 years of service for a "qualified employer" (i.e., an
educational organization, hospital, home health service agency, health and
welfare service agency, church or convention or association of churches)
generally may exceed the limit by $3,000 per year, subject to an aggregate limit
of $15,000 for all years.

Section 415(c) also provides an overall limit on the amount of employer and
employee salary reduction contributions to a Section 403(b) annuity that will be
excludable from an employee's gross income in a given year. Generally, the
Section 415(c) limit is the lesser of (i) $40,000, or (ii) 100% of the
employee's annual compensation.

SECTIONS 408 AND 408A -- Premiums (other than rollover contributions) paid under
a Contract used in connection with a traditional or Roth individual retirement
annuity (IRA) that is described in Section 408 or Section 408A of the Internal
Revenue Code are subject to the limits on contributions to IRA's under Section
219(b) of the Internal Revenue Code. Under Section 219(b) of the Code,
contributions (other than rollover contributions) to an IRA are limited to the
lesser of 100% of the individual's taxable compensation or the applicable dollar
amount as shown in the table below:

---------------------------- ----------------
TAX YEAR AMOUNT
---------------------------- ----------------
2002-2004 $3,000
2005-2007 $4,000
2008 and thereafter $5,000
---------------------------- ----------------

If an individual is age 50 or over, the individual may make an additional catch
up contribution to a traditional IRA of $500 during the tax years of 2002-2005,
or $1,000 for the 2006 tax year or any tax year thereafter.

Spousal IRAs allow an Owner and his or her spouse to contribute up to the
applicable dollar amount to their respective IRAs so long as a joint tax return
is filed and joint income is $6,000 or more. The maximum amount the higher
compensated spouse may contribute for the year is the lesser of the applicable
dollar amount as shown in the table above or 100% of that spouse's compensation.
The maximum the lower compensated spouse may contribute is the lesser of (i) the
applicable dollar amount as shown in the table above or (ii) 100% of that
spouse's compensation plus the amount by which the higher compensated spouse's
compensation exceeds the amount the higher compensated spouse contributes to his
or her IRA. The extent to which an Owner may deduct contributions to a
traditional IRA depends on the gross income of the Owner and his or her spouse
for the year and whether either are an "active participant" in an
employer-sponsored retirement plan.

Premiums under a Contract used in connection with a simplified employee pension
plan described in Section 408 of the Internal Revenue Code are subject to limits
under Section 402(h) of the Internal Revenue Code. Section 402(h) currently
limits employer contributions and salary reduction contributions (if permitted)
under a simplified employee pension plan to the lesser of (a) 15% of the
compensation of the participant in the Plan, or (b) $40,000. Salary reduction
contributions, if any, are subject to additional annual limits.

SECTION 457 -- Contributions on behalf of an employee to a Section 457 plan
generally are limited to the lesser of (i) the applicable amount as set forth in
the table below or (ii) 100% of the employee's includable compensation.

---------------------------- -------------------------
TAX YEAR DEFERRED AMOUNT
---------------------------- -------------------------
2002 $11,000
2003 $12,000
2004 $13,000
2005 $14,000
2006 and thereafter $15,000
---------------------------- -------------------------

The $15,000 limit will be adjusted for inflation in $500 increments for tax
years beginning after the 2006 tax year.

If the employee participates in more than one Section 457 plan, the applicable
dollar limit applies to contributions to all such programs. Beginning in 2002,
the applicable dollar limit is no longer reduced by the amount of any salary
reduction contribution the employee makes to a 403(b) annuity, an IRA or a
retirement plan qualified under Section 401. The Section 457 limit may be
increased during the last three years ending before the employee reaches his or
her normal retirement age. In each of these last three years, the plan may
permit a "catch-up" amount in addition to the regular amount to be deferred. The
maximum combined amount, which may be deferred in each of these three years, is
increased up to $15,000, reduced by any amount excluded from the employee's
income for the taxable year as a contribution to another plan. If an individual
is age 50 or over, catch-up contributions can be made to a 457 plan during the
tax years and at the rates set forth in the table below:

The $5,000 limit will be adjusted for inflation in $500 increments for tax years
beginning after the 2006 tax year.

ASSIGNMENT

Variflex Contracts may be assigned by the Contractowner except when issued to
plans or trusts qualified under Section 401, 403, 408, 408A or 457 of the
Internal Revenue Code.

DISTRIBUTION OF THE CONTRACTS

Security Distributors, Inc. ("SDI") is Principal Underwriter of the Contract.
SDI is registered as a broker/dealer with the Securities and Exchange Commission
("SEC") under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. ("NASD"). The offering of the
Contracts is continuous.

Subject to arrangements with Security Benefit, the Contract is sold by
independent broker/dealers who are members of the NASD and who become licensed
to sell variable annuities for SBL, and by certain financial institutions. SDI
acts as principal underwriter on behalf of Security Benefit for the distribution
of the Contract. SDI is not compensated under its Distribution Agreement with
Security Benefit.

The compensation payable by SDI under these arrangements may vary, but is not
expected to exceed in the aggregate 6% of purchase payments.

The Variflex offering is continuous. During the years ended December 31, 2001,
2000 and 1999 , Security Benefit received contingent deferred sales charges from
Variflex as follows: $1,632,304, $3,177,633 and $2,824,952, respectively.

SAFEKEEPING OF VARIFLEX
ACCOUNT ASSETS

All assets of Variflex are held in the custody and safekeeping of Security
Benefit. Additional protection for such assets is offered by Security Benefit's
blanket fidelity bond presently covering all officers and employees for a total
of $10,000,000 per loss.

STATE REGULATION

As a life insurance company organized under the laws of Kansas, Security Benefit
(including Variflex) is subject to regulation by the Commissioner of Insurance
of the State of Kansas. An annual statement is filed with the Kansas
Commissioner of Insurance on or before March 1 each year covering the operations
of Security Benefit for the prior year and its financial condition on December
31 of that year. Security Benefit is subject to a complete examination of its
operations, including an examination of the liabilities and reserves of Security
Benefit and Variflex, by the Kansas Commissioner of Insurance whenever such
examination is deemed necessary by the Commissioner. Such regulation and
examination does not, however, involve any supervision of the investment
policies applicable to Variflex.

In addition, Security Benefit is subject to insurance laws and regulations of
the other jurisdictions in which it is or may become licensed to operate.
Generally, the insurance department of any such other jurisdiction applies the
laws of the state of domicile in determining permissible investments.

EXPERTS

The consolidated financial statements of Security Benefit Life Insurance Company
and Subsidiaries at December 31, 2001 and 2000, and for each of the three years
in the period ended December 31, 2001, and the financial statements of Variflex
at December 31, 2001, and for each of the two years in the period ended December
31, 2001, included in this Statement of Additional Information have been audited
by Ernst & Young LLP, independent auditors, for the periods indicated in their
reports thereon appearing elsewhere herein, and are included in reliance upon
such reports given upon the authority of such firm as experts in accounting and
auditing.

FINANCIAL STATEMENTS

The consolidated financial statements of Security Benefit Life Insurance Company
and Subsidiaries, which are included in this Statement of Additional
Information, should be considered only as bearing on the ability of the Company
to meet its obligations under the Contracts. They should not be considered as
bearing on the investment performance of the assets held in the Separate
Account.

Variflex(R)

Financial Statements

Years Ended December 31, 2001 and 2000

CONTENTS

PAGE

Report of Independent Auditors........................................... 12

Audited Financial Statements

Statements of Assets and Liabilities................................ 13

Statements of Operations............................................ 17

Statements of Changes in Net Assets................................. 19

Notes to Financial Statements....................................... 23

Report of Independent Auditors

The Contract Owners of Variflex and

The Board of Directors of Security Benefit Life Insurance Company

We have audited the accompanying statements of assets and liabilities of
Variflex comprising the Equity, Large Cap Value, Money Market, Global,
Diversified Income, Large Cap Growth, Enhanced Index, International, Mid Cap
Growth, Global Strategic Income, Capital Growth, Global Total Return, Managed
Asset Allocation, Equity Income, High Yield, Small Cap Value, Social Awareness,
Technology, Mid Cap Value, Main Street Growth and Income, Small Cap Growth, and
Select 25 Subaccounts as of December 31, 2001, and the related statements of
operations for the year then ended and changes in net assets for each of the two
years in the periods then ended, except for those individual subaccounts
operating for portions of such periods as disclosed in the financial statements.
These financial statements are the responsibility of Security Benefit Life
Insurance Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of investments owned as of December 31, 2001,
by correspondence with the transfer agent. An audit also includes assessing the
accounting principles used and significant estimates made by management as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the subaccounts
constituting Variflex at December 31, 2001, and the results of their operations
and changes in their net assets for the periods described above in conformity
with accounting principles generally accepted in the United States.

Ernst & Young LLP

Kansas City, Missouri
February 1, 2002

Variflex

Statements of Assets and Liabilities

December 31, 2001

(DOLLARS IN THOUSANDS - EXCEPT UNIT VALUES)

LARGE MONEY DIVERSIFIED LARGE
EQUITY CAP VALUE MARKET GLOBAL INCOME CAP GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------------------------------------------------------------------
Assets:
Mutual funds,
at value...... $634,885 $491,243 $75,764 $353,296 $90,362 $6,825
Receivable
from SBL...... 361 299 --- 297 66 --
-------------------------------------------------------------------------
Total assets...... 635,246 491,542 75,764 353,593 90,428 6,825

Liabilities:
Payable to
SBL........... --- (22) (81) (11) (28) ---
-------------------------------------------------------------------------
Net assets........ $635,246 $491,520 $75,683 $353,582 $90,400 $6,825
=========================================================================
Net assets:
Accumulation
assets........ $633,484 $490,008 $75,468 $353,007 $89,840 $6,816
Annuity
assets........ 1,762 1,512 215 575 560 9
-------------------------------------------------------------------------
Net assets........ $635,246 $491,520 $75,683 $353,582 $90,400 $6,825
=========================================================================
Units
outstanding:
Variflex
Qualified..... 9,100,167 7,444,335 2,360,404 11,812,015 2,442,080 810,035
Variflex
Nonqualified.. 1,835,449 1,753,185 1,101,767 2,704,547 907,488 222,143
Variflex ES.... 2,241 2,062 12 629 172 ---

Unit value:
Variflex
Qualified..... $ 58.11 $ 53.47 $21.87 $ 24.38 $27.17 $6.61
Variflex
Nonqualified.. $ 58.09 $ 53.43 $21.87 $ 24.38 $27.15 $6.61
Variflex ES.... $ 20.60 $ 17.26 $13.05 $ 22.57 $14.39 $6.64

Mutual funds,
at cost.......... $793,335 $678,636 $75,052 $387,823 $87,963 $7,930
Mutual fund
shares...........28,393,778 26,425,100 6,210,147 55,989,953 7,926,532 1,011,085

Variflex

Statements of Assets and Liabilities (continued)

(DOLLARS IN THOUSANDS - EXCEPT UNIT VALUES)

GLOBAL GLOBAL
ENHANCED INTER- MID CAP STRATEGIC CAPITAL TOTAL
INDEX NATIONAL GROWTH INCOME GROWTH RETURN
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------------------------------------------------------------------
Assets:
Mutual funds,
at value...... $18,935 $6,907 $379,914 $9,533 $10,104 $17,100
Receivable
from SBL...... --- --- 297 10 --- ---
-------------------------------------------------------------------------
Total assets...... 18,935 6,907 380,211 9,543 10,104 17,100

Liabilities:
Payable to
SBL........... (3) --- (69) (1) --- (1)
-------------------------------------------------------------------------
Net assets........ $18,932 $6,907 $380,142 $9,542 $10,104 $17,099
=========================================================================

Net assets:
Accumulation
assets........ $18,932 $6,907 $379,527 $9,542 $10,104 $17,048
Annuity
assets........ --- --- 615 --- --- 51
-------------------------------------------------------------------------
Net assets........ $18,932 $6,907 $380,142 $9,542 $10,104 $17,099
=========================================================================

Units
outstanding:
Variflex
Qualified.....1,925,639 653,966 7,904,848 497,190 1,336,931 1,081,897
Variflex
Nonqualified.. 302,681 257,938 1,946,959 175,220 163,517 347,165
Variflex ES.... 18 136 235 --- --- ---

Unit value:
Variflex
Qualified..... $ 8.50 $7.57 $ 38.63 $14.20 $ 6.73 $11.98
Variflex
Nonqualified.. $ 8.50 $7.57 $ 38.62 $14.20 $ 6.73 $11.97
Variflex ES.... $ 8.54 $7.61 $ 30.12 $14.38 $ 6.75 $12.12

Mutual funds,
at cost.......... $22,601 $9,314 $394,077 $9,264 $12,254 $21,699
Mutual fund
shares...........2,196,683 883,301 15,751,003 973,762 1,477,265 1,943,209

Variflex

Statements of Assets and Liabilities (continued)

(DOLLARS IN THOUSANDS - EXCEPT UNIT VALUES)

MANAGED SMALL
ASSET EQUITY HIGH SMALL CAP SOCIAL
ALLOCATION INCOME YIELD VALUE AWARENESS
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------------------------------------------------------
Assets:
Mutual funds,
at value...... $47,232 $116,902 $8,516 $35,560 $125,015
Receivable
from SBL...... 4 19 --- --- 251
-------------------------------------------------------------
Total assets...... 47,236 116,921 8,516 35,560 125,266

Liabilities:
Payable
to SBL........ --- --- (1) --- (58)
-------------------------------------------------------------
Net assets........ $47,236 $116,921 $8,515 $35,560 $125,208
=============================================================

Net assets:
Accumulation
assets........ $47,131 $116,712 $8,515 $35,560 $124,861
Annuity
assets........ 105 209 --- --- 347
-------------------------------------------------------------
Net assets........ $47,236 $116,921 $8,515 $35,560 $125,208
=============================================================

Units
outstanding:
Variflex
Qualified.....2,258,069 4,370,480 509,774 2,165,394 3,953,251
Variflex
Nonqualified.. 661,016 1,088,784 172,694 601,352 1,003,971
Variflex ES.... 1,348 1,962 104 30 3,473

Unit value:
Variflex
Qualified..... $16.18 $ 21.42 $12.48 $12.86 $ 25.24
Variflex
Nonqualified.. $16.18 $ 21.41 $12.48 $12.86 $ 25.24
Variflex ES.... $16.38 $ 21.68 $12.61 $12.90 $ 20.12

Mutual funds,
at cost.......... $50,761 $118,085 $9,175 $34,025 $138,992
Mutual fund
shares...........3,465,332 7,306,391 626,186 2,780,302 5,521,896

Variflex

Statements of Assets and Liabilities (continued)

(DOLLARS IN THOUSANDS - EXCEPT UNIT VALUES)

MAIN
STREET
GROWTH SMALL
MID CAP AND CAP
TECHNOLOGY VALUE INCOME GROWTH SELECT 25
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------------------------------------------------------
Assets:
Mutual funds,
at value...... $10,603 $96,312 $17,815 $50,376 $32,328
Receivable
from SBL...... --- 41 --- --- 8
--------------------------------------------------------------
Total assets...... 10,603 96,353 17,815 50,376 32,336

Liabilities:
Payable
to SBL........ --- --- --- --- ---
--------------------------------------------------------------
Net assets........ $10,603 $96,353 $17,815 $50,376 $32,336
==============================================================

Net assets:
Accumulation
assets........ $10,603 $96,353 $17,815 $50,376 $32,336
Annuity
assets........ --- --- --- --- ---
--------------------------------------------------------------
Net assets........ $10,603 $96,353 $17,815 $50,376 $32,336
==============================================================

Units
outstanding:
Variflex
Qualified.....1,896,347 3,062,821 1,812,239 3,216,970 2,961,348
Variflex
Nonqualified.. 430,690 703,426 426,747 806,870 609,728
Variflex ES.... --- 1,913 13 602 1,304

Unit value:
Variflex
Qualified..... $ 4.56 $25.58 $ 7.95 $12.52 $ 9.05
Variflex
Nonqualified.. $ 4.56 $25.58 $ 7.95 $12.52 $ 9.05
Variflex ES.... $ 4.57 $25.82 $ 7.98 $12.62 $ 9.10

Mutual funds,
at cost.......... $14,347 $86,880 $19,617 $70,980 $37,701
Mutual fund
shares...........2,280,274 4,100,140 2,199,380 3,979,112 3,457,467

SEE ACCOMPANYING NOTES.

Variflex

Statements of Operations

Year Ended December 31, 2001

(IN THOUSANDS)

LARGE MONEY DIVERSIFIED LARGE
EQUITY CAP VALUE MARKET GLOBAL INCOME CAP GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------------------------------------------------------
Net investment
(loss) income:
Dividend income..$ 1,438 $ 6,841 $4,317 $ --- $ 5,583 $ ---
Expenses:
Mortality and
expense risk
fee........... (8,895) (6,844) (917) (5,076) (1,117) (70)
-----------------------------------------------------------------------
Net investment
(loss) income...... (7,457) (3) 3,400 (5,076) 4,466 (70)

Net realized
and unrealized
(loss) gain on
investments:
Capital gains
distributions... 84,932 --- --- 65,819 --- ---
Realized (loss)
gain on sale
of fund shares.. (69,614) (72,782) (171) (20,125) (862) (1,088)
Change in
unrealized
appreciation/
depreciation on
investments
during the year. (110,314) 31,284 (1,588) (104,888) 1,188 77
-----------------------------------------------------------------------
Net realized
and unrealized
(loss) gain on
investments........ (94,996) (41,498) (1,759) (59,194) 326 (1,011)
-----------------------------------------------------------------------
Net (decrease)
increase in net
assets resulting
from operations....$(102,453) $(41,501) $1,641 $ (64,270) $ 4,792 $(1,081)
=======================================================================

GLOBAL GLOBAL
ENHANCED INTER- MID CAP STRATEGIC CAPITAL TOTAL
INDEX NATIONAL GROWTH INCOME GROWTH RETURN
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
-----------------------------------------------------------------------
Net investment
(loss) income:
Dividend income.. $ 89 $ --- $ --- $ 566 $ --- $ 674
Expenses:
Mortality and
expense risk
fee........... (242) (85) (5,243) (102) (127) (247)
-----------------------------------------------------------------------
Net investment
(loss) income...... (153) (85) (5,243) 464 (127) 427

Net realized and
unrealized (loss)
gain on
investments:
Capital gains
distributions... --- --- 61,813 --- 49 ---
Realized (loss)
gain on
sale of fund
shares.......... (1,198) (661) (16,622) (56) (2,148) (1,760)
Change in
unrealized
appreciation/
depreciation on
investments
during the
year........... (1,816) (1,339) (118,088) (97) (170) (1,762)
-----------------------------------------------------------------------
Net realized
and unrealized
(loss) gain on
investments........ (3,014) (2,000) (72,897) (153) (2,269) (3,522)
-----------------------------------------------------------------------
Net (decrease)
increase in net
assets resulting
from operations.... $(3,167) $(2,085) $ (78,140) $ 311 $(2,396) $(3,095)
=======================================================================

Variflex

Statements of Operations (continued)

(IN THOUSANDS)

MANAGED
ASSET EQUITY HIGH SMALL SOCIAL
ALLOCATION INCOME YIELD CAP VALUE AWARENESS
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------------------------------------------------------
Net investment
(loss) income:
Dividend income. $ 1,256 $ 1,826 $ 709 $ --- $ ---
Expenses:
Mortality and
expense risk
fee.......... (570) (1,449) (100) (286) (1,800)
---------------------------------------------------------------
Net investment
(loss) income..... 686 377 609 (286) (1,800)

Net realized
and unrealized
(loss) gain on
investments:
Capital gains
distributions.. 3,528 9,719 --- 700 8,554
Realized (loss)
gain on
sale of fund
shares......... (1,511) (3,645) (277) 494 (6,110)
Change in
unrealized
appreciation/
depreciation on
investments
during the
year.......... (5,575) (6,466) (278) 1,361 (23,785)
---------------------------------------------------------------
Net realized
and unrealized
(loss) gain on
investments....... (3,558) (392) (555) 2,555 (21,341)
---------------------------------------------------------------
Net (decrease)
increase in net
assets resulting
from operations... $(2,872) $ (15) $ 54 $2,269 $(23,141)
=============================================================

MAIN
STREET
GROWTH SMALL
MID CAP AND CAP
TECHNOLOGY VALUE INCOME GROWTH SELECT 25
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------------------------------------------------------
Net investment
(loss) income:
Dividend income.. $ --- $ 229 $ 22 $ --- $ ---
Expenses:
Mortality and
expense risk
fee........... (118) (1,020) (178) (625) (417)
--------------------------------------------------------------
Net investment
(loss) income...... (118) (791) (156) (625) (417)

Net realized
and unrealized
(loss) gain on
investments:
Capital gains
distributions... --- 3,122 --- --- ---
Realized (loss)
gain on
sale of fund
shares......... (4,283) 3,293 (599) (17,430) (3,957)
Change in
unrealized
appreciation/
depreciation on
investments
during the
year........... 807 1,007 (822) (4,375) (742)
--------------------------------------------------------------
Net realized
and unrealized
(loss) gain on
investments........ (3,476) 7,422 (1,421) (21,805) (4,699)
--------------------------------------------------------------
Net (decrease)
increase in net
assets resulting
from operations.... $(3,594) $ 6,631 $(1,577) $(22,430) $(5,116)
==============================================================

SEE ACCOMPANYING NOTES.

Variflex

Statements of Changes in Net Assets

Years Ended December 31, 2001 and 2000 (Except as Noted)

(In Thousands)

LARGE CAP VALUE
EQUITY SUBACCOUNT SUBACCOUNT
2001 2000 2001 2000
------------------------------------------------------
(Decrease) increase
in net assets:
From operations:
Net investment
(loss) income........ $ (7,457) $ (11,654)$ (3) $ 12,599
Capital gains
distributions....... 84,932 76,198 --- 60,165
Realized (loss)
gain on
investments.......... (69,614) (14,113) (72,782) (162,238)
Change in
unrealized
appreciation/
depreciation on
investments
during the year...... (110,314) (189,531) 31,284 13,423
-------------------------------------------------------
Net (decrease)
increase in
net assets from
operations............ (102,453) (139,100) (41,501) (76,051)

From contractholder
transactions:
Variable annuity
deposits............ 60,624 100,680 32,407 45,173
Administrative
fees................ (850) (1,315) (845) (1,342)
Terminations and
withdrawals......... (90,156) (174,868) (76,800) (165,052)
Annuity payments..... (1,550) (1,192) (669) (974)
Transfers between
subaccounts, net (38,370) (106,185) (27,501) (141,138)
Mortality adjustment. 13 (3) 5 30
-------------------------------------------------------
Net (decrease)
increase in net
assets from
contractholder
transactions.......... (70,289) (182,883) (73,403) (263,303)
-------------------------------------------------------
Net (decrease) increase
in net assets............ (172,742) (321,983) (114,904) (339,354)
Net assets at
beginning of year........ 807,988 1,129,971 606,424 945,778
--------------------------------------------------------
Net assets at end
of year................ $ 635,246 $ 807,988 $ 491,520 $ 606,424
==========================================================

MONEY MARKET
SUBACCOUNT
2001 2000
-----------------------------
(Decrease) increase
in net assets:
From operations:
Net investment
(loss) income........ $ 3,400 $ (650)
Capital gains
distributions....... --- ---
Realized (loss)
gain on
investments.......... (171) (1,425)
Change in
unrealized
appreciation/
depreciation on
investments
during the year...... (1,588) 5,834
---------------------------
Net (decrease)
increase in
net assets from
operations............ 1,641 3,759

From contractholder
transactions:
Variable annuity
deposits............ 13,066 40,271
Administrative
fees................ (191) (338)
Terminations and
withdrawals......... (24,473) (69,437)
Annuity payments..... (146) (1,335)
Transfers between
subaccounts, net 12,558 (6,382)
Mortality adjustment. 1 13
---------------------------
Net (decrease)
increase in net
assets from
contractholder
transactions.......... 815 (37,208)
---------------------------
Net (decrease) increase
in net assets............ 2,456 (33,449)
Net assets at
beginning of year........ 73,227 106,676
---------------------------
Net assets at end
of year.................. $ 75,683 $ 73,227
===========================

DIVERSIFIED INCOME
GLOBAL SUBACCOUNT SUBACCOUNT
2001 2000 2001 2000
-----------------------------------------------------
(Decrease) increase
in net assets:
From operations:
Net investment
(loss) income....... $ (5,076) $ (6,147) $ 4,466 $ (479)
Capital gains
distributions....... 65,819 48,822 --- ---
Realized (loss)
gain on
investments.......... (20,125) 15,501 (862) (6,996)
Change in
unrealized
appreciation/
depreciation on
investments during
the year............. (104,888) (48,459) 1,188 13,494
------------------------------------------------------
Net (decrease)
increase in
net assets from
operations............ (64,270) 9,717 4,792 6,019

From contractholder
transactions:
Variable annuity
deposits............ 29,398 51,387 6,785 9,132
Administrative fees.. (185) (280) (212) (254)
Terminations and
withdrawals......... (44,964) (66,630) (14,990) (20,459)
Annuity payments..... (263) (463) (261) (781)
Transfers between
subaccounts, net (34,845) 30,527 7,304 (7,725)
Mortality adjustment. 1 (10) (4) 4
------------------------------------------------------
Net (decrease)
increase in net
assets from
contractholder
transactions.......... (50,858) 14,531 (1,378) (20,083)
------------------------------------------------------
Net (decrease) increase
in net assets............ (115,128) 24,248 3,414 (14,064)
Net assets at
beginning of year........ 468,710 444,462 86,986 101,050
------------------------------------------------------
Net assets at end
of year.................. $ 353,582 $468,710 $ 90,400 $ 86,986
======================================================

LARGE CAP GROWTH SUBACCOUNT
2001 2000*
-----------------------------

(Decrease) increase
in net assets:
From operations:
Net investment $ (70) $ (29)
(loss) income.......
Capital gains --- ---
distributions.......
Realized (loss)
gain on (1,088) (130)
investments..........
Change in
unrealized
appreciation/
depreciation on
investments during 77 (1,182)
the year.............----------------------------

Net (decrease)
increase in
net assets from (1,081) (1,341)
operations............

From contractholder
transactions:
Variable annuity 1,427 530
deposits............ (10) (8)
Administrative fees..
Terminations and (387) (424)
withdrawals......... (2) ---
Annuity payments.....
Transfers between 1,360 6,761
subaccounts, net --- ---
Mortality adjustment.----------------------------

Net (decrease)
increase in net
assets from
contractholder 2,388 6,859
transactions..........----------------------------

Net (decrease) increase 1,307 5,518
in net assets............
Net assets at 5,518 ---
beginning of year........----------------------------

Net assets at end $ 6,825 $ 5,518
of year..................============================

*For the period from May 1, 2000 (inception date) through December 31, 2000.

Variflex

Statements of Changes in Net Assets (continued)

(IN THOUSANDS)

ENHANCED INDEX INTERNATIONAL
SUBACCOUNT SUBACCOUNT
2001 2000 2001 2000
-------------------------------------------------------
(Decrease) increase
in net assets:
From operations:
Net investment
(loss) income....... $ (153) $ (227) $ (85) $ (75)
Capital gains
distributions....... --- 145 --- ---
Realized (loss)
gain on
investments......... (1,198) 57 (661) (207)
Change in
unrealized
appreciation/
depreciation on
investments during
the year............ (1,816) (2,456) (1,339) (1,389)
-------------------------------------------------------
Net (decrease)
increase in net
assets from
operations............ (3,167) (2,481) (2,085) (1,671)

From contractholder
transactions:
Variable annuity
deposits......... 2,401 2,959 1,026 1,060
Administrative fees.. (27) (21) (3) (3)
Terminations and
withdrawals......... (2,452) (1,394) (550) (626)
Annuity payments..... --- --- --- ---
Transfers between
subaccounts, net 99 15,071 1,131 7,041
Mortality adjustment. --- --- --- ---
-------------------------------------------------------
Net (decrease)
increase in net
assets from
contractholder
transactions.......... 21 16,615 1,604 7,472
-------------------------------------------------------
Net (decrease) increase
in net assets............ (3,146) 14,134 (481) 5,801
Net assets at
beginning of year........ 22,078 7,944 7,388 1,587
-------------------------------------------------------
Net assets at end
of year.................. $18,932 $22,078 $ 6,907 $ 7,388
=======================================================

MID CAP GROWTH SUBACCOUNT
2001 2000
-----------------------------
(Decrease) increase
in net assets:
From operations:
Net investment
(loss) income....... $ (5,243) $ (5,840)
Capital gains
distributions....... 61,813 35,397
Realized (loss)
gain on
investments......... (16,622) 28,459
Change in
unrealized
appreciation/
depreciation on
investments during
the year............ (118,088) (2,073)
-----------------------------
Net (decrease)
increase in net
assets from
operations............ (78,140) 55,943

From contractholder
transactions:
Variable annuity
deposits......... 36,051 72,152
Administrative fees.. (263) (363)
Terminations and
withdrawals......... (45,151) (66,163)
Annuity payments..... (451) (669)
Transfers between
subaccounts, net (26,590) 78,225
Mortality adjustment. 1 (5)
-----------------------------
Net (decrease)
increase in net
assets from
contractholder
transactions.......... (36,403) 83,177
-----------------------------
Net (decrease) increase
in net assets............ (114,543) 139,120
Net assets at
beginning of year........ 494,685 355,565
-----------------------------
Net assets at end
of year.................. $ 380,142 $494,685
=============================

GLOBAL STRATEGIC INCOME CAPITAL GROWTH
SUBACCOUNT SUBACCOUNT
2001 2000 2001 2000*
-------------------------------------------------------
(Decrease) increase
in net assets:
From operations:
Net investment
(loss) income....... $ 464 $ (81) $ (127) $ (51)
Capital gains
distributions....... --- --- 49 ---
Realized (loss)
gain on
investments......... (56) (312) (2,148) (161)
Change in
unrealized
appreciation/
depreciation on
investments during
the year............ (97) 562 (170) (1,980)
-------------------------------------------------------
Net (decrease)
increase in
net assets from
operations............ 311 169 (2,396) (2,192)

From contractholder
transactions:
Variable annuity
deposits............ 829 696 1,550 841
Administrative
fees................ (17) (21) (13) (9)
Terminations and
withdrawals......... (819) (1,148) (914) (845)
Annuity payments..... --- --- --- ---
Transfers between
subaccounts, net 3,158 (448) 1,877 12,205
Mortality adjustment. --- --- --- ---
-------------------------------------------------------
Net (decrease)
increase in net
assets from
contractholder
transactions.......... 3,151 (921) 2,500 12,192
-------------------------------------------------------
Net (decrease) increase
in net assets............ 3,462 (752) 104 10,000
Net assets at
beginning of year........ 6,080 6,832 10,000 ---
-------------------------------------------------------
Net assets at
end of year.............. $9,542 $ 6,080 $10,104 $10,000
=======================================================

GLOBAL TOTAL RETURN
SUBACCOUNT
2001 2000
----------------------------
(Decrease) increase
in net assets:
From operations:
Net investment
(loss) income....... $ 427 $ (319)
Capital gains
distributions....... --- 2,657
Realized (loss)
gain on
investments......... (1,760) (1,292)
Change in
unrealized
appreciation/
depreciation on
investments during
the year............ (1,762) (4,206)
----------------------------
Net (decrease)
increase in
net assets from
operations............ (3,095) (3,160)

From contractholder
transactions:
Variable annuity
deposits............ 1,651 2,533
Administrative
fees................ (28) (41)
Terminations and
withdrawals......... (1,736) (3,659)
Annuity payments..... (10) (14)
Transfers between
subaccounts, net (2,278) (2,558)
Mortality adjustment. 2 (1)
----------------------------
Net (decrease)
increase in net
assets from
contractholder
transactions.......... (2,399) (3,740)
----------------------------
Net (decrease) increase
in net assets............ (5,494) (6,900)
Net assets at
beginning of year........ 22,593 29,493
----------------------------
Net assets at
end of year.............. $17,099 $22,593
======================================================

*For the period from May 1, 2000 (inception date) through December 31, 2000.

Variflex

Statements of Changes in Net Assets (continued)

(IN THOUSANDS)

MANAGED ASSET EQUITY INCOME
ALLOCATION SUBACCOUNT SUBACCOUNT
2001 2000 2001 2000
--------------------------------------------------------
(Decrease) increase
in net assets:
From operations:
Net investment
(loss) income....... $ 686 $ (500) $ 377 $ (1,098)
Capital gains
distributions....... 3,528 1,946 9,719 9,465
Realized (loss)
gain on
investments......... (1,511) 287 (3,645) (7,862)
Change in
unrealized
appreciation/
depreciation on
investments during
the year............ (5,575) (2,697) (6,466) 9,069
--------------------------------------------------------
Net (decrease)
increase in
net assets from
operations............ (2,872) (964) (15) 9,574

From contractholder
transactions:
Variable annuity
deposits............ 4,668 6,180 10,852 12,260
Administrative
fees................ (115) (136) (271) (297)
Terminations and
withdrawals......... (5,095) (8,800) (14,999) (20,218)
Annuity payments..... (134) (94) (107) (179)
Transfers between
subaccounts, net 4,400 (3,518) 12,489 (24,371)
Mortality adjustment. --- --- 5 (2)
--------------------------------------------------------
Net (decrease)
increase in net
assets from
contractholder
transactions........... 3,724 (6,368) 7,969 (32,807)
--------------------------------------------------------
Net (decrease) increase
in net assets............ 852 (7,332) 7,954 (23,233)
Net assets at
beginning of year........ 46,384 53,716 108,967 132,200
--------------------------------------------------------
Net assets at
end of year.............. $47,236 $46,384 $116,921 $108,967
========================================================

HIGH YIELD
SUBACCOUNT
2001 2000
----------------------------
(Decrease) increase
in net assets:
From operations:
Net investment
(loss) income....... $ 609 $ 205
Capital gains
distributions....... --- ---
Realized (loss)
gain on
investments......... (277) (95)
Change in
unrealized
appreciation/
depreciation on
investments during
the year............ (278) (199)
----------------------------
Net (decrease)
increase in
net assets from
operations............ 54 (89)

From contractholder
transactions:
Variable annuity
deposits............ 617 584
Administrative
fees................ (18) (7)
Terminations and
withdrawals......... (1,882) (431)
Annuity payments..... --- ---
Transfers between
subaccounts, net 6,065 1,324
Mortality adjustment. --- ---
----------------------------
Net (decrease)
increase in net
assets from
contractholder
transactions........... 4,782 1,470
----------------------------
Net (decrease) increase
in net assets............ 4,836 1,381
Net assets at
beginning of year........ 3,679 2,298
----------------------------
Net assets at
end of year.............. $ 8,515 $3,679
============================

SMALL CAP VALUE SOCIAL AWARENESS
SUBACCOUNT SUBACCOUNT
2001 2000* 2001 2000
-------------------------------------------------------
(Decrease) increase
in net assets:
From operations:
Net investment
(loss) income............ $ (286) $ (11) $ (1,800) $ (2,337)
Capital gains
distributions............ 700 --- 8,554 ---
Realized (loss)
gain on
investments......... 494 9 (6,110) 672
Change in
unrealized
appreciation/
depreciation on
investments during
the year............ 1,361 174 (23,785) (25,043)
-------------------------------------------------------
Net (decrease)
increase in
net assets from
operations............ 2,269 172 (23,141) (26,708)

From contractholder
transactions:
Variable annuity
deposits............ 4,609 349 14,665 22,978
Administrative
fees................ (10) --- (132) (182)
Terminations and
withdrawals......... (2,128) (73) (15,475) (26,440)
Annuity payments..... --- --- (177) (56)
Transfers between
subaccounts, net 28,125 2,247 (12,983) 4,726
Mortality adjustment. --- --- (1) (19)
-------------------------------------------------------
Net (decrease)
increase in net
assets from
contractholder
transactions.......... 30,596 2,523 (14,103) 1,007
-------------------------------------------------------
Net (decrease) increase
in net assets............ 32,865 2,695 (37,244) (25,701)
Net assets at
beginning of year........ 2,695 --- 162,452 188,153
-------------------------------------------------------
Net assets at
end of year.............. $35,560 $2,695 $125,208 $162,452
=======================================================

TECHNOLOGY
SUBACCOUNT
2001 2000*
----------------------------
(Decrease) increase
in net assets:
From operations:
Net investment
(loss) income............ $ (118) $ (56)
Capital gains
distributions............ --- ---
Realized (loss)
gain on
investments......... (4,283) (362)
Change in
unrealized
appreciation/
depreciation on
investments during
the year............ 807 (4,551)
----------------------------
Net (decrease)
increase in
net assets from
operations............ (3,594) (4,969)

From contractholder
transactions:
Variable annuity
deposits............ 2,283 1,361
Administrative
fees................ (6) (4)
Terminations and
withdrawals......... (672) (511)
Annuity payments..... --- ---
Transfers between
subaccounts, net 3,296 13,419
Mortality adjustment. --- ---
----------------------------
Net (decrease)
increase in net
assets from
contractholder
transactions.......... 4,901 14,265
----------------------------
Net (decrease) increase
in net assets............ 1,307 9,296
Net assets at
beginning of year........ 9,296 ---
----------------------------
Net assets at
end of year.............. $10,603 $ 9,296
============================

*For the period from May 1, 2000 (inception date) through December 31, 2000.

Variflex

Statements of Changes in Net Assets (continued)

(IN THOUSANDS)

MID CAP VALUE MAIN STREET GROWTH
SUBACCOUNT AND INCOME SUBACCOUNT
2001 2000 2001 2000*
-----------------------------------------------------------------
(Decrease) increase
in net assets:
From operations:
Net investment
(loss) income....... $ (791) $ (413) $ (156) $ (35)
Capital gains
distributions....... 3,122 422 --- ---
Realized (loss)
gain on
investments.......... 3,293 1,301 (599) (48)
Change in
unrealized
appreciation/
depreciation on
investments during
the year............ 1,007 8,040 (822) (980)
-----------------------------------------------------------------
Net (decrease)
increase in net
assets from
operations............ 6,631 9,350 (1,577) (1,063)

From contractholder
transactions:
Variable annuity
deposits............ 12,263 4,677 2,990 1,114
Administrative
fees................ (66) (34) (36) (21)
Terminations and
withdrawals......... (7,247) (3,052) (1,166) (628)
Annuity payments..... --- --- --- ---
Transfers between
subaccounts, net 23,822 36,483 5,995 12,207
Mortality adjustment. --- --- --- ---
-----------------------------------------------------------------
Net (decrease)
increase in net
assets from
contractholder
transactions.......... 28,772 38,074 7,783 12,672
-----------------------------------------------------------------
Net (decrease) increase
in net assets............ 35,403 47,424 6,206 11,609
Net assets at
beginning of year........ 60,950 13,526 11,609 ---
-----------------------------------------------------------------
Net assets at
end of year.............. $96,353 $60,950 $17,815 $11,609
=================================================================

SMALL CAP GROWTH SUBACCOUNT SELECT 25 SUBACCOUNT
2001 2000 2001 2000
-----------------------------------------------------------------
(Decrease) increase
in net assets:
From operations:
Net investment
(loss) income....... $ (625) $ (922) $ (417) $ (505)
Capital gains
distributions....... --- 819 --- ---
Realized (loss)
gain on
investments......... (17,430) 969 (3,957) 194
Change in
unrealized
appreciation/
depreciation on
investments during
the year............ (4,375) (21,360) (742) (6,745)
-----------------------------------------------------------------
Net (decrease)
increase i
net assets from
operations............ (22,430) (20,494) (5,116) (7,056)

From contractholder
transactions:
Variable annuity
deposits............ 8,089 10,765 4,248 6,414
Administrative
fees................ (24) (40) (48) (47)
Terminations and
withdrawals......... (5,251) (8,932) (4,038) (3,917)
Annuity payments..... --- --- --- ---
Transfers between
subaccounts, net (11,449) 74,584 (4,734) 27,702
Mortality adjustment. --- --- --- ---
-----------------------------------------------------------------
Net (decrease)
increase in net
assets from
contractholder
transactions.......... (8,635) 76,377 (4,572) 30,152
-----------------------------------------------------------------
Net (decrease) increase
in net assets............ (31,065) 55,883 (9,688) 23,096
Net assets at
beginning of year........ 81,441 25,558 42,024 18,928
-----------------------------------------------------------------
Net assets at
end of year.............. $50,376 $81,441 $32,336 $42,024
=================================================================

*For the period from May 1, 2000 (inception date) through December 31, 2000.

SEE ACCOMPANYING NOTES.

Variflex

Notes to Financial Statements

December 31, 2001 and 2000

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION -- Variflex (the Account) is a separate account of Security
Benefit Life Insurance Company (SBL). The Account is registered as a
unit investment trust under the Investment Company Act of 1940, as
amended. Deposits received by the Account are invested in the SBL Fund,
a mutual fund not otherwise available to the public. As directed by the
owners, amounts deposited may be invested in a designated series of the
SBL Fund as follows:

SUBACCOUNT SERIES OF THE SBL FUND
-----------------------------------------------------------------------------

Equity........................Series A (Equity Series)
Large Cap Value...............Series B (Large Cap Value Series)
Money Market..................Series C (Money Market Series)
Global........................Series D (Global Series)
Diversified Income............Series E (Diversified Income Series)
Large Cap Growth..............Series G (Large Cap Growth Series)
Enhanced Index................Series H (Enhanced Index Series)
International.................Series I (International Series)
Mid Cap Growth................Series J (Mid Cap Growth Series)
Global Strategic
Income.......................Series K (Global Strategic Income Series)
Capital Growth................Series L (Capital Growth Series)
Global Total Return...........Series M (Global Total Return Series)
Managed Asset
Allocation...................Series N (Managed Asset Allocation Series)
Equity Income.................Series O (Equity Income Series)
High Yield....................Series P (High Yield Series)
Small Cap Value...............Series Q (Small Cap Value Series)
Social Awareness..............Series S (Social Awareness Series)
Technology....................Series T (Technology Series)
Mid Cap Value.................Series V (Mid Cap Value Series)
Main Street Growth
and Income...................Series W (Main Street Growth and Income Series)
Small Cap Growth..............Series X (Small Cap Growth Series)
Select 25.....................Series Y (Select 25 Series)

Under applicable insurance law, the assets and liabilities of the
Account are clearly identified and distinguished from SBL's other assets
and liabilities. The portion of the Account's assets applicable to the
variable annuity contracts is not chargeable with liabilities arising
out of any other business SBL may conduct.

Under the terms of the investment advisory contracts, investment
portfolios of the underlying mutual funds are managed by Security
Management Company, LLC (SMC), a limited liability company controlled by
its members, SBL and Security Benefit Group, Inc., a wholly owned
subsidiary of SBL.

SMC has engaged T. Rowe Price Associates, Inc. to provide subadvisory
services for the Managed Asset Allocation Series and the Equity Income
Series; Strong Capital Management, Inc. to provide subadvisory services
for the Small Cap Value Series and the Small Cap Growth Series;
Oppenheimer Funds, Inc. to provide subadvisory services for the Global
Series and the Main Street Growth and Income Series; Banker's Trust
Company to provide subadvisory services for the Enhanced Index Series
and the International Series; Wellington Management Company, LLP
(Wellington Management) to provide subadvisory services for the Global
Strategic Income Series, the Global Total Return Series, and the
Technology Series; and Alliance Capital Management to provide
subadvisory services for the Capital Growth Series.

The Account receives deposits from two types of variable annuity
contracts issued by SBL: Variflex Variable Annuity (Variflex) and
Variflex ES Variable Annuity (Variflex ES).

INVESTMENT VALUATION -- Investments in mutual fund shares are carried in
the statement of assets and liabilities at market value (net asset value
of the underlying mutual fund). Investment transactions are accounted
for on the trade date. Realized gains and losses on sales of investments
are determined based on the average cost of investments sold.

The cost of investments purchased and proceeds from investments sold for
the year ended December 31, 2001 were as follows:

COST OF PROCEEDS FROM
SUBACCOUNT PURCHASES SALES
------------------------------------------------------------------
(IN THOUSANDS)

Equity.......................... $219,978 $213,190
Large Cap Value................. 74,199 147,882
Money Market.................... 153,969 149,701
Global.......................... 119,162 109,567
Diversified Income.............. 45,993 42,947
Large Cap Growth................ 6,507 4,197
Enhanced Index.................. 6,098 6,247
International................... 3,963 2,453
Mid Cap Growth.................. 156,287 136,390
Global Strategic Income......... 7,752 4,153
Capital Growth.................. 10,018 7,603
Global Total Return............. 3,646 5,622
Managed Asset
Allocation..................... 23,050 15,127
Equity Income................... 58,106 40,069
High Yield...................... 17,666 12,275
Small Cap Value................. 52,825 21,817
Social Awareness................ 33,400 40,958
Technology...................... 12,733 7,955
Mid Cap Value................... 75,583 44,521
Main Street Growth
and Income..................... 12,732 5,111
Small Cap Growth................ 27,220 36,480
Select 25....................... 11,482 16,479

ANNUITY RESERVES -- Annuity reserves relate to contracts that have
matured and are in the payout stage. Such reserves are computed on the
basis of published mortality tables using assumed interest rates that
will provide reserves as prescribed by law. In cases where the payout
option selected is life contingent, SBL periodically recalculates the
required annuity reserves, and any resulting adjustment is either
charged or credited to SBL and not to the Account.

REINVESTMENT OF DIVIDENDS -- Dividend and capital gains distributions
paid by the mutual fund to the Account are reinvested in additional
shares of each respective fund. Dividend income and capital gains
distributions are recorded as income on the ex-dividend date.

FEDERAL INCOME TAXES -- The operations of the Account are included in
the federal income tax return of SBL, which is taxed as a life insurance
company under the provisions of the Internal Revenue Code (IRC). Under
the current provisions of the IRC, SBL does not expect to incur federal
income taxes on the earnings of the Account to the extent the earnings
are credited under contracts. Based on this, no charge is being made
currently to the Account for federal income taxes. SBL will review
periodically the status of this policy in the event of changes in the
tax law. A charge may be made in future years for any federal income
taxes that would be attributable to the contracts.

USE OF ESTIMATES -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.

RECLASSIFICATIONS -- Certain amounts from prior year have been
reclassified to conform to the current year presentation.

2. VARIABLE ANNUITY CONTRACT CHARGES

SBL deducts an administrative fee of $30 per year for each Variflex
contract and $15 per year for each Variflex ES contract, except for
certain contracts based on a minimum account value and the period of
time the contract has been in force. Mortality and expense risks assumed
by SBL are compensated for by a fee equivalent to an annual rate of 1.2%
of the net asset value of each Variflex contract and 1.0% of the net
asset value of each Variflex ES contract, of which 0.7% is for assuming
mortality risks and the remainder is for assuming expense risks.

When applicable, an amount for state premium taxes is deducted as
provided by pertinent state law either from the purchase payments or
from the amount applied to effect an annuity at the time annuity
payments commence.

3. SUMMARY OF UNIT TRANSACTIONS

The changes in units outstanding for the years ended December 31, 2001
and 2000 were as follows:

2001
-----------------------------------------
UNITS UNITS NET INCREASE
SUBACCOUNT ISSUED REDEEMED (DECREASE)
-----------------------------------------------------------------------------
(IN THOUSANDS)

Equity.............................. 2,292 (3,526) (1,234)
Large Cap Value..................... 1,294 (2,672) (1,378)
Money Market........................ 6,589 (6,549) 40
Global.............................. 2,307 (4,459) (2,152)
Diversified Income.................. 1,433 (1,492) (59)
Large Cap Growth.................... 897 (563) 334
Enhanced Index...................... 652 (659) (7)
International....................... 414 (231) 183
Mid Cap Growth...................... 2,611 (3,532) (921)
Global Strategic Income............. 505 (283) 222
Capital Growth...................... 1,282 (1,034) 248
Global Total Return................. 254 (445) (191)
Managed Asset Allocation............ 1,100 (869) 231
Equity Income....................... 2,194 (1,826) 368
High Yield.......................... 1,319 (941) 378
Small Cap Value..................... 4,065 (1,551) 2,514
Social Awareness.................... 936 (1,505) (569)
Technology.......................... 2,350 (1,552) 798
Mid Cap Value....................... 2,850 (1,699) 1,151
Main Street Growth and Income....... 1,484 (543) 941
Small Cap Growth.................... 1,859 (2,471) (612)
Select 25........................... 1,173 (1,734) (561)

2000
----------------------------------------
UNITS UNITS NET INCREASE
SUBACCOUNT ISSUED REDEEMED (DECREASE)
-----------------------------------------------------------------------------
(IN THOUSANDS

Equity.............................. 2,937 (5,433) (2,496)
Large Cap Value..................... 1,063 (5,684) (4,621)
Money Market........................ 10,636 (12,440) (1,804)
Global.............................. 4,710 (4,207) 503
Diversified Income.................. 851 (1,685) (834)
Large Cap Growth.................... 877 (179) 698
Enhanced Index...................... 2,006 (484) 1,522
International....................... 917 (312) 605
Mid Cap Growth...................... 5,112 (3,268) 1,844
Global Strategic Income............. 176 (244) (68)
Capital Growth...................... 1,411 (159) 1,252
Global Total Return................. 324 (573) (249)
Managed Asset Allocation............ 795 (1,154) (359)
Equity Income....................... 1,249 (3,047) (1,798)
High Yield.......................... 255 (136) 119
Small Cap Value..................... 314 (61) 253
Social Awareness.................... 1,561 (1,538) 23
Technology.......................... 1,807 (277) 1,530
Mid Cap Value....................... 2,497 (647) 1,850
Main Street Growth and Income....... 1,395 (97) 1,298
Small Cap Growth.................... 5,011 (1,687) 3,324
Select 25........................... 3,899 (1,310) 2,589

4. UNIT VALUES

A summary of units outstanding, unit values, net assets, expense ratios,
investment income ratios, and total return ratios for each of the five
years in the period ended December 31, 2001 follows:

SUBACCOUNT 2001 2000 1999
--------------------------------------------------------------------------------------

EQUITY

Units.................. 10,937,857 12,171,505 14,667,004
Unit value............. $20.60-$58.11 $23.47-$66.39 $23.89-$77.05
Net assets (000s)...... $635,246 $807,988 $1,129,971
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... 0.20% 0.03% 0.76%
Total return (3)....... (12.23)%-(9.61)% (16.54)%-(1.76)% (5.94)%-6.84%

LARGE CAP VALUE

Units.................. 9,199,582 10,577,818 15,199,689
Unit value............. $17.26-$53.47 $18.54-$57.34 $19.10-$62.24
Net assets (000s)...... $491,520 $606,424 $945,778
Ratio of expenses
to net assets (1)... 1.00%-1.2% 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... 1.25% 2.74% 2.21%
Total return (3)....... (6.9)%-(5.58)% (9.00)%-(8.99)% (3.78)%-0.61%

MONEY MARKET

Units.................. 3,462,183 3,422,403 5,226,187
Unit value............. $13.05-$21.87 $21.35-$21.40 $20.38-$20.41
Net assets (000s)...... $75,683 $73,227 $106,676
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... 5.80% 0.42% 6.99%
Total return (3)....... 2.44%-2.76% 4.76%-5.00% 3.40%-3.55%

GLOBAL

Units.................. 14,517,191 16,668,822 16,165,939
Unit value............. $22.57-$24.38 $25.98-$28.12 $18.75-$27.49
Net assets (000s)...... $353,582 $468,710 $444,462
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... ---% ---% ---%
Total return (3)....... (13.13)%-(11.31)% 0.0%-38.56% 12.55%-51.79%

DIVERSIFIED INCOME

Units.................. 3,349,740 3,389,180 4,223,756
Unit value............. $14.39-$27.17 $13.53-$25.84 $11.34-$23.92
Net assets (000s)...... $90,400 $86,986 $101,050
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... 6.30% 0.66% 12.11%
Total return (3)....... 5.15%-6.36% 8.03%-19.31% (14.42)%-(4.93)%

LARGE CAP GROWTH (5)

Units.................. 1,032,178 698,124 ---
Unit value............. $6.61/$6.64 $7.91 $---
Net assets (000s)...... $6,825 $5,518 $---
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2% ---%
Investment income
ratio (2)........... ---% ---% ---%
Total return (3)....... (16.27)%/(12.10)% (24.80)% ---%

ENHANCED INDEX (6)

Units.................. 2,228,338 2,235,345 713,124
Unit value............. $8.50/$8.54 $9.63/$9.88 $11.14
Net assets (000s)...... $18,932 $22,078 $7,944
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... 0.43% ---% 0.68%
Total return (3)....... (11.55)%/(11.32)% (13.73)%/(13.71)% 11.40%

INTERNATIONAL (6)

Units.................. 912,040 728,341 123,049
Unit value............. $7.57/$7.61 $10.08/$10.15 $12.89
Net assets (000s)...... $6,907 $7,388 $1,587
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... ---% ---% ---%
Total return (3)....... (24.95)%/(24.90)% (21.86)%-(21.46)% 29.00%

MID CAP GROWTH

Units.................. 9,852,042 10,773,159 8,928,996
Unit value............. $30.12-$38.63 $35.75-$45.92 $39.81-$39.83
Net assets (000s)...... $380,142 $494,685 $355,565
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... ---% ---% ---%
Total return (3)....... (15.75)%-(11.42)% 9.52%-15.58% 59.90%-59.94%

GLOBAL STRATEGIC

INCOME (4)

Units.................. 672,410 450,363 517,888
Unit value............. $14.20/$14.38 $13.51/$13.51 $13.19/$13.19
Net assets (000s)...... $9,542 $6,080 $6,832
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... 7.25% ---% ---%
Total return (3)....... 4.72%/4.72% 2.81%/2.81% (0.08)%/(0.08)%

CAPITAL GROWTH (5)

Units.................. 1,500,448 1,252,245 ---
Unit value............. $6.73/$6.75 $7.99 $---
Net assets (000s)...... $10,104 $10,000 $---
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2% ---%
Investment income
ratio (2)........... ---% ---% ---%
Total return (3)....... (15.63)%/(11.80)% (23.70)% ---%

GLOBAL TOTAL RETURN (4)

Units.................. 1,429,062 1,620,084 1,869,005
Unit value............. $11.97-$12.12 $13.77-$13.95 $15.77-$15.78
Net assets (000s)...... $17,099 $22,593 $29,493
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... 3.40% -% 3.36%
Total return (3)....... (13.98)%-(13.00)% (12.74)%-(12.68)% 12.56%-12.63%

MANAGED ASSET
ALLOCATION

Units.................. 2,920,433 2,689,481 3,047,370
Unit value............. $16.18-$16.38 $17.03-$17.44 $15.98-$17.63
Net assets (000s)...... 47,236 $46,384 $53,716
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... 2.68% 0.23% 3.73%
Total return (3)....... (6.08)%-(4.99)% (3.40)%-9.14% (2.32)%-8.43%

EQUITY INCOME

Units.................. 5,461,226 5,093,159 6,891,180
Unit value............. $21.41-$21.68 $21.27-$21.61 $17.54-$19.19
Net assets (000s)...... $116,921 $108,967 $132,200
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... 1.62% 0.19% 3.30%
Total return (3)....... 0.32%-0.71% 10.89%-10.90% (7.44)%-1.91%

HIGH YIELD

Units.................. 682,572 304,385 184,920
Unit value............. $12.48/$12.61 $12.09 $12.43
Net assets (000s)...... $8,515 $3,679 $2,298
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... 11.63% 8.23% 15.49%
Total return (3)....... 2.97%/5.61% (2.49)% 0.08%

SMALL CAP VALUE (5)

Units.................. 2,766,776 253,165 ---
Unit value............. $12.86/$12.90 $10.65 $---
Net assets (000s)...... $35,560 $2,695 $---
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2% ---%
Investment income
ratio (2)........... ---% ---% ---%
Total return (3)....... 20.90%/22.94% 4.60% ---%

SOCIAL AWARENESS

Units.................. 4,960,695 5,530,314 5,508,136
Unit value............. $20.12-$25.24 $23.38-$29.38 $24.40-$34.17
Net assets (000s)...... $125,208 $162,452 $188,153
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... ---% ---% 0.55%
Total return (3)....... (13.94)%-(11.43)% (16.57)%-(4.18)% 4.41%-15.80%

TECHNOLOGY (5)

Units.................. 2,327,037 1,529,663 ---
Unit value............. $4.56/$4.57 $6.08 $---
Net assets (000s)...... $10,603 $9,296 $---
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2% ---%
Investment income
ratio (2)........... ---% ---% ---%
Total return (3)....... (24.96)%/(17.39)% (44.80)% ---%

MID CAP VALUE

Units.................. 3,768,160 2,617,544 767,711
Unit value............. $25.58/$25.82 $22.75/$23.47 $14.92/$17.62
Net assets (000s)...... $96,353 $60,950 $13,526
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... 0.29% ---% 0.61%
Total return (3)....... 10.01%/12.44% 29.11%/57.31% (0.86)%/17.47%

MAIN STREET GROWTH
AND INCOME (5)

Units.................. 2,238,999 1,297,768 ---
Unit value............. $7.95/$7.98 $8.95 $---
Net assets (000s)...... $17,815 $11,609 $---
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2% ---%
Investment income
ratio (2)........... 0.15% 0.13% ---%
Total return (3)....... (10.94)%/(8.30)% (13.30)% ---%

SMALL CAP GROWTH

Units.................. 4,024,442 4,636,263 1,312,167
Unit value............. $12.52/$12.62 $16.14/$17.66 $19.48
Net assets (000s)...... $50,376 $81,441 $25,556
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... ---% ---% 0.02%
Total return (3)....... (28.54)%/(22.43)% (17.15)%/(9.71)% 85.00%

SELECT 25 (6)

Units.................. 3,572,380 4,133,375 1,545,779
Unit value............. $9.05/$9.10 $9.78/$10.17 $11.74/$12.27
Net assets (000s)...... $32,336 $42,024 $18,928
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... ---% ---% ---%
Total return (3)....... (9.36)%/(7.46)% (20.29)%/(14.48)% 17.40%/22.70%

SUBACCOUNT 1998 1997
-------------------------------------------------------------

EQUITY

Units.................. 14,710,720 13,992,517
Unit value............. $25.40-$72.10 $58.17/$58.19
Net assets (000s)...... $1,060,662 $814,195
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... 0.50% 0.65%
Total return (3)....... 23.12%-23.90% 27.16%/27.18%

LARGE CAP VALUE

Units.................. 17,438,378 18,792,440
Unit value............. $19.85-$61.86 $58.17/$58.22
Net assets (000s)...... $1,078,658 $1,093,948
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... 1.71% 2.14%
Total return (3)....... 6.25%-14.00% 24.99%/24.99%

MONEY MARKET

Units.................. 4,404,290 3,578,429
Unit value............. $19.71-$19.72 $18.97/$18.98
Net assets (000s)...... $86,834 $67,920
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... 5.65% 6.36%
Total return (3)....... 3.85%-3.90% 3.89%/3.94%

GLOBAL

Units.................. 16,612,792 16,556,702
Unit value............. $16.66-$18.11 $15.26/$15.26
Net assets (000s)...... $300,829 $252,695
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... 1.33% 2.17%
Total return (3)....... 17.91%-18.68% 5.17%/5.17%

DIVERSIFIED INCOME

Units.................. 4,771,351 4,997,681
Unit value............. $13.25-$25.16 $23.56-$23.58
Net assets (000s)...... $120,032 $117,810
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... 5.89% 6.46%
Total return (3)....... 1.38%-6.71% 8.71%-8.72%

LARGE CAP GROWTH (5)

Units.................. --- ---
Unit value............. $--- $---
Net assets (000s)...... $--- $---
Ratio of expenses
to net assets (1)... ---% ---%
Investment income
ratio (2)........... ---% ---%
Total return (3)....... ---% ---%

ENHANCED INDEX (6)

INTERNATIONAL (6)

MID CAP GROWTH

Units.................. 8,998,960 8,787,323
Unit value............. $24.89-$24.91 $21.36/$21.37
Net assets (000s)...... $224,096 $187,774
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... 0.58% 0.29%
Total return (3)....... 16.53%-16.57% 18.47%/18.52%

GLOBAL STRATEGIC

INCOME (4)

Units.................. 578,844 639,460
Unit value............. $13.20/$13.20 $12.49/$12.50
Net assets (000s)...... $7,638 $7,991
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... 9.34% 9.40%
Total return (3)....... 5.60%/5.68% 4.08%/4.17%

CAPITAL GROWTH (5)

GLOBAL TOTAL RETURN (4)

Units.................. 2,135,209 2,363,978
Unit value............. $14.01/$14.01 $12.59/$12.59
Net assets (000s)...... $29,917 $29,765
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... 2.09% 2.33%
Total return (3)....... 11.28%/12.80% 4.83%/4.92%

MANAGED ASSET
ALLOCATION

Units.................. 2,717,229 1,522,998
Unit value............. $16.26-$16.36 $13.89/$13.89
Net assets (000s)...... $44,175 $21,161
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... 1.25% 1.59%
Total return (3)....... 13.45%-17.06% 17.02%/17.02%

EQUITY INCOME

Units.................. 6,816,281 5,401,305
Unit value............. $18.83-$18.95 $17.48/$17.49
Net assets (000s)...... $128,372 $94,439
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... 1.36% 1.00%
Total return (3)....... 7.66%-15.48% 26.85%/26.92%

HIGH YIELD

SMALL CAP VALUE (5)

SOCIAL AWARENESS

Units.................. 4,210,060 3,451,636
Unit value............. $23.37-$29.51 $22.72/$22.73
Net assets (000s)...... $124,218 $78,416
Ratio of expenses
to net assets (1)... 1.0%-1.2% 1.0%-1.2%
Investment income
ratio (2)........... 0.21% 0.19%
Total return (3)....... 28.76%-29.84% 21.17%/21.23%

TECHNOLOGY (5)

MID CAP VALUE

MAIN STREET GROWTH
AND INCOME (5)

SMALL CAP GROWTH

SELECT 25 (6)

(1) These ratios represent the annualized contract expenses of the Account,
consisting primarily of mortality and expense charges, for each period
indicated. The ratios include only those expenses that result in a direct
reduction to unit values. Charges made directly to contract owner accounts
through the redemption of units and expenses of the underlying fund are
excluded.

(2) These amounts represent the dividends, excluding distributions of capital
gains, received by the subaccount from the underlying mutual fund, net of
management fees assessed by the fund manager, divided by the average net
assets. These ratios exclude those expenses, such as mortality and expense
charges, that result in direct reductions in the unit values. The
recognition of investment income by the subaccount is affected by the
timing of the declaration of dividends by the underlying fund in which the
subaccounts invest.

(3) These amounts represent the total return for the periods indicated,
including changes in the value of the underlying fund, and reflect
deductions for all items included in the expense ratio. The total return
does not include any expenses assessed through the redemption of units;
inclusion of these expenses in the calculation would result in a reduction
in the total return presented. Investment options with a date notation
indicate the effective date of that investment option in the variable
account. The total return is calculated for the period indicated or from
the effective date through the end of the reporting period.

(4) Meridian Investment Management Corporation (Meridian) served as subadvisor
for the Global Strategic Income Series and the Global Total Return Series
until May 15, 1999, when Meridian was replaced by Wellington Management.

(5) The inception date of these subaccounts was May 1, 2000.

(6) The inception date of these subaccounts was May 3, 1999.

Security Benefit Life Insurance Company and Subsidiaries

Consolidated Financial Statements

Years Ended December 31, 2001, 2000, and 1999

CONTENTS

PAGE

Report of Independent Auditors.......................................... 31

Audited Consolidated Financial Statements

Consolidated Balance Sheets........................................ 32

Consolidated Statements of Income.................................. 33

Consolidated Statements of Changes in Stockholder's Equity......... 34

Consolidated Statements of Cash Flows.............................. 35

Notes to Consolidated Financial Statements......................... 36

Report of Independent Auditors

The Board of Directors
Security Benefit Life Insurance Company

We have audited the accompanying consolidated balance sheets of Security Benefit
Life Insurance Company and Subsidiaries (the Company), an indirect, wholly owned
subsidiary of Security Benefit Mutual Holding Company, as of December 31, 2001
and 2000, and the related consolidated statements of income, changes in
stockholder's equity, and cash flows for each of the three years in the period
ended December 31, 2001. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Security Benefit
Life Insurance Company and Subsidiaries at December 31, 2001 and 2000, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States.

As discussed in Note 1 to the consolidated financial statements, in 2001 the
Company changed its method of accounting for derivative instruments.

Ernst & Young LLP

Kansas City, Missouri
February 1, 2002

Security Benefit Life Insurance Company and Subsidiaries

Consolidated Balance Sheets

(IN THOUSANDS)

DECEMBER 31
2001 2000
-----------------------------------
ASSETS
Investments:

Securities available-for-sale:
Bonds.......................................... $2,422,466 $2,289,173
Equity securities.............................. 195,069 241,639
Bonds held-to-maturity........................... 121,836 138,555
Equity securities, trading....................... 19,220 19,112
Mortgage loans................................... 9,334 12,128
Policy loans..................................... 104,956 109,211
Cash............................................. 49,151 56,282
Short-term investments........................... 16,984 18,145
Other invested assets............................ 53,660 29,768
-----------------------------------
Total investments................................... 2,992,676 2,914,013

Accrued investment income........................... 34,586 35,415
Accounts receivable................................. 11,410 11,558
Reinsurance recoverable............................. 436,264 423,421
Property and equipment, net......................... 60,278 24,052
Deferred policy acquisition costs................... 277,865 290,656
Other assets........................................ 22,766 21,076
Separate account assets............................. 4,077,795 4,589,156
-----------------------------------
Total assets........................................ $7,913,640 $8,309,347
===================================

LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:

Policy reserves and annuity
account values.................................. $3,018,136 $2,860,320
Policy and contract claims....................... 7,641 8,101
Other policyholder funds......................... 21,337 22,007
Accounts payable and accrued expenses............ 63,077 68,438
Income taxes payable............................. 17,088 29,222
Deferred income tax liability.................... 29,878 28,588
Long-term debt and other borrowings.............. 50,000 105,000
Other liabilities................................ 18,571 14,976
Separate account liabilities..................... 4,077,795 4,589,156
-----------------------------------
Total liabilities................................... 7,303,523 7,725,808

Stockholder's equity:
Common stock, $10 par value;
1,000,000 shares
authorized; 700,010 issued
and outstanding................................ 7,000 7,000
Accumulated other comprehensive
loss, net....................................... (29,391) (25,031)
Retained earnings................................ 632,508 601,570
------------------------------------
Total stockholder's equity.......................... 610,117 583,539
------------------------------------
Total liabilities and stockholder's equity.......... $7,913,640 $8,309,347
====================================

SEE ACCOMPANYING NOTES.

Security Benefit Life Insurance Company and Subsidiaries

Consolidated Statements of Income

(IN THOUSANDS)

YEAR ENDED DECEMBER 31
2001 2000 1999
------------------------------------------------
Revenues:
Insurance premiums and
other considerations............... $ 29,110 $ 26,871 $ 22,320
Net investment income............... 184,232 210,905 199,725
Asset based fees.................... 105,822 117,007 102,643
Other product charges............... 17,492 17,795 12,349
Realized (losses) gains............. (15,843) 2,152 10,232
Other revenues...................... 7,943 8,438 11,251
------------------------------------------------
Total revenues......................... 328,756 383,168 358,520

Benefits and expenses:
Annuity benefits:
Interest credited to
account balances................. 113,340 125,103 115,953
Benefits in excess of
account balances................. 5,533 1,689 269
Traditional life
insurance benefits................. 17,804 14,229 13,117
Other benefits...................... 21,984 20,716 15,849
------------------------------------------------
Total benefits...................... 158,661 161,737 145,188

Commissions and other
operating expenses................. 92,616 86,668 82,926
Amortization of deferred
policy acquisition costs........... 36,806 35,873 27,387
Interest expense.................... 5,973 5,602 4,765
Other expenses...................... 6,215 4,885 4,815
------------------------------------------------
Total benefits and expenses............ 300,271 294,765 265,081
------------------------------------------------
Income before income taxes............. 28,485 88,403 93,439
Income tax (benefit) expense........... (2,953) 18,303 23,988
------------------------------------------------
Net income............................. $ 31,438 $ 70,100 $ 69,451
================================================

SEE ACCOMPANYING NOTES.

Security Benefit Life Insurance Company and Subsidiaries

Consolidated Statements of Changes in Stockholder's Equity

(IN THOUSANDS)

ACCUMULATED
OTHER TOTAL
COMMON COMPREHENSIVE RETAINED STOCKHOLDER'S
STOCK INCOME (LOSS) EARNINGS EQUITY

-----------------------------------------------------

Balance at January 1, 1999....... $7,000 $ 30,100 $462,019 $499,119
Comprehensive income
(loss):
Net income.................. --- --- 69,451 69,451
Other comprehensive
loss, net.................. --- (61,321) --- (61,321)
-------------
Comprehensive income.......... 8,130
-----------------------------------------------------
Balance at December 31, 1999..... 7,000 (31,221) 531,470 507,249
Comprehensive income:
Net income.................. --- --- 70,100 70,100
Other comprehensive
income, net................ --- 6,190 --- 6,190
-------------
Comprehensive income.......... 76,290
-----------------------------------------------------
Balance at December 31, 2000..... 7,000 (25,031) 601,570 583,539
Comprehensive income
(loss):
Net income.................. --- --- 31,438 31,438
Cumulative effect of
change in accounting for
derivative instruments,
net of tax................ --- (1,061) --- (1,061)
Other comprehensive
loss, net.................. --- (3,299) --- (3,299)
-------------
-------------
Comprehensive income.......... 27,078
Dividends paid................ --- --- (500) (500)
-----------------------------------------------------
-----------------------------------------------------
Balance at December 31, 2001..... $7,000 $(29,391) $632,508 $610,117
=====================================================

SEE ACCOMPANYING NOTES.

Security Benefit Life Insurance Company and Subsidiaries

Consolidated Statements of Cash Flows

(IN THOUSANDS)

YEAR ENDED DECEMBER 31
2001 2000 1999
----------------------------------------
OPERATING ACTIVITIES

Net income............................... $ 31,438 $ 70,100 $ 69,451
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Realized losses (gains)............... 15,843 (2,152) (10,232)
Depreciation.......................... 6,223 3,827 5,010
Amortization of investment
premiums and discounts................ 2,436 2,024 2,705
Annuity and interest
sensitive life products:
Interest credited to
account balances.................... 113,340 125,103 115,953
Policy acquisition costs
deferred............................. (41,011) (40,322) (41,592)
Amortization of deferred
policy acquisition costs............. 36,806 35,873 27,387
Net purchases of equity
securities, trading.................. (2,659) (7,341) (1,879)
Other................................. (6,897) 31,217 (13,099)
-----------------------------------------
Net cash provided by
operating activities.................... 155,519 218,329 153,704

INVESTING ACTIVITIES

Sale, maturity, or repayment of investments:

Bonds available-for-sale.............. 401,325 166,201 349,219
Equity securities
available-for-sale................... 33,001 104,410 60,578
Bonds held-to-maturity................ 16,719 19,217 107,475
Mortgage loans........................ 5,465 12,161 35,239
Other invested assets................. 3,224 902 2,882
-----------------------------------------
459,734 302,891 555,393
Acquisition of investments:
Bonds available-for-sale.............. (514,917) (113,751) (653,078)
Equity securities
available-for-sale................... (5,644) (65,600) (179,916)
Bonds held-to-maturity................ --- --- (964)
Mortgage loans........................ (2,643) (778) (1,132)
Other invested assets................. (32,754) (4,018) (12,947)
-----------------------------------------
(555,958) (184,147) (848,037)

Purchase of property
and equipment........................... (42,449) (17,515) (2,191)
Net sales (purchases) of
short-term investments.................. 317 (22) (17,994)
Proceeds from sales of
property and equipment.................. --- --- 20,750
Net decrease (increase)
in policy loans......................... 4,255 (2,082) (3,415)
Net cash transferred under
coinsurance agreement................... --- (30,439) ---
-----------------------------------------
Net cash (used in) provided
by investing activities................. (134,101) 68,686 (295,494)

FINANCING ACTIVITIES

(Decrease) increase of
long-term debt and other
borrowings.............................. $ (55,000) $ 50,000 $ (5,000)
Dividends paid........................... (500) --- ---
Deposits credited to
annuity account balances................ 454,641 525,727 973,096
Withdrawals from annuity
account balances........................ (427,690) (824,245) (836,940)
-----------------------------------------
Net cash (used in) provided
by financing activities................. (28,549) (248,518) 131,156
-----------------------------------------

(Decrease) increase in cash.............. (7,131) 38,497 (10,634)
Cash at beginning of year................ 56,282 17,785 28,419
-----------------------------------------
Cash at end of year...................... $ 49,151 $ 56,282 $ 17,785
=========================================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid
during the year for:

Interest.............................. $ 6,418 $ 5,320 $ 4,741
=========================================

Income taxes.......................... $ 8,438 $ 20,433 $ 25,019
=========================================

SEE ACCOMPANYING NOTES.

Security Benefit Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2001

1. SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS AND ORGANIZATION -- The operations of Security
Benefit Life Insurance Company (the Company) consist primarily of
marketing and distributing annuities, mutual funds, life insurance, and
related products throughout the United States. The Company and/or its
subsidiaries offer a diversified portfolio of investment products
comprised primarily of individual and group annuities and mutual fund
products through multiple distribution channels.

The Company was formed by converting from a mutual life insurance
company to a stock life insurance company under a mutual holding company
structure pursuant to a Plan of Conversion (the Conversion). In
connection with the Conversion, Security Benefit Corp. (SBC), a Kansas
domiciled intermediate stock holding company, and Security Benefit
Mutual Holding Company (SBMHC), a Kansas domiciled mutual holding
company, were formed. As a result of the Conversion, SBMHC indirectly
owns, through its ownership of SBC, all of the issued and outstanding
common stock of the Company (except shares required by law to be held by
the Company's Directors). In accordance with Kansas law, SBMHC must at
all times hold at least 51% of the voting stock of SBC.

BASIS OF PRESENTATION-- The consolidated financial statements include
the operations and accounts of the Company and its subsidiaries,
including Security Management Company, LLC and Security Benefit Group,
Inc. (SBG). The consolidated financial statements of SBG include its
subsidiaries, First Security Benefit Life Insurance and Annuity Company
of New York; Security Distributors, Inc.; Security Benefit Academy,
Inc.; and Security Financial Resources, Inc. Significant intercompany
transactions have been eliminated in consolidation.

USE OF ESTIMATES -- The preparation of consolidated financial statements
requires management to make estimates and assumptions that affect
amounts reported in the consolidated financial statements and
accompanying notes. Actual results could differ from those estimates.

INVESTMENTS -- Bonds are classified as either held-to-maturity or
available-for-sale. Bonds are classified as held-to-maturity when the
Company has the positive intent and ability to hold the securities to
maturity. Held-to-maturity securities are stated at amortized cost,
adjusted for amortization of premiums and accrual of discounts. The
Company holds certain equity securities, classified as trading, which
were purchased to generate returns for certain liabilities. These
securities are stated at fair value with the change in fair value
reported as realized gains or losses in the consolidated statements of
income.

Bonds not classified as held-to-maturity and equity securities not
classified as trading are classified as available-for-sale. Securities
available-for-sale are reported in the accompanying consolidated
financial statements at fair value. Any changes in the fair value of
these securities are reflected as a component of accumulated other
comprehensive income or loss. These unrealized gains or losses in
accumulated other comprehensive income or loss are reported net of
adjustments to deferred policy acquisition costs and income taxes.
Equity securities are comprised of common stocks, nonredeemable
preferred stocks, and mutual funds.

The amortized cost of bonds is adjusted for amortization of premiums and
accrual of discounts. Premiums and discounts are recognized over the
estimated lives of the assets adjusted for prepayment activity.
Distributions from mutual funds are included in net investment income.
Realized gains and losses on sales of investments are recognized using
the specific-identification method. The carrying values of investments
are reviewed on an ongoing basis for credit deterioration. If this
review indicates a decline in market value that is other than temporary,
the carrying value of the investment is reduced to its fair value and a
specific write-down is taken.

Mortgage loans are reported at amortized cost. Policy loans are reported
at unpaid principal. Investments accounted for by the equity method
include investments in, and advances to, various joint ventures and
partnerships and are reported in other invested assets.

Cash includes cash on hand, money market mutual funds, and other
investments with initial maturities of less than 90 days.

Short-term investments are carried at market value and represent fixed
maturity securities with initial maturities of greater than 90 days but
less than one year.

DERIVATIVE INSTRUMENTS -- As of January 1, 2001, the Company adopted
Financial Accounting Standards Board Statement of Financial Accounting
Standards (SFAS) No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES, which was issued in June 1998, and its amendments,
SFAS No. 137, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES - DEFERRAL OF THE EFFECTIVE DATE OF SFAS NO. 133, and SFAS
No. 138, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND CERTAIN HEDGING
ACTIVITIES, issued in June 1999 and June 2000, respectively
(collectively referred to as SFAS No. 133).

As a result of SFAS No. 133, the Company now recognizes all derivative
financial instruments, such as interest-rate swap contracts, in the
consolidated financial statements at fair value regardless of the
purpose or intent for holding the instrument. Changes in fair value of
the derivative financial instruments are either recognized periodically
in income or in stockholder's equity as a component of other
comprehensive income depending on whether the derivative financial
instrument qualifies for hedge accounting and, if so, whether it
qualifies as a fair value hedge or cash flow hedge. Generally, changes
in fair values of derivatives accounted for as fair value hedges are
recorded in income along with the portions of the changes in fair values
of the hedged items that relate to the hedged risks. Changes in fair
values of derivatives accounted for as cash flow hedges, to the extent
that they are effective as hedges, are recorded in other comprehensive
income net of deferred taxes. Changes in fair values of derivatives not
qualifying as hedges are reported in income.

The Company accounted for the adoption of SFAS No. 133 as a cumulative
effect of a change in accounting principle. As a result, the Company
reflected a loss of $1,061,000 (net of income taxes of $571,000) as a
component of other comprehensive loss in the statement of changes in
stockholder's equity on January 1, 2001.

Prior to January 1, 2001, the Company also used interest-rate swap
contracts for hedging purposes. The net amounts paid or received and net
amounts accrued through the end of the accounting period were included
in interest expense. Unrealized gains or losses on interest-rate swap
contracts were not recognized in income. The discounts or premiums on
the instruments were amortized to income over the lives of the contracts
using the straight-line method. Realized gains and losses were included
in other assets and liabilities and recognized in income when the future
transaction occurred or at the time the transaction was no longer
expected to occur.

DEFERRED POLICY ACQUISITION COSTS -- To the extent recoverable from
future policy revenues and gross profits, commissions and other
policy-issue, underwriting, and selling costs that are primarily related
to the acquisition or renewal of deferred annuity business have been
deferred. Deferred policy acquisition costs are amortized in proportion
to the present value (discounted at the crediting rate) of expected
gross profits from investment, mortality, and expense margins. That
amortization is adjusted retrospectively when estimates of current or
future gross profits to be realized from a group of products are
revised. Deferred policy acquisition costs are adjusted for the impact
on estimated gross profits of net unrealized gains and losses on
securities.

The present value of future profits (PVFP) relates to reinsurance
assumed in 2000 (see Note 5) and is included in deferred policy
acquisition costs. PVFP reflects the estimated fair value of acquired
annuity business and represents the acquisition cost that was allocated
to the value of future cash flows from insurance contracts existing at
the date of acquisition. Such value is the present value of the
actuarially determined projected net cash flows from the acquired
insurance contracts.

PVFP is amortized over the lives of the acquired insurance business in
force in a manner consistent with amortization of deferred policy
acquisition costs. An analysis of the PVFP asset account is presented
below for the years ended December 31:

2001 2000
-------------------------------
-------------------------------
(IN THOUSANDS)

Balance at beginning of year................. $80,011 $ ---
Acquisition............................... --- 80,225
Imputed interest.......................... 2,886 2,847
Amortization.............................. (6,531) (3,061)
--------------------------------
Balance at end of year....................... $76,366 $80,011
================================

Based on current conditions and assumptions as to future events on
acquired contracts in force, the Company expects that the net
amortization will be between 5% and 6% in each of the years 2002 through
2006. The interest rate used to determine the amount of imputed interest
on the unamortized PVFP balance approximates 7%.

DEFERRED SELLING COMMISSIONS -- For certain mutual funds that do not
have a front-end sales charge, the Company pays a selling commission to
the selling broker/dealer. The Company, in its broker-dealer subsidiary,
accounts for these charges under the cost deferral method of accounting
for distributors of mutual funds. The selling commissions are
capitalized and amortized based on the revenue stream of contingent
deferred sales charges and distribution fees. At December 31, 2001 and
2000, deferred selling commissions aggregated $11,411,000 and
$10,544,000, respectively, and are classified as deferred policy
acquisition costs for financial reporting purposes.

PROPERTY AND EQUIPMENT -- Property and equipment, including home office
real estate, furniture and fixtures, and data-processing hardware and
related systems are recorded at cost, less accumulated depreciation. The
provision for depreciation of property and equipment is computed using
the straight-line method over the estimated lives of the related assets.

The following is a summary of property and equipment at cost less
accumulated depreciation:

DECEMBER 31
2001 2000
---------------------------------
---------------------------------
(IN THOUSANDS)

Land $ 1,710 $ 1,710
Data processing equipment................. 8,405 8,852
Computer software......................... 37,305 23,427
Other..................................... 5,411 4,977
Construction in progress.................. 31,307 5,225
-------------------------------
84,138 44,191

Less accumulated depreciation............. (23,860) (20,139)
---------------------------------
---------------------------------
$ 60,278 $ 24,052
=================================

The Company is constructing a new office facility which is scheduled to
be completed in the second quarter of 2002. As of December 31, 2001, the
Company incurred, and capitalized in construction in progress, costs of
$31,307,000, which includes $408,000 of interest capitalized in 2001.
The estimated cost to complete the construction of the facility is
approximately $15.2 million.

The Company sold its home office building and furniture and equipment to
the state of Kansas in 1999 under a sale-leaseback agreement (see Note
12).

SEPARATE ACCOUNTS -- The separate account assets and liabilities
reported in the accompanying consolidated balance sheets represent funds
that are separately administered for the benefit of contractholders who
bear the investment risk. The separate account assets and liabilities
are carried at fair value. Revenues and expenses related to separate
account assets and liabilities, to the extent of benefits paid or
provided to the separate account contractholders, are excluded from the
amounts reported in the consolidated statements of income. Investment
income and gains or losses arising from separate accounts accrue
directly to the contractholders and, therefore, are not included in
investment earnings in the accompanying consolidated statements of
income. Revenues to the Company from the separate accounts consist
principally of contract maintenance charges, administrative fees, and
mortality and expense risk charges.

POLICY RESERVES AND ANNUITY ACCOUNT VALUES -- Liabilities for future
policy benefits for traditional life products are computed using a net
level-premium method, including assumptions as to investment yields,
mortality, and withdrawals and other assumptions that approximate
expected experience.

Liabilities for future policy benefits for interest sensitive life and
deferred annuity products represent contract values accumulated at
interest without reduction for potential surrender charges. Interest on
accumulated contract values is credited to contracts as earned.
Crediting rates ranged from 3% to 15% during 2001, from 4% to 12% during
2000, and from 3.4% to 12% during 1999.

INCOME TAXES -- Deferred income tax assets and liabilities are
determined based on differences between the financial reporting and
income tax bases of assets and liabilities and are measured using the
enacted tax rates and laws. Deferred income tax expense or benefit,
reflected in the Company's consolidated statements of income, is based
on the changes in deferred tax assets or liabilities from period to
period (excluding unrealized gains and losses on securities
available-for-sale and the change in the related valuation allowance).

RECOGNITION OF REVENUES -- Traditional life insurance products include
whole life insurance, term life insurance, and certain annuities.
Premiums for these traditional products are recognized as revenues when
due. Revenues from deferred annuities consist of policy charges for the
cost of insurance, policy administration charges, and surrender charges
assessed against contractholder account balances during the period.

FAIR VALUES OF FINANCIAL INSTRUMENTS -- The following methods and
assumptions were used by the Company in estimating its fair value
disclosures for financial instruments:

CASH AND SHORT-TERM INVESTMENTS: The carrying amounts reported in
the consolidated balance sheet for these instruments approximate
their fair values.

INVESTMENT SECURITIES: Fair values for bonds are based on quoted
market prices, if available. For bonds not actively traded, fair
values are estimated using values obtained from independent pricing
services or estimated by discounting expected future cash flows
using a current market rate applicable to the yield, credit quality,
and maturity of the investments. The fair values for equity
securities are based on quoted market prices.

INTEREST-RATE SWAPS: Fair values of the Company's interest-rate
swaps are estimated based on dealer quotes, quoted market prices of
comparable contracts adjusted through interpolation where necessary
for maturity differences, or if there are no relevant comparable
contracts, on pricing models or formulas using current assumptions.

MORTGAGE LOANS AND POLICY LOANS: Fair values for mortgage loans and
policy loans are estimated using discounted cash flow analyses based
on market interest rates for similar loans to borrowers with similar
credit ratings. Loans with similar characteristics are aggregated
for purposes of the calculations. The carrying amounts for these
instruments reported in the consolidated balance sheets approximate
their fair values.

INVESTMENT-TYPE INSURANCE CONTRACTS: Fair values for the Company's
liabilities under investment-type insurance contracts are estimated
using the assumption reinsurance method, whereby the amount of
statutory profit the assuming company would realize from the
business is calculated. Those amounts are then discounted at a rate
of return commensurate with the rate presently offered by the
Company on similar contracts.

LONG-TERM DEBT: Fair values for long-term debt are estimated using
discounted cash flow analyses based on current borrowing rates for
similar types of borrowing arrangements.

SEPARATE ACCOUNT ASSETS AND LIABILITIES: The assets held in the
separate account are carried at quoted market values or, where
quoted market values are not available, at fair market value as
determined by the investment manager. The carrying amounts for
separate account assets and liabilities reported in the consolidated
balance sheets approximate their fair values.

RECLASSIFICATIONS -- Certain amounts from prior years have been
reclassified to conform to the current year presentation.

2. INVESTMENTS

Information as to the amortized cost, gross unrealized gains and losses,
and fair values of the Company's portfolio of bonds and equity
securities available-for-sale and bonds held-to-maturity at December 31,
2001 and 2000 is as follows:

DECEMBER 31, 2001
--------------------------------------------------
AMORTIZED GROSS GROSS
COST UNREALIZED UNREALIZED FAIR
GAINS LOSSES VALUE
--------------------------------------------------
(IN THOUSANDS)
AVAILABLE-FOR-SALE
U.S. Treasury securities
and obligations of
U.S. government
corporations and
agencies................ $ 93,716 $ 1,152 $ 1,125 $ 93,743
Obligations of states
and political subdivisions. 18,018 720 - 18,738
Corporate securities........ 1,221,812 16,001 64,150 1,173,663
Mortgage-backed securities.. 960,488 26,769 4,062 983,195
Asset-backed securities..... 153,170 1,358 1,401 153,127
----------------------------------------------------
Totals...................... $2,447,204 $46,000 $70,738 $2,422,466
====================================================

Equity securities........... $ 200,036 $12,579 $17,546 $ 195,069
====================================================
HELD-TO-MATURITY
Obligations of states
and political subdivisions. $ 17,682 $ 428 $ --- $ 18,110
Corporate securities........ 51,853 1,807 285 53,375
Mortgage-backed securities.. 13,102 841 --- 13,943
Asset-backed securities..... 39,199 598 994 38,803
----------------------------------------------------
Totals...................... $ 121,836 $ 3,674 $ 1,279 $ 124,231
====================================================

DECEMBER 31, 2000
---------------------------------------------------
AMORTIZED GROSS GROSS
COST UNREALIZED UNREALIZED FAIR
GAINS LOSSES VALUE
----------------------------------------------------
(IN THOUSANDS)
AVAILABLE-FOR-SALE
U.S. Treasury securities
and obligations of
U.S. government
corporations and
agencies.................. $ 146,438 $ 566 $ 610 $ 146,394
Obligations of states
and political subdivisions... 21,560 366 1 21,925
Corporate securities.......... 1,134,633 5,758 60,112 1,080,279
Mortgage-backed securities.... 837,519 10,375 6,639 841,255
Asset-backed securities....... 199,283 1,276 1,239 199,320
---------------------------------------------------
Totals........................ $2,339,433 $18,341 $68,601 $2,289,173
===================================================

Equity securities............. $ 238,051 $20,386 $16,798 $ 241,639
===================================================

HELD-TO-MATURITY
Obligations of states
and political subdivisions... $ 39,547 $ 511 $ 150 $ 39,908
Corporate securities.......... 77,179 2,248 971 78,456
Mortgage-backed securities.... 18,438 730 - 19,168
Asset-backed securities....... 3,391 1 5 3,387
---------------------------------------------------
Totals........................ $ 138,555 $ 3,490 $ 1,126 $ 140,919
===================================================

The change in net unrealized holding gains (losses) on trading
securities, which are included in realized gains, was $(923,000),
$(3,133,000), and $2,172,000 for 2001, 2000, and 1999, respectively.

The amortized cost and fair value of bonds at December 31, 2001, by
contractual maturity, are shown below. Expected maturities may differ
from contractual maturities because borrowers may have the right to call
or prepay obligations with or without penalties.

AVAILABLE-FOR-SALE HELD-TO-MATURITY
----------------------------------------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
----------------------------------------------------
(IN THOUSANDS)
Due in one year
or less.................... $ 41,141 $ 41,946 $ --- $ ---
Due after one year
through five years......... 217,360 216,498 14,422 15,488
Due after five years
through ten years.......... 557,013 522,905 25,429 25,460
Due after ten years......... 518,032 504,795 29,684 30,537
Mortgage-backed
securities................. 960,488 983,195 13,102 13,943
Asset-backed securities..... 153,170 153,127 39,199 38,803
----------------------------------------------------
$2,447,204 $2,422,466 $121,836 $124,231
====================================================

The composition of the Company's portfolio of bonds, by quality rating,
at December 31, 2001 is as follows:

QUALITY RATING CARRYING AMOUNT %
-----------------------------------------------------------------------------
(IN THOUSANDS)

AAA....................................... $1,091,085 42.9%
AA........................................ 310,416 12.2
A......................................... 468,020 18.4
BBB....................................... 490,530 19.3
Noninvestment grade....................... 184,251 7.2
---------------------------------
$2,544,302 100.0%
=================================

Major categories of net investment income for the years ended December
31, 2001, 2000, and 1999 are summarized as follows:

2001 2000 1999
-------------------------------------------
(IN THOUSANDS)

Interest on bonds................ $168,469 $180,222 $175,938
Dividends and distributions
on equity securities............ 6,562 19,086 12,434
Interest on mortgage loans....... 707 1,568 4,502
Interest on policy loans......... 6,352 6,123 5,510
Interest on short-term
investments..................... 4,027 4,470 2,686
Other............................ (51) 2,076 597
-------------------------------------------
Total investment income.......... 186,066 213,545 201,667

Less investment expenses......... 1,834 2,640 1,942
-------------------------------------------
Net investment income............ $184,232 $210,905 $199,725
===========================================

Proceeds from sales of bonds and equity securities available-for-sale
and related realized gains and losses, including losses for
other-than-temporary impairments, for the years ended December 31, 2001,
2000, and 1999 are as follows:

2001 2000 1999
------------------------------------------
(IN THOUSANDS)

Proceeds from sales............... $207,250 $116,732 $180,289
Gross realized gains.............. 6,663 13,189 9,857
Gross realized losses............. 19,955 7,883 5,674

Net realized gains (losses), net of associated amortization of deferred
policy acquisition costs, for the years ended December 31, 2001, 2000,
and 1999 consist of the following:

2001 2000 1999
-------------------------------------------
(IN THOUSANDS)

Bonds............................. $ (3,561) $(7,943) $ (751)
Equity securities................. (12,820) 8,735 7,062
Gain on sale of home office
building, furniture, and
equipment........................ --- --- 4,173
Other............................. --- --- (56)
-------------------------------------------
(16,381) 792 10,428
Amortization of deferred policy
acquisition costs................ 538 1,360 (196)
-------------------------------------------
Net realized (losses) gains....... $(15,843) $ 2,152 $10,232
===========================================

There were no outstanding agreements to sell securities at December 31,
2001 or 2000.

At December 31, 2001, the Company had approximately $808.5 million in
securities held as collateral in relation to its structured
institutional products and line of credit.

DERIVATIVE INSTRUMENTS -- The Company only uses derivatives for hedging
purposes. The following is a summary of the Company's risk management
strategies and the effect of these strategies on the Company's
consolidated financial statements.

FAIR VALUE HEDGING STRATEGY -- The Company has entered into several
interest-rate swap agreements to manage interest rate risk. The
interest-rate swap agreements effectively modify the Company's exposure
to interest risk by converting certain of the Company's fixed-rate
liabilities to a floating rate based on LIBOR over the next four years.
The notional amounts of the swaps are $107 million and are scheduled to
decline as the liabilities mature. These agreements involve the receipt
of fixed-rate amounts in exchange for floating-rate interest payments
over the life of the agreements without an exchange of the underlying
principal amount. The Company also has interest-rate swap agreements
which effectively modify fixed-rate bonds into floating-rate investments
based on LIBOR over the next nine years. The notional amount of these
swaps is $34 million.

During the year ended December 31, 2001, the Company recognized a net
gain of $8,000 related to the ineffective portion of its fair value
hedges which has been included in net investment income in the
consolidated statement of income for the year ended December 31, 2001.

CASH FLOW HEDGING STRATEGY -- The Company has entered into interest-rate
swap agreements that effectively convert a portion of its floating-rate
liabilities to a fixed-rate basis for the next four years, thus,
reducing the impact of interest-rate changes on future income. The
notional amount of these swaps is $109 million.

During the year ended December 31, 2001, the Company recognized a loss
of $140,000 related to the ineffective portion of its hedging
instruments in net investment income in the consolidated statement of
income for the year ended December 31, 2001.

3. OTHER COMPREHENSIVE INCOME (LOSS)

The components of other comprehensive income (loss) are as follows:

UNREALIZED
GAINS
(LOSSES) ON
AVAILABLE- DERITIVE
FOR-SALE INSTRUMENTS
INSTRUMENTS GAINS
SECURITIES LOSSES TOTAL
----------------------------------------
----------------------------------------
(IN THOUSANDS)

ACCUMULATED OTHER COMPREHENSIVE
INCOME AT JANUARY 1, 1999............. $ 30,100 $ --- $ 30,100
Unrealized losses on available-
for-sale securities................ (139,545) --- (139,545)
Gains reclassified into
earningsfrom other
comprehensive income............... 10,232 --- 10,232
Unlocking of deferred policy
acquisition costs.................. 44,923 --- 44,923
Change in deferred income
taxes, net of valuation
allowance.......................... 23,069 --- 23,069
----------------------------------------
Total other comprehensive loss...... (61,321) --- (61,321)
----------------------------------------
ACCUMULATED OTHER COMPREHENSIVE
LOSS AT DECEMBER 31, 1999............. (31,221) --- (31,221)
Unrealized gains on available-
for-sale securities................ 21,251 --- 21,251
Gains reclassified into
earnings from other
comprehensive income.............. 2,152 --- 2,152
Unlocking of deferred policy
acquisition costs.................. (20,913) --- (20,913)
Change in deferred income
taxes, net of valuation
allowance.......................... 3,700 --- 3,700
----------------------------------------
Total other comprehensive income.... 6,190 --- 6,190
----------------------------------------
ACCUMULATED OTHER COMPREHENSIVE
LOSS AT DECEMBER 31, 2000............. (25,031) --- (25,031)
Unrealized gains on available-
for-sale securities................ 32,810 --- 32,810
Cumulative effect of change
in accounting for derivative
instruments....................... --- (1,632) (1,632)
Change in fair value of
derivatives........................ --- (4,119) (4,119)
Losses reclassified into
earnings from other
comprehensive income............... (15,843) --- (15,843)
Unlocking of deferred policy
acquisition costs.................. (15,029) --- (15,029)
Change in deferred income
taxes including $571 for
cumulative effect adjustment,
net of valuation allowance......... (2,559) 2,012 (547)
----------------------------------------
Total other comprehensive loss...... (621) (3,739) (4,360)
----------------------------------------
ACCUMULATED OTHER COMPREHENSIVE
LOSS AT DECEMBER 31, 2001............. $ (25,652) $(3,739) $ (29,391)
========================================

4. EMPLOYEE BENEFIT PLANS

Substantially all Company employees are covered by a qualified,
noncontributory defined benefit pension plan sponsored by the Company
and certain of its affiliates. Benefits are based on years of service
and an employee's highest average compensation over a period of five
consecutive years during the last ten years of service. The Company's
policy has been to contribute funds to the plan in amounts required to
maintain sufficient plan assets to provide for accrued benefits. In
applying this general policy, the Company considers, among other
factors, the recommendations of its independent consulting actuaries,
the requirements of federal pension law, and the limitations on
deductibility imposed by federal income tax law. Plan assets are
invested in public mutual funds with varying investment objectives which
are managed by an affiliated entity. Current year net periodic pension
cost includes special termination benefits related to an early
retirement program.

In addition to the Company's defined benefit pension plan, the Company
provides certain medical and life insurance benefits to full-time
employees who have retired after the age of 55 with five years of
service. The plan is contributory, with retiree contributions adjusted
annually, and contains other cost-sharing features such as deductibles
and coinsurance. Contributions vary based on the employee's years of
service earned after age 40. The Company's portion of the costs is
frozen after 2002 with all future cost increases passed on to the
retirees, except for retirees in the plan prior to July 1, 1993 whose
costs continue to be covered 100% by the Company.

The following table sets forth the plans' funded status and amounts
recognized in the consolidated financial statements at December 31 and
for the years then ended:

PENSION BENEFITS OTHER BENEFITS
2001 2000 2001 2000
-------------------------------------------------
(IN THOUSANDS)
Benefit obligation at
year-end..................... $(19,451) $(14,444) $(6,457) $(5,504)
Fair value of plan assets
at year-end.................. 12,576 13,803 --- ---
-------------------------------------------------
Funded status of the plan
(underfunded)................ $ (6,875) $ (641) $(6,457) $(5,504)
=================================================
Accrued benefit cost
recognized in the
consolidated balance sheets.. $ (3,654) $ (1,225) $(6,215) $(5,893)
=================================================

PENSION BENEFITS OTHER BENEFITS
2001 2000 1999 2001 2000 1999
------------------------------------------------------
(DOLLARS IN THOUSANDS)
Net periodic
benefit cost............ $3,429 $1,040 $999 $667 $609 $538
Benefits paid............ 1,617 439 389 412 396 284
Contributions............ 1,000 100 966 66 58 43

WEIGHTED-AVERAGE
ASSUMPTIONS AS OF
DECEMBER 31
Discount rate............ 7.25% 7.75% 7.50% 7.25% 7.75% 7.50%
Expected return on
plan assets............. 9.00% 9.00% 9.00% --- --- ---
Rate of compensation
increase................ 4.50% 4.50% 4.50% --- --- ---

The annual assumed rate of increase in the per capita cost of covered
medical benefits is 5% for 2001 and 6% for 2000 and is assumed to remain
at 5% in 2002 and thereafter.

The health care cost trend rate could have a significant effect on the
other benefits amount reported. For example, increasing the assumed
health care cost trend rates by one percentage point each year would
increase the other benefits accumulated postretirement benefit
obligation as of December 31, 2001 by $287,000 and the aggregate of the
service and interest cost components of net periodic postretirement
benefit cost for 2001 by $64,000.

The Company has a profit sharing and savings plan for which
substantially all employees are eligible. Company contributions to the
profit sharing and savings plan charged to operations were $808,000,
$2,267,000, and $2,565,000 for 2001, 2000, and 1999, respectively.

The Company has a number of annual discretionary incentive compensation
plans for certain employees. Allocations to participants each year under
these plans are based on the performance and discretion of the Company.
The annual allocations to participants are fully vested at the time the
Company determines such amounts. Certain participants have the option to
receive their balances immediately or to defer such amounts. The Company
also has a long-term incentive plan for executives in which allocations
to participants are based on the performance of the Company over a
three-year period. The participants vest in the allocated amounts over
the subsequent three-year period, 50% in the first year and 25% in the
second and third years. Participants have the option to receive their
vested balances immediately or to defer such amounts. Amounts deferred
by participants of the Company's incentive compensation plans are
invested in shares of affiliated mutual funds. Incentive compensation
expense amounted to $5,688,000, $6,228,000, and $8,700,000 for 2001,
2000, and 1999, respectively.

5. REINSURANCE

Principal reinsurance ceded transactions for the years ended December
31, 2001, 2000, and 1999 are summarized as follows:

2001 2000 1999
---------------------------------------
(IN THOUSANDS)

Reinsurance ceded:
Premiums paid..................... $42,026 $42,785 $47,074
=======================================
Commissions received.............. $ 4,154 $ 4,395 $ 4,570
=======================================
Claim recoveries.................. $20,206 $20,182 $25,008
=======================================

In the accompanying consolidated financial statements, premiums,
benefits, settlement expenses, and deferred policy acquisition costs are
reported net of reinsurance ceded; policy liabilities and accruals are
reported gross of reinsurance ceded. The Company remains liable to
policyholders if the reinsurers are unable to meet their contractual
obligations under the applicable reinsurance agreements. To minimize its
exposure to significant losses from reinsurance insolvencies, the
Company evaluates the financial condition of its reinsurers and monitors
concentrations of credit risk arising from similar geographic regions,
activities, or economic characteristics of reinsurers. At December 31,
2001 and 2000, the Company had established receivables totaling
$436,264,000 and $423,421,000, respectively, for reserve credits,
reinsurance claims, and other receivables from its reinsurers.
Substantially all of these receivables are collateralized by assets of
the reinsurers held in trust. Life insurance in force ceded at December
31, 2001 and 2000 was $5.7 billion and $6.0 billion, respectively.

In 2000, the Company acquired, through a 100% coinsurance of general
account liabilities and a 100% modified coinsurance of separate account
liabilities, a block of approximately 57,000 deferred annuity contracts.
At acquisition, general and separate account balances of $64.6 million
and $796.1 million, respectively, were acquired. In addition, the
Company received $15.3 million in policy loans. Under the modified
coinsurance agreement, the separate account assets and liabilities are
retained by the reinsured with the related revenues and expenses ceded
to and reported by the Company in the consolidated statements of income.
The Company paid a reinsurance commission of $71.9 million which, in
addition to other related items, was deferred and recorded in deferred
policy acquisition costs and is being amortized over the estimated life
of the business assumed, in relation to estimated gross profits. Product
charges from this business totaled $14.5 million and $8.3 million in
2001 and 2000, respectively.

6. INCOME TAXES

The Company files a consolidated life/nonlife federal income tax return
with SBMHC. Income taxes are allocated to the Company as if it filed a
separate return. The provision for income taxes includes current federal
income tax expense or benefit and deferred income tax expense or benefit
due to temporary differences between the financial reporting and income
tax bases of assets and liabilities.

Income tax expense (benefit) consists of the following for the years
ended December 31, 2001, 2000, and 1999:

2001 2000 1999
----------------------------------------------
(IN THOUSANDS)

Current..................... $(3,696) $21,843 $28,209
Deferred.................... 743 (3,540) (4,221)
----------------------------------------------
$(2,953) $18,303 $23,988
==============================================

The provision for income taxes differs from the amount computed at the
statutory federal income tax rate due primarily to dividends-received
deductions, tax credits, and favorable resolution of items provided for
in prior years.

Net deferred income tax assets or liabilities consist of the following:

DECEMBER 31
2001 2000
------------------------------------
(IN THOUSANDS)
Deferred income tax assets:
Net unrealized loss on
securities available-for-sale.......... $16,640 $16,989
Future policy benefits.................. 4,718 4,249
Employee benefits....................... 13,789 14,348
Deferred gain on life
coinsurance agreement.................. 2,557 3,180
Other................................... 15,648 17,775
------------------------------------
Total deferred income tax assets........... 53,352 56,541
Valuation allowance for deferred
income tax asset.......................... (4,250) (2,000)
------------------------------------
Net deferred income tax assets............. 49,102 54,541

Deferred income tax liabilities:
Deferred policy acquisition costs....... 65,673 68,896
Deferred gain on investments............ 6,331 7,078
Other................................... 6,976 7,155
------------------------------------
Total deferred income tax liabilities...... 78,980 83,129
------------------------------------
Net deferred income tax liability.......... $29,878 $28,588
====================================

SFAS No. 109, ACCOUNTING FOR INCOME TAXES, requires companies to
determine whether a deferred income tax asset will be realized in future
years. The Company has evaluated the recoverability of its deferred
income tax assets and established a valuation allowance related to a
portion of its net unrealized loss on securities available-for-sale.

7. CONDENSED FAIR VALUE INFORMATION

SFAS No. 107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS,
requires disclosures of fair value information about financial
instruments, whether recognized or not recognized in a company's balance
sheet, for which it is practicable to estimate that value. The methods
and assumptions used by the Company to estimate the following fair value
disclosures for financial instruments are set forth in Note 1.

SFAS No. 107 excludes certain insurance liabilities and other
nonfinancial instruments from its disclosure requirements. However, the
liabilities under all insurance contracts are taken into consideration
in the Company's overall management of interest rate risk that minimizes
exposure to changing interest rates through the matching of investment
maturities with amounts due under insurance contracts. The fair value
amounts presented herein do not include an amount for the value
associated with customer or agent relationships, the expected interest
margin (interest earnings in excess of interest credited) to be earned
in the future on investment-type products or other intangible items.
Accordingly, the aggregate fair value amounts presented herein do not
necessarily represent the underlying value of the Company; likewise,
care should be exercised in deriving conclusions about the Company's
business or financial condition based on the fair value information
presented herein.

DECEMBER 31, 2001 DECEMBER 31, 2000
--------------------------------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------------------------------------------------------
(IN THOUSANDS)

Bonds (NOTE 2)......... $2,544,302 $2,546,697 $2,427,728 $2,430,092
Equity securities
(NOTE 2)............... 214,289 214,289 260,751 260,751
Mortgage loans......... 9,334 9,334 12,128 12,128
Policy loans........... 104,956 105,165 109,211 109,408
Separate account
assets................ 4,077,795 4,077,795 4,589,156 4,589,156
Supplementary
contracts without
life contingencies.... (23,268) (27,632) (24,487) (27,903)
Individual and group
annuities............. (2,444,126) (2,267,082) (2,402,383) (2,238,401)
Long-term debt......... (50,000) (56,115) (105,000) (105,399)
Interest-rate swaps.... (5,883) (5,883) - (1,632)
Separate account
liabilities........... (4,077,795) (4,077,795) (4,589,156) (4,589,156)

8. COMMITMENTS AND CONTINGENCIES

The Company leases various equipment under several operating lease
agreements. Total expense for all operating leases amounted to
$2,846,000, $2,686,000, and $1,396,000 during 2001, 2000, and 1999,
respectively. The Company has aggregate future lease commitments at
December 31, 2001 of $4,467,000 for noncancelable operating leases
consisting of $1,689,000 in 2002, $1,003,000 in 2003, $662,000 in 2004,
$620,000 in 2005, and $493,000 in 2006.

In addition, in 2007, under the terms of one of the operating leases,
the Company has the option to purchase the asset for approximately $3.4
million or return the asset to the lessor and pay a termination charge
of approximately $2.8 million. There are no noncancelable lease
commitments beyond 2007.

In connection with its investments in certain limited partnerships, the
Company is committed to invest additional capital of $13,500,000 over
the next few years as required by the general partner.

Guaranty fund assessments are levied on the Company by life and health
guaranty associations in most states to cover policyholder losses of
insolvent or rehabilitated insurers. At December 31, 2001 and 2000, the
Company has reserved $2,051,000 and $1,949,000, respectively, to cover
current and estimated future assessments, net of related premium tax
credits.

The Company is a codefendant in a lawsuit filed by a former policyholder
who is seeking class action status for others similarly situated. The
contractual obligations of the policies were assumed by the Company and
subsequently ceded to another insurance company, the codefendant in this
litigation. The plaintiff is seeking an unspecified amount of damages
based upon breach of contract related to alleged failure to administer
the policyholder accounts in accordance with the contractual terms. The
Company may have the ability to recoup any damages it is assessed from
this suit from the codefendant. The Company believes that any loss
resulting from this suit will not have a material impact on the
financial position, results of operations, or cash flow in future years.

9. LONG-TERM DEBT AND OTHER BORROWINGS

The Company has a $225.8 million line-of-credit facility from the
Federal Home Loan Bank of Topeka (FHLB). Overnight borrowings in
connection with this line of credit bear interest at 0.15% over the
Federal Funds rate (1.25% at December 31, 2001). The Company has no
borrowings under this line of credit as of December 31, 2001. At
December 31, 2000, the Company had other short-term borrowings of $55
million with FHLB.

At December 31, 2001 and 2000, the Company has $50 million of 8.75%
surplus notes maturing on May 15, 2016. The surplus notes were issued
pursuant to Rule 144A under the Securities Act of 1933. The surplus
notes have repayment conditions and restrictions whereby each payment of
interest or principal on the surplus notes may be made only with the
prior approval of the Kansas Insurance Commissioner and only out of
surplus funds that the Kansas Insurance Commissioner determines to be
available for such payment under the Kansas Insurance Code.

10. RELATED-PARTY TRANSACTIONS

The Company owns shares of mutual funds managed by Security Management
Company, LLC with net asset values totaling $159,354,000 and
$198,721,000 at December 31, 2001 and 2000, respectively. These amounts
are included in equity securities, available-for-sale and trading, in
the consolidated balance sheets.

Mortgage loans in the accompanying consolidated balance sheets include
amounts due from officers of $7,685,000 and $5,395,000 at December 31,
2001 and 2000, respectively. Such loans are secured by first mortgage
liens on residential real estate located in Kansas and bear interest at
rates approximating 5.29%.

11. STATUTORY FINANCIAL INFORMATION

The Company and its insurance subsidiary prepare statutory-basis
financial statements in accordance with accounting practices prescribed
or permitted by the Kansas and New York Insurance Departments,
respectively. Kansas and New York have adopted the National Association
of Insurance Commissioner's statutory accounting practices (NAIC SAP) as
the basis of their statutory accounting practices. In addition, the
commissioners of the Kansas and New York Insurance Departments have the
right to permit other specific practices that may deviate from
prescribed practices. "Permitted" statutory accounting practices
encompass all accounting practices that are not prescribed; such
practices may differ from state to state, may differ from company to
company within a state and may change in the future. The Company and its
insurance company subsidiary have no permitted practices.

Statutory capital and surplus of the insurance operations were
$467,303,000 and $440,903,000 at December 31, 2001 and 2000,
respectively. Statutory net income (loss) of the insurance operations
were $16,183,000, $(10,754,000), and $55,139,000 for the years ended
December 31, 2001, 2000, and 1999, respectively. The net loss incurred
in 2000 was attributable to the statutory accounting treatment of the
reinsurance commission discussed in Note 5.

12. SALE-LEASEBACK OF HOME OFFICE BUILDING AND FURNITURE AND EQUIPMENT

In 1999, the Company sold its home office building and furniture and
equipment to the state of Kansas for $20,750,000. Concurrent with the
sale, the Company leased the building and the furniture and equipment
back for a period of not less than 24 months and not more than 30
months. The transaction resulted in a gain of $7,322,000. In accordance
with SFAS No. 13, ACCOUNTING FOR LEASES, and SFAS No. 28, ACCOUNTING FOR
SALES WITH LEASEBACKS, $4,173,000 of the gain was recognized immediately
while the remaining gain of $3,149,000 was deferred and is being
amortized over the lease term. The Company recognized in earnings
$1,254,000, $1,232,000, and $34,000 of the previously deferred gain in
2001, 2000, and 1999, respectively. The remaining deferred gain will be
recognized in 2002. The future minimum lease payments under the terms of
the related operating lease agreement total $562,000 for 2002.

PART C
OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

a. Financial Statements

All required financial statements are included in Part B of
this Registration Statement.

b. Exhibits

(1) Resolution of the Board of Directors of Security
Benefit Life Insurance Company authorizing
establishment of the Separate Account(b)
(2) Not Applicable
(3) (a) Service Facilities Agreement(b)
(b) SBL Variable Products Sales Agreement(g)
(c) SBL Variable Products Schedule of Commissions
Variflex - Variable Annuity(f)
(d) SBL Variable Products Schedule of Asset-Based
Commissions(f)
(e) Marketing Organization Agreement(f)
(f) SBL Variable Products Variflex Variable Annuity
Commission Schedule(f)
(4) (a) Individual Contract (Form V6023 1-98)(b)
(b) Individual Contract-Unisex (Form V6023 1-98U)(b)
(c) Group Allocated Contract (Form GV6023 1-98)(b)
(d) Group Allocated Contract-Unisex (Form GV6023
1-98U)(b)
(e) Group Certificate (Form GVC6023 1-98)(b)
(f) Group Certificate-Unisex (Form GVC6023 1-98U)(b)
(g) Group Unallocated Contract (Form GV6317 2-88)(a)
(h) Loan Endorsement (Form V6066 10-00)(h)
(i) Group Loan Provision Certificate (Form GV6821
L-4 1-97)(a)
(j) Individual Stepped-Up Death Benefit Endorsement
(Form V6050 3-96)(a)
(k) Group Stepped-Up Death Benefit Endorsement (Form
V6050A 3-96)(a)
(l) Group Stepped-Up Death Benefit Certificate (Form
V6050C 3-96)(a)
(m) Individual Withdrawal Charge Waiver (Form V6051
3-96)(a)
(n) Group Withdrawal Charge Waiver (Form GV6051
3-96)(a)
(o) Group Withdrawal Charge Waiver Certificate (Form
GV6051C 3-96)(a)
(p) Group and Individual IRA Endorsement (Form
4453C-5 R9-96)(a)
(q) SIMPLE IRA Endorsement (Form 4453C-5S 2-97)(a)
(r) TSA Endorsement (Form 6832A R9-96)(a)
(s) 457 Endorsement (Form V6054 2-98)(c)
(t) 403(a) Endorsement (Form V6057 10-98)(d)
(u) Roth IRA Endorsement (Form V6851 10-97)(c)
(v) Method for Deductions Endorsement (Form V6071
3-01)(f)
(w) Texas Optional Retirement Plan Rider (Form
V6932G 7-00)(f)
(x) Traditional IRA Endorsement (Form 6849A 1-97)
(y) Terminal Illness (Form 6051 TI 2-97)
(z) Endorsement Non-Qualified (Form NONQ 1-85)
(5) (a) Group and Individual Application (Form V7567
1-98)(e)
(b) Group Enrollment (Form GV7581 1-98)(e)
(6) (a) Composite of Articles of Incorporation of SBL(b)
(b) Bylaws of SBL(b)
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel(f)
(10) Consent of Independent Auditors
(11) Not Applicable
(12) Not Applicable
(13) Schedules of Computation of Performance
(14) Powers of Attorney of Howard R. Fricke, Kris A.
Robbins, Sister Loretto Marie Colwell, John C. Dicus,
Steven J. Douglass, Duane L. Fager, William W. Hanna,
John E. Hayes, Jr., Pat A. Loconto and Robert C.
Wheeler.(g)

(a) Incorporated herein by reference to the Exhibits filed with the
Registrant's Post-Effective Amendment No. 18 under the Securities Act of
1933 and Amendment No. 17 under the Investment Company Act of 1940 to
Registration Statement No. 2-89328 (filed April 30, 1997).

(b) Incorporated herein by reference to the Exhibits filed with the
Registrant's Post-Effective Amendment No. 20 under the Securities Act of
1933 and Amendment No. 19 under the Investment Company Act of 1940 to
Registration Statement No. 2-89328 (filed August 17, 1998).

(c) Incorporated herein by reference to the Exhibits filed with the
Registrant's Post-Effective Amendment No. 19 under the Securities Act of
1933 and Amendment No. 18 under the Investment Company Act of 1940 to
Registration Statement No. 2-89328 (filed April 30, 1998).

(d) Incorporated herein by reference to the Exhibits filed with the
Registrant's Post-Effective Amendment No. 22 under the Securities Act of
1933 and Amendment No. 21 under the Investment Company Act of 1940 to
Registration Statement No. 2-89328 (filed April 29, 1999).

(e) Incorporated herein by reference to the Exhibits filed with the
Registrant's Post-Effective Amendment No. 23 under the Securities Act of
1933 and Amendment No. 22 under the Investment Company Act of 1940 to
Registration Statement No. 2-89328 (filed May 1, 2000).

(f) Incorporated herein by reference to the Exhibits filed with the
Registrant's Post-Effective Amendment No. 25 under the Securities Act of
1933 and Amendment No. 24 under the Investment Company Act of 1940 to
Registration Statement No. 2-89328 (filed April 11, 2001).

(g) Incorporated herein by reference to the Exhibits filed with the SBL
Variable Annuity Account XIV Post-Effective Amendment No. 1 under the
Securities Act of 1933 and Amendment No. 6 under the Investment Company
Act of 1940 to Registration Statement No. 333-52114 (filed March 1,
2002).

(h) Incorporated herein by reference to the Exhibits filed with the SBL
Variable Annuity Account XIV Post-Effective Amendment No. 1 under the
Securities Act of 1933 and Amendment No. 2 under the Investment Company
Act of 1940 to Registration Statement No. 333-41180 (filed February 16,
2001).

ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR

Name and Principal
BUSINESS ADDRESS POSITIONS AND OFFICES WITH DEPOSITOR

Howard R. Fricke* Chairman of the Board and Director

Kris A. Robbins* President, Chief Executive Officer
and Director

Sister Loretto Marie Colwell Director
1700 SW 7th Street
Topeka, Kansas 66606

John C. Dicus Director
700 Kansas Avenue
Topeka, Kansas 66603

Steven J. Douglass Director
3231 East 6th Street
Topeka, Kansas 66607

Duane L. Fager Director
3035 S. Topeka Blvd.
Topeka, Kansas 66611

William W. Hanna Director
100 N. Broadway
KS1-100-02-68
Wichita, Kansas 67202

John E. Hayes, Jr. Director
200 Gulf Blvd.
Belleair Shore, Florida 33786

Pat A. Loconto Director
c/o Mary Abdo
400 West 15th Street, Suite 1700
Austin, TX 78701

Robert C. Wheeler Director
400 SW 8th Street
Topeka, Kansas 66603

Donald J. Schepker* Senior Vice President, Chief
Financial Officer and Treasurer

Roger K. Viola* Senior Vice President, General
Counsel and Secretary

Malcolm E. Robinson* Senior Vice President

John D. Cleland* Senior Vice President

Terry A. Milberger* Senior Vice President

Venette K. Davis* Senior Vice President

J. Craig Anderson* Senior Vice President

Gregory J. Garvin* Senior Vice President

James R. Schmank* Senior Vice President

Kalman Bakk, Jr.* Senior Vice President and Chief
Marketing Officer

Amy J. Lee* Associate General Counsel, Vice
President and Assistant Secretary

Thomas A. Swank* Senior Vice President and Chief
Risk Officer

*Located at One Security Benefit Place, Topeka, Kansas 66636.

ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR REGISTRANT

The Depositor, Security Benefit Life Insurance Company ("SBL"), is
controlled by Security Benefit Corp. through the ownership of
700,000 of SBL's 700,010 issued and outstanding shares of common
stock. One share each of SBL's issued and outstanding common stock
is owned by each director of SBL, in accordance with the
requirements of Kansas law. Security Benefit Corp., is
wholly-owned by Security Benefit Mutual Holding Company ("SBMHC"),
which in turn is controlled by SBL policyholders. As of December
31, 2001, no one person holds more than approximately 0.0003% of
the voting power of SBMHC. The Registrant is a segregated asset
account of SBL.

The following chart indicates the persons controlled by or under
common control with Variflex or SBL:

PERCENT
VOTING
SECURITIES
OWNED BY SBMHC
JURISDICTION OF (DIRECTLY OR
NAME INCORPORATION INDIRECTLY)

Security Benefit Mutual Holding Company Kansas ---
(Holding Company)

Security Benefit Corp. (Holding Company) Kansas 100%

Security Benefit Life Insurance Company Kansas 100%
(Stock Life Insurance Company)

Security Benefit Group, Inc. Kansas 100%
(Holding Company)

Security Management Company, LLC Kansas 100%
(Investment Adviser)

Security Distributors, Inc. Kansas 100%
(Broker/Dealer, Principal
Underwriter of Mutual Funds)

First Advantage Insurance Agency, Inc. Kansas 100%
(Insurance Agency)

Security Benefit Academy, Inc. Kansas 100%
(Daycare Company)

Security Financial Resources, Inc. Kansas 100%
(Financial Services)

Security Financial Resources Collective Delaware 100%
Investments, LLC (Private Fund)

First Security Benefit Life Insurance New York 100%
and Annuity Company of New York
(Stock Life Insurance Company)

SBL is also the depositor of the following separate accounts: SBL
Variable Annuity Accounts I, III, IV and XI, SBL Variable Life
Insurance Account Varilife, Security Varilife Separate Account,
SBL Variable Annuity Account VIII (Variflex Extra Credit), SBL
Variable Annuity Account VIII (Variflex LS), SBL Variable Annuity
Account VIII (Variflex Signature), SBL Variable Annuity Account
XIV (SecureDesigns), SBL Variable Annuity Account XIV
(AdvisorDesigns), SBL Variable Annuity Account XIV (NEA
Valuebuilder), T. Rowe Price Variable Annuity Account and
Parkstone Variable Annuity Separate Account.

Through the above-referenced separate accounts, SBL might be
deemed to control the open-end management investment companies
listed below. As of December 18, 2001, the approximate percentage
of ownership by the separate accounts for each company is as
follows:

Security Growth and Income Fund 31.4%
SBL Fund 100%

ITEM 27. NUMBER OF CONTRACTOWNERS

As of February 1, 2002, there were 104,595 owners of Variflex
Qualified Contracts and 21,143 owners of Variflex Non-Qualified
Contracts.

ITEM 28. INDEMNIFICATION

The bylaws of Security Benefit Life Insurance Company provide that
the Company shall, to the extent authorized by the laws of the
State of Kansas, indemnify officers and directors for certain
liabilities threatened or incurred in connection with such
person's capacity as director or officer.

The Articles of Incorporation include the following provision:

(a) No director of the Corporation shall be liable to
the Corporation or its stockholders for monetary damages for
breach of his or her fiduciary duty as a director, PROVIDED
that nothing contained in this Article shall eliminate or
limit the liability of a director (a) for any breach of the
director's duty of loyalty to the Corporation or its
stockholders, (b) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of
law, (c) under the provisions of K.S.A. 17-6424 and amendments
thereto, or (d) for any transaction from which the director
derived an improper personal benefit. If the General
Corporation Code of the State of Kansas is amended after the
filing of these Articles of Incorporation to authorize
corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of
the Corporation shall be eliminated or limited to the fullest
extent permitted by the General Corporation Code of the State
of Kansas, as so amended.

(b) Any repeal or modification of the foregoing
paragraph by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or
modification.

Insofar as indemnification for a liability arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Depositor has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Depositor of expenses incurred or paid by a director,
officer or controlling person of the Depositor in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
Securities being registered, the Depositor will, unless in the
opinion of its counsel the matter has been settled by a
controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.

ITEM 29. PRINCIPAL UNDERWRITER

(a) Security Distributors, Inc. ("SDI"), a subsidiary of SBL,
acts as distributor of the Variflex contracts. SDI receives
no compensation for its distribution function in excess of
the commissions it pays to selling broker/dealers. SDI also
acts as a distributor for SBL Variable Annuity Accounts I,
III, IV, XI and XIV (SecureDesigns, NEA Valuebuilder and
AdvisorDesigns), SBL Variable Life Insurance Account
Varilife, Security Varilife Separate Account, SBL Variable
Annuity Account VIII (Variflex Extra Credit, Variflex LS and
Variflex Signature), and Parkstone Variable Annuity Separate
Account. SDI also acts as principal underwriter for the
following management investment companies for which Security
Management Company, LLC, an affiliate of SBL, acts as
investment adviser: Security Equity Fund, Security Income
Fund, Security Growth and Income Fund, Security Municipal
Bond Fund, Security Ultra Fund, SBL Fund and Security
Financial Resources Collective Investments, LLC.

(b)
Name and Principal Position and Offices
BUSINESS ADDRESS* WITH UNDERWRITER

Gregory J. Garvin President and Director
John D. Cleland Vice President and Director
James R. Schmank Director
Mark E. Young Director
Tammy Brownfield Treasurer
Amy J. Lee Secretary
Brenda M. Harwood Vice President and Director

*One Security Benefit Place, Topeka, Kansas 66636-0001

(c) Although SDI receives no compensation under its distribution
agreement with SBL, it does receive certain payments from
SBL in connection with the sale of Variflex contracts. These
payments are not expected to exceed 0.75% of sales. For the
fiscal year ended December 31, 2001, SDI received payments
in the amount of $1,947,975 from SBL under this arrangement.

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS

All accounts and records required to be maintained by Section
31(a) of the 1940 Act and the rules under it are maintained by SBL
at its administrative offices--One Security Benefit Place, Topeka,
Kansas 66636-0001.

ITEM 31. MANAGEMENT SERVICES

All management contracts are discussed in Part A or Part B.

ITEM 32. UNDERTAKINGS

(a) Registrant undertakes that it will file a post-effective
amendment to this Registration Statement as frequently as
necessary to ensure that the audited financial statements in
the Registration Statement are never more than sixteen (16)
months old for so long as payments under the Variable
Annuity contracts may be accepted.

(b) Registrant undertakes that it will include as part of the
Variflex contract application a space that an applicant can
check to request a Statement of Additional Information.

(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made
available under this Form promptly upon written or oral
request to SBL at the address or phone number listed in the
prospectus.

(d) Depositor represents that the fees and charges deducted
under the Contract, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to
be incurred, and the risks assumed by the Depositor.

(e) SBL, sponsor of the unit investment trust, Variflex, hereby
represents that it is relying upon American Counsel of Life
Insurance, SEC No-Action Letter, [1988-1989 Transfer Binder]
Fed. Sec. L. Rep. (CCH) paragraph 78,904 (Nov. 28, 1988),
and that it has complied with the provisions of paragraphs
(1) - (4) of such no-action letter which are incorporated
herein by reference.

(f) Depositor represents that it is relying upon Rule 6c-7 under
the Investment Company Act of 1940 with respect to Contracts
issued to participants under the Texas Optional Retirement
Program and that it has complied with the provisions of
paragraphs (a) - (d) of that Rule.

SIGNATURES

As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that is meets the requirements of Securities Act
Rule 485(b) for effectiveness of this Registration Statement and has caused this
Registration Statement to be signed on its behalf, in the City of Topeka, and
State of Kansas on this 1st day of April, 2002.

SIGNATURES AND TITLES

Sister Loretto Marie Colwell By: HOWARD R. FRICKE
Director ---------------------------------------
Howard R. Fricke, Director and Chairman
of the Board and as Attorney in Fact for
John C. Dicus the Officers and Directors Whose Names
Director Appear Opposite.

Steven J. Douglass SECURITY BENEFIT LIFE INSURANCE COMPANY
Director (The Depositor)
By: KRIS A. ROBBINS
----------------------------------------
Duane L. Fager Kris A. Robbins, Director, President
Director and Chief Executive Officer

William W. Hanna VARIFLEX SEPARATE ACCOUNT
Director (Variflex Educator Series)(The Registrant)

By: SECURITY BENEFIT LIFE INSURANCE COMPANY
John E. Hayes, Jr. (The Depositor)
Director
By: KRIS A. ROBBINS
----------------------------------------
Pat A. Loconto Kris A. Robbins, Director, President
Director and Chief Executive Officer

Robert C. Wheeler By: DONALD J. SCHEPKER
Director ----------------------------------------
Donald J. Schepker, Senior Vice President,
Chief Financial Officer and Treasurer

(ATTEST): ROGER K. VIOLA
------------------------------------
Roger K. Viola, Senior Vice President,
General Counsel and Secretary

Date: April 1, 2002

EXHIBIT INDEX

(1) None

(2) None

(3) (a) None
(b) None
(c) None
(d) None
(e) None
(f) None

(4) (a) None
(b) None
(c) None
(d) None
(e) None
(f) None
(g) None
(h) None
(i) None
(j) None
(k) None
(l) None
(m) None
(n) None
(o) None
(p) None
(q) None
(r) None
(s) None
(t) None
(u) None
(v) None
(w) None
(x) Traditional IRA Endorsement
(y) Terminal Illness
(z) Endorsement Non-Qualified

(5) (a) None
(b) None

(6) (a) None
(b) None

(7) None

(8) None

(9) None

(10) Consent of Independent Auditors

(11) None

(12) None

(13) Schedules of Computation of Performance

(14) None