A MESSAGE TO VARIABLE ANNUITY CONTRACT OWNERS
After significant increases in the Stock Markets in 1995,
the first half of 1996 witnessed increases which were more
in line with long term historical results. As of this
writing, the Dow Jones Industrial Average increased
approximately 5% in value from the beginning of the year,
even after contending with a correction of about 7% from its
high point. The S&P 500 has increased since the beginning
of 1996 by a smaller amount of approximately 3%.
While the Stock Markets increased by relatively small
amounts, and are struggling to hold on to these gains, the
yield on the 30 year Treasury Bond increased fairly
significantly from 5.9% at the beginning of the year, to
approximately 7%. Short term rates, as measured by the 3
month Treasury Bill, are yielding 5.1% now, which is about
the same as the beginning of the year.
The U.S. Gross Domestic Product for the first quarter of
1996 increased 2.2% and for the second quarter the increase
is expected to be near 4.0%. Inflation remains low with the
Consumer Price Index running at 2.8% this year after last
year's 2.5%.
David H. Roe, President
The Outlook. For the balance of 1996, we expect solid economic growth and
continuing moderate inflation with interest rates remaining near current
levels. At the time of this report, macroeconomic indicators are showing
mixed signs. While the expansion is slowing, business profits are expected
to continue to improve, albeit at a slower rate than in 1995.
Name Change. Please note that on July 1, 1996, Bankers Security Life
Insurance Society changed its name to ReliaStar Bankers Security Life
Insurance Company. ReliaStar Bankers Security is part of a group of companies
owned by ReliaStar Financial Corp.
Respectfully,
David H. Roe
President
ReliaStar Bankers Security Life Insurance
Company
<PAGE>
<TABLE>
BANKERS SECURITY VARIABLE ANNUITY FUNDS 001, 002 AND 003
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
Oppenheimer Eaton Vance Oppenheimer
Income Money Market Combined
ASSETS Fund 001 Fund 002 Fund 003 Totals
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investments (see below).................................... $ 50,915 $ 4,835 $ 54,051 $ 109,801
LIABILITIES
Net payable to Bankers Security Life Insurance Society...... 203 165 264 632
------------ ------------ ------------ ------------
Net Assets $ 50,712 $ 4,670 $ 53,787 $ 109,169
============ ============ ============ ============
Accumulation Units Outstanding 9,924 849 15,590 26,363
============ ============ ============ ============
Accumulation Unit Value $ 5.11 $ 5.50 $ 3.45
============ ============ ============
Investment basis data:
Shares Owned 4,194 609 54,051
Net Asset Value $ 12.14 $ 7.94 $ 1.00
Cost $ 27,600 $ 4,113 $ 54,051
</TABLE>
<TABLE>
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
Six Months Ended June 30, 1996 (Unaudited)
Combined
Fund 001 Fund 002 Fund 003 Totals
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income -
Reinvested dividends.....................................$ - $ 237 $ 1,197 $ 1,434
Expenses -
Mortality and expense guarantee fees...................... (218) (19) (265) (502)
------------ ------------ ------------ ------------
Net investment income (expense)............................. (218) 218 932 932
Net realized loss........................................... - (6) - (6)
Net unrealized gain (loss).................................. 4,286 (8) - 4,278
------------ ------------ ------------ ------------
Increase in net assets resulting from operations............ 4,068 204 932 5,204
Net contracts purchased..................................... - - - -
Payments to contract owners - surrenders and other benefits. - - - -
------------ ------------ ------------ ------------
Net increase in net assets.................................. 4,068 204 932 5,204
Net assets, beginning of period............................. 46,644 4,466 52,855 103,965
------------ ------------ ------------ ------------
Net assets, end of period..................................$ 50,712 $ 4,670 $ 53,787 $ 109,169
============ ============ ============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
BANKERS SECURITY VARIABLE ANNUITY FUNDS 001, 002 AND 003
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
Six Months Ended June 30, 1995 (Unaudited)
Combined
Fund 001 Fund 002 Fund 003 Totals
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income -
Reinvested dividends.....................................$ - $ 218 $ 1,284 $ 1,502
Expenses -
Mortality and expense guarantee fees...................... (184) (18) (256) (458)
------------ ------------ ------------ ------------
Net investment income (expense)............................. (184) 200 1,028 1,044
Net realized gain (loss).................................... 14 (6) - 8
Net unrealized gain......................................... 5,791 164 - 5,955
------------ ------------ ------------ ------------
Increase in net assets resulting from operations............ 5,621 358 1,028 7,007
Net contracts purchased..................................... - - - -
Payments to contract owners - surrenders and other benefits. - - - -
------------ ------------ ------------ ------------
Net increase in net assets.................................. 5,621 358 1,028 7,007
Net assets, beginning of period............................. 37,896 3,887 73,873 115,656
------------ ------------ ------------ ------------
Net assets, end of period..................................$ 43,517 $ 4,245 $ 74,901 $ 122,663
============ ============ ============ ============
See accompanying notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
Note 1 - Organization
In April 1975, Bankers Security Variable Annuity Funds 001, 002 and 003
(the "Separate Accounts") were established under the provisions of New York
Insurance Law by Bankers Security Life Insurance Society ("Bankers
Security"). The Separate Accounts are registered with the Securities and
Exchange Commission as a unit investment trust under the Investment Company
Act of 1940, as amended (the "Act") and are used to fund certain benefits
for variable annuity policies issued by Bankers Security. The assets of
the Separate Accounts are invested in open-end diversified management
investment companies which are also registered under the Act. New sales
terminated in September 1981. Only subsequent sales to existing contracts
are accepted.
Note 2 - Investments
Security transactions are recorded on the trade date at the purchase cost
or sales proceeds, as applicable. Investments owned are valued at closing
market quotations (net asset value). The difference between the beginning of
year value and current market value of investments owned is recorded as an
unrealized gain (loss) on investments. Dividends received are generally
recorded as income on the record date and are reinvested to purchase
additional mutual fund shares. The aggregate cost of shares acquired
and the aggregate proceeds from shares sold for the six months ended
June 30, 1996, were:
Cost of Proceeds
Shares from Shares
Acquired Sold
------------ ------------
$ - $ 42
237 37
1,198 42
Note 3 - Taxes
Bankers Security is taxed as a life insurance company under the Internal
Revenue Code of amended (the "Code"). Since the Separate Accounts are not a
separate entity from Bankers Security their operations form a part of Bankers
Security, they are not taxed separately as a "regulated investment company"
under Sub-chapter M of the Code. Under existing Federal income tax law,
investment income of the Separate Accounts, to the extent that it is applied
to increase reserves under not taxed and may be compounded through
reinvestment without additional tax to Bankers Security.
<PAGE>
Note 4 - Charges
Deductions not exceeding 8.5% (9.29% of the net amount invested) are made
from each purchase payment for sales and administrative charges and the
minimum death benefit. Bankers Security deducts a daily charge equal to an
annual rate of 1.0% of the daily asset value of the Separate Accounts as
a charge for mortality and expense risks assumed. Where applicable, premium
taxes are charged.
Note 5 - Supplementary Information
Accumulation unit values for a unit of the funds outstanding at June 30, were:
Fund 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
001 $ 5.11 $ 4.46 $ 4.19 $ 4.00 $ 3.60 $ 3.26 $ 2.94 $ 2.79 $ 2.49 $ 2.87
002 5.50 5.57 5.77 5.65 4.93 3.81 3.53 3.72 3.19 2.97
003 3.45 3.34 3.22 3.15 3.10 2.99 2.82 2.63 2.45 2.32
Note 6 - Subsequent Event
The New York Insurance Department has approved a name change for Bankers
Security, effective July 1, 1996, to ReliaStar Bankers Security Life Insurance
Company. Policyowner notifications will be mailed once other states approvals
are obtained.
