A Message to Variable Annuity Contract Owners
There were significant increases in the Stock Markets in both 1995 and 1996.
In 1996, the Dow Jones Industrial Average increased 26.0% in value and the
Standard & Poor's 500 Index increased by 20.3%. Both the Dow Jones Industrial
Average and the S&P 500 are unmanaged indices.
The yield on the 30 year Treasury Bond has increased recently, so that at the
end of January, 1997 it was approximately 7%. Short term rates, as measured
by the 3 month Treasury Bill, are yielding 5.4% now, which is slightly ahead
of a year ago.
The U.S. Gross Domestic Product for 1996 increased approximately 3% while
inflation remains low with the Consumer Price Index increasing by 3.3% in
1996.
The Variable Annuity contracts which are the subject of this report are
distributed by Washington Square Securities, Inc. ("WSSI"), 20 Washington
Avenue South, Minneapolis, Minnesota 55401, (612) 372-5507. WSSI, a
registered broker-dealer, is an affiliated company of ReliaStar Bankers
Security Life Insurance Company, the issuer of your insurance contract.
The Outlook. For 1997, we expect economic growth to continue near the trend
rate 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 business expansion has been underway for
almost six years, it is likely to be sustained throughout 1997. Nevertheless,
profits are expected to grow albeit at a slower rate than in the past few
years.
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,
James G. Cochran
Executive Vice President
ReliaStar Bankers Security Life Insurance Company
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<TABLE>
RELIASTAR BANKERS SECURITY VARIABLE ANNUITY FUNDS 001, 002 AND 003
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1996
Oppenheimer Eaton Vance Oppenheimer
------------ ------------ ------------
Income Fund
of Boston Money Market Combined
ASSETS Fund 001 Fund 002 Fund 003 Totals
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investments................................................$ 24,244 $ 5,232 $ 23,809 $ 53,285
Net receivable from ReliaStar Bankers....................... 317 - - 317
------------ ------------ ------------ ------------
24,561 5,232 23,809 53,602
LIABILITIES
Net payable to ReliaStar Bankers............................ - 211 68 279
------------ ------------ ------------ ------------
Net Assets $ 24,561 $ 5,021 $ 23,741 $ 53,323
============ ============ ============ ============
Accumulation Units Outstanding 3,211 663 6,629 10,503
============ ============ ============ ============
Accumulation Unit Value $ 6.31 $ 7.57 $ 3.54
============ ============ ============
Investment basis data:
Shares Owned 2,022 638 23,809
Net Asset Value $ 11.99 $ 8.20 $ 1.00
Cost $ 11,014 $ 4,338 $ 23,809
</TABLE>
<TABLE>
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
Year Ended December 31, 1996
Combined
Fund 001 Fund 002 Fund 003 Totals
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income -
Reinvested dividends.....................................$ 2,705 $ 485 $ 2,519 $ 5,709
Expenses -
Mortality and expense guarantee fees...................... (676) (49) (708) (1,433)
------------ ------------ ------------ ------------
Net investment income....................................... 2,029 436 1,811 4,276
Net realized gain (loss).................................... 12,076 (9) - 12,067
Net unrealized gain (loss).................................. (5,799) 164 - (5,635)
------------ ------------ ------------ ------------
Increase in net assets resulting from operations............ 8,306 591 1,811 10,708
Net contracts purchased..................................... - - - -
Reserve transfers from (to) ReliaStar Bankers............... 562 (36) 113 639
Payments to contract owners - surrenders and other benefits. (30,951) - (31,038) (61,989)
------------ ------------ ------------ ------------
Net increase(decrease) in net assets....................... (22,083) 555 (29,114) (50,642)
Net assets, beginning of year............................... 46,644 4,466 52,855 103,965
------------ ------------ ------------ ------------
Net assets, end of year....................................$ 24,561 $ 5,021 $ 23,741 $ 53,323
============ ============ ============ ============
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
RELIASTAR BANKERS SECURITY VARIABLE ANNUITY FUNDS 001, 002 AND 003
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
Year Ended December 31, 1995
Combined
Fund 001 Fund 002 Fund 003 Totals
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income -
Reinvested dividends.....................................$ 4,163 $ 455 $ 2,725 $ 7,343
Expenses -
Mortality and expense guarantee fees...................... (394) (36) (515) (945)
------------ ------------ ------------ ------------
Net investment income....................................... 3,769 419 2,210 6,398
Net realized gain (loss).................................... 48 (6) - 42
Net unrealized gain......................................... 4,931 166 - 5,097
------------ ------------ ------------ ------------
Increase in net assets resulting from operations............ 8,748 579 2,210 11,537
Net contracts purchased..................................... - - - -
Payments to contract owners - surrenders and other benefits. - - - -
------------ ------------ ------------ ------------
Net increase in net assets.................................. 8,748 579 2,210 11,537
Net assets, beginning of year............................... 37,896 3,887 50,645 92,428
------------ ------------ ------------ ------------
Net assets, end of year....................................$ 46,644 $ 4,466 $ 52,855 $ 103,965
============ ============ ============ ============
See accompanying notes to financial statements.
</TABLE>
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NOTES TO FINANCIAL STATEMENTS
December 31, 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 ReliaStar Bankers Security Life Insurance Company ("ReliaStar Bankers"),
previously Bankers Security Life Insurance Society. 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 ReliaStar
Bankers. The assets of the Separate Account 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 year ended December 31, 1996, were:
Cost of Proceeds
Shares from Shares
Acquired Sold
------------ ------------
Fund 001 $ 2,705 $ 31,409
Fund 002 485 57
Fund 003 2,519 31,605
Note 3 - Taxes
ReliaStar Bankers is taxed as a life insurance company under the Internal
Revenue Code of 1986, as amended (the "Code"). Since the Separate Accounts are
not a separate entity from ReliaStar Bankers, and their operations form a part
of ReliaStar Bankers, 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 a contract, is not taxed and may be
compounded through reinvestment without additional tax to ReliaStar Bankers.
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 mininum
death benefit. ReliaStar Bankers 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 December 31,
were:
Fund 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
001 $ 6.31 $ 4.70 $ 3.89 $ 4.36 $ 3.85 $ 3.59 $ 2.80 $ 2.95 $ 2.40 $ 2.23
002 7.57 5.54 5.38 6.00 5.11 4.35 3.05 2.65 3.39 2.92
003 3.54 3.40 3.27 3.18 3.13 3.05 2.91 2.72 2.53 2.38
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INDEPENDENT AUDITORS' REPORT
To ReliaStar Bankers Security Life Insurance Company and
ReliaStar Bankers Security Variable Annuity Funds 001, 002 and 003
Contract Owners:
We have audited the accompanying combined statement of assets and liabilities
of the ReliaStar Bankers Security Variable Annuity Funds 001, 002 and 003 as of
December 31, 1996, and the combined statements of operations and changes in net
assets for the years ended December 31, 1996 and 1995. These financial
statements are the responsibility of the ReliaStar Bankers Security Life
Insurance Company management. Our responsibility is to express an opinion on
these financial statements based on our audits. The accumulation unit values
for each of the years in the eight-year period ended December 31, 1994, were
audited by other auditors whose report dated February 9, 1995, expressed an
unqualified opinion on those values.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the combined funds
constituting the ReliaStar Bankers Security Variable Annuity Funds 001, 002
and 003 as of December 31, 1996, and the combined results of operations and
changes in net assets for the years ended December 31, 1996 and 1995, in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Minneapolis, MN
February 14, 1997
