Registration No. 33-11489
811-3098
As filed with the Securities and Exchange Commission
April 30, 1997
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
POST-EFFECTIVE AMENDMENT NO. 12
TO
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 12 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 16 [X]
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RELIASTAR BANKERS SECURITY VARIABLE ANNUITY FUNDS M, P AND Q
(Exact Name of Registrant)
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
(Name of Depositor)
1000 Woodbury Lane, Suite 102
Woodbury, New York 11797
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (516) 682-8700
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Jeffrey A. Proulx, Esq.
ReliaStar Bankers Security Life Insurance Company
20 Washington Avenue South
Minneapolis, Minnesota 55401
(Name and Address of Agent of Service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
Registration Statement becomes effective.
It is proposed that this filing will become effective (check appropriate space):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on April 30, 1996 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on (date) pursuant to paragraph (a) of Rule 485.
If appropriate, check the following box:
[X] this Post-effective amendment designates a new effective date for a
previously-filed post-effective amendment.
Registrant has chosen to register an indefinite amount of securities in
accordance with Rule 24f-2. The Rule 24f-2 Notice for Registrant's most recent
fiscal year was filed on or about February 20, 1997.
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<TABLE>
<CAPTION>
RELIASTAR BANKERS SECURITY VARIABLE ANNUITY FUNDS M, P AND Q
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(A)
FORM N-4
ITEM NUMBER PART A HEADING IN PROSPECTUS
----------- ----------------------------
<S> <C>
1. Cover Page
2. Glossary of Special Terms
3. Summary
4. Condensed Financial Information
5. The Company; The Separate Accounts; The Funds
6. Summary of Contract Expenses; Charges and Other Deductions
7. Summary; Accumulation Period - Deferred Variable Annuities; Miscellaneous
Contract Provisions
8. Annuity Period
9. Death Benefit During the Accumulation Period
10. Purchase of Contracts; Accumulation Period - Deferred Variable Annuities
11. Surrenders Without Charge; Surrender and Termination; Right to Examine
Contract
12. Federal Income Tax Status
13. Litigation
14. Statement of Additional Information
PART B HEADING IN STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------------------------
15. Cover Page
16. Table of Contents
17. General Information about the Company
18. Custodian and Accountants
19. Underwriter
20. Underwriter
21. Calculation of Performance Data
22. Annuity Period (in Prospectus)
23. Financial Statements
PART C HEADINGS
---------------
24. Financial Statements and Exhibits
25. Directors and Officers of the Depositor
26. Persons Controlled by or Under Common Control with the Depositor or
Registrant
27. Number of Contract Owners
28. Indemnification
29. Principal Underwriters
30. Location of Accounts and Records
31. Management Services
32. Undertakings
</TABLE>
RELIASTAR BANKERS SECURITY VARIABLE ANNUITY FUNDS P AND Q
INDIVIDUAL FLEXIBLE PAYMENT VARIABLE ANNUITY CONTRACTS
OFFERED BY
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
1000 WOODBURY ROAD, SUITE 102, WOODBURY, NEW YORK 11797
This Prospectus describes individual flexible payment variable annuity
contracts (the "Contracts") issued by ReliaStar Bankers Security Life Insurance
Company ("ReliaStar" or the "Company"). The Contracts provide Deferred Variable
Annuities with an Accumulation Period on a variable or fixed basis and for
payment of annuity benefits on a fixed basis, a variable basis, or a combination
thereof. The Contracts may be purchased for individual plans which qualify for
certain Federal tax benefits available under the Internal Revenue Code
("Qualified Plans") or may be issued for deferred compensation and other plans
which do not qualify under such Code sections ("Non-Qualified Plans"). Purchase
payments, after deductions for any applicable premium taxes, are allocated to
ReliaStar Bankers Security Variable Annuity Fund P ("Separate Account P") for
Non-Qualified Plans and to ReliaStar Bankers Security Variable Annuity Fund Q
("Separate Account Q") for Qualified Plans. The Owner of the Contract directs
the Company to allocate such net purchase payments to a Fixed Account or up to
seventeen of nineteen variable sub-accounts ("Sub-Accounts") that are
established within each Separate Account. Each Sub-Account invests exclusively
in shares of one of the following portfolios of mutual funds (collectively, the
"Funds"):
<TABLE>
<CAPTION>
<S> <C> <C>
Northstar Variable Trust Oppenheimer Variable Account Funds Fidelity Variable Insurance Products Fund
- Growth Fund - Capital Appreciation Fund and Variable Insurance Products Fund II
- Income and Growth Fund - Growth Fund - Growth Portfolio
- High Yield Bond Fund - Multiple Strategies Fund - Contrafund Portfolio
- Global Securities Fund - Equity-Income Portfolio
- Bond Fund - Index 500 Portfolio
Alliance Variable Products Series Fund - Strategic Bond Fund - Asset Manager Portfolio
- Growth and Income Portfolio - High Income Fund - Investment Grade Bond Portfolio
- Short-Term Multi-Market - Money Fund
Portfolio
</TABLE>
THE MINIMUM INITIAL PURCHASE PAYMENT FOR SEPARATE ACCOUNT P IS $1,000 ($100
FOR AUTOMATIC PAYMENT PLANS) WITH SUBSEQUENT MINIMUM PAYMENTS OF AT LEAST $100
UNLESS WAIVED BY RELIASTAR. THE MINIMUM INITIAL PAYMENT FOR SEPARATE ACCOUNT Q
IS $250 ($50 FOR AUTOMATIC PAYMENT PLANS) WITH SUBSEQUENT PAYMENTS OF AT LEAST
$50 UNLESS WAIVED BY RELIASTAR. NO CONTRACT PAYMENTS WILL BE ACCEPTED WITH
RESPECT TO AN ANNUITANT OR CONTRACT OWNER WHO IS OLDER THAN EIGHTY YEARS OF AGE.
This Prospectus provides information a prospective investor should know
before investing and should be kept for future reference.
Additional information about the Contracts has been filed with the
Securities and Exchange Commission ("SEC") in a Statement of Additional
Information, dated April 30, 1997, which is incorporated herein by reference.
The Statement of Additional Information, the table of contents of which is set
forth on page 32 of this Prospectus, is available without charge upon request by
writing to ReliaStar at the above address or by calling 1-800-338-7737, and may
also be obtained by accessing the SEC's internet web site (http://www.sec.gov).
Information about the Fixed Account may be found on page 32 of this
Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE. SHARES OF THE FUNDS AND INTERESTS IN THE CONTRACTS ARE
NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, A BANK, AND THE
SHARES AND INTERESTS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THIS PROSPECTUS IS ACCOMPANIED BY THE CURRENT PROSPECTUS OF OPPENHEIMER VARIABLE
ACCOUNT FUNDS, ALLIANCE VARIABLE PRODUCTS SERIES FUNDS, FIDELITY INVESTMENTS
VARIABLE INSURANCE PRODUCTS FUND, FIDELITY INVESTMENTS VARIABLE INSURANCE
PRODUCTS FUND II AND NORTHSTAR VARIABLE TRUST. NO OFFER IS BEING MADE OF A
CONTRACT FUNDED BY ANY UNDERLYING FUNDS FOR WHICH A CURRENT PROSPECTUS HAS NOT
BEEN DELIVERED.
The date of this Prospectus is April 30, 1997
TABLE OF CONTENTS
-----------------
HEADING PAGE
- ------- ----
GLOSSARY OF SPECIAL TERMS....................................3
SUMMARY......................................................4
SUMMARY OF CONTRACT EXPENSES.................................5
CONDENSED FINANCIAL INFORMATION..............................8
THE COMPANY.................................................12
THE SEPARATE ACCOUNTS.......................................12
THE FUNDS...................................................13
PURCHASE OF CONTRACTS.......................................15
CHARGES AND OTHER DEDUCTIONS................................16
A. Contingent Deferred Sales Charge......................16
B. Surrenders Without Charge.............................17
C. Mortality and Expense Risk Charges....................18
D. Contract Maintenance Charge...........................18
E. Premium Taxes.........................................18
F. Other Charges.........................................18
G. Reduction or Elimination of Charges...................18
ACCUMULATION PERIOD - DEFERRED
VARIABLE ANNUITIES........................................19
A. Crediting Accumulation Units..........................19
B. Value of an Accumulation Unit.........................19
C. Death Benefit During the Accumulation Period..........19
D. Transfers Between Sub-Accounts........................20
E. Dollar Cost Averaging.................................20
F. Systematic Withdrawal Program.........................21
G. Surrender and Termination.............................21
ANNUITY PERIOD..............................................22
A. Annuity Commencement Date.............................22
B. Annuity Options.......................................22
C. Allocation of Annuity.................................23
D. Value of an Annuity Unit..............................23
E. Frequency and Amount of Annuity Payments..............23
F. Assumed Investment Rate...............................24
MISCELLANEOUS CONTRACT PROVISIONS...........................24
A. Time of Payments......................................24
B. Right to Examine Contract.............................24
C. Amendment of Contract.................................24
D. Reports to Contract Owners............................24
E. Assignment............................................24
F. Substitution of Fund Shares...........................24
G. Ownership of the Contract.............................25
FEDERAL INCOME TAX STATUS...................................25
A. Introduction..........................................25
B. Tax Status............................................25
C. Taxation of Annuities in General/Non-Qualified Plans..25
D. Additional Considerations.............................26
E. Qualified Plans.......................................28
F. Withholding Requirements Where Rollovers are
Distributed Directly to Participant..............29
G. Seek Tax Advice.......................................29
REGULATION..................................................29
A. State.................................................29
B. Proposed Unisex Legislation...........................30
VOTING RIGHTS...............................................30
TEXAS OPTIONAL RETIREMENT PROGRAM...........................30
LITIGATION..................................................30
REGISTRATION STATEMENT......................................30
LEGAL OPINIONS..............................................31
PERFORMANCE DATA............................................31
FINANCIAL STATEMENTS........................................32
STATEMENT OF ADDITIONAL INFORMATION.........................32
THE FIXED ACCOUNT...........................................32
APPENDIX I..................................................34
APPENDIX II.................................................36
APPENDIX III................................................37
GLOSSARY OF SPECIAL TERMS
ACCUMULATION PERIOD - The period between the date the Contract is issued and the
Annuity Commencement Date.
ACCUMULATION UNIT - An accounting unit used to value a Contract Owner's interest
prior to the Annuity Commencement Date.
ANNUITANT - The person designated to receive or who is receiving annuity
payments.
ANNUITY COMMENCEMENT DATE - The date on which annuity payments are to commence.
ANNUITY OPTION - The provisions under which a series of annuity payments is made
to the Annuitant.
ANNUITY UNIT - An accounting unit of measure used to calculate the value of
second and subsequent variable annuity payments.
BENEFICIARY - The person to receive benefits under a Contract upon the
Annuitant's death.
CONTRACT ANNIVERSARY - The same day and month that the Contract is issued in
each subsequent year.
CONTRACT OWNER - The person or entity with legal rights of ownership of the
Contract.
CONTRACT OWNER'S INDIVIDUAL ACCOUNT - The sum of all values in the Sub-Accounts
of the Separate Accounts and the Fixed Account credited to a Contract Owner
during the Accumulation Period.
CONTRACT VALUE - The value of the Contract Owner's Individual Account.
FIXED ACCOUNT - Assets of ReliaStar other than those allocated to any separate
account of ReliaStar.
FIXED ACCOUNT VALUE - The Contract Value allocated to the Fixed Account, which
accumulates in ReliaStar's general account.
FIXED ANNUITY - An annuity with payments which remain fixed throughout the
annuity period and do not vary with investment experience.
JOINT ANNUITANT - The designated second person under a joint and survivor life
annuity.
PURCHASE PAYMENT - An initial or subsequent Purchase Payment to purchase an
annuity.
SEPARATE ACCOUNTS P AND Q - Segregated investment accounts established by
ReliaStar pursuant to applicable law and registered as a unit investment trust
under the Investment Company Act of 1940, as amended.
SUB-ACCOUNT - A division of the Separate Accounts whose assets are invested in
shares of corresponding underlying portfolios.
VALUATION DATE - Each day on which the New York Stock Exchange is open for
business, except for a day that a Sub-Account's corresponding Fund does not
value its shares. The New York Stock Exchange is currently closed on weekends
and on the following holidays: New Year's Day; Presidents' Day; Good Friday;
Memorial Day; July Fourth; Labor Day; Thanksgiving Day; and Christmas Day.
VALUATION PERIOD - The interval of time between two consecutive Valuation Dates
measured from the daily closing of the New York Stock Exchange.
VARIABLE ANNUITY - An annuity with payments varying as to dollar amount in
relation to the investment experience of the Sub-Account.
SUMMARY
The Contracts are flexible premium individual deferred variable/fixed
annuity contracts issued by the Separate Accounts and the Company (see "The
Company" and "The Separate Accounts" on page 12). They are sold to or in
connection with retirement plans which may or may not qualify for special
federal tax treatment under the Internal Revenue Code (see "Federal Income Tax
Status" on page 25). Annuity payments under the Contracts are deferred until a
later date.
Purchase payments may be allocated to up to seventeen of the nineteen
available Sub-Accounts of each Separate Account and/or to the Fixed Account (see
"The Funds" on page 13). Purchase payments allocated to the Sub-Accounts of the
Separate Accounts will be invested in shares at net asset value of one or more
of the Funds. The Contract Value and the amount of variable annuity payments
will vary, primarily based on the investment performance of the Funds whose
shares are held in the Sub-Accounts selected.
No deduction for a sales charge is made from the purchase payments for the
Contracts. However, a Surrender Charge (Contingent Deferred Sales Charge) may,
with certain exceptions, apply to whole or partial surrenders of purchase
payments that have been credited under the Contract for less than eight Contract
years, on a pro-rata basis, unless ReliaStar is otherwise instructed by the
Contract Owner. The Surrender Charge will also apply at the time the annuity
payments begin, with certain exceptions (see "Contingent Deferred Sales Charge,"
page 16).
In addition, on each Contract Anniversary (and on the surrender of the
Contract for its full value if it is not surrendered on a Contract Anniversary)
the Company will deduct from the Contract Value a Contract Maintenance Charge of
$30. The Contract Maintenance Charge is to reimburse the Company for
administrative expenses relating to the issue and maintenance of the Contracts
(see "Contract Maintenance Charge" on page 18).
The Company also deducts mortality and expense risk charges equal to an
annual rate of 1.25% of the daily asset value of the Sub-Accounts of each
Separate Account (see "Mortality Expense Risk Charges" on page 18).
The minimum initial purchase payment must be at least $1,000 ($100 for
automatic payment plans) for a Non-Qualified Plan, and no subsequent individual
payment may be less than $100 unless waived by ReliaStar. If the Contract is
being purchased by or in connection with a Qualified Plan, the minimum initial
purchase payment is $250 ($50 for automatic payment plans), and no subsequent
individual payment may be less than $50 unless waived by ReliaStar. The Company
may choose not to accept any subsequent purchase payment if the additional
purchase payment, when added to the Contract Value at the next Valuation Date,
would exceed $250,000. No purchase payments will be accepted with respect to an
Annuitant or Contract Owner who is older than 80 years of age. The Company
reserves the right to accept smaller initial and subsequent purchase payments in
connection with special circumstances, including sales through group or
sponsored arrangements.
If the Contract Value at the Annuity Commencement Date is less than $2,000,
the Contract Value may be distributed in a single sum payment in lieu of annuity
payments. If the net Contract Value is not less than $2,000 but any annuity
payment would be less than $20, the Company has the right to change the
frequency of payments to such intervals as will result in payments of at least
$20 (see "Frequency and Amount of Annuity Payments" on page 23). The minimum
frequency and amount of annuity payments or the minimum Contract Value required
for annuity payments may vary by state.
Premium taxes payable to any governmental entity will be charged against
the Contracts (see "Premium Taxes" on page 18).
The Contract Owner may request early withdrawal or surrender of all or part
of the Contract Value before the Annuity Commencement Date (see "Systematic
Withdrawal Program" and "Surrender and Termination" on page 21). Under the
Internal Revenue Code, penalty taxes may apply to the early withdrawal of
amounts accumulated under a Contract whether or not such Contract is part of a
Qualified Plan (see "Federal Income Tax Status" on page 25).
The Contract Owner may return the Contract within twenty days after it was
delivered to the Contract Owner, and receive a refund of the Contract Value
unless otherwise required by law (see "Right to Examine Contract" on page 24).
SUMMARY OF CONTRACT EXPENSES
<TABLE>
<CAPTION>
CONTRACT OWNER TRANSACTION EXPENSES
<S> <C>
Sales load imposed on purchases (as a percentage of purchase payments)............................................................0%
Contingent Deferred Sales Charge (Surrender Charge) as a percentage of purchase
payments:
YEARS FROM RECEIPT OF CONTINGENT DEFERRED SALES
PURCHASE PAYMENT(a) CHARGE DEDUCTION
------------------ ----------------
0-1 7%
1-2 7%
2-3 6%
3-4 5%
4-5 4%
5-6 3%
6-7 2%
7-8 1%
8+ 0%
(a) The eight year Surrender Charge period is measured from the date of each
purchase payment. There is no Surrender Charge for purchase payments more
than eight years old. Under certain circumstances, partial Contract Values
may be surrendered without charge. However, such surrenders may be subject
to Federal tax penalties (see "Surrenders Without Charge," page 17).
Charge for transfers among sub-accounts...........................................................................................0%
ANNUAL CONTRACT MAINTENANCE CHARGE...............................................................................................$30
SEPARATE ACCOUNT ANNUAL EXPENSES
Mortality and Expense Risk Charge (as percentage of the average Sub-Account value)........................................1.25%
Account Fees and Expenses....................................................................................................0%
Total Separate Account Annual Expenses....................................................................................1.25%
</TABLE>
ANNUAL FUND EXPENSES AFTER REIMBURSEMENT1 (AS PERCENTAGE OF EACH FUND'S AVERAGE
NET ASSETS) PAID BY EACH FUND IN ITS FISCAL YEAR ENDED DECEMBER 31, 1996. TOTAL
EXPENSES FOR THE FUNDS ARE RESTATED TO REFLECT CURRENT MANAGEMENT CHARGES.
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL FUND
FEES EXPENSES ANNUAL EXPENSES
---- -------- ---------------
<S> <C> <C> <C>
OPPENHEIMER MONEY FUND .45% .04% .49%
OPPENHEIMER HIGH INCOME FUND .75% .06% .81%
OPPENHEIMER BOND FUND .74% .04% .78%
OPPENHEIMER STRATEGIC BOND FUND .75% .10% .85%
OPPENHEIMER CAPITAL APPRECIATION FUND .72% .03% .75%
OPPENHEIMER GROWTH FUND .75% .03% .78%
OPPENHEIMER MULTIPLE STRATEGIES FUND .73% .04% .77%
OPPENHEIMER GLOBAL SECURITIES FUND .73% .08% .81%
ALLIANCE GROWTH AND INCOME PORTFOLIO .63% .19% .82%
ALLIANCE SHORT-TERM MULTI-MARKET PORTFOLIO .00% .95% .95%
FIDELITY CONTRAFUND PORTFOLIO .61% .13% .74%2
FIDELITY EQUITY INCOME PORTFOLIO .51% .07% .58%2
FIDELITY GROWTH PORTFOLIO .61% .08% .69%2
FIDELITY INVESTMENT GRADE BOND PORTFOLIO .45% .13% .58%
FIDELITY ASSET MANAGER PORTFOLIO .64% .10% .74%2
FIDELITY INDEX 500 PORTFOLIO .13% .15% .28%
NORTHSTAR GROWTH FUND .75% .05% .80%
NORTHSTAR INCOME AND GROWTH FUND .75% .05% .80%
NORTHSTAR HIGH YIELD BOND FUND .75% .05% .80%
</TABLE>
EXAMPLES
If you surrender your contract at the end of the applicable time period, you
would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets:
<TABLE>
<CAPTION>
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
OPPENHEIMER MONEY FUND $ 89 $118 $140 $217
OPPENHEIMER HIGH INCOME FUND 92 128 157 251
OPPENHEIMER BOND FUND 92 127 155 248
OPPENHEIMER STRATEGIC BOND FUND 92 129 159 255
OPPENHEIMER CAPITAL APPRECIATION 91 126 154 244
OPPENHEIMER GROWTH FUND 92 127 155 248
OPPENHEIMER MULTIPLE STRATEGIES 92 127 155 247
OPPENHEIMER GLOBAL SECURITIES 92 128 157 251
ALLIANCE GROWTH AND INCOME PORTFOLIO 92 128 157 252
ALLIANCE SHORT-TERM MULTI-MARKET 94 132 164 265
FIDELITY CONTRAFUND PORTFOLIO 91 126 153 243
FIDELITY EQUITY INCOME PORTFOLIO 90 121 145 226
FIDELITY GROWTH PORTFOLIO 91 124 151 238
FIDELITY INVESTMENT GRADE BOND PORTFOLIO 90 121 145 226
FIDELITY ASSET MANAGER PORTFOLIO 91 126 153 243
FIDELITY INDEX 500 PORTFOLIO 87 112 129 194
NORTHSTAR GROWTH FUND 92 128 156 250
NORTHSTAR INCOME AND GROWTH FUND 92 128 156 250
NORTHSTAR HIGH YIELD BOND FUND 92 128 156 250
If you annuitize at the end of the applicable time period, you would pay the following expenses on a $1,000 investment, assuming
5% annual return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ------ ------- ------- --------
OPPENHEIMER MONEY FUND $ 89 $118 $100 $217
OPPENHEIMER HIGH INCOME FUND 92 128 117 251
OPPENHEIMER BOND FUND 92 127 115 248
OPPENHEIMER STRATEGIC BOND FUND 92 129 119 255
OPPENHEIMER CAPITAL APPRECIATION 91 126 114 244
OPPENHEIMER GROWTH FUND 92 127 115 248
OPPENHEIMER MULTIPLE STRATEGIES 92 127 115 247
OPPENHEIMER GLOBAL SECURITIES 92 128 117 251
ALLIANCE GROWTH AND INCOME PORTFOLIO 92 128 117 252
ALLIANCE SHORT-TERM MULTI-MARKET 94 132 124 265
FIDELITY CONTRAFUND PORTFOLIO 91 126 113 243
FIDELITY EQUITY INCOME PORTFOLIO 90 121 105 226
FIDELITY GROWTH PORTFOLIO 91 124 111 238
FIDELITY INVESTMENT GRADE BOND PORTFOLIO 90 121 105 226
FIDELITY ASSET MANAGER PORTFOLIO 91 126 113 243
FIDELITY INDEX 500 PORTFOLIO 87 112 89 194
NORTHSTAR GROWTH FUND 92 128 116 250
NORTHSTAR INCOME AND GROWTH FUND 92 128 116 250
NORTHSTAR HIGH YIELD BOND FUND 92 128 116 250
If you do not surrender your contract, you would pay the following expenses on a $1,000 investment, assuming 5% annual return on
assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ------ ------- ------- --------
OPPENHEIMER MONEY FUND $ 19 $ 58 $100 $217
OPPENHEIMER HIGH INCOME FUND 22 68 117 251
OPPENHEIMER BOND FUND 22 67 115 248
OPPENHEIMER STRATEGIC BOND FUND 22 69 119 255
OPPENHEIMER CAPITAL APPRECIATION 21 66 114 244
OPPENHEIMER GROWTH FUND 22 67 115 248
OPPENHEIMER MULTIPLE STRATEGIES 22 67 115 248
OPPENHEIMER GLOBAL SECURITIES 22 68 117 251
ALLIANCE GROWTH AND INCOME PORTFOLIO 22 68 117 252
ALLIANCE SHORT-TERM MULTI-MARKET 24 72 124 265
FIDELITY CONTRAFUND PORTFOLIO 21 66 113 243
FIDELITY EQUITY INCOME PORTFOLIO 20 61 105 226
FIDELITY GROWTH PORTFOLIO 21 64 111 238
FIDELITY INVESTMENT GRADE BOND PORTFOLIO 20 61 105 226
FIDELITY ASSET MANAGER PORTFOLIO 21 66 113 243
FIDELITY INDEX 500 PORTFOLIO 17 52 89 194
NORTHSTAR GROWTH FUND 22 68 116 250
NORTHSTAR INCOME AND GROWTH FUND 22 68 116 250
NORTHSTAR HIGH YIELD BOND FUND 22 68 116 250
</TABLE>
The purpose of the above table is to assist the Contract Owner in understanding
the various costs and expenses that a Contract Owner will bear directly or
indirectly. The fee table does not reflect any fees which may be waived by
ReliaStar. In calculating the expenses in the above examples, the $30 annual
Contract Maintenance Charge has been converted to a .09% annual asset charge by
dividing the total Contract fees collected in 1996 by the total average net
assets of all of the Sub-Accounts. The actual amount of the annual Contract fee
attributable to a $1,000 investment depends on the value of the Contract. The
table reflects expenses of each Separate Account as well as the Fund (see
"Charges and Other Deductions" on page 16 of this Prospectus and "Management of
the Fund" in each Fund's Prospectus).
Any premium taxes or other taxes levied by any governmental entity with respect
to the Contract will be charged against the Contract Values based on a
percentage of premiums paid. Premium taxes currently imposed by certain states
on the Contracts range from 0% to 3.5% of premiums paid (see "Premium Taxes,"
page 18).
"Other Expenses" are based upon the expenses outlined under the section
describing the management of the Fund in each Fund's Prospectus. Total Fund
expenses are assessed at the underlying mutual fund level.
After a Purchase Payment has been in the Contract for 12 months, a Contract
Owner may surrender up to 10% of that Purchase Payment per year without a
Surrender Charge (see "Surrenders Without Charge, " page 17).
1 The expenses listed in the table for the Index 500 Sub-Account, the
Northstar Growth Fund, the Income and Growth Fund and the High Yield Bond
Fund are net of expense reimbursements. Expense reimbursements are
voluntary. There is no assurance of ongoing reimbursement. The total annual
expenses of these Funds, before expense reimbursements, would be: Index 500
Portfolio - .43%; Northstar Growth - 1.70%, Income and Growth - 1.40%; and
High Yield Bond - 1.73%.
2 A portion of the brokerage commissions that certain Funds pay was used to
reduce these Funds expenses. In addition, certain Funds have entered into
arrangements with their custodian and transfer agent whereby interest
earned on uninvested cash balances was used to reduce custodian and
transfer agent expenses. Including these reductions, the total operating
expenses presented in the table would have been .56% for Equity Income
Portfolio, .67% for Growth Portfolio, .73% for Asset Manager Portfolio and
.71% for Contrafund Portfolio.
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<TABLE>
<CAPTION>
CONDENSED FINANCIAL INFORMATION
(Unaudited)
TOTAL NO. OF
ACCUMULATION ACCUMULATION ACCUMULATION
NON-QUALIFIED CONTRACTS UNIT VALUE UNIT VALUE UNITS OUTSTANDING
Account* Fund BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------------- ----------- --------------
<S> <C> <C> <C> <C>
120 Northstar Income and Growth Fund
1995.................................... $1.000 $1.083 8,476
1996.................................... 1.083 1.238 232,833
127 Northstar High Yield Bond Fund
1995.................................... 1.000 1.008 24,738
1996.................................... 1.008 1.199 957,784
179 Northstar Growth Fund
1996.................................... 1.000 1.022 114,625
144 Oppenheimer Money Fund
1987.................................... 1.000 1.034 93,218
1988.................................... 1.034 1.095 1,795,770
1989.................................... 1.095 1.180 3,264,826
1990.................................... 1.180 1.261 4,137,387
1991.................................... 1.261 1.324 3,530,844
1992.................................... 1.324 1.359 2,492,443
1993.................................... 1.359 1.385 3,998,003
1994.................................... 1.385 1.425 5,478,469
1995.................................... 1.425 1.490 2,852,045
1996.................................... 1.490 1.544 2,588,520
145 Oppenheimer Capital Appreciation Fund
1987.................................... $1.000 $0.887 153,418
1988.................................... 0.887 0.971 1,264,130
1989.................................... 0.971 1.224 2,899,407
1990.................................... 1.224 1.014 5,576,327
1991.................................... 1.014 1.534 7,348,757
1992.................................... 1.534 1.731 9,997,201
1993.................................... 1.731 2.172 9,363,538
1994.................................... 2.172 1.983 9,302,670
1995.................................... 1.983 2.595 8,372,729
1996.................................... 2.595 3.080 7,619,988
146 Oppenheimer High Income Fund
1987.................................... 1.000 0.984 24,586
1988.................................... 0.984 1.115 2,063,277
1989.................................... 1.115 1.155 3,053,727
1990.................................... 1.155 1.194 3,507,426
1991.................................... 1.194 1.577 5,011,404
1992.................................... 1.577 1.835 6,112,912
1993.................................... 1.835 2.287 6,654,354
1994.................................... 2.287 2.187 7,029,356
1995.................................... 2.187 2.599 5,723,847
1996.................................... 2.599 2.958 4,479,354
147 Oppenheimer Multiple Strategies Fund
1987.................................... 1.000 0.987 153,630
1988.................................... 0.987 1.174 7,038,185
1989.................................... 1.174 1.338 14,688,009
1990.................................... 1.338 1.296 14,398,614
1991.................................... 1.296 1.504 11,822,309
1992.................................... 1.504 1.619 11,763,608
1993.................................... 1.619 1.854 11,614,088
1994.................................... 1.854 1.796 11,651,992
1995.................................... 1.796 2.152 9,941,909
1996.................................... 2.152 2.455 8,986,735
148 Oppenheimer Global Securities Fund
1990.................................... 1.000 1.002 481,915
1991.................................... 1.002 1.027 2,717,933
1992.................................... 1.027 0.943 4,148,982
1993.................................... 0.943 1.579 7,844,806
1994.................................... 1.579 1.469 9,907,933
1995.................................... 1.469 1.483 7,628,233
1996.................................... 1.483 1.724 8,962,885
149 Alliance Short-Term Multi Market Portfolio
1990.................................... 1.000 1.002 62,463
1991.................................... 1.002 1.060 2,860,674
1992.................................... 1.060 1.057 2,130,062
1993.................................... 1.057 1.113 1,651,993
1994.................................... 1.113 1.028 1,302,876
1995.................................... 1.028 1.084 610,597
1996.................................... 1.084 1.173 554,457
143 Alliance Growth and Income Portfolio
1991.................................... 1.000 1.017 491,096
1992.................................... 1.017 1.080 1,127,369
1993.................................... 1.080 1.190 1,397,688
1994.................................... 1.190 1.170 1,613,227
1995.................................... 1.170 1.569 1,716,168
1996.................................... 1.569 1.922 1,790,697
150 Oppenheimer Strategic Bond Fund
1995.................................... $1.000 $1.121 2,896,090
1996.................................... 1.121 1.240 412,169
151 Oppenheimer Bond Fund
1995.................................... 1.000 1.046 62,264
1996.................................... 1.046 1.082 138,625
152 Oppenheimer Growth Fund
1995.................................... 1.000 1.247 1,176,022
1996.................................... 1.247 1.542 1,618,311
171 Fidelity Growth Portfolio
1995.................................... 1.000 1.155 1,600,070
1996.................................... 1.155 1.308 1,793,710
172 Fidelity Equity-Income Portfolio
1995.................................... 1.000 1.166 1,330,026
1996.................................... 1.166 1.316 2,203,171
174 Fidelity Investment Grade Bond Portfolio
1995.................................... 1.000 1.056 57,961
1996.................................... 1.056 1.076 155,516
175 Fidelity Asset Manager Portfolio
1995.................................... 1.000 1.112 167,816
1996.................................... 1.112 1.250 535,521
176 Fidelity Index 500 Portfolio
1995.................................... 1.000 1.173 400,667
1996.................................... 1.173 1.421 1,428,619
178 Fidelity Contrafund Portfolio
1996.................................... 1.000 1.057 4,993
ACCUMULATION ACCUMULATION ACCUMULATION
QUALIFIED CONTRACTS UNIT VALUE UNIT VALUE UNITS OUTSTANDING
Account* Fund BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------------- ----------- --------------
020 Northstar Income and Growth Fund
1995.................................... $1.000 $1.038 43,086
1996.................................... 1.038 1.175 141,640
027 Northstar High Yield Bond Fund
1995.................................... 1.000 1.003 35,156
1996.................................... 1.003 1.202 247,943
079 Northstar Growth Fund
1996.................................... 1.000 1.013 125
044 Oppenheimer Money Fund
1987.................................... 1.000 1.029 123,844
1988.................................... 1.029 1.089 1,145,741
1989.................................... 1.089 1.173 2,501,593
1990.................................... 1.173 1.250 4,718,105
1991.................................... 1.250 1.313 2,539,827
1992.................................... 1.313 1.348 2,258,558
1993.................................... 1.348 1.373 2,679,574
1994.................................... 1.373 1.411 2,717,190
1995.................................... 1.411 1.469 1,475,816
1996.................................... 1.469 1.532 1,520,253
045 Oppenheimer Capital Appreciation Fund
1987.................................... $1.000 $0.934 213,796
1988.................................... 0.934 1.041 1,106,060
1989.................................... 1.041 1.308 2,700,696
1990.................................... 1.308 1.079 4,309,195
1991.................................... 1.079 1.637 5,852,713
1992.................................... 1.637 1.861 7,560,094
1993.................................... 1.861 2.340 8,411,689
1994.................................... 2.340 2.136 10,183,605
1995.................................... 2.136 2.796 8,254,376
1996.................................... 2.796 3.321 7,879,088
046 Oppenheimer High Income Fund
1987.................................... 1.000 1.003 55,650
1988.................................... 1.003 1.137 1,301,095
1989.................................... 1.137 1.175 2,275,672
1990.................................... 1.175 1.216 2,217,520
1991.................................... 1.216 1.607 2,779,650
1992.................................... 1.607 1.871 3,479,721
1993.................................... 1.871 2.331 4,822,116
1994.................................... 2.331 2.228 5,483,048
1995.................................... 2.228 2.649 4,795,757
1996.................................... 2.649 3.014 3,921,301
047 Oppenheimer Multiple Strategies Fund
1987.................................... 1.000 0.951 416,460
1988.................................... 0.951 1.147 4,438,167
1989.................................... 1.147 1.305 15,240,153
1990.................................... 1.305 1.264 16,667,402
1991.................................... 1.264 1.467 14,730,777
1992.................................... 1.467 1.579 14,941,044
1993.................................... 1.579 1.808 15,125,832
1994.................................... 1.808 1.751 14,855,639
1995.................................... 1.751 2.098 14,609,651
1996.................................... 2.098 2.394 12,763,831
048 Oppenheimer Global Securities Fund
1990.................................... 1.000 1.003 195,425
1991.................................... 1.003 1.028 2,387,359
1992.................................... 1.028 0.944 3,490,049
1993.................................... 0.944 1.585 6,051,326
1994.................................... 1.585 1.470 8,959,731
1995.................................... 1.470 1.484 6,517,492
1996.................................... 1.484 1.726 6,251,704
049 Alliance Short-Term Multi Market Portfolio
1990.................................... 1.000 1.002 240,022
1991.................................... 1.002 1.057 2,013,739
1992.................................... 1.057 1.053 2,217,277
1993.................................... 1.053 1.110 902,191
1994.................................... 1.110 1.025 524,724
1995.................................... 1.025 1.081 221,712
1996.................................... 1.081 1.170 198,444
043 Alliance Growth and Income Portfolio
1990.................................... 1.000 1.000 11,759
1991.................................... 1.000 1.022 928,702
1992.................................... 1.022 1.090 1,246,481
1993.................................... 1.090 1.203 1,376,518
1994.................................... 1.203 1.185 1,613,227
1995.................................... 1.185 1.588 1,778,121
1996.................................... 1.588 1.947 1,753,403
050 Oppenheimer Strategic Bond Fund
1995.................................... $1.000 $1.130 1,201,509
1996.................................... 1.130 1.251 288,665
051 Oppenheimer Bond Fund
1995.................................... 1.000 1.110 67,637
1996.................................... 1.110 1.149 115,398
052 Oppenheimer Growth Fund
1995.................................... 1.000 1.267 382,509
1996.................................... 1.267 1.567 703,092
071 Fidelity Growth Portfolio
1995.................................... 1.000 1.182 906,399
1996.................................... 1.182 1.339 1,617,163
072 Fidelity Equity- Income Portfolio
1995.................................... 1.000 1.159 635,475
1996.................................... 1.159 1.309 1,512,879
074 Fidelity Investment Grade Bond Portfolio
1995.................................... 1.000 1.045 5,779
1996.................................... 1.045 1.063 61,107
075 Fidelity Asset Manager Portfolio
1995.................................... 1.000 1.107 166,628
1996.................................... 1.107 1.244 314,032
076 Fidelity Index 500 Portfolio
1995.................................... 1.000 1.175 301,011
1996.................................... 1.175 1.423 823,891
078 Fidelity Contrafund Portfolio
1996.................................... 1.000 1.024 196,230
</TABLE>
* The inception date for the Funds' inclusion as investment options in the
Contracts is as follows: 120: May 31, 1995; 127: September 8, 1995; 143: January
31, 1991; 144: June 2, 1987; 145: July 30, 1987; 146: August 28, 1987; 147: June
2, 1987; 148: November 9, 1990; 149: November 23, 1990; 150: April 3, 1995; 151:
June 22, 1995; 152: March 24, 1995; 171: May 25, 1995; 172: May 25, 1995; 174:
June 19, 1995; 175: June 8, 1995; 176: May 23, 1995; 178: November 1, 1996; 179:
November 1, 1996; 020: July 17, 1995; 027: August 14, 1995; 043: December 27,
1990; 044: June 2, 1987; 045: June 16, 1987; 046: June 16, 1987; 047: May 27,
1987; 048: November 12, 1990; 049: November 26, 1990; 050: March 20, 1995; 051:
March 14, 1995; 052: March 14, 1995; 071: May 31, 1995; 072: May 16, 1995; 074:
September 16, 1995; 075: June 1, 1995; 076: May 16, 1995; 078: November 12,
1996; 079: December 10, 1996.
THE COMPANY
ReliaStar Bankers Security Life Insurance Company ("ReliaStar" or the
"Company") is a stock life insurance company incorporated under the laws of the
State of New York in 1917 under the name The Morris Plan Insurance Society. It
adopted the name Bankers Security Life Insurance Society in 1946 and ReliaStar
Bankers Security Life Insurance Company in 1996. It is authorized to transact
business in all states, the District of Columbia and the Dominican Republic. The
Company is a wholly-owned subsidiary of ReliaStar Financial Corp., a holding
company whose subsidiaries specialize in life insurance and related financial
services businesses.
ReliaStar's principal office is located at 1000 Woodbury Road, Suite 102,
P.O. Box 9004, Woodbury, New York 11797. ReliaStar writes all forms of life
insurance.
THE SEPARATE ACCOUNTS
Separate Accounts P and Q were established in December, 1981 and September,
1982, respectively, under the provisions of the New York Insurance Law. The
Separate Accounts, along with Separate Account M, are registered collectively as
a unit investment trust under the Investment Company Act of 1940 (the "1940
Act"), but such registration does not involve any supervision of the management
or investment practices or policies of the Separate Accounts.
The assets of Separate Accounts P and Q are held separately from the assets
of ReliaStar. Under New York Insurance Law, all income, gains or losses of the
Sub-Accounts of the Separate Accounts, whether realized or not, must be credited
to or charged against the amounts placed in those Sub-Accounts without regard to
the other income, gains and losses of ReliaStar. The assets of the Separate
Accounts attributable to the Contracts may not be charged with liabilities
arising out of other business that ReliaStar conducts. They may, however, be
subject to liabilities arising from Sub-Accounts whose assets are attributable
to other variable annuity contracts offered the Separate Accounts. All
obligations under the Contracts are general corporate obligations of ReliaStar.
Purchase payments allocated to the Separate Accounts under a Contract are
invested in up to seventeen of the nineteen available Sub-Accounts of the
Separate Accounts as selected by the Contract Owner. The future Separate Account
Contract Value depends primarily on the investment performance of the Funds
whose shares are held in the Sub-Accounts selected.
The Company or its affiliates may receive compensation from an affiliate or
affiliates of certain of the Funds based upon an annual percentage of the
average net assets held in that Fund by the Company and certain of the Company's
insurance company affiliates. These amounts are intended to compensate the
Company or the Company's affiliates for administrative, record keeping,
distribution, and other services provided by such parties to the Funds and/or
the Funds' affiliates. Payments of such amounts by an affiliate or affiliates of
the Funds do not increase the fees paid by the Funds or their shareholders.
Shares of the Funds are also available to other variable contracts funded
by the Separate Accounts and to separate accounts for other types of variable
contracts. Any and all distributions received from the chosen Fund(s) will be
reinvested to purchase additional Fund shares at net asset value for the
Sub-Account.
THE FUNDS
There are currently nineteen Sub-Accounts whose Funds are available for
investment under the Separate Accounts. We reserve the right to establish
additional Sub-Accounts of the Separate Accounts, each of which could invest in
a new Fund with a specified investment objective. You are only permitted,
however, to participate in a total of seventeen investment options over the
lifetime of your Contract. You would not have to choose your investment options
in advance, but upon participation in the seventeenth Fund since the issue of
the Contract, you would only be able to transfer within the seventeen Funds
already utilized and which are still available.
For example, assume that you select seven investment options. Later, you
transfer out of all your seven initial selections and choose ten different
Sub-Accounts, none of which are the same as your original seven selections. You
have now used your maximum selection of seventeen Sub-Accounts. You may still
allocate purchase payments or transfer Contract Values among any of the
seventeen Sub-Accounts you have previously selected. However, you may not
allocate funds to the remaining two Sub-Accounts at any time. An Owner may
transfer partial or complete Contract Values to the Fixed Account from the
Variable Account at any time.
Each of the Funds has separate assets and liabilities and a separate net
asset value per share, and the value of an Accumulation Unit for a Sub-Account
depends upon the value of the shares of the Fund in which the Sub-Account's
assets are invested. Since market risks are inherent in all securities to
varying degrees, assurance cannot be given that the investment objective of any
of the Funds will be met. The board of directors (trustees) for certain of the
Funds monitors events for any irreconcilable conflicts because both variable
life and variable annuity contracts invest in certain of the Funds.
No offer will be made of a Contract funded by any of the Funds unless a
current prospectus of the Oppenheimer Variable Account Funds, the Alliance
Variable Products Series Fund, Inc., the Fidelity Investments Variable Insurance
Products Fund and Variable Insurance Products Fund II, or the Northstar Variable
Trust has been delivered. An investor's order to purchase a Contract under a
Separate Account will be accepted only if the investor has received the current
prospectuses.
For more complete information about each Fund, including management fees,
other expenses, and risks associated with mixed and/or shared funding, consult
the prospectus for each Fund. Read each prospectus carefully before investing.
Additional copies of these prospectuses may be obtained by writing to ReliaStar
at 4601 Fairfax Drive, Arlington, Virginia 22203. Send no money.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Oppenheimer Variable Account Funds is an open-end, diversified investment
company organized as a Massachusetts business trust in 1984 that consists of
eight separate Funds that are available under the Contracts. Oppenheimer Funds,
Inc. serves as the investment manager of Oppenheimer Variable Account Funds.
(1) MONEY FUND. The investment objective of the Money Fund is to provide
maximum current income from investment in "money market" securities consistent
with low capital risk and maintenance of liquidity. The Money Fund will invest
only in short-term (maturing in one year or less) debt obligations payable in
U.S. dollars issued or guaranteed by the Federal government or its agencies or
instrumentalities, or certain banks, savings and loan associations, and
corporations.
(2) HIGH INCOME FUND. The objective of the High Income Fund is to realize a
high level of current income. The High Income Fund will invest primarily in a
diversified portfolio of high-yield, fixed-income securities (long-term debt and
preferred stock issues, including convertible securities). The investments,
commonly known as "junk bonds," will principally be in the lower rating
categories. These securities may be subject to greater market fluctuations and
risk of loss of income and principal than lower-yielding, higher rated fixed
income securities, while providing higher yield than such securities. Consult
the High Income Fund's prospectus for further details.
(3) BOND FUND. The investment objective is to earn a high level of current
income by investing primarily in a diversified portfolio of high yield
fixed-income securities. As a secondary objective, the Bond Fund seeks capital
growth when consistent with its primary objective.
(4) STRATEGIC BOND FUND. The investment objective of the Strategic Bond
Fund is to seek a high level of current income principally derived from interest
on debt securities and to enhance such income by writing covered call options on
debt securities. The Strategic Bond Fund intends to invest a portion of its
assets in lower-rated, high yield domestic debt securities commonly known as
"junk bonds" which are subject to a greater risk of loss of non-payment of
principal and interest than higher-rated securities. Consult the Strategic Bond
Fund's prospectus for further details.
(5) CAPITAL APPRECIATION FUND. In seeking its objective of capital
appreciation, with income as a secondary objective, the Capital Appreciation
Fund will emphasize investments in securities of "growth-type" companies.
(6) GROWTH FUND. In seeking its objective of capital appreciation, the
Growth Fund will emphasize investments in securities of well-known and
established companies. Current income is a secondary consideration in the
selection of the Growth Fund's portfolio securities.
(7) MULTIPLE STRATEGIES FUND. The objective of the Multiple Strategies Fund
is to seek a high total investment return, which includes current income as well
as capital appreciation in the value of its shares.
(8) GLOBAL SECURITIES FUND. The objective of the Global Securities Fund is
to seek long-term capital appreciation. Current income is not an objective.
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
Alliance Variable Products Series Fund, Inc. is an open-end series
investment company designed to fund variable annuity contracts and variable life
insurance policies offered by the separate accounts of life insurance companies.
The Contracts use two of Alliance's nineteen separate portfolios: the Growth and
Income Portfolio and the Short-Term Multi-Market Portfolio. Alliance Capital
Management L.P. serves as the investment adviser to Alliance Variable Products
Series Fund, Inc.
(1) GROWTH AND INCOME PORTFOLIO. The Growth and Income Portfolio's
objective is reasonable current income and reasonable opportunity for
appreciation through investments primarily in dividend-paying common stocks of
good quality.
(2) SHORT-TERM MULTI-MARKET PORTFOLIO. The Short-Term Multi-Market
Portfolio seeks the highest level of current income, consistent with what the
Adviser considers to be prudent investment risk, that is available from a
portfolio of high-quality debt securities having remaining maturities of not
more than three years.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND AND FUND II
Fidelity Variable Insurance Products Fund is an open-end, diversified
management investment company organized as a Massachusetts business trust on
November 13, 1981. Fidelity Variable Insurance Products Fund II is an open-end,
diversified, management investment company organized as a Massachusetts business
trust on March 21, 1988. The Contracts use two of the Funds from Variable
Insurance Products Fund: the Equity Income Portfolio and the Growth Portfolio.
The Contracts use four of the Funds from the Variable Insurance Products Fund
II: the Contrafund Portfolio, the Investment Grade Bond Portfolio, the Asset
Manager Portfolio and the Index 500 Portfolio. Fidelity Management & Research
Company serves as investment adviser to these Funds.
(1) CONTRAFUND PORTFOLIO. The Contrafund Portfolio seeks capital
appreciation by investing in equity securities of companies that are believed by
the investment adviser to be undervalued due to an overly pessimistic appraisal
by the public.
(2) EQUITY INCOME PORTFOLIO. The investment objective of the Equity Income
Portfolio is to seek reasonable income by investing primarily in
income-producing equity securities.
(3) GROWTH PORTFOLIO. The investment objective of the Growth Portfolio is
to seek to achieve capital appreciation.
(4) INVESTMENT GRADE BOND PORTFOLIO. The investment objective of the
Investment Grade Bond Portfolio is to seek as high a level of current income as
is consistent with the preservation of capital.
(5) ASSET MANAGER PORTFOLIO. The investment objective of the Asset Manager
Portfolio is to seek to obtain high total return with reduced risk over the
long-term by allocating its assets among domestic and foreign stocks, bonds and
short-term fixed-income instruments.
(6) INDEX 500 PORTFOLIO. The investment objective of the Index 500
Portfolio is to seek investment results that correspond to the total return
(i.e., the combination of capital changes and income) of common stocks publicly
traded in the United States, as represented by the Standard & Poor's Composite
Stock Price Index (the S&P 500 or Index), while keeping transaction costs and
other expenses low.
NORTHSTAR VARIABLE TRUST
Northstar Variable Trust is a Massachusetts business trust, organized as an
open-end diversified series management investment company. Currently the
Northstar Variable Trust offers four series comprising four separate investment
portfolios. The Contracts use three of the four separate portfolios offered by
Northstar Variable Trust: the Growth Fund, the Income and Growth Fund and the
High Yield Bond Fund. Northstar Investment Management Corporation ("NIMC")
serves as investment adviser to the Trust. Navellier Fund Management, Inc.
serves as sub-adviser to the Growth Fund and is responsible for the day-to-day
investment management of this Fund. Wilson/Bennett Capital Management, Inc.
("Wilson/Bennett") is the sub-adviser to the Northstar Income and Growth Fund
and is responsible for the day-to-day investment management of this Fund. Each
sub-adviser is subject to the supervision of NIMC and the Trustees of each Fund.
All fees and expenses of each subadvisory agreement are borne by NIMC.
(1) NORTHSTAR GROWTH FUND. The investment objective of the Northstar Growth
Fund is to seek long-term capital growth primarily through investments in equity
securities diversified over industries and companies which are believed to
provide above-average potential for capital appreciation.
(2) INCOME AND GROWTH FUND. The investment objective of the Income and
Growth Fund is to seek current income balanced with the objective of achieving
capital appreciation.
(3) HIGH YIELD BOND FUND. The investment objective of the High Yield Bond
Fund is to seek high income. Under normal conditions, the Fund will seek its
investment objective by investing at least 65% of its total assets in
higher-yielding, lower-rated U.S. dollar denominated debt securities, which may
involve high risk and are predominantly speculative in nature. These securities
are commonly known as "junk bonds." Consult the High Yield Bond Fund's
prospectus for further details.
PURCHASE OF CONTRACTS
PURCHASE PAYMENTS
This Prospectus offers individual flexible purchase payment Contracts which
provide for an initial purchase payment and for subsequent purchase payments, if
desired. However, the Contract Owner assumes no obligation to make additional
payments.
Investors in each Separate Account purchase Accumulation Units only of the
Sub-Account which they have chosen and not shares of the Fund in which that
Sub-Account invests.
ReliaStar uses a "two day/five day" procedure for the pricing of the
initial purchase payments. The purchase payment, less any deduction for premium
taxes if applicable, is applied to purchase Accumulation Units not later than
two business days after receipt of the purchase order by ReliaStar if the
application and all information necessary for processing the purchase order is
complete. The purchase payment may be retained for the benefit of ReliaStar up
to five business days to complete an incomplete application. If the information
necessary to process an application within the five business days cannot be
obtained, ReliaStar will inform the applicant of the reason for the delay and
immediately return the payment unless the applicant requests that ReliaStar
retain the money and application until it is made complete. When it is complete,
applicant's funds will be invested within two business days.
The minimum initial purchase payment must accompany the application. The
initial minimum required for Separate Accounts P (Non-Qualified Plans) and Q
(Qualified Plans) is $1,000 and $250, respectively (except $100 initially will
be accepted for Separate Account P and $50 for Separate Account Q for all
automatic payment plans, such as payroll deduction and automatic bank check
plans). Subsequent purchase payments for Separate Accounts P and Q must be at
least $100 and $50, respectively, but this requirement may be waived by
ReliaStar. The purchaser is cautioned that investment return on smaller purchase
payments may be less because of certain charges assessed by ReliaStar (see
"Charges and Other Deductions," page 16). A payment may not exceed $250,000
without the Company's consent.
ALLOCATION OF NET PURCHASE PAYMENTS
Purchase payments, after deductions for any applicable premium taxes, will
be allocated among the Sub-Accounts for the designated Separate Account, in
accordance with the allocation percentage specified by the Contract Owner. The
percentage allocation of future purchase payments may be changed by the Owner at
any time prior to the Annuity Commencement Date by providing written notice to
ReliaStar at its principal office or other designated office. (For a discussion
of transfer rights between Funds, see "Transfers Between Sub-Accounts," page
20.) Purchase payments, after any applicable premium tax deductions, may also be
allocated to the Fixed Account (see "Fixed Account" at page 32).
IMMEDIATE VARIABLE ANNUITIES
Initial payments allocated to the Separate Accounts for immediate variable
annuities will be credited, after deductions for any applicable premium taxes
(See "Charges and Other Deductions," page 16), to the Contract Owner's
Individual Account and will be converted to Annuity Units (see "Annuity Period,"
page 22).
CHARGES AND OTHER DEDUCTIONS
A. CONTINGENT DEFERRED SALES CHARGE (SURRENDER CHARGE)
No deduction for a sales charge is made from the purchase payments for
these Contracts. However, a Contingent Deferred Sales Charge (Surrender Charge),
when applicable, will be used to help defray expenses relating to the sale of
the Contracts, which include commissions paid to sales personnel, the cost of
preparation of sales literature and other promotional activity. Commissions paid
on the sale of these Contracts do not exceed 6% of the purchase payments. This
does not include any payments the Company may make to wholesalers.
During the Accumulation Period, prior to receiving an annuity, a Contract
Owner may make as many purchase payments as desired. For purposes of determining
if a Surrender Charge is due upon a partial or complete withdrawal, each
purchase payment is treated separately and is measured from the date the
purchase payment is received by the Company. Any Surrender Charge imposed upon a
withdrawal of purchase payments is on a "first in - first out" basis. In other
words, for the purposes of determining the Surrender Charge, surrenders shall
first be taken from purchase payments received earliest by the Company until the
amount of such payments is exhausted, and thereafter from purchase payments next
earliest received. The charge, if applicable, is as follows:
1. Any purchase payment left in this Contract for 96 months or longer is
not subject to a Surrender Charge.
2. During the first 96 months after a purchase payment is made under the
Contract, a partial or complete surrender of that Payment will be charged a
Surrender Charge, the amount depending upon the length of time the purchase
payment was in the Contract. The Surrender Charge imposed in connection with
partial surrenders will be deducted from the Separate Accounts on a pro-rata
basis unless ReliaStar is instructed otherwise by the Contract Owner.
PERCENTAGE OF PURCHASE PAYMENTS
YEAR FROM RECEIPT OF WITHDRAWN IN EXCESS OF THE
PURCHASE PAYMENT "NO CHARGE AMOUNT"
---------------- ----------------------
0-1 7%
1-2 7
2-3 6
3-4 5
4-5 4
5-6 3
6-7 2
7-8 1
8+ 0
3. If a "first-in" purchase payment is fully withdrawn, these rules apply
to the "next-in" purchase payment made under the Contract and continue
thereafter in this manner. The Surrender Charge only applies to purchase
payments made under the Contracts. If the total of the Contract Owner's purchase
payments have been withdrawn, which may or may not have been subject to
Surrender Charges, the Contract may have value from accumulated earnings. There
is no Surrender Charge on these earnings.
4. The Surrender Charge at the percentage listed above also applies at the
time annuity payments begin unless (a) the first annuity payment begins after
the fourth Contract year; (b) the first annuity payment begins after the second
Contract year and the Annuitant has attained age 59 1/2 at such time; (c)
annuity payments are being made as part of the death proceeds during the
Accumulation Period or as part of a distribution upon death of the Annuitant or
the Contract Owner during the Accumulation Period; or (d) this Contract is an
immediate annuity, i.e., annuity payments are starting at a date no more than
approximately 31 days after the Contract is issued.
The Internal Revenue Code places (with certain exceptions) an additional
IRS tax penalty on withdrawals prior to age 59 1/2 (see "Federal Income Tax
Status - Penalty Tax on Surrenders or Withdrawals," page 26). That amount, if
applicable, is separate and distinct from the Contingent Deferred Sales Charge.
The Contracts may be sold without a Contingent Deferred Sales Charge to
directors, officers, and bona fide full-time employees of ReliaStar and its
affiliated insurance companies, and to Oppenheimer Fund Management, Inc.,
Oppenheimer Funds, Inc., Alliance Capital Management Corporation, Alliance
Capital Management L.P., Fidelity Management & Research Company, and Northstar
Investment Management Corporation, who qualify under rules adopted by the
Securities and Exchange Commission. If applicable, such sales will be made only
upon the written assurance of the purchaser that the purchase is made for
investment purposes and that the Contract will not be sold or assigned except
through surrender to ReliaStar.
B. SURRENDERS WITHOUT CHARGE
1. After each purchase payment has been in the Contract for 12 months, a
Contract Owner may surrender, during each Contract Year, up to 10% of that
purchase payment without a Surrender Charge (the "No Charge Amount"). The "No
Charge Amount" is also applicable to all subsequent payments which are in the
Contract for more than twelve months. However, such "no fee" withdrawals may be
subject to a penalty tax under the Internal Revenue Code. "No Charge Amounts"
are fixed at 10% of the purchase payment and are cumulative up to 20%. For
example, if in a particular year, the withdrawal option is not exercised, the
"free" withdrawal for the next year is up to 20%. Withdrawals of more than 10%
(except where the 20% cumulative withdrawal right applies) are subject to a
Surrender Charge, if applicable (see chart below).
2. A Contract Owner may be eligible for a waiver of the Surrender Charge
during any period the Contract Owner is admitted to and confined in an
accredited hospital or long-term care facility, after the Contract Owner has
been confined to such an accredited hospital or long-term care facility for more
than 30 days. Contract Owners interested in exercising this right should contact
the Company for details.
<TABLE>
<CAPTION>
ILLUSTRATION OF WITHDRAWAL RIGHTS FOR EACH PURCHASE PAYMENT
(ASSUMES $10,000 PURCHASE
PAYMENT AND WITHDRAWALS OF $1,000
(10%) EVERY 12 MONTHS)
PERCENTAGE AND AMOUNT
OF PURCHASE PAYMENT
LENGTH OF TIME THAT MAY BE WITHDRAWN
EACH PURCHASE PAYMENT EACH 12 MONTHS WITHOUT AMOUNT AND RATE SUBJECT
LEFT IN CONTRACT A SURRENDER CHARGE TO A SURRENDER CHARGE
---------------- ------------------ ---------------------
Years % Amount Amount Rate
<S> <C> <C> <C> <C> <C>
0-1 0% $ 0 $10,000 7%
1-2 10 1,000 9,000 7
2-3 10 1,000 8,000 6
3-4 10 1,000 7,000 5
4-5 10 1,000 6,000 4
5-6 10 1,000 5,000 3
6-7 10 1,000 4,000 2
7-8 10 1,000 3,000 1
8 and thereafter 100 Total -- 0
Contract
Value
</TABLE>
C. MORTALITY AND EXPENSE RISK CHARGES
ReliaStar deducts an amount equal on an annual basis to 1.25% of the daily
asset value of the Sub-Accounts of each Separate Account for assuming mortality
and expense risks under the Contracts (approximately 1.00% for mortality and
.25% for expenses). The mortality risk assumed by ReliaStar arises from its
obligation to continue to make annuity payments, determined in accordance with
the annuity tables and other provisions of the Contracts, to each Annuitant
regardless of how long he lives and regardless of how long all payees as a group
live. In addition, ReliaStar assumes the risk that the charges for
administrative expenses may not be adequate to cover such expenses and assures
that it will not increase the amount charged for administrative expenses.
D. CONTRACT MAINTENANCE CHARGE
Each year on the Contract Anniversary, ReliaStar will deduct an annual
Contract Maintenance Charge of $30 from the Contract Value to reimburse its
expenses relating to maintenance of the Contract. In this respect ReliaStar,
among other things, establishes and maintains records, and provides reports to
Contract Owners. In any Contract year when the Contract is surrendered for its
full value on a date other than the Contract Anniversary, the Contract
Maintenance Charge will be deducted at the time of such surrender. The amount of
the maintenance charge under the Contract is contractual and may not be
increased by ReliaStar. If an individual has more than one Contract in The USA
Plan, the $30 charge will be charged on only one Contract. Each participant in a
Qualified Plan is charged the Contract Maintenance Charge.
E. PREMIUM TAXES
Any applicable premium tax will be deducted when incurred. Premium taxes
imposed by some states or municipalities presently range from 0% to 3.5% and may
be imposed at the time a payment is made or at the Annuity Commencement Date.
When permitted by state law, it is ReliaStar's policy to postpone the
computation and deduction of premium taxes until the Annuity Commencement Date.
The amount of any applicable premium taxes will then be deducted from the
Contract Value; otherwise, such taxes will be deducted from purchase payments
when received. If any premium taxes are deducted, but are subsequently
determined not due, ReliaStar will apply the amount previously deducted to
increase the number of Accumulation Units or Annuity Units under the Contract at
the time the determination is made. If premium taxes are deducted but the amount
deducted is subsequently determined to be insufficient, or if no premium tax was
deducted but is subsequently determined due, ReliaStar reserves the right to
reduce the Accumulation Units or Annuity Units under the Contract by the amount
of the tax due.
F. OTHER CHARGES
Charges for investment management are paid out of the assets of the Funds
(see each of the Fund's prospectuses).
G. REDUCTION OR ELIMINATION OF CHARGES
The Company reserves the right to waive certain contract charges, as
described below, in accordance with Company policies in the following
circumstances:
(1) Where a variable annuity contract issued by the Company, or any
affiliated life insurance company, has no applicable surrender charge, the owner
may transfer values in his contract to purchase a variable annuity Contract
offered by this Prospectus and the Surrender Charge will not apply to the newly
issued Contract; or
(2) Where a life insurance or annuity contract issued by the Company, or
any affiliated life insurance company, has matured, been surrendered, or where a
death benefit has been paid on the contract, the recipient of the proceeds may
use the proceeds to purchase a variable annuity Contract offered by this
Prospectus. A Surrender Charge will not apply to the newly-issued contract if
the purchase is made within two years from the date the proceeds have been paid
out.
These waivers of charges may not be available in all states.
Additionally, any of the charges under the Contract, as well as the minimum
purchase payment requirements set forth herein, may be reduced due to special
circumstances that result in lower sales, administrative or mortality expenses.
For example, special circumstances may exist in connection with group or
sponsored arrangements, sales to the Company's policy and Contract Owners or
those of affiliated insurance companies, or sales to employees or clients of the
Company's affiliates. The amount of any reductions will reflect the reduced
sales effort and administrative costs resulting from, or the different mortality
experience expected as a result of, the special circumstances.
Reductions will not be unfairly discriminatory against any person,
including the affected policy or Contract Owners and owners of all other
contracts funded by the Variable Account.
ACCUMULATION PERIOD-DEFERRED VARIABLE ANNUITIES
A. CREDITING ACCUMULATION UNITS
During the Accumulation Period, purchase payments on deferred Variable
Annuity Contracts, after deductions for any premium taxes, where applicable (see
"Charges and Other Deductions," page 16), are credited to the Contract Owner's
account in the form of Accumulation Units. The number of Accumulation Units
credited to a Contract Owner for the Sub-Account is determined by dividing the
net purchase payment allocated to the Sub-Account by the value of an
Accumulation Unit for the Sub-Account for the Valuation Period during which the
purchase payment is received by ReliaStar at its principal office.
The value of the Contract Owner's Individual Account varies with the value
of the assets of the Sub-Account and the performance of the chosen Fund. There
is no assurance that the value of a Contract Owner's Individual Account will
equal or exceed purchase payments. The value of a Contract Owner's Individual
Account for a Valuation Period can be determined by multiplying the total number
of Accumulation Units credited to his account for the Sub-Account by the value
of an Accumulation Unit for the Sub-Account for that Valuation Period and adding
the value of the Sub-Accounts.
B. VALUE OF AN ACCUMULATION UNIT
The value of an Accumulation Unit of the Sub-Accounts was arbitrarily set
initially at $1.00. The value of an Accumulation Unit for any subsequent
Valuation Period is determined by multiplying the value of an Accumulation Unit
for the immediately preceding Valuation Period by the net investment factor, as
described below, for the Valuation Period for which the Accumulation Unit Value
is being calculated (see Appendix 1, Example B on page 34). The value of an
Accumulation Unit for the Sub-Account may increase or decrease from Valuation
Period to Valuation Period and will be affected by, among other things, the
investment performance of the Funds and their expenses.
NET INVESTMENT FACTOR
The net investment factor for the Sub-Account for any Valuation Period is
determined by dividing (a) by (b) and subtracting (c) from the result, where (a)
is the result of:
(1) the net asset value per share of the Fund invested in by the
Sub-Account determined at the end of the current Valuation Period, plus
(2) the per share amount of any dividend or capital gains distributions
made by the corresponding Fund if the "ex-dividend" date occurs during the
current Valuation Period, minus or plus
(3) a per share charge or credit for any taxes reserved for, which is
determined by ReliaStar to have resulted from the maintenance of the Sub-Account
(see "Federal Income Tax Status," page 25);
(b) is the net result of:
(1) the net asset value per share of the corresponding Fund determined as
of the end of the immediately preceding Valuation Period, minus or plus
(2) the per share charge or credit for any taxes reserved for the
immediately preceding Valuation Period (see "Federal Income Tax Status," page
25); and
(c) is a factor representing the charges deducted for mortality and expense
risks (see "Mortality and Expense Risk Charges," page 18). The net investment
factor may be greater or less than one; and, therefore, the value of an
Accumulation Unit for the Sub-Account may increase or decrease. (For an
illustration of this calculation, see Appendix 1, Example A on page 34.)
C. DEATH BENEFIT DURING THE ACCUMULATION PERIOD.
If the Annuitant or Contract Owner dies prior to the Annuity Commencement
Date, the Contract generally ends. A payment will be made by ReliaStar under the
terms of the Contract upon receipt of due proof of the death of the Annuitant or
Contract Owner. The amount of the payment will be determined as of the Valuation
Date on or next following the date on which due proof of death is received by
ReliaStar at its Executive Office or other designated office.
During the first eight years of the Contract, the death benefit will be the
greater of (1) the sum of all purchase payments (gross, prior to any deductions
or charges) made under an individual Contract less any amounts surrendered, or
(2) the Contract Value. After an Owner has been in the Contract for more than
eight years, ReliaStar will determine the contract value on the eighth
anniversary of the Contract, and on each eighth anniversary thereafter, until
the Annuitant or Owner reaches 75 years of age. If an Owner's Contract is in
force for eight years or longer, and if permitted by state and/or federal law,
the amount of the death benefit will be the greater of (1) the sum of all
purchase payments (gross, prior to any deductions or charges) made under an
individual Contract less any amounts surrendered, or (2) the Contract Value, or
(3) the Contract Value as of the last eighth year Contract Anniversary Date
occurring prior to the Annuitant's or Owner's 75th birthday, less any amounts
surrendered after that last eighth year Contract Anniversary date.
If the Contract Owner did not elect payment of the death benefit under one
of the Annuity Options prior to the Annuitant's death, the Beneficiary may elect
to have the death benefit paid in a single sum or applied to provide an annuity
under one of the Annuity Options or as otherwise permitted by ReliaStar. If a
single sum settlement is requested, the proceeds will be paid within seven days
of receipt of such election and due proof of death. If an Annuity Option is
desired, election may be made by the Beneficiary during a ninety day period
commencing with the date of receipt of notification of death. If such an
election is not made, a single sum settlement will be made to the Beneficiary at
the end of such ninety day period. If an Annuity Option is elected, the Annuity
Commencement Date shall be the date specified in the election but no later than
ninety days after receipt by ReliaStar of notification of death. No deduction is
made for sales or other expenses upon the election of an Annuity Option.
D. TRANSFERS BETWEEN SUB-ACCOUNTS
During the Accumulation Period an Owner may transfer a portion or all of a
Sub-Account's Contract Value between Sub-Accounts within that Separate Account
or to the Fixed Account without payment of any fee or charge, subject to the
following conditions: (a) the dollar amount of a transfer from any one
Sub-Account may not be less than $250 except that an entire Sub-Account Contract
value may be transferred if less than $250; (b) once a Contract Owner has
allocated any Contract Value to any seventeen of the Sub-Accounts over the life
of the Contract, transfers may only be made among these seventeen Sub-Accounts
(see "The Funds" on page 13); and (c) no transfer may be made after the Annuity
Commencement Date or the date of receipt by ReliaStar of notification of death
of the Annuitant prior to the Annuity Commencement Date. Normally, such
transfers shall be made as of the end of the Valuation Period during which the
request for transfer is received by ReliaStar at its principal office or other
designated office, or a later Valuation Period if requested. ReliaStar in its
discretion reserves the right to refuse or reduce any transfer request that will
disadvantage a Sub-Account.
A transfer may be made by either: (1) submitting a written request to
ReliaStar at its principal office or other designated office, or (2) by
telephone or facsimile exchange instructions to ReliaStar by the Contract Owner
or the broker of record for an account, if ReliaStar has received an application
or Telephone/Fax Exchange Form authorizing telephone or fax exchanges for the
account. Any requests via fax are considered telephone requests and are bound by
the conditions in the Telephone/Fax Exchange Form you sign. Any fax should
include your name, daytime telephone number, contract number, and the names of
the Sub-Accounts from which and to which money will be transferred, and the
allocation percentage. The amount of the Contract Value transferred may be less
than the amount requested if the amount requested would be subject to a
restriction cited above. ReliaStar reserves the right to reject telephone or
written requests submitted in bulk on behalf of 10 or more accounts, and also
reserves the right to amend, suspend or discontinue this privilege at any time
without prior notice. No telephone transfers are permitted in states where they
are not allowed. To place a telephone transfer request, call ReliaStar at
1-800-338-7737. ReliaStar will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Such procedures may include,
among others, requiring some form of personal identification prior to acting
upon instructions received by telephone, providing written confirmation of such
transactions, and/or tape recording of telephone instructions. Your request for
telephone transactions authorizes ReliaStar to record telephone calls. If
reasonable procedures are not employed, ReliaStar may be liable for any losses
due to unauthorized or fraudulent instructions. Telephone transfers are subject
to the rules described above. If all telephone transfer lines are busy (which
might occur, for example, during periods of substantial market fluctuations)
Contract Owners might not be able to request telephone transfers and would have
to submit written requests.
E. DOLLAR COST AVERAGING
A Dollar Cost Averaging program is available to Contract Owners who want to
automatically transfer, at regular intervals, specified dollar amounts from any
one Sub-Account or the Fixed Account to any other investment options available
under the Contract.
This feature is available at the time of initial purchase of the Contract
or thereafter during the Accumulation Period. The Contract Owner specifies a
dollar amount of Contract Value in the Account to be automatically transferred
on a monthly basis to the other available Variable Account or Fixed Account
investment options. The minimum transfer amount is $100, but this may be divided
and allocated into two or more accounts. Transfers are not available if the
Sub-Account or Fixed Account has less than $100 of value.
Dollar Cost Averaging may also be selected for 12, 24 or 36 month periods.
The total Contract Value at the time this method is selected must be at least
$5,000 for the 12 month period and at least $10,000 for the 24 or 36 month
period. Transfers will be made on a monthly basis into available investment
options offered by the Contract, as selected by the Owner, and in the amount(s)
designated by the Owner. A minimum transfer of $100 is required, and this amount
may also be allocated among the Variable Account or Fixed Account
Transfers under the Dollar Cost Averaging program will be made on the first
business day of each month based on a valuation of the Accumulation Unit Values
of the accounts involved as of that day, provided the New York Stock Exchange is
open on that valuation date. If the Exchange is closed, valuation will be
determined in the same manner described above as of the next day the Exchange is
open.
The Dollar Cost Averaging program is elected by the Owner completing an
Automated Dollar Cost Averaging Form and returning it to the Company. We require
20 days after receipt to begin the program for the Contract Owner.
Dollar Cost Averaging will terminate upon any of the following events: (1)
the designated number of transfers are completed; (2) the Contract Value in the
designated Sub-Account or Fixed Account falls below $100 or is insufficient to
complete the next transfer for the amount designated by the Owner; (3) the Owner
requests termination in writing; in this event termination of the Dollar Cost
Averaging program will occur 20 days after the Company receives the termination
notice; or (4) surrender of the Contract.
Dollar Cost Averaging may be reinstated or changed, subject to the above
terms, 20 days after the Company receives a new election form.
F. SYSTEMATIC WITHDRAWAL PROGRAM
During the Accumulation Period a Contract Owner may elect, in writing, to
take systematic withdrawals from one or more of the Sub-Accounts. The
withdrawals may occur monthly, quarterly, semi-annually or annually, but the
amount to be systematically withdrawn must be at least $100. Withdrawals up to
the "No Charge Amount" (see page 17) are not subject to any contractual
Surrender Charges. Additional withdrawals are subject to such charges. The Owner
may choose to withdraw a specified dollar amount or a percentage of the Contract
Value.
Systematic payments will be made within the first ten business days of the
month. To begin the program, ReliaStar must receive a written request by the
first day of the month. The program may be canceled by the Owner at any time by
written notice to the Company. After a five (5) day notice to you the program
will automatically be canceled by the Company should the Contract Value fall
below $250 (see "Federal Income Tax Status," page 25).
G. SURRENDER AND TERMINATION
A Contract Owner, during the Accumulation Period under a deferred annuity
Contract, may elect, at any time before the earlier of the Annuity Commencement
Date or the death of the Annuitant, to surrender the Contract for all or any
part of his Individual Account. Participants in Tax-Sheltered Annuities (IRC
Section 403(b) Plans) and in the Texas Optional Retirement Program are subject
to the restrictions thereunder concerning the payment of amounts surrendered
(see "Tax-Sheltered Annuities" and "Texas Optional Retirement Program," pages 28
and 30, respectively). The Company will, upon receipt of a request for a partial
surrender, redeem a number of Accumulation Units necessary to equal the dollar
amount requested, plus any applicable Contingent Deferred Sales Charge, Contract
Maintenance Charge and premium taxes. For complete surrenders, the entire
Contract Value will be surrendered, the said applicable charges deducted, and
the balance sent to the Contract Owner (see "Charges and Other Deductions," page
16). The value of the Accumulation Units under a partial surrender and of the
Contract Value under a complete surrender will be determined as of the end of
the Valuation Period during which the written request is received by ReliaStar
at its principal office. Payment of proceeds in connection with a partial or
complete surrender will generally be made within seven days after receipt of
request for a surrender. Postponement of payments may occur in certain
circumstances (see "Time of Payments," page 24). (For information as to Federal
tax consequences resulting from surrenders, see "Federal Income Tax Status,"
page 25; for information about state premium tax consequences, see "Premium
Taxes," page 18 and Appendix A of the Statement of Additional Information.)
ANNUITY PERIOD
A. ANNUITY COMMENCEMENT DATE
Annuity payments will begin on the maturity date of the Contract which is
the first day of the calendar month following the Annuitant's 90th birthday, or
on an earlier Annuity Commencement Date as selected by the Contract Owner. Not
later than 30 days prior to the Annuity Commencement Date, the Contract Owner
may elect in writing to advance or defer the Annuity Commencement Date.
B. ANNUITY OPTIONS
The Contract Owner may, at any time at least 30 days prior to the Annuity
Commencement Date upon written notice to ReliaStar at its Principal Office,
elect to have payments made under any one of the Annuity Options provided in the
Contract. If one of the Annuity Options is not selected by the Contract Owner at
least 30 days prior to the Annuity Commencement Date, the amounts held under the
Contract on the date of maturity will automatically be applied to provide a
variable joint and one-half to survivor life annuity under Option 2c described
below.
On the Annuity Commencement Date, ReliaStar will apply the Contract value,
reduced by any applicable premium taxes not previously deducted, to provide a
Variable Annuity, a Fixed Annuity, or any combination thereof, as elected by the
Contract Owner.
The Contracts provide for the Annuity Options described below. The payments
under the Annuity Options may be fixed, variable, or any combination thereof, as
determined by the Contract Owner, except for Option 4 under which the payments
must be variable.
OPTION 1 - LIFE ANNUITY - An annuity payable during the lifetime of the
Annuitant, ceasing with the last payment due prior to the death of the
Annuitant. If this Option is elected, annuity payments terminate automatically
and immediately upon the death of the Annuitant without regard to the number or
total amount of payments received. (For example, if the Annuitant dies before
the due date of the second payment, no further payments will be made.)
Generally, however, the monthly payment amount during the Annuitant's lifetime
is greater under Option 1 than the monthly payment amount where payments for a
guaranteed number of months (Option 3) has been selected.
OPTION 2A - JOINT AND 100% SURVIVOR LIFE ANNUITY - An annuity payable
monthly during the joint lifetime of the Annuitant and the Joint Annuitant and
continuing thereafter at the same amount during the lifetime of the survivor,
ceasing with the last payment due prior to the death of the survivor.
OPTION 2B - JOINT AND TWO-THIRDS TO SURVIVOR LIFE ANNUITY - An annuity
payable monthly during the lifetime of the Annuitant and the Joint Annuitant and
continuing thereafter during the lifetime of the survivor at an amount equal to
two-thirds of the joint annuity payment, ceasing with the last payment due prior
to the death of the survivor.
OPTION 2C - JOINT AND ONE-HALF TO SURVIVOR LIFE ANNUITY - An annuity
payable monthly during the joint lifetime of the Annuitant and the Joint
Annuitant and continuing thereafter during the lifetime of the survivor at an
amount equal to one-half of the joint annuity payment, ceasing with the last
payment due prior to the death of the survivor.
UNDER OPTIONS 2A, 2B, 2C, ANNUITY PAYMENTS TERMINATE AUTOMATICALLY AND
IMMEDIATELY ON THE DEATHS OF BOTH THE ANNUITANT AND THE JOINT ANNUITANT WITHOUT
REGARD TO THE NUMBER OR TOTAL AMOUNT OF PAYMENTS RECEIVED, EVEN IF ONLY ONE
PAYMENT HAS BEEN RECEIVED.
OPTION 3 - LIFE ANNUITY WITH 60, 120 OR 240 MONTHLY PAYMENTS GUARANTEED -
An annuity payable monthly during the life of the Annuitant with the guarantee
that if, upon the death of the Annuitant, annuity payments have been made for
less than 60, 120 or 240 monthly periods, as elected, payments will be made as
follows:
1. Any guaranteed annuity payments will be continued during the remainder
of the selected period to the Beneficiary. The Beneficiary may, at any time,
elect to have the present value of the unpaid guaranteed number of annuity
payments commuted in the manner specified in 2 below, paid in a lump sum.
2. If a Beneficiary receiving annuity payments under this Option dies after
the death of the Annuitant, the present value, computed as of the Valuation
Period in which notice of death of the Beneficiary is received by ReliaStar at
its principal office, of the guaranteed number of annuity payments remaining
after the receipt of such notice and to which such deceased Beneficiary would
have been entitled had he not died, computed at the effective annual interest
rate assumed in determining the Annuity Tables contained in the Contract, shall
be paid in a lump sum in accordance with the Contract.
OPTION 4 - UNIT REFUND LIFE ANNUITY - An annuity payable monthly during the
lifetime of the Annuitant, terminating with the last payment due prior to the
death of the Annuitant. An additional annuity payment will be made to the
Beneficiary equal to the value of an Annuity Unit Value of the Separate Account
as of the date that notice of death in writing is received by ReliaStar at its
principal office, multiplied by the excess if any, of (a) over (b) where: (a) is
the net Contract value allocated to Sub-Accounts and applied under the Option at
the Annuity Commencement Date, divided by the corresponding Annuity Unit Value
as of the Annuity Commencement Date, and (b) is the product of the number of
Annuity Units applicable under the Sub-Account represented by each annuity
payment and the number of annuity payments made. The additional payment will be
equal to the combined results, if any, for the Separate Account. (For an
illustration of this Option see Appendix II on page 36.)
C. ALLOCATION OF ANNUITY
The Contract Owner may elect to have the net Contract Value, as determined
below in Paragraph E, applied at the Annuity Commencement Date to provide a
Fixed Annuity, a Variable Annuity, or any combination thereof. Such elections
must be made, or modified if previously made, in writing to ReliaStar at its
principal office or other designated office, at least 30 days prior to the
Annuity Commencement Date. After the Annuity Commencement Date, redemptions are
not allowed.
D. VALUE OF AN ANNUITY UNIT
For each of the Sub-Accounts of the Separate Accounts, the value of an
Annuity Unit was arbitrarily set initially at $1.00. The value of an Annuity
Unit for any subsequent Valuation Period is determined by multiplying the value
of the Annuity Unit for the immediately preceding Valuation Period by the net
investment factor (see "Accumulation Period - Deferred Variable Annuities: Net
Investment Factor," page 19) for the Valuation Period for which the value of the
Annuity Unit is being calculated, and multiplying the result by an interest
factor to offset the effect of an investment earnings rate of 3.5% per annum,
which is assumed in the Annuity Tables contained in the Contract. (For an
illustration of this calculation see Appendix III, Example A, on page 37.)
E. FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
When annuity payments are to commence, the Contract Value to be applied to
a Variable Annuity Option will be determined by multiplying the value of an
Accumulation Unit for the Valuation Date on or immediately preceding the seventh
day before the Annuity Commencement Date by the number of Accumulation Units
owned. This seven day period is used to permit calculation of amounts of annuity
payments and mailing of checks in advance of the due date. At that time any
applicable premium taxes not previously deducted will be deducted from the
Contract Value to determine the net Contract value. The resultant value is then
applied to the Annuity Tables set forth in the Contract to determine the amount
of the monthly installment for each $1,000 of contract value applied. These
Annuity Tables vary according to the Annuity Option selected by the Contract
Owner and according to the sex and adjusted age of the Annuitant and any joint
Annuitant at the Annuity Commencement Date. The Contract contains a formula for
determining the adjusted age, and the Annuity Tables are determined from the
Progressive Annuity Table assuming births in the year 1900 and a net investment
rate of 3.5% per annum.
Because statistically women as a class live longer than men, the annuity
payout rates for women under Annuity Tables which differentiate between men and
women are less, at the same age, than they are for men. On July 6, 1983, the
United States Supreme Court ruled that employer-based retirement benefits
derived from contributions made after August 1, 1983 may not differentiate
between men and women. In calculating benefits derived from contributions made
after August 1, 1983 for employer-based retirement plans funded by Contracts
offered by this prospectus, we will not use values which differentiate between
men and women. We will increase the guaranteed annuity payment rates in the
Annuity Tables for women so that they will equal the guaranteed annuity rates
for men. However, we will continue to use Annuity Tables which differentiate
between men and women for Contracts which are not associated with employer-based
retirement plans.
The dollar amount of the first monthly payment of a Variable Annuity,
determined as above, is divided by the value of an Annuity Unit for the
Sub-Account for the Valuation Date on or immediately preceding the seventh day
before the Annuity Commencement Date to establish the number of Annuity Units
representing each monthly payment under the Sub-Account. This seven day period
is used to permit calculation of amounts of annuity payments and mailing of
checks in advance of the due date. This number of Annuity Units remains fixed
for all variable annuity payments. The dollar amount of the second and
subsequent variable annuity payments is determined by multiplying the fixed
number of Annuity Units for the Sub-Account by the applicable value of an
annuity unit for the Valuation Date on or immediately preceding the seventh day
before the due date of the payment. The value of an Annuity Unit is determined
on each Valuation Date and will vary with the investment performance of the
Fund, and, therefore, the dollar amount of the second and subsequent variable
annuity payments may change from month to month. (For an illustration of the
calculation of the first and subsequent Variable Payments, see Appendix III,
Examples B, C, and D on pages 38, 39 and 40, respectively.)
If the net Contract Value on the Annuity Commencement Date is less than
$2,000, ReliaStar may pay such Value in one sum in lieu of annuity payments. If
the net Contract Value is not less than $2,000 but the annuity payments provided
for would be or become less than $20, ReliaStar may change the frequency of
annuity payments to such intervals as will result in payments of at least $20.
F. ASSUMED INVESTMENT RATE
A 3.5% assumed investment rate is built into the annuity tables in the
Contract. A higher assumption would mean a higher initial payment but more
slowly rising and more rapidly falling subsequent variable annuity payments. A
lower assumption would have the opposite effect. If the actual net investment
rate of the Sub-Account is at the annual rate of 3.5%, the variable annuity
payments will be level.
MISCELLANEOUS CONTRACT PROVISIONS
A. TIME OF PAYMENTS
All payments due under the Contracts will ordinarily be made within seven
days of the payment due date or within seven days after the date of receipt of a
request for a withdrawal or termination. However, ReliaStar reserves the right
to postpone payment of any amounts derived from purchase payments paid by check
or bank draft until ReliaStar is reasonably assured that the check or draft has
cleared, normally thirty days from the date of receipt of the check or draft.
ReliaStar further reserves the right to suspend or postpone the date of any
payment due under the Contracts (1) for any period during which the New York
Stock Exchange is closed (other than customary weekend and holiday closings) or
during which trading on the Exchange, as determined by the SEC, is restricted;
(2) for any period during which an emergency, as determined by the SEC, exists
as a result of which disposal of securities held in the Separate Account is not
reasonably practical or it is not reasonably practical to determine the value of
the Separate Account's net assets; or (3) for such other periods as the SEC may
by order permit for the protection of security holders or as may be permitted
under the 1940 Act.
B. RIGHT TO EXAMINE CONTRACT
Any Contract Owner may revoke the Contract at any time between the date of
application and the date 20 days after receipt of the Contract. In order to
revoke the Contract, it must be mailed or delivered (if it has already been
received), to the agent through whom the Contract was purchased, or to the
Company at 4601 Fairfax Drive, Arlington, Virginia 22203. Mailing or delivery
must occur on or before 20 days after receipt of the Contract for revocation to
be effective.
Upon revocation, ReliaStar will pay, unless otherwise required by state
and/or federal law, the Contract Value for the Contract based on the
Accumulation Unit Value as of the close of the business day when the Contract is
received at ReliaStar's principal office. The liability of the Separate Account
under this provision is limited to the Contract Owner's Contract Value in the
Separate Account on the date of receipt.
C. AMENDMENT OF CONTRACT
Contracts may be amended to conform to changes in applicable law or
interpretations of applicable law, or to accommodate design changes. Changes in
the Contract may need to be approved by Contract Owners and state insurance
departments.
D. REPORTS TO CONTRACT OWNERS
ReliaStar will mail to each Contract Owner, at the last known address of
record, at least annually, a report containing such information as may be
required by any applicable law or regulation and a statement of the Accumulation
Units credited to the Contract for the Sub-Accounts and the values of the
Accumulation Unit. In addition, latest available reports of the Fund invested in
by the Sub-Account will be mailed to each Contract Owner.
E. ASSIGNMENT
Any amounts payable under the Contracts may not be commuted, alienated,
assigned or otherwise encumbered before they are due. To the extent permitted by
law, no such payments shall be subject in any way to any legal process to be
used for payment of any claims against any Annuitant, joint annuitant or
Beneficiary. Separate Account P Contracts may be assigned. Separate Account Q
Contracts may not be assigned.
F. SUBSTITUTION OF FUND SHARES
If in ReliaStar's judgment one or more of the Funds becomes unsuitable for
investment by Contract Owners because of a change in the investment policy, or a
change in the tax laws, or because the shares are no longer available for
investment, ReliaStar may seek to substitute the shares of another Fund or the
shares of an entirely different mutual fund. Before this can be done, the
approval of the SEC, and possibly one or more state insurance departments, will
be required.
G. OWNERSHIP OF THE CONTRACT
Ordinarily, the purchaser of a Contract is both the Owner and the Annuitant
and is entitled to exercise all the rights under the Contract. However, the
Owner may be a person other than the Annuitant. This is frequently the case with
respect to Contracts issued in connection with corporate retirement plans and
Keogh Plans. Transfer of the ownership of a Contract may involve Federal income
tax consequences, and a qualified advisor should be consulted before any such
transfer is attempted.
FEDERAL INCOME TAX STATUS
A. INTRODUCTION
The Contracts may be purchased for use by individuals in retirement plans
which qualify for Federal tax benefits available under Sections 401, 403(a),
403(b), 408 or 457 plans ("Qualified Plans") under the provisions of the
Internal Revenue Code of 1986 (the "Code"). They may also be issued for deferred
compensation and other individual retirement plans which do not qualify under
such provisions of the Code ("Non-Qualified Plans"). The ultimate effect of
Federal income taxes on the amounts held under a Contract, on annuity payments,
and on the economic benefits of the Contract Owner, Annuitant or Beneficiary
depends on ReliaStar's tax status, on the type of retirement plan for which the
Contract is purchased, and upon the tax and employment status of the individual
concerned.
The following discussion is general in nature and is not intended as tax
advice. Each person concerned should consult a competent tax advisor. No attempt
is made to consider any applicable state or other tax laws. Moreover, the
discussion is based upon ReliaStar's understanding of the Federal income tax
laws as they are currently interpreted. No representation is made regarding the
likelihood of continuation of the Federal income tax laws or the current
interpretations by the Internal Revenue Service (the "Service"). For a
discussion of Federal income taxes as they relate to the mutual funds, please
see the accompanying Prospectuses of the Funds. References are made in this
discussion to the tax acts of the last several years that have significantly
affected taxation of these products: the Deficit Reduction Act of 1984 (the
"DRA"), the Tax Reform Act of 1986 (the "TRA"); and the Technical and
Miscellaneous Revenue Act of 1988 (the "TAMRA"). The TRA and the TAMRA tax acts
also include technical corrections to the DRA, some of which are discussed in
the material below.
B. TAX STATUS
ReliaStar is taxed as a life insurance company under Subchapter L of the
Code. Since Separate Accounts P and Q are not separate entities from ReliaStar
and their operations form a part of ReliaStar, they will not be taxed separately
as a "regulated investment company" under Subchapter M of the Code. Investment
income and realized capital gains on the assets of the Separate Account are
reinvested and taken into account in determining the value of an Accumulation
Unit held under the Contracts. As a result, such investment income and realized
capital gains are automatically applied to increase reserves under the Contract.
Under existing Federal income tax law, the Separate Accounts' investment income,
including realized net capital gains, is not taxed to ReliaStar to the extent it
is applied to increase reserves under a Contract. ReliaStar's basis in the
assets underlying the Contracts will be adjusted for appreciation or
depreciation, to the extent the reserves are so adjusted.
C. TAXATION OF ANNUITIES IN GENERAL - NON-QUALIFIED PLANS
Section 72 of the Code governs taxation of annuities. In general, a
Contract Owner is not taxed on increases in value of the Accumulation Units held
under a Contract until some form of distribution is made under the Contract.
However, in some cases, the increase in value may be subject to tax currently.
In the case of Contracts not owned by natural persons, see page 27. In the case
of Contracts not meeting the diversification requirements, see page 27.
1. SURRENDERS OR WITHDRAWALS.
Section 72 of the Code provides that a complete surrender or a withdrawal
from a Contract prior to the date of maturity of the Contract will, as a general
rule, be treated as taxable income to the extent the amounts held under the
Contract exceed the "investment in the Contract." The remainder will be treated
as a return of capital. For these purposes, loans against the Contract or the
pledging of the Contract are treated as withdrawals. The "investment in the
Contract" is the aggregate amount of purchase payments by or on behalf of an
individual under a Contract minus the amounts received under the Contract that
have been excludable from the individual's gross income. The taxable portion is
taxed at ordinary income tax rates. For Contracts issued in connection with
Qualified Plans, the "investment in the contract" can be zero.
2. ANNUITY PAYMENTS
For fixed annuity payments, the taxable portion of each payment is
determined by 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 is determined by a formula which establishes a
specific dollar amount of each payment that is not taxed. The dollar amount is
determined by dividing the investment in the Contract by the total number of
expected periodic payments. The remaining portion of each payment is taxed at
ordinary income rates. Withholding of Federal income taxes on all distributions
may be required unless the recipient elects not to have any amounts withheld and
properly notifies ReliaStar of that election. 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.
3. TAXATION OF DEATH BENEFIT PROCEEDS.
Amounts may be distributed from a Contract because of the death of an Owner
or Annuitant. Generally, such amounts are includible in the income of the
recipient as follows: (i) if distributed in a lump sum, they are taxed in the
same manner as a full surrender of the contract; or (ii) if distributed under an
Annuity Option, they are taxed in the same way as annuity payments. For these
purposes, the investment in the contract is not affected by the owner's or
annuitant's death. That is, the investment in the contract remains the amount of
any purchase payments paid which were not excluded from gross income.
4. PENALTY TAX ON SURRENDERS OR WITHDRAWALS.
Generally, a 10 percent (10%) penalty tax is imposed on premature taxable
distributions (surrenders or withdrawals). The penalty is 10 percent (10%) of
the amount received that is includible in income by the Contract Owner. The
penalty tax is not imposed on amounts received (i) after the Contract Owner
attains age 59 1/2, (ii) after the death of the Contract Owner (or, if the
Contract Owner is not an individual, on or after the death of the primary
annuitant), (iii) that are attributable to the Contract Owner becoming totally
disabled, (iv) in a series of substantially equal periodic payments made for the
life (or life expectancy) of the taxpayer or the joint lives (or joint life
expectancies) of such taxpayer and his Beneficiary, and (v) under an immediate
annuity contract (an annuity which is purchased with a single premium, the
annuity starting date of which commences no later than one year from the date of
the purchase of the annuity and which provides for a series of substantially
equal periodic payments to be made not less frequently than annually). Other tax
penalties may apply to certain distributions under a Qualified Plan Contract
(see "Qualified Plans," page 28).
5. POSSIBLE TAX CHANGES.
In recent years, legislation has been proposed that would have adversely
modified the Federal taxation of certain annuities. For example, one such
proposal would have changed the tax treatment of nonqualified annuities that did
not have "substantial life contingencies" by taxing income as it is credited to
the annuity. Although as of the date of this prospectus Congress is not
considering any legislation regarding the taxation of 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, it is also possible that any legislative change could be
retroactive (that is, effective prior to the date of such change).
D. ADDITIONAL CONSIDERATIONS
1. DISTRIBUTION-AT-DEATH RULES.
In order to be treated as an annuity contract, a Contract issued on or
after January 19, 1985 must provide that if any Contract Owner dies on or after
the Contract Annuity Commencement Date, and before the entire interest in the
Contract has been distributed, the remainder of his interest will be distributed
at least as quickly as the method in effect on the Owner's death. If a Contract
Owner dies before the Annuity Commencement Date, his entire interest must
generally be distributed within five (5) years after the date of death, or must
be annuitized for some period (not extending beyond the life or life expectancy
of the designated Beneficiary) within one (1) year after the date of death. If
the designated Beneficiary is the spouse of the deceased Contract 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 the sole Contract
Owner.
For Contracts issued on or after April 23, 1987, the following changes
apply. Where a Contract Owner is not an individual, the primary Annuitant is
considered a Contract Owner. The primary Annuitant is defined as the individual,
the events in whose life which are of primary importance in affecting the timing
and amount of the payout under the Contract. In addition, when a Contract Owner
is not an individual, a change in the primary Annuitant is treated as the death
of the Contract Owner. Finally, in the case of joint Contract Owners, the
distribution will be required at the death of the first of the Contract Owners.
Other rules relating to distributions at death apply to Qualified Plans. You
should consult your legal counsel and tax adviser regarding these rules and
their impact on the Contracts (see "Qualified Plans," page 28).
2. GIFT OF ANNUITY CONTRACTS.
With respect to Contracts issued on or after April 23, 1987, gifts of
non-qualified annuity contracts prior to the Annuity Commencement Date will
trigger tax on the gain in the Contract, with the done getting a step-up in
basis for the amount included in the donor's income. This provision does not
apply to transfers between spouses or incident to a divorce.
3. CONTRACTS OWNED BY NON-NATURAL PERSONS.
In the case of contributions after February 28, 1986, where the Contract is
held by a non-natural person (for example, a corporation) the income on that
Contract (generally the increase in the net surrender value less the premium
paid) is includible in income each year. The rule does not apply where the
non-natural person is the nominal Owner of a Contract and the beneficial Owner
is a natural person. The rule also does not apply where the annuity Contract is
acquired by the estate of a decedent, where the Contract is held under a
Qualified Plan, a TSA program, or an IRA, 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.
4. SECTION 1035 EXCHANGES.
Section 1035 of the Code provides that no gain or loss shall be recognized
on the exchange of one annuity contract for another. A replacement contract
obtained in a tax-free exchange of contracts succeeds to the status of the
surrendered contract. If the surrendered contract was issued prior to August 14,
1982, the tax rules which formerly provided that the surrender was taxable only
to the extent the amount received exceeds the Contract Owner's investment in the
Contract, will continue to apply. In contrast, Contracts issued on or after
January 19, 1985, in a Code Section 1035 exchange, are treated after exchange as
new Contracts for purposes of the penalty and distribution-at-death rules.
Special rules and procedures apply to Code 1035 transactions. Purchasers wishing
to take advantage of Code 1035 should consult their tax advisors.
5. ANTI-ABUSE RULES.
To discourage abusive situations, TAMRA provides that all deferred annuity
contracts issued after October 21, 1988 by the same insurer (or its affiliates)
to the same contract owner during any 12-month period will be aggregated in
figuring how much of any distribution is includible in gross income. TAMRA also
gives the Treasury Department regulatory authority to prevent avoidance of
TAMRA's rules concerning how much of any distribution is includible in gross
income.
6. DIVERSIFICATION REQUIREMENTS.
Section 817(h) of the Code provides that separate account investments
underlying a contract must be "adequately diversified" in accordance with
Treasury regulations in order for the contract to qualify as an annuity contract
under Section 72 of the Code. The Separate Accounts, through the portfolios of
the mutual fund, intend to comply with the diversification requirements
prescribed in regulations under Section 817(h) of the Code, which affect how the
assets in the various Sub-Accounts may be invested. Although ReliaStar does not
have control over the Funds in which the Separate Accounts invest, we expect
that the portfolios of Funds in which the Separate Accounts own shares will meet
the diversification requirements and that therefore the Contracts will be
treated as annuity contracts under the Code.
Section 817(h) applies to variable annuity contracts other than pension
plan contracts. The regulations reiterate that the diversification requirements
do not apply to pension plan contracts. All of the Qualified Plans (described
above) are defined as pension plan contracts for these purposes. Notwithstanding
the exception of Contracts in Qualified Plans from application of the
diversification rules, the investment vehicle for ReliaStar's Contracts in
Qualified Plans (i.e., the portfolios of mutual funds) will be structured to
comply with the diversification standards because it serves as the investment
vehicle for Contracts in Non-Qualified Plans as well as Qualified Plans.
7. OWNERSHIP TREATMENT.
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 includible in the variable
annuity contract owner's gross income. Several years ago, the IRS stated in
published rulings that a variable contract Owner will be considered the owner of
separate account assets if the contract Owner possesses incidents of ownership
in those assets, such as the ability to exercise investment control over the
assets. More recently, the Treasury Department announced, in connection with the
issuance of regulations concerning investment 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, 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 sub-accounts without being treated as
owners of the underlying assets."
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 contract owners were not owners of separate account assets. For
example, the Owner of the Contracts has the choice of one or more Sub-Accounts
in which to allocate premiums and Contract Values, and may be able to transfer
among Sub-Accounts more frequently than in such rulings. These differences could
result in the Contract Owner being treated as the Owner of the assets of the
Separate Accounts. In addition, ReliaStar 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. ReliaStar therefore reserves the right to modify
the Contracts as necessary to attempt to prevent the contract owners from being
considered the owners of the assets of the Separate Accounts.
8. 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 exchanges should
contact a competent tax advisor with respect to the potential effects of such a
transaction.
9. WITHHOLDING.
Pension and annuity distributions generally are subject to withholding for
the recipient's Federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients, however,
generally are provided the opportunity to elect not to have tax withheld from
distributions. Effective January 1, 1993, distribution from certain Qualified
Plans are generally subject to mandatory withholding.
10. MULTIPLE CONTRACTS.
All Non-Qualified deferred annuity contracts entered into after October 21,
1988 that are issued by ReliaStar (or its affiliates) to the same Owner during
any calendar year are treated as one annuity Contract for purposes of
determining the amount includible in gross income under Code Section 72(e). The
effects of this rule are not yet clear; however, it could affect the time when
income is taxable and the amount that might be subject to the 10% penalty tax
described above. In addition, the Treasury Department has specific authority to
issue regulations that prevent the avoidance of Section 72(e) through the serial
purchase of annuity contracts or otherwise. There may also be other situations
in which the Treasury may conclude that it would be appropriate to aggregate two
or more annuity contracts purchased by the same Owner. Accordingly, a Contract
Owner should consult a competent tax advisor before purchasing more than one
annuity contract.
E. QUALIFIED PLANS
The Contracts may be used with several types of Qualified Plans. TSAs,
Keoghs, Individual Retirement Arrangements ("IRAs"), Corporate Pension and
Profit-Sharing Plans and Section 457 Deferred Compensation Plans will be
treated, for purposes of this discussion, as Qualified Plans. 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 Contracts with the
various types of Qualified Plans. Participants under such Qualified Plans as
well as Contract Owners, 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, regardless of the terms and
conditions of the Contract issued in connection therewith. Owners are
responsible for determining that contributions, distributions and other
transactions with respect to the Contracts satisfy applicable law. Purchasers of
Contracts for use with any Qualified Plan should consult their legal counsel and
tax adviser regarding the suitability of the Contract.
The TRA has made numerous changes in the tax rules governing Qualified
Plans including rules with respect to: maximum contributions, minimum, maximum
and timing of distributions, anti-discrimination, coverage and vesting. The TRA
also generally increased the penalty tax on premature distributions,
substantially revised the general rules for the taxation of distributions, and
added a new penalty tax on large distributions. The following are brief
descriptions of the various types of Qualified Plans and of the use of the
Contracts in connection therewith:
1. TAX-SHELTERED ANNUITIES.
Section 403(b) of the Code permits public school employees and employees of
certain types of charitable, educational and scientific organizations, specified
in Code 501(c)(3) to purchase annuity contracts and, subject to certain
limitations, exclude the amount of purchase payments from gross income for
Federal income tax purposes. However, these payments may be subject to FICA
(Social Security) taxes. These annuity contracts are commonly referred to as
"TSAs." In accordance with the requirements of Section 403(b), any Contract used
for a 403(b) plan will restrict distributions of (i) elective contributions made
in years beginning after December 31, 1988, and (ii) earnings on those
contributions, and (iii) earnings on amounts attributable to elective
contributions held as of the end of the last year beginning before January 1,
1989. However, distributions of such amounts will be allowed upon death of the
employee, attainment of age 59 1/2, separation from service, disability, or
financial hardship, except that income attributable to elective contributions
may not be distributed in the case of hardship. Purchasers of the Contracts for
these purposes should seek competent advice as to eligibility, applicable
non-discrimination rules, limitations on permissible amounts of purchase
payments, required distributions and tax consequences upon distribution.
2. KEOGH PLANS.
The Self-Employed Individual Tax Retirement Act of 1962, as amended,
permits self-employed individuals to establish "Keoghs," or Qualified Plans for
themselves and their employees. The tax consequences to participants under such
a plan depend upon the terms of the plan. In addition, special rules apply to
such plans with respect to maximum permissible contributions, required
distributions, nonforfeitability of interests, nondiscrimination, and the
taxation of distributions. Restrictions on the availability of the amounts may
be applicable. In order to establish such a plan, a plan document must be
adopted and implemented by the employer, and advance approval by the IRS is
often requested. Purchasers of the Contracts for use with Keogh plans should
seek competent advice as to the suitability of the proposed plan document and of
the Contracts to those specific needs.
3. INDIVIDUAL RETIREMENT ARRANGEMENTS.
Section 408 of the Code permits eligible individuals to contribute to an
individual retirement arrangement known as an "IRA." These IRAs are subject to
limitations on the amount which may be contributed, the deductibility of
contributions, the persons who may be eligible, the time when distributions must
commence and the taxation of distributions. In addition, distributions from
certain other types of Qualified Plans may be placed on a tax-deferred basis
into an IRA. Purchasers of the Contracts for such purposes should seek competent
advice as to the suitability of the Contracts therefore. The Internal Revenue
Service has not reviewed the Contract for qualification as an IRA, and has not
generally ruled whether a death benefit provision such as the provision in the
Contract comports with IRA qualification requirements.
4. CORPORATE PENSION AND PROFIT SHARING PLANS.
Sections 401(a) and 403(a) of the Code permit corporate employers to
establish various types of retirement plans for employees. The rules applicable
to such plans of corporate employers are similar to the rules applicable to
Keogh plans. Such retirement plans may permit the purchase of Contracts to
provide benefits thereunder. Corporate employers, intending to use the Contracts
in connection with such plans, should seek competent advice in connection
therewith.
5. SECTION 457 DEFERRED COMPENSATION PLANS WITH RESPECT TO SERVICE FOR
STATE AND LOCAL GOVERNMENTS AND TAX-EXEMPT ENTITIES. Section 457 of the Code
provides for certain deferred compensation plans with respect to service for
state and local governments and tax-exempt entities. The Contracts may be used
in connection with these plans; however, under these plans, the Contract Owner
is the plan sponsor, and the individual participants in the plans are the
annuitants. Under such Contracts, the rights of individual plan participants are
governed solely by their agreements with the plan sponsor and not by the terms
of the Contracts. A number of special rules apply to deferred compensation plans
described in Code Section 457, relating to items such as ownership of plan
assets, persons allowed to participate, maximum contributions, permitted
distributions, required distributions, and taxation of distributions.
Accordingly, state and local governments and tax-exempt entities intending to
use the Contracts in connection with such plans should seek competent advice in
connection therewith.
F. WITHHOLDING REQUIREMENTS WHERE ROLLOVERS ARE DISTRIBUTED DIRECTLY TO THE
PARTICIPANT
A qualified retirement or annuity plan must permit participants to elect to
have any distribution that is eligible for rollover treatment ("Eligible
Rollover Distributions") transferred directly to another qualified plan, IRA or
individual retirement annuity specified by the participant. Direct transfers are
sometimes referred to as Trustee-to-Trustee transfer.
Beginning January 1, 1993, when Eligible Rollover Distributions are made
directly to the participants, rather than Trustees-to-Trustee, 20% of the
distribution will be withheld and paid to the IRS.
G. SEEK TAX ADVICE
The above description of Federal income tax consequences of the different
types of Qualified Plans which may be funded by the Contracts offered by this
Prospectus is only a brief summary and is not intended as tax advice. The rules
relating to Qualified Plans are extremely complex and often difficult to
comprehend. Many of these rules were changed by the TRA. Anything less than full
compliance with the applicable rules, all of which are subject to change, may
trigger severe adverse tax consequences. A prospective purchaser considering
adoption of a Qualified Plan should first consult a qualified and competent tax
advisor.
REGULATION
A. STATE
ReliaStar is subject to the laws of the State of New York governing
insurance companies and to regulation by the New York Department of Insurance.
An annual statement in a prescribed form is filed with the Department of
Insurance each year covering the operations of ReliaStar for the preceding year
and its financial condition as of the end of such year.
ReliaStar's books and accounts are subject to review by the Department of
Insurance at any time and a full examination of its operations is conducted
periodically. Such regulation does not, however, involve any supervision of
management or investment practices or policies except to determine compliance
with the requirements of New York Insurance Law. In addition, ReliaStar is
subject to regulation under the insurance laws of other jurisdictions in which
it may operate.
B. PROPOSED UNISEX LEGISLATION
From time to time, legislation in several forms is considered to prohibit
insurers from using rates or factors which distinguish on the basis of sex in
determining premium rates and benefit payments under insurance policies and
annuity contracts (see "Annuity Period," page 22). If "unisex" insurance
requirements are enacted, ReliaStar may be required to utilize contract annuity
rate tables which do not differentiate in the amount of annuity benefits on the
basis of sex. If enacted, one aspect of such legislation might result in a
Contract change which provides for either an increase in the initial rate
amounts of monthly benefits to be applied for females or a decrease in such rate
amounts for males or a combination of both. ReliaStar may be required to amend
existing policies to reflect such changes.
VOTING RIGHTS
As stated above, all of the assets held in the Sub-Accounts of the Separate
Accounts will be invested in shares of the corresponding Fund (the "Fund
Shares"). In accordance with its view of present applicable law, ReliaStar will
vote the Fund Shares held in the Separate Account at meetings of shareholders of
the Fund in accordance with instructions received from the Contract Owner. Fund
Shares as to which no timely instructions are received and Fund shares that are
not otherwise attributable to Contract Owners will be voted by ReliaStar in
proportion to the instructions received from all persons furnishing timely
instructions. However, if the 1940 Act or any regulation thereunder should be
amended or if the present interpretation thereof should change, and as a result
ReliaStar determines that it is permitted to vote the Fund Shares in its own
right, it may elect to do so.
Prior to the Annuity Commencement Date, the number of Fund Shares held in
the Sub-Accounts of the Separate Accounts which is attributable to each Contract
Owner is determined by dividing the Sub-Account Contract value by the net asset
value of one Fund Share. After the Annuity Commencement Date, the number of Fund
Shares held in the Sub-Account of the Separate Account which is attributable to
each Contract is determined by dividing the reserve held in the Sub-Account for
the variable annuity payment under such Contract by the net asset value of one
Fund Share. As this reserve fluctuates, the number of votes fluctuates, although
generally they will decrease, causing the votes attributable to a Contract to
decrease.
The number of votes which a person has the right to cast will be determined
as of the record date established by each Fund. Voting instructions will be
solicited by written communication prior to the date of the meeting at which
votes are to be cast. Each person having a voting interest in the Separate
Account will receive reports and other materials relating to the Funds.
TEXAS OPTIONAL RETIREMENT PROGRAM
Participants in the Texas Optional Retirement Program may not receive the
proceeds of a withdrawal from, or complete surrender of, a Contract, or apply
them to provide annuity options prior to retirement except in the case of
termination of employment in the Texas public institutions of higher education,
death or total disability. Such proceeds may, however, be used to fund another
eligible retirement vehicle.
LITIGATION
No litigation is pending that would have a material effect upon the
Separate Accounts.
REGISTRATION STATEMENT
A registration statement has been filed with the SEC under the Securities
Act of 1933, as amended, with respect to the Contracts. This Prospectus does not
contain all the information set forth in the registration statement and
amendments thereto and the exhibits filed as a part thereof, to all of which
reference is hereby made for further information concerning the Separate
Accounts, ReliaStar, and the Contracts. Statements contained in this Prospectus
as to the content of the Contract and other legal instruments are summaries. For
a complete statement of the terms thereof, reference is made to such instruments
as filed.
LEGAL OPINIONS
Legal matters in connection with the Contracts described in this Prospectus
have been passed upon by Robert B. Saginaw, Counsel for ReliaStar.
PERFORMANCE DATA
From time to time, the ReliaStar Bankers Security Variable Annuity Accounts
("The USA Plan") may advertise several types of performance measures relating
both to the Funds and to the Sub-Accounts themselves for specified periods,
assuming current Contract charges and actual Fund performance. Methods of
quoting performance will include standardized calculations of average annual
total return for one, five and ten years, ending on a recent calendar quarter,
or if such periods have not yet elapsed, at the end of a shorter period
corresponding to the life of the Sub-Account. The USA Plan may also use
nonstandardized performance measures, comparisons of investment results to
various indices including the Dow Jones Average of 30 Industrial Stocks, the
Standard and Poor's 500 Stock Index, the Consumer Price Index, the Salomon
Brothers High Grade Bond Index, the Lehman Brothers Government/Corporate Bond
Index and the Merrill Lynch Government/Corporate Master Index, all of which are
widely recognized indices of stock market performance but which do not include
the reinvestment of income dividends and do not consider tax consequences. In
addition, The USA Plan may be compared to the performance of other fixed income
or government bond mutual funds or mutual fund indices such as reported by
Lipper Analytical Services, Inc. ("Lipper") or CDA Investment Technologies, Inc.
("CDA"). Lipper and CDA are widely recognized independent mutual fund reporting
services. Their performance calculations are based upon changes in net asset
value with all dividends reinvested, but do not include the effect of any sales
charges. Comparisons may also be made with results of other mutual funds or
groups of mutual funds in advertisements or in reports furnished to present or
prospective shareholders. Standardized measures of performance are based on
several assumptions which may or may not apply to an individual investor's
account. Because the average annual total return figures are annualized, they
represent an average percentage change over an annual period which may be based
on less than 12 months of actual data, whereas previously reported total return
figures may not have been annualized and represented in those cases the
aggregate percentage or dollar-value change over the period in question.
The USA Plan's method for computing average annual total return is to
compute the average annual compounded rate of return that equates a purchase
payment to the market value of such purchase payment on the last day of the
period for which such return is calculated. For purposes of the calculation, it
is assumed that an initial payment of $1,000 is made on the first day of the
period for which the return is calculated. All recurring charges are reflected
in the calculations. The asset charges are reflected in the changes in unit
values. The $30 Contract Maintenance Charge is deducted by dividing the total
amount of contract fees collected in the prior year by the total average net
assets.
Certain Sub-Accounts may quote current yield and effective yield. The
current yield refers to the income generated by an investment over a 7-day
period (which period will be stated in the advertisement). This income is then
assumed to be earned each week over a 52-week period. The effective yield is
calculated similarly, but the income earned by the sub-account investments are
assumed to be reinvested.
Each of the other Sub-Accounts may also quote yield. The yield of these
Sub-Accounts refers to the net income earned by the underlying mutual fund over
a 30-day period (which period will be stated in the advertisement). This income
is then assumed to be earned for a full year and to be reinvested each month or
six months. The resulting semi-annual yield is doubled.
Other reportable performance measures may include income production rates,
percentage changes in Accumulation Unit Values, and distribution rates. A
distribution rate is simply a measure of the level of income and short-term
capital gain dividends distributed for a specified period. It is, therefore, not
intended to be a complete measure of performance. The distribution rate may
sometimes be greater than yield since, for instance, it may include short-term
gains (which may be nonrecurring) and may not include the effect of amortization
of bond premiums. A distribution rate will be accompanied by a disclosure
explaining (i) the components of the distribution rate that differ from yield,
(ii) where components consist of capital gains, they are nonrecurring, and (iii)
where a component consists of option premiums, what potential effect on overall
performance option writing might have.
Any of the indicators mentioned in the section entitled "Performance Data"
may be included in sales literature and shareholder reports when accompanied by
required standardized calculations. More detailed information on performance
data is set forth in the Statement of Additional Information.
FINANCIAL STATEMENTS
The financial statements of ReliaStar set forth in the Statement of
Additional Information are separate and apart from the financial statements of
Separate Accounts P and Q and should be considered only as bearing upon the
ability of ReliaStar to meet its obligations under the Contracts.
STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific information
and financial statements relating to the Separate Accounts and ReliaStar. The
Table of Contents of the Statement of Additional Information is set forth below:
<TABLE>
<CAPTION>
<S> <C>
General Information About the Company..................................................................... S-2
Custodian and Accountants................................................................................. S-2
Underwriter............................................................................................... S-2
Calculation of Performance Data........................................................................... S-2
Financial Statements...................................................................................... S-9
</TABLE>
Contract Owner inquiries and requests for a Statement of Additional
Information should be directed to ReliaStar in writing at 4601 Fairfax Drive,
Arlington, Virginia 22203, or by telephoning ReliaStar at (703) 875-3623.
THE FIXED ACCOUNT
During the accumulation period, the Owner may elect to have Contract Values
accumulate on a fixed basis in the Fixed Account within the Company's General
Account, which consists of all assets of ReliaStar other than allocated to any
separate account of ReliaStar. Because of exemptive and exclusionary provisions,
interests in the Fixed Account have not been registered under the Securities Act
of 1933 and the Fixed Account has not been registered as an investment company
under the 1940 Act. Accordingly, neither the Fixed Account nor any interest
therein are subject to the provisions of these acts and, as a result, the staff
of the SEC has not reviewed the disclosures in this Prospectus relating to the
Fixed Account. Disclosures regarding the Fixed Account may, however, be subject
to certain generally applicable provisions of the Federal securities laws
relating to the accuracy and completeness of statements made in prospectuses.
This Prospectus is generally intended to serve as a disclosure document only for
the aspects of the Contract involving Separate Accounts P and Q and their
Sub-Accounts and contains only selected information regarding the Fixed Account.
More information regarding the Fixed Account may be obtained from ReliaStar's
principal office or from your registered representative.
GENERAL DESCRIPTION
ReliaStar's obligations with respect to the Fixed Account are supported by
its General Account. Subject to applicable law, ReliaStar has sole discretion
over the investment of the assets in its General Account.
ReliaStar guarantees that Contract Values in the Fixed Account will accrue
interest at an effective rate of at least 4%, independent of the actual
investment experience of the General Account. ReliaStar may, at its sole
discretion, credit a higher rate of interest, although it is not obligated to
credit interest in excess of 4% per year. Any interest rate in excess of 4% per
year with respect to any amount in the Fixed Account pursuant to a Contract will
be declared by ReliaStar for a specific period of time as follows. On the issue
date and on any Contract Anniversary, the excess interest, if any, will be set
on the Fixed Account Value and guaranteed until the next Contract Anniversary.
Net purchase payments and transfers into the Fixed Account during the contract
year will be credited with an excess interest rate as then declared and such
excess interest rate will be guaranteed until the next Contract Anniversary.
Once credited, such interest will be guaranteed and become part of the
Contract Value in the Fixed Account from which deductions for fees and charges
may be made.
Charges under the Contract are the same as when a Separate Account is being
used, except that the 1.25% per annum charged for mortality and expense risk is
not imposed on amounts of Contract Value in the Fixed Account.
FIXED ACCOUNT VALUE
The Contract's Fixed Account Value on any Valuation Date is the sum of the
net purchase payments allocated to the Fixed Account, plus any transfers from
the Separate Accounts, plus interest credited to the Fixed Account, less any
surrenders, any applicable Contingent Deferred Sales Charges, any applicable
premium taxes, annual Contract Maintenance Charges allocated to the Fixed
Account, and/or transfers to the Separate Accounts.
TRANSFERS, TOTAL AND PARTIAL SURRENDERS
Amounts in Fixed Account are generally subject to the same rights and
limitations and will be subject to the same charges as are amounts allocated to
the Sub-Accounts of the Separate Accounts with respect to total and partial
surrenders (see page 16 of prospectus, "Charges and Other Deductions").
Transfers out of the Fixed Account have special limitations. The owner may
make partial or total transfers of Contract Values from the Fixed Account to one
or more variable Sub-Accounts available in the Contract, as long as the amounts
to be transferred have been in the Fixed Account for at least six months, unless
transfers are being made as a part of an automatic dollar cost averaging
program. The following conditions are also applicable: (a) all transfers within
the Contract are without payment of any fee or charge; (b) the dollar amount of
a transfer may not be less than $250 except that the entire Fixed Account Value
may be transferred if less than $250; and (c) no transfer may be made after the
Annuity Commencement Date or the date of receipt by ReliaStar of notification of
death of the Annuitant. All transfers shall be made as of the end of the
Valuation Period during which the request for transfer is received by ReliaStar
at its principal office, or later Valuation Period if requested.
APPENDIX I
<TABLE>
<CAPTION>
EXAMPLE A
FORMULA AND ILLUSTRATION FOR DETERMINING
THE NET INVESTMENT FACTOR OF A
SUB-ACCOUNT FOR ALL CONTRACTS
A + B - C
Net Investment Factor = --------- - F
D - E
Where:
<S> <C> <C> <C> <C>
A = The Net Asset Value of the Fund as of the end of the current
Valuation Period.
Assume....................................................................= $11.570000
B = The per share amount of any dividend or capital gains
distribution since the end of the immediately preceding Valuation
Period.
Assume....................................................................= 0
C = The per share charge or credit for any taxes reserved for at the
end of the current Valuation Period.
Assume....................................................................= 0
D = The Net Asset Value of a Fund share at the end of the immediately
preceding Valuation Period.
Assume....................................................................= 11.400000
E = The per share amount of any taxes reserved for at the end of the
immediately preceding Valuation Period.
Assume....................................................................= 0
F = The daily deduction for mortality and expense risks, which
totals 1.25% on an annual basis
On a Daily Basis..........................................................= 0.000034
Then, the Net Investment Factor = 11.570000 - 0.000034
---------
11.400000
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE B
FORMULA AND ILLUSTRATION FOR DETERMINING
ACCUMULATION UNIT VALUE OF A
SUB-ACCOUNT
Accumulation Unit Value = A x B
Where:
<S> <C> <C> <C> <C>
A = The Accumulation Unit Value for the immediately preceding
Valuation Period.
Assume.....................................................................= $1.347125
B = The Net Investment Factor for the current Valuation Period.
Assume....................................................................= 1.014878
Then, the Accumulation Unit Value
= $1.347125 x 1.014878
= $1.367167
</TABLE>
<TABLE>
<CAPTION>
APPENDIX II
EXAMPLE A
FORMULA AND ILLUSTRATION FOR DETERMINING
DEATH BENEFIT PAYABLE UNDER
SETTLEMENT OPTION 4 - UNIT REFUND LIFE ANNUITY
Upon the death of the Annuitant the designated Beneficiary under this option
will receive under each applicable Separate Account a lump sum death benefit of
the then dollar value of a number of Annuity Units computed using the following
format:
Annuity Units Payable = A - (C X D), IF A IS GREATER THEN C X D
-------------------------------------
- -
B B
Where:
<S> <C> <C> <C> <C>
A = The net benefit applied on the Annuity Commencement Date to
purchase the Variable Annuity.
Assume....................................................................= $15,000
B = The Annuity Unit Value at the Annuity Commencement Date.
Assume....................................................................= 1.103300
C = The number of Annuity Units represented by each payment made.
Assume....................................................................= 82.933019
D = The total number of monthly Variable Annuity Payments made prior
to the Annuitant's death.
Assume....................................................................= 24
Then the number of Annuity Units Payable
$15,00000 - (82.933019 X 24)
--------- - ----------------
$1.103300
</TABLE>
= 13,595.576905 - 1990.392456
= 11,605.184449 Annuity Unit
If the value of an Annuity Unit on the date of receipt of notification of death
was $1.130529 then the amount of the benefit under each applicable Separate Unit
would be:
11,605.18449 x $1.130529 = $13,120.00
This calculation will be made for each Separate Account upon which Variable
Annuity Payments were based.
<TABLE>
<CAPTION>
APPENDIX III
EXAMPLE A
FORMULA AND ILLUSTRATION FOR DETERMINING
ANNUITY VALUE OF A
SEPARATE ACCOUNT
Annuity Unit Value = A x B x C
Where:
<S> <C> <C> <C> <C>
A = Annuity Unit Value for the immediately preceding Valuation
Period.
Assume....................................................................= $1.097696
B = Net Investment Factor for the Valuation Period for which the
Annuity Unit is being calculated.
Assume....................................................................= 1.005200
C = A factor to neutralize the assumed interest of 3 1/2% built into
the Annuity tables used.
Daily factor equals.......................................................= 0.999906
Then, the Annuity Value is:
$1.097696 x 1.005200 x 0.999906 = $1.103300
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE B
FORMULA AND ILLUSTRATION FOR DETERMINING
AMOUNT OF FIRST MONTHLY VARIABLE ANNUITY PAYMENT FROM
ONE SEPARATE ACCOUNT
First Monthly Variable Annuity Payment = A X B
$1,000
Where:
<S> <C> <C> <C> <C>
A = The Contract value allocated to a Separate Account for the
Valuation Date or immediately preceding the seventh day before the
Annuity Commencement Date.
Assume....................................................................= $15,000.00
B = The Annuity purchase rate per $1,000 based upon the option
selected, the sex and adjusted age of the Annuitant according to
the tables contained in the Contract.
Assume....................................................................= 6.100000
Then, the first Monthly Variable Payment
= $15,000 X $6.10 = $91.50
-------------------
$1,000
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE C
FORMULA AND ILLUSTRATION FOR DETERMINING
THE NUMBER OF ANNUITY UNITS FOR ONE SEPARATE ACCOUNT
REPRESENTED BY EACH MONTHLY VARIABLE ANNUITY PAYMENT
Number of Annuity Units = A
B
Where:
<S> <C> <C> <C> <C>
A = The dollar amount of the first monthly Variable Annuity Payment.
Assume....................................................................= $91.50
B = The Annuity Unit Value for the Valuation Date on or immediately
preceding the seventh day before the Annuity Commencement Date.
Assume....................................................................= $1.103300
Then, the number of Annuity Units
= $91.50 = 82.933019
$1.103300
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE D
FORMULA AND ILLUSTRATION FOR DETERMINING
THE AMOUNT OF SECOND AND SUBSEQUENT MONTHLY VARIABLE
ANNUITY PAYMENTS FROM ONE SEPARATE ACCOUNT
Second Monthly Variable Annuity Payment = A x B
Where:
<S> <C> <C> <C> <C>
A = The number of Annuity Units represented by each monthly Variable
Annuity Payment.
Assume....................................................................= $82.933019
B = The Annuity Unit Value for the Valuation Date on or immediately
preceding the seventh day before the date on which the second (or
subsequent) Variable Annuity Payment is due.
Assume....................................................................= $1.128621
Then, the second monthly Variable Annuity Payment
= $82.933019 x $1.128621 = $93.60
The above example was based upon the assumption of an increase in the Annuity
Unit Value since the initial Variable Annuity Payment due to favorable
investment results of the Separate Account and the Fund. If the investment
results were less favorable, a decrease in the Annuity Unit Value and in the
second monthly Variable Annuity Payment could result. Assume B above was
$1.074360.
Then, the second monthly Variable Annuity Payment
= $82.933019 x $1.074360 = $89.10
</TABLE>
RELIASTAR BANKERS SECURITY VARIABLE ANNUITY FUNDS M, P AND Q
INDIVIDUAL FLEXIBLE PAYMENT VARIABLE ANNUITY CONTRACTS
OFFERED BY
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
1000 Woodbury Lane, Suite 102
Woodbury, NY 11797
Telephone: (516) 682-8700
STATEMENT OF ADDITIONAL INFORMATION
April 30, 1997
This Statement of Additional Information is not a Prospectus and should be
read in conjunction with the Contract's Prospectus, dated April 30, 1997, which
is available without charge by contacting ReliaStar Bankers Security Life
Insurance Company at the above address or telephone number.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
HEADING PAGE
- ------- ----
<S> <C>
GENERAL INFORMATION ABOUT THE COMPANY...........................................................................................S-2
CUSTODIAN AND ACCOUNTANTS.......................................................................................................S-2
UNDERWRITER.....................................................................................................................S-2
CALCULATION OF PERFORMANCE DATA.................................................................................................S-2
FINANCIAL STATEMENTS............................................................................................................S-9
</TABLE>
GENERAL INFORMATION ABOUT THE COMPANY
ReliaStar Bankers Security Life Insurance Company ("ReliaStar" or the
"Company") is a stock life insurance company incorporated under the laws of the
State of New York in 1917 under the name The Morris Plan Insurance Society. It
adopted the name Bankers Security Life Insurance Society in 1946 and ReliaStar
Bankers Security Life Insurance Company in 1996. ReliaStar is a wholly-owned
subsidiary of ReliaStar United Services Life Insurance Company ("ReliaStar
United Services") which in turn is wholly-owned by ReliaStar Life Insurance
Company, a subsidiary of ReliaStar Financial Corp. ReliaStar Financial Corp. is
a holding company incorporated under the laws of the State of Delaware whose
subsidiaries are engaged in life and health insurance and financial services.
CUSTODIAN AND ACCOUNTANTS
A. Custodian
ReliaStar, whose address appears on the cover of the prospectus, is the
custodian of the assets of the Separate Accounts.
B. Accountants
The annual financial statements of ReliaStar Bankers Security Variable
Annuity Funds P and Q as of December 31, 1996, which are incorporated herein by
reference in the Statement of Additional Information, and the annual financial
statements of ReliaStar, which are included in the Statement of Additional
Information, have been audited by Deloitte & Touche LLP, independent auditors,
as stated in their reports, which are incorporated by reference and included
herein, and have been so incorporated and included in reliance upon the reports
of such firm, which reports are given upon their authority as experts in
accounting and auditing. From 1987 to 1994, KPMG Peat Marwick LLP served as the
independent auditors for the Separate Accounts.
UNDERWRITER
Effective February 1, 1997, the Contracts are distributed in continuous
offering by the principal underwriter, Washington Square Securities, Inc.
("WSSI"), an affiliate of ReliaStar and a subsidiary of ReliaStar Financial
Corp. WSSI is a registered broker/dealer under the Securities Exchange Act of
1934 and is a member of the National Association of Securities Dealers, Inc. The
principal business address of WSSI is 100 Washington Avenue South, Minneapolis,
MN 55401. Prior to February 1, 1997, the Contracts were distributed and
underwritten by ReliaStar Financial Marketing Corporation ("RFMC"; formerly
known as USLICO Securities Corporation), also an affiliate of ReliaStar. The
Contracts are sold by state-licensed insurance agents of ReliaStar who are also
registered representatives of broker/dealers who have sales agreements with
WSSI. There are no special purchase plans or exchange privileges not described
in the Prospectus (see "Charges and Other Deductions," on page 16 of the
Prospectus). Commissions paid to these and other broker/dealers obtaining
applications for Contracts accepted by ReliaStar will not exceed 6% of the
Purchase Payments. The Contracts are sold in those states where their sale is
lawful. Under certain circumstances, dealers may, in the calendar year in which
they qualify, receive their commissions in advance of Contract Owner purchase
payments. During 1994, 1995 and 1996, RFMC received approximately $907,648.12,
$370,000, and $0, respectively, of commission income for the sale of variable
annuity contracts issued by ReliaStar.
CALCULATION OF YIELD AND RETURN
Current Yield and Effective Yield:
Current yield and effective yield will be calculated only for the
Oppenheimer Money Fund.
The current yield is based on a seven-day period (the "base period") and is
calculated by determining the "net change in value" on a hypothetical account
having a balance of one Accumulation Unit at the beginning of the period,
dividing the net change in account value by the value of the account at the
beginning of the base period to obtain the base period return, and multiplying
the base period return by 365/7 with the resulting yield figure carried to the
nearest hundredth of one percent. The effective yield is computed in a similar
manner, except that the base period return is compounded by adding 1, raising
the sum to a power equal to 365 divided by 7, and subtracting 1 from the result,
according to the following formula:
365/7
EFFECTIVE YIELD = [(Base Period Return + 1) ] - 1
Net changes in value of a hypothetical account will include net investment
income of the account (accrued daily dividends as declared by the Oppenheimer
Money Fund, less daily expense and contract charges to the account) for the
period, but will not include realized or unrealized gains or losses on its
underlying fund shares.
The Oppenheimer Money Fund's yield and effective yield will vary in
response to any fluctuations in interest rates and expenses of the Sub-Account.
The yield and effective yield of the Sub-Account for the seven day period
ending December 31, 1996 were as follows:
Non-Qualified Contracts Qualified Contracts
Yield: 3.08% Yield: 3.08%
Effective Yield: 3.12% Effective Yield: 3.12%
Standardized Yield:
A standardized yield computation may be used for the Northstar High Yield
Bond Fund, the Oppenheimer Strategic Bond, Fund, the Oppenheimer Bond Fund and
the Fidelity Investment Grade Bond Portfolio Sub-Accounts. The yield quotation
will be based on a recent 30 day (or one month) period, and is computed by
dividing the net investment income per Accumulation Unit earned during the
period by the maximum offering price on the last day of the period according to
the following formula:
6
YIELD = 2[(a - b + 1) - 1]
-----
cd
Where:
a = net investment earned during the period by the Fund or Portfolio
attributable to shares owned by the Sub-Account.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of Accumulation Units outstanding during
the period.
d = the maximum offering price per Accumulation Unit on the last day of
the period.
Yield on each Sub-Account is earned from dividends declared and paid by the
underlying Fund or Portfolio, which are automatically reinvested in Fund or
Portfolio shares.
Following are the standardized yields for the Northstar High Yield Bond
Fund, the Oppenheimer Strategic Bond Fund, the Oppenheimer Bond Fund and the
Fidelity Investment Grade Bond Portfolio Sub-Accounts for the month ended
December 31, 1996:
<TABLE>
<CAPTION>
Non-Qualified Contracts: Qualified Contracts:
<S> <C> <C> <C>
Northstar High Yield Bond Fund: 59.18% Northstar High Yield Bond Fund: 53.39%
Oppenheimer Strategic Bond Fund 31.89% Oppenheimer Strategic Bond Fund 35.31%
Oppenheimer Bond Fund 21.97% Oppenheimer Bond Fund 25.48%
Fidelity Investment Grade Bond Portfolio -.93% Fidelity Investment Grade Bond Portfolio -.73%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS. From time to time, sales literature or
advertisements may also quote average annual total returns for one or more of
the Sub-Accounts for various periods of time.
Average annual total returns represent the average annual compounded rates
of return that would equate an initial investment of $1,000 under a Contract to
the redemption value of that investment as of the last day of each of the
periods. The ending date for each period for which total return quotations are
provided will be for the most recent month-end practicable, considering the type
and media of the communication and will be stated in the communication.
Average annual total returns will be calculated using Sub-Account unit
values which the Company calculates on each Valuation Date based on the
performance of the Sub-Account's underlying portfolio, the deductions for the
Mortality and Expense Risk Charges, and the Contract Maintenance Charge. The
calculation assumes that the Contract Maintenance Charge is $30 per year per
Contract deducted at the end of each Contract year. For purposes of calculating
average annual total return, an average per dollar Contract Maintenance Charge
attributable to the hypothetical account for the period is used. The calculation
also assumes surrender of the Contract at the end of the period for the return
quotation. Total returns will therefore reflect a deduction of the surrender
charge for any period less than EIGHT years. The total return will then be
calculated according to the following formula:
1/N
TR = ((ERV/P) ) - 1
Where:
TR = The average annual total return net of Sub-Account recurring
charges.
ERV = the ending redeemable value (net of any applicable surrender charge)
of the hypothetical account at the end of the period.
P = a hypothetical initial payment of $1,000.
N = the number of years in the period.
<TABLE>
<CAPTION>
Such average annual total return information for the
Sub-Accounts is as follows:
QUALIFIED PLANS FOR THE 1-YEAR FOR THE 5-YEAR FOR THE 10-YEAR FOR THE PERIOD FROM DATE
PERIOD ENDED PERIOD ENDED PERIOD ENDED OF INCEPTION OF
SUB-ACCOUNT 12/31/96 12/31/96 12/31/96 SUB-ACCOUNT TO 12/31/96
- ----------- -------- -------- -------- -----------------------
<S> <C> <C> <C> <C>
Oppenheimer Money Fund -3.14% 2.02% N/A 5.13%
(Inception: 5/27/87
Oppenheimer High Income Fund 5.58% 12.42% N/A 13.80%
(Inception: 6/16/87
Oppenheimer Bond Fund -3.80% N/A N/A 3.77%
(Inception: 3/14/95)
Oppenheimer Strategic Bond Fund 2.68% N/A N/A 8.94%
(Inception: 3/20/95)
Oppenheimer Capital Appreciation Fund 10.92% 14.20% N/A 15.10%
(Inception: 6/16/87)
Oppenheimer Growth Fund 14.56% N/A N/A 23.93%
(Inception: 3/14/95)
Oppenheimer Multiple Strategies Fund 5.46% 9.33% N/A 10.64%
(Inception: 5/27/87)
Oppenheimer Global Securities Fund 7.68% 9.95% N/A 8.78%
(Inception: 11/12/90)
Alliance Growth and Income Portfolio 13.29% 12.77% N/A 11.10%
(Inception: 12/27/90)
Alliance Short-Term Multi-Market Portfolio 0.50% 1.14% N/A 2.02%
(Inception: 11/26/90)
Fidelity Contrafund Portfolio N/A N/A N/A -4.87%
(Inception: 11/12/96)
Fidelity Equity Income Portfolio 4.42% N/A N/A 13.11%
(Inception: 5/16/95)
Fidelity Growth Portfolio 4.98% N/A N/A 14.76%
(Inception: 5/31/95)
Fidelity Investment Grade Bond Portfolio -5.44% N/A N/A -1.04%
(Inception: 9/16/95)
Fidelity Asset Manager Portfolio 4.21% N/A N/A 10.13%
(Inception: 6/1/95)
Fidelity Index 500 Portfolio 11.67% N/A N/A 19.25%
(Inception: 5/16/95)
Northstar Growth Fund N/A N/A N/A -5.88%
(Inception: 12/10/96)
Northstar Income and Growth Fund 4.71% N/A N/A 6.39%
(Inception: 7/17/95)
Northstar High Yield Bond Fund 10.96% N/A N/A 8.63%
(Inception: 8/14/95)
NON-QUALIFIED PLANS FOR THE FOR THE 5-YEAR FOR THE 10-YEAR FOR THE PERIOD FROM DATE
1-YEAR PERIOD PERIOD ENDED PERIOD ENDED OF INCEPTION OF
SUB-ACCOUNT ENDED 12/31/96 12/31/96 12/31/96 SUB-ACCOUNT TO 12/31/96
- ----------- -------------- -------- -------- -----------------------
Oppenheimer Money Fund -3.68% 2.22% N/A 5.23%
(Inception: 6/2/87)
Oppenheimer High Income Fund 5.58% 12.42% N/A 13.84%
(Inception: 8/28/87)
Oppenheimer Bond Fund -3.81% N/A N/A 0.35%
(Inception: 6/22/95)
Oppenheimer Strategic Bond Fund 2.67% N/A N/A 8.86%
(Inception: 4/3/95)
Oppenheimer Capital Appreciation Fund 10.86% 13.97% N/A 14.24%
(Inception: 7/30/87)
Oppenheimer Growth Fund 14.56% N/A N/A 22.82%
(Inception: 3/24/95)
Oppenheimer Multiple Strategies Fund 5.43% 9.33% N/A 11.08%
(Inception: 6/2/87)
Oppenheimer Global Securities Fund 7.60% 9.94% N/A 8.75%
(Inception: 11/9/90)
Alliance Growth and Income Portfolio 13.25% 12.59% N/A 10.84%
(Inception: 1/31/91)
Alliance Short-Term Multi-Market Portfolio .50% 1.14% N/A 2.06%
(Inception: 11/23/90)
Fidelity Contrafund Portfolio N/A N/A N/A -1.80%
(Inception: 11/1/96)
Fidelity Equity Income Portfolio 4.42% N/A N/A 13.52%
(Inception: 5/25/95)
Fidelity Growth Portfolio 4.98% N/A N/A 13.10%
(Inception: 5/25/95)
Fidelity Investment Grade Bond Portfolio -5.28% N/A N/A -0.05%
(Inception: 6/19/95)
Fidelity Asset Manager Portfolio 4.21% N/A N/A 10.47%
(Inception: 6/8/95)
Fidelity Index 500 Portfolio 11.67% N/A N/A 19.16%
(Inception: 5/23/95)
Northstar Growth Fund N/A N/A N/A -5.05%
(Inception: 11/1/96)
Northstar Income and Growth Fund 5.64% N/A N/A 9.21%
(Inception: 5/31/95)
Northstar High Yield Bond Fund 10.11% N/A N/A 8.99%
(Inception: 9/8/95)
OTHER TOTAL RETURNS. From time to time, sales literature or advertisements
may quote average annual total returns for the Sub-Accounts that do not reflect
the surrender charge. These returns are calculated in exactly the same way as
average annual total returns described above, except that the ending redeemable
value of the hypothetical account for the period is replaced with an ending
value for the period that does not take into account any charges on amounts
surrendered or withdrawn. Such information is as follows:
RETURNS SINCE SUB-ACCOUNTS COMMENCED OPERATIONS
QUALIFIED PLANS FOR THE 1-YEAR FOR THE 5-YEAR FOR THE 10-YEAR FOR THE PERIOD FROM DATE
PERIOD ENDED PERIOD ENDED PERIOD ENDED OF INCEPTION OF
SUB-ACCOUNT 12/31/96 12/31/96 12/31/96 SUB-ACCOUNT TO 12/31/96
- ----------- -------- -------- -------- -----------------------
Oppenheimer Money Fund 4.15% 2.85% N/A 5.13%
(Inception: 5/27/87
Oppenheimer High Income Fund 13.52% 13.34% N/A 13.80%
(Inception: 6/16/87
Oppenheimer Bond Fund 3.44% N/A N/A 8.17%
(Inception: 3/14/95)
Oppenheimer Strategic Bond Fund 10.40% N/A N/A 13.55%
(Inception: 3/20/95)
Oppenheimer Capital Appreciation Fund 19.27% 15.14% N/A 15.10%
(Inception: 6/16/87)
Oppenheimer Growth Fund 23.18% N/A N/A 56.52%
(Inception: 3/14/95)
Oppenheimer Multiple Strategies Fund 13.40% 10.22% N/A 10.64%
(Inception: 5/27/87)
Oppenheimer Global Securities Fund 15.79% 10.85% N/A 9.32%
(Inception: 11/12/90)
Alliance Growth and Income Portfolio 21.82% 13.70% N/A 11.67%
(Inception: 12/27/90)
Alliance Short-Term Multi-Market Portfolio 8.07% 1.97% N/A 2.53%
(Inception: 11/26/90)
Fidelity Contrafund Portfolio N/A N/A N/A 2.29%
(Inception: 11/12/96)
Fidelity Equity Income Portfolio 12.28% N/A N/A 18.42%
(Inception: 5/16/95)
Fidelity Growth Portfolio 12.88% N/A N/A 20.15%
(Inception: 5/31/95)
Fidelity Investment Grade Bond Portfolio 1.68% N/A N/A 6.13%
(Inception: 9/16/95)
Fidelity Asset Manager Portfolio 12.05% N/A N/A 15.59%
(Inception: 6/1/95)
Fidelity Index 500 Portfolio 20.08% N/A N/A 24.84%
(Inception: 5/16/95)
Northstar Growth Fund N/A N/A N/A 1.21%
(Inception: 12/10/96)
Northstar Income and Growth Fund 12.60% N/A N/A 11.98%
(Inception: 7/17/95)
Northstar High Yield Bond Fund 19.31% N/A N/A 14.70%
(Inception: 8/14/95)
NON-QUALIFIED PLANS FOR THE 1-YEAR FOR THE 5-YEAR FOR THE 10-YEAR FOR THE PERIOD FROM DATE
PERIOD ENDED PERIOD ENDED PERIOD ENDED OF INCEPTION OF
SUB-ACCOUNT 12/31/96 12/31/96 12/31/96 SUB-ACCOUNT TO 12/31/96
- ----------- -------- -------- -------- -----------------------
Oppenheimer Money Fund 3.57% 3.06% N/A 5.23%
(Inception: 6/2/87)
Oppenheimer High Income Fund 13.52% 13.34% N/A 13.84%
(Inception: 8/28/87)
Oppenheimer Bond Fund 3.43% N/A N/A 5.63%
(Inception: 6/22/95)
Oppenheimer Strategic Bond Fund 10.40% N/A N/A 13.71%
(Inception: 4/3/95)
Oppenheimer Capital Appreciation Fund 19.20% 14.90% N/A 14.24%
(Inception: 7/30/87)
Oppenheimer Growth Fund 23.18% N/A N/A 28.02%
(Inception: 3/24/95)
Oppenheimer Multiple Strategies Fund 13.37% 10.23% N/A 11.08%
(Inception: 6/2/87)
Oppenheimer Global Securities Fund 15.70% 10.84% N/A 9.29%
(Inception: 11/9/90)
Alliance Growth and Income Portfolio 21.78% 13.51% N/A 11.61%
(Inception: 1/31/91)
Alliance Short-Term Multi-Market Portfolio 8.07% 1.97% N/A 2.57%
(Inception: 11/23/90)
Fidelity Contrafund Portfolio N/A N/A N/A 5.59%
(Inception: 11/1/96)
Fidelity Equity Income Portfolio 12.28% N/A N/A 18.85%
(Inception: 5/25/95)
Fidelity Growth Portfolio 12.88% N/A N/A 18.40%
(Inception: 5/25/95)
Fidelity Investment Grade Bond Portfolio 1.85% N/A N/A 4.91%
(Inception: 6/19/95)
Fidelity Asset Manager Portfolio 12.05% N/A N/A 15.95%
(Inception: 6/8/95)
Fidelity Index 500 Portfolio 20.08% N/A N/A 24.75%
(Inception: 5/23/95)
Northstar Growth Fund N/A N/A N/A 2.10%
(Inception: 11/1/96)
Northstar Income and Growth Fund 13.60% N/A N/A 14.33%
(Inception: 5/31/95)
Northstar High Yield Bond Fund 18.40% N/A N/A 15.51%
(Inception: 9/8/95)
</TABLE>
The Company may disclose Cumulative Total Returns in conjunction with the
standard formats described above. The Cumulative Total Returns will be
calculated using the following formula.
CTR = ERV/P - 1
Where:
CTR = The Cumulative Total Return net of Sub-Account recurring charges for
the period.
ERV = the ending redeemable value of the hypothetical investment at the
end of the period.
P = a hypothetical single payment of $1,000.
EFFECT OF THE ANNUAL ADMINISTRATIVE CHARGE ON PERFORMANCE DATA. The
Contract provides for a $30 Contract Maintenance Charge to be deducted annually
at the end of each Contract year, from the Sub-Accounts and the Fixed Account
based on the proportion that the value of each such account bears to the total
Contract Value. For purposes of reflecting the Contract Maintenance Charge in
yield and total return quotations, the annual charge is converted into an annual
charge per $1,000 invested based on the Annual Contract Charges collected from
the average total assets of the Variable Account and Fixed Account during the
calendar year ending December 31, 1996.
FINANCIAL STATEMENTS
The Statement of Additional Information incorporates by reference Financial
Statements of the ReliaStar Bankers Security Variable Annuity Funds P and Q for
The USA Plan as of December 31, 1996 and for each of the two years in the period
then ended. Deloitte & Touche LLP served as independent auditors for the years
ended December 31, 1996 and 1995. From 1987 to 1994, KPMG Peat Marwick LLP
served as the independent auditors for the Separate Accounts.
The Company's statement of financial condition as of December 31, 1996 and
1995, and the related statements of operations, changes of capital and surplus
and cash flows for the years ended December 31, 1996 and 1995 which are included
in this Statement of Additional Information, should be considered only as
bearing on the Company's ability to meet its obligations under the Contracts.
They should not be considered as bearing on the investment performance of the
assets held in the Variable Account.
RELIASTAR BANKERS SECURITY VARIABLE ANNUITY
FUNDS P AND Q FOR THE USA PLAN
Independent Auditors' Report*
Statements of Assets and Liabilities*
Statements of Operations and Changes in Net Assets*
Notes to Financial Statements*
December 31, 1996
* Incorporated by reference to the Registrant's 1996 Annual Report to
Variable Annuity Contract Owners filed on March 7, 1997, except for the
Independent Auditors' report of KPMG Peat Marwick LLP dated February 9,
1995 with regard to the accumulation unit values for each of the eight
years for the period ended December 31, 1994, which is set forth herein.
INDEPENDENT AUDITORS' REPORT
Board of Directors and Contract Owners ReliaStar Bankers Security Variable
Annuity Funds P and Q:
We have audited the statements of assets and liabilities and the related
statements of operations and changes in net assets of ReliaStar Bankers Security
Variable Annuity Funds P and Q for The USA Plan (formerly Bankers Security
Variable Annuity Funds P and Q) as of and for the year ended December 31, 1994
(not presented herein), and the accumulation unit values of the ReliaStar
Bankers Security Variable Annuity Funds P and Q for The USA Plan for each of the
years in the eight-year period ended December 31, 1994, included in note 7.
These financial statements are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 audit provides 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 funds constituting the
ReliaStar Bankers Security Variable Annuity Funds P and Q for The USA Plan as of
December 31, 1994, and the results of operations and the changes in net assets
for the year ended December 31, 1994 (not presented herein), and the
accumulation unit values for each of the years in the eight-year period ended
December 31, 1994, included in note 7, in conformity with generally accepted
accounting principles.
/s/KPMG Peat Marwick LLP
Washington, DC
February 9, 1995
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholder
ReliaStar Bankers Security Life Insurance Company
(A Wholly Owned Subsidiary of ReliaStar United Services Life Insurance Company)
Woodbury, New York
We have audited the accompanying balance sheets of ReliaStar Bankers
Security Life Insurance Company as of December 31, 1996 and 1995, and the
related statements of income, shareholder's equity and cash flows for each of
the two years in the period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ReliaStar Bankers Security
Life Insurance Company as of December 31, 1996 and 1995 and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
As discussed in Note 2 to the financial statements, on January 17, 1995 the
Company was acquired by ReliaStar Financial Corp. (ReliaStar) and consequently
the financial statements reflect a new basis of accounting. In addition, in
December 1995 The North Atlantic Life Insurance Company of America, a subsidiary
of ReliaStar was merged into the Company. The merger was accounted for in a
manner similar to a pooling of interests.
/s/Deloitte & Touche LLP
Minneapolis, Minnesota
March 31, 1997
<TABLE>
<CAPTION>
BALANCE SHEETS
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR UNITED SERVICES LIFE INSURANCE COMPANY)
DECEMBER 31
-----------
(IN MILLIONS) 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
INVESTMENTS
Fixed Maturity Securities (Amortized Cost: 1996, $1,297.5; 1995, $1,308.6) $1,356.7 $1,413.4
Equity Securities (Cost: 1996, $6.5; 1995, $5.8) 7.3 6.6
Mortgage Loans on Real Estate 276.3 233.9
Real Estate 1.6 7.2
Policy Loans 73.4 68.5
Other Invested Assets 5.6 4.9
Short-Term Investments 8.7 14.7
- ----------------------------------------------------------------------------------------------------------------
Total Investments 1,729.6 1,749.2
- ----------------------------------------------------------------------------------------------------------------
Cash (4.7) 13.6
Accounts and Notes Receivable 6.1 13.4
Reinsurance Receivable 26.1 32.1
Deferred Policy Acquisition Costs 131.8 113.5
Present Value of Future Profits 53.3 39.7
Property and Equipment, Net 7.9 7.8
Accrued Investment Income 25.1 25.7
Goodwill 16.9 17.3
Other Assets 1.5 8.4
Assets Held in Separate Accounts 403.3 272.9
- ----------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $2,396.9 $2,293.6
================================================================================================================
LIABILITIES
Future Policy and Contract Benefits $1,575.0 $1,607.3
Pending Policy Claims 22.5 24.0
Other Policyholder Funds 8.7 5.7
Income Taxes 28.6 30.4
Other Liabilities 23.5 29.4
LIABILITIES RELATED TO SEPARATE ACCOUNTS 400.8 269.8
- ----------------------------------------------------------------------------------------------------------------
Total Liabilities 2,059.1 1,966.6
- ----------------------------------------------------------------------------------------------------------------
SHAREHOLDER'S EQUITY
Common Stock (1.4 Million Shares Issued and Outstanding) 2.8 2.8
Additional Paid-In Capital 165.4 165.4
Net Unrealized Investment Gains 28.0 41.8
Retained Earnings 141.6 117.0
- ----------------------------------------------------------------------------------------------------------------
Total Shareholder's Equity 337.8 327.0
- ----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $2,396.9 $2,293.6
================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
STATEMENTS OF INCOME
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR UNITED SERVICES LIFE INSURANCE COMPANY)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
(IN MILLIONS) 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES
Premiums $ 47.1 $ 53.4
Net Investment Income 137.0 134.0
Realized Investment Gains 3.5 .4
Policy and Contract Charges 65.7 59.4
Other Income 2.0 1.7
- ----------------------------------------------------------------------------------------------------------------
Total 255.3 248.9
- ----------------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Benefits to Policyholders 154.1 163.2
Sales and Operating Expenses 44.8 30.9
Amortization of Deferred Policy Acquisition Costs
and Present Value of Future Profits 18.0 18.4
Dividends and Experience Refunds to Policyholders - .4
- ----------------------------------------------------------------------------------------------------------------
Total 216.9 212.9
- ----------------------------------------------------------------------------------------------------------------
Income before Income Taxes 38.4 36.0
Income Tax Expense 13.8 13.4
- ----------------------------------------------------------------------------------------------------------------
NET INCOME $ 24.6 $ 22.6
================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
STATEMENTS OF SHAREHOLDER'S EQUITY
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
A WHOLLY OWNED SUBSIDIARY OF RELIASTAR UNITED SERVICES LIFE INSURANCE COMPANY)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
(IN MILLIONS) 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK
Beginning and End of Year $ 2.8 $ 2.8
- ------------------------------------------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL
Beginning of Year 165.4 47.4
Purchase Accounting Adjustment - 78.8
Merger with Affiliate - 39.2
- ------------------------------------------------------------------------------------------------------------
End of Year 165.4 165.4
- ------------------------------------------------------------------------------------------------------------
NET UNREALIZED INVESTMENT GAINS (LOSSES)
Beginning of Year 41.8 (13.1)
Purchase Accounting Adjustment - 13.1
Merger with Affiliate - (9.9)
Change for the Year (13.8) 51.7
- ------------------------------------------------------------------------------------------------------------
End of Year 28.0 41.8
- ------------------------------------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
Beginning of Year - (1.9)
Purchase Accounting Adjustment - 1.9
- ------------------------------------------------------------------------------------------------------------
End of Year - -
- ------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Beginning of Year 117.0 113.4
Purchase Accounting Adjustment - (113.4)
Merger With Affiliate - 94.4
Net Income 24.6 22.6
- ------------------------------------------------------------------------------------------------------------
End of Year 141.6 117.0
- ------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDER'S EQUITY $ 337.8 $ 327.0
============================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
STATEMENTS OF CASH FLOWS
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR UNITED SERVICES LIFE INSURANCE COMPANY)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
(IN MILLIONS) 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 24.6 $ 22.6
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities
Interest Credited to Insurance Contracts 75.1 77.2
Future Policy Benefits (59.6) (39.2)
Capitalization of Policy Acquisition Costs (26.5) (26.1)
Amortization of Deferred Policy Acquisition Costs
and Present Value of Future Profits 18.0 18.4
Deferred Income Taxes 6.2 3.9
Net Change in Receivables and Payables 9.0 (12.0)
Other Assets 7.9 (.1)
Realized Investment Gains, Net (3.5) (.4)
OTHER (.2) (.1)
- ----------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 51.0 44.2
- ----------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from Sales of Fixed Maturity Securities 24.6 15.7
Proceeds from Maturities or Repayment of Fixed Maturity Securities
Available-for-Sale 134.6 67.7
Held-to-Maturity - 41.9
Cost of Fixed Maturity Securities Acquired
Available-for-Sale (146.5) (107.5)
Held-to-Maturity - (41.8)
Sale (Purchases) of Equity Securities, Net (.7) 2.3
Proceeds of Mortgage Loans Sold, Matured or Repaid 40.9 36.0
Cost of Mortgage Loans Acquired (83.4) (57.3)
Sales of Real Estate, Net 6.8 .1
Policy Loans Issued, Net (4.9) (8.6)
Sales of Other Invested Assets, Net .8 16.3
Sales (Purchases) of Short-Term Investments, Net 6.0 (11.0)
Cash Acquired with Merger of Affiliate - .6
- ----------------------------------------------------------------------------------------------------------------
Net Cash Used by Investing Activities (21.8) (45.6)
- ----------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Deposits to Insurance Contracts 134.9 154.3
Maturities and Withdrawals from Insurance Contracts (182.4) (141.9)
- ----------------------------------------------------------------------------------------------------------------
Net Cash Provided (Used) by Financing Activities (47.5) 12.4
- ----------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash (18.3) 11.0
Cash at Beginning of Year 13.6 2.6
- ----------------------------------------------------------------------------------------------------------------
Cash at End of Year $ (4.7) $ 13.6
================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
NOTES TO FINANCIAL STATEMENTS
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR UNITED SERVICES LIFE INSURANCE COMPANY)
NOTE 1. CHANGES IN ACCOUNTING PRINCIPLES
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF
Effective January 1, 1996, ReliaStar Bankers Security Life Insurance Company
(Bankers Security or the Company) adopted Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of." SFAS No. 121 establishes
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles, and goodwill related to those assets to be held and
used and for long-lived assets and certain identifiable intangibles to be
disposed of. This Statement requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Measurement of an impairment
loss for long-lived assets and identifiable intangibles that an entity expects
to hold and use should be based on the fair value of the asset. Long-lived
assets and certain identifiable intangibles to be disposed of must be reported
at the lower of carrying amount or fair value less cost to sell. The adoption of
this standard did not have a significant effect on the financial results of the
Company.
ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN
Effective January 1, 1995, the Company adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan" and SFAS No. 118, "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosures." SFAS No. 114 and
SFAS No. 118 require a company to measure impairment based upon the present
value of expected future cash flows discounted at the loan's effective interest
rate, the loan's observable market price or the fair value of the collateral if
the loan is collateral dependent. If foreclosure is probable, the measurement of
impairment must be based upon the fair value of the collateral. The adoption of
these standards did not have a significant effect on the financial results of
the Company.
NOTE 2. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The Company is principally engaged in the business of providing life insurance,
annuities and related financial service products. The Company operates primarily
in the United States and is authorized to conduct business in all 50 states.
BASIS OF PRESENTATION
The Company is a wholly-owned subsidiary of ReliaStar United Services Life
Insurance Company (United Services) which is a wholly-owned subsidiary of
ReliaStar Life Insurance Company (ReliaStar Life) whose ultimate parent is
ReliaStar Financial Corp. (ReliaStar). Bankers Security, United Services and
ReliaStar Life were formerly known as Bankers Security Life Insurance Society,
United Services Life Insurance Company and Northwestern National Life Insurance
Company, respectively. Prior to January 17, 1995 the Company's ultimate parent
was USLICO Corporation (USLICO).
On January 17, 1995, ReliaStar acquired USLICO and contributed all of the
capital stock of United Services and Bankers Security to ReliaStar Life. The
North Atlantic Life Insurance Company of America (NALIC), an affiliate of the
Company and a wholly-owned subsidiary of ReliaStar Life was merged into the
Company pursuant to a statutory merger (the Merger) which became effective as of
December 28, 1995. The financial statements for the year ended December 31, 1995
reflect the effects of the merger of NALIC into the Company, which was accounted
for in a manner similar to a pooling of interests, as of January 1, 1995.
The financial statements also reflect a new basis of accounting for the accounts
of the Company (excluding NALIC). Under the new basis of accounting the assets
and liabilities of the Company (excluding NALIC) were valued at their estimated
fair value as of the date USLICO was acquired. The excess of the purchase price
allocated to the Company (excluding NALIC) over the fair value of the net assets
acquired is reflected as goodwill on the balance sheets. This is known as the
purchase method of accounting under Accounting Principles Board Opinion No. 16
pushed down to the subsidiary's financial statements (push-down accounting).
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVESTMENTS
Fixed maturity securities (bonds and redeemable preferred stocks) are classified
as available-for-sale and are valued at fair value.
Equity securities (common stocks and nonredeemable preferred stocks) are valued
at fair value.
Mortgage loans on real estate are carried at amortized cost less an impairment
allowance for estimated uncollectible amounts.
Investment real estate owned directly by the Company is carried at cost less
accumulated depreciation and allowances for estimated losses. Real estate
acquired through foreclosure is carried at the lower of fair value less
estimated costs to sell or cost.
Short-term investments are carried at amortized cost.
Unrealized investment gains and losses of equity securities and fixed maturity
securities classified as available-for-sale, net of related deferred policy
acquisition costs (DAC), present value of future profits (PVFP) and tax effects,
are accounted for as a direct increase or decrease in shareholder's equity.
Realized investment gains and losses enter into the determination of net income.
Realized investment gains and losses on sales of securities are determined on
the specific identification method. Write-offs of investments that decline in
value below cost on other than a temporary basis and the change in the allowance
for mortgage loans and wholly owned real estate are included with realized
investment gains and losses in the Statements of Income.
The Company records write-offs or allowances for its investments based upon an
evaluation of specific problem investments. The Company reviews, on a continual
basis, all invested assets (including marketable bonds, private placements,
mortgage loans and real estate investments) to identify investments where the
Company has credit concerns. Investments with credit concerns include those the
Company has identified as problem investments, which are issues delinquent in a
required payment of principal or interest, issues in bankruptcy or foreclosure,
and restructured or foreclosed assets. The Company also identifies investments
as potential problem investments, which are investments where the Company has
serious doubts as to the ability of the borrowers to comply with the present
loan repayment terms.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost, net of accumulated depreciation of
$1.9 million and $1.1 million at December 31, 1996 and 1995, respectively. The
Company provides for depreciation of property and equipment using straight-line
and accelerated methods over the estimated useful lives of the assets. Buildings
are generally depreciated over 35 to 50 years. Depreciation expense for 1996 and
1995 amounted to $.3 million and $.4 million, respectively.
SEPARATE ACCOUNTS
The Company operates separate accounts. The assets (principally investments) and
liabilities (principally to contractholders) of each account are clearly
identifiable and distinguishable from other assets and liabilities of the
Company. Assets are carried at fair value.
PREMIUM REVENUE AND BENEFITS TO POLICYHOLDERS
RECOGNITION OF TRADITIONAL LIFE, GROUP AND ANNUITY PREMIUM REVENUE AND BENEFITS
TO POLICYHOLDERS - Traditional life insurance products include those products
with fixed and guaranteed premiums and benefits, and consist principally of
whole life and term insurance policies and certain annuities with life
contingencies (immediate annuities). Life insurance premiums and immediate
annuity premiums are recognized as premium revenue when due. Group insurance
premiums are recognized as premium revenue over the time period to which the
premiums relate. Benefits and expenses are associated with earned premiums so as
to result in recognition of profits over the life of the contracts. This
association is accomplished by means of the provision for liabilities for future
policy benefits and unearned premiums and the amortization of DAC and PVFP.
RECOGNITION OF UNIVERSAL LIFE-TYPE CONTRACTS REVENUE AND BENEFITS TO
POLICYHOLDERS - Universal life-type policies are insurance contracts with terms
that are not fixed and guaranteed. The terms that may be changed could include
one or more of the amounts assessed the policyholder, premiums paid by the
policyholder or interest accrued to policyholder balances. Amounts received as
payments for such contracts are not reported as premium revenues.
Revenues for universal life-type policies consist of charges assessed against
policy account values for deferred policy loading and the cost of insurance and
policy administration. Policy benefits and claims that are charged to expense
include interest credited to contracts and benefit claims incurred in the period
in excess of related policy account balances.
RECOGNITION OF INVESTMENT CONTRACT REVENUE AND BENEFITS TO POLICYHOLDERS -
Contracts that do not subject the Company to risks arising from policyholder
mortality or morbidity are referred to as investment contracts. Certain deferred
annuities are considered investment contracts. Amounts received as payments for
such contracts are not reported as premium revenues.
Revenues for investment contracts consist of investment income and policy
administration charges. Contract benefits that are charged to expense include
benefit claims incurred in the period in excess of related contract balances,
and interest credited to contract balances.
POLICY ACQUISITION COSTS
Those costs of acquiring new business, which vary with and are primarily related
to the production of new business, have been deferred to the extent that such
costs are deemed recoverable. Such costs include commissions, certain costs of
policy issuance and underwriting and certain variable agency expenses.
Costs deferred related to traditional life insurance are amortized over the
premium paying period of the related policies, in proportion to the ratio of
annual premium revenues to total anticipated premium revenues. Such anticipated
premium revenues are estimated using the same assumptions used for computing
liabilities for future policy benefits.
Costs deferred related to universal life-type policies and investment contracts
are amortized over the lives of the policies, in relation to the present value
of estimated gross profits from mortality, investment, surrender and expense
margins.
PRESENT VALUE OF FUTURE PROFITS
The present value of future profits reflects the estimated fair value of the
insurance business in-force at the date the Company was acquired by ReliaStar,
and represents the portion of the cost to acquire the Company 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. The weighted
average discount rate used to determine such value was approximately 15%.
An analysis of the PVFP asset account is presented below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, Beginning of Year $39.7 -
Acquisition - $75.6
Imputed Interest 3.8 4.4
Amortization (8.4) (8.5)
Impact of Net Unrealized Investment Gains and Losses 18.2 (31.8)
- ------------------------------------------------------------------------------------------------------------------
BALANCE, END OF YEAR $53.3 $39.7
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Based on current conditions and assumptions as to future events on acquired
policies in-force, the Company expects that the net amortization of the initial
PVFP balance will be between 5% and 6% in each of the years 1997 through 2001.
The interest rates used to determine the amount of imputed interest on the
unamortized PVFP balance ranged from 5% to 8%.
GOODWILL
Goodwill is the excess of the amount paid to acquire the Company over the fair
value of the net assets acquired. Goodwill is amortized on straight-line basis
over 40 years. The carrying value of goodwill is monitored for impairment of
value based on the Company's estimated future earnings. The carrying value of
goodwill is reduced and a charge to income is recorded when an impairment in
value is identified. No such goodwill impairment charges have been recorded.
FUTURE POLICY AND CONTRACT BENEFITS
Liabilities for future policy benefits for traditional life contracts are
calculated using the net level premium method and assumptions as to investment
yields, mortality, withdrawals and dividends. The assumptions are based on
projections of past experience and include provisions for possible unfavorable
deviation. These assumptions are made at the time the contract is issued or, for
purchased contracts, at the date of acquisition.
Liabilities for future policy and contract benefits on universal life-type and
investment contracts are based on the policy account balance.
The liabilities for future policy and contract benefits for group disabled life
reserves and long-term disability reserves are based upon interest rate
assumptions and morbidity and termination rates from published tables, modified
for Company experience.
INCOME TAXES
The Company files a consolidated Federal income tax return with United Services.
The provision for income taxes includes amounts currently payable and deferred
income taxes resulting from the cumulative differences in the assets and
liabilities determined on a tax return and financial statement basis.
INTEREST RATE SWAP AGREEMENTS
Interest rate swap agreements are used as hedges for asset/liability management
of adjustable rate and short-term invested assets. The Company does not enter
into any interest rate swap agreements for trading purposes. The interest rate
swap transactions involve the exchange of fixed and floating rate interest
payments without the exchange of underlying principal amounts and do not contain
other optional provisions. The difference between amounts paid and amounts
received on interest rate swaps is reflected in net investment income.
NOTE 3. INVESTMENTS
Investment income summarized by type of investment was as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
(IN MILLIONS) 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Fixed Maturity Securities $108.7 $109.5
Equity Securities .4 .6
Mortgage Loans on Real Estate 23.3 20.1
Real Estate .9 1.4
Policy Loans 5.0 4.4
Other Invested Assets .5 2.8
Short-Term Investments 1.9 1.1
- ------------------------------------------------------------------------------------------------------------------
Gross Investment Income 140.7 139.9
Investment Expenses (3.7) (5.9)
- ------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME $137.0 $134.0
==================================================================================================================
Net pretax realized investment gains (losses) were as follows:
YEAR ENDED DECEMBER 31
----------------------
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
Net Gains (Losses) on Sales of Investments
Fixed Maturity Securities $1.2 $ .2
Equity Securities - 1.6
Foreclosed Real Estate .7 -
Other 1.6 .4
- ------------------------------------------------------------------------------------------------------------------
3.5 2.2
- ------------------------------------------------------------------------------------------------------------------
Provisions for Losses:
Fixed Maturity Securities - (.2)
Equity Securities - (.2)
Mortgage Loans - (1.0)
Foreclosed Real Estate - (.4)
- ------------------------------------------------------------------------------------------------------------------
- (1.8)
- ------------------------------------------------------------------------------------------------------------------
PRETAX REALIZED INVESTMENT GAINS $3.5 $ .4
==================================================================================================================
</TABLE>
Gross realized investment gains of $1.5 million and $.7 million and gross
realized investment losses of $.3 million and $.5 million were recognized on
sales of fixed maturity securities during the years ended December 31, 1996 and
1995, respectively. All 1996 and 1995 fixed maturity security sales were from
the available-for-sale portfolio.
The amortized cost and fair value of investments in fixed maturity securities by
type of investment were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
GROSS UNREALIZED
AMORTIZED ---------------- FAIR
(IN MILLIONS) COST GAINS (LOSSES) VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
United States Government and Government
Agencies and Authorities $ 38.2 $ 1.7 - $ 39.9
States, Municipalities and Political Subdivisions 9.9 .4 $ (.1) 10.2
Foreign Governments 13.4 .8 - 14.2
Public Utilities 122.9 8.6 (.3) 131.2
Corporate Securities 863.8 41.3 (3.4) 901.7
Mortgage-Backed/Structured Finance Securities 249.1 10.7 (.5) 259.3
Redeemable Preferred Stock .2 - - .2
- ------------------------------------------------------------------------------------------------------------------
TOTAL $1,297.5 $63.5 $(4.3) $1,356.7
==================================================================================================================
DECEMBER 31, 1995
-----------------
GROSS UNREALIZED
AMORTIZED ---------------- FAIR
(IN MILLIONS) COST GAINS (LOSSES) VALUE
- ------------------------------------------------------------------------------------------------------------------
United States Government and Government
Agencies and Authorities $ 42.5 $ 3.4 - $ 45.9
States, Municipalities and Political Subdivisions 9.8 .4 - 10.2
Foreign Governments 13.4 1.4 - 14.8
Public Utilities 129.8 15.0 $ (.1) 144.7
Corporate Securities 838.8 70.4 (2.3) 906.9
Mortgage-Backed/Structured Finance Securities 274.1 16.8 (.2) 290.7
Redeemable Preferred Stock .2 - - .2
- ------------------------------------------------------------------------------------------------------------------
TOTAL $1,308.6 $107.4 $(2.6) $1,413.4
==================================================================================================================
The amortized cost and fair value of fixed maturity securities by contractual
maturity are shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
AMORTIZED FAIR AMORTIZED FAIR
(IN MILLIONS) COST VALUE COST VALUE
- ------------------------------------------------------------------------------------------------------------------
Due in One Year or Less $ 31.8 $ 32.1 $ 18.7 $ 18.9
Due After One Year Through Five Years 482.4 499.4 412.9 438.3
Due After Five Years Through Ten Years 394.9 416.8 447.3 488.6
Due After Ten Years 132.7 142.0 155.6 176.9
Mortgage-Backed/Structured Finance Securities 255.7 266.4 274.1 290.7
- ------------------------------------------------------------------------------------------------------------------
TOTAL $1,297.5 $1,356.7 $1,308.6 $1,413.4
==================================================================================================================
</TABLE>
The fair values for the marketable bonds are determined based upon the quoted
market prices for bonds actively traded. The fair values for marketable bonds
without an active market are obtained through several commercial pricing
services which provide the estimated fair values. Fair values of privately
placed bonds which are not considered problems are determined utilizing a
commercially available pricing model. The model considers the current level of
risk-free interest rates, current corporate spreads, the credit quality of the
issuer and cash flow characteristics of the security. Utilizing this data, the
model generates estimated market values which the Company considers reflective
of the fair value of each privately placed bond. Fair values for privately
placed bonds which are considered problems are determined through consideration
of factors such as the net worth of the borrower, the value of collateral, the
capital structure of the borrower, the presence of guarantees and the Company's
evaluation of the borrower's ability to compete in the relevant market.
At December 31, 1996, the largest industry concentration of the private
placement portfolio was consumer non-cyclical, where 23.6% of the portfolio was
invested, and the largest industry concentration of the marketable bond
portfolio was mortgage-backed/structured finance, where 23.4% of the portfolio
was invested. At December 31, 1996, the largest geographic concentration of
commercial mortgage loans was in the midwest region of the United States, where
approximately 31.4% of the commercial mortgage loan portfolio was invested.
At December 31, 1996 and 1995, gross unrealized appreciation of equity
securities was $.9 million and $1.0, respectively, and gross unrealized
depreciation was $.1 million and $.2 million, respectively.
Invested assets which were nonincome producing (no income received for the 12
months preceding the balance sheet date) were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-----------
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Fixed Maturity Securities $ .1 -
Mortgage Loans on Real Estate .3 -
Real Estate 2.1 -
- -------------------------------------------------------------------------------------------------------------------
Total $2.5 -
===================================================================================================================
</TABLE>
Allowances for losses on investments are reflected on the Balance Sheets as a
reduction of the related assets and were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-----------
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mortgage Loans $1.0 $1.4
Foreclosed Real Estate .8 -
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1996, and 1995, the total investment in impaired mortgage loans
(before allowances for credit losses), the related allowance for credit losses
and the average investment related to impaired mortgage loans and the interest
income recognized on impaired mortgage loans during 1996 and 1995 were as
follows:
<TABLE>
<CAPTION>
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
Impaired Mortgage Loans
<S> <C> <C>
Total Investment $2.7 $2.7
Allowance for Credit Losses 1.1 1.4
Average Investment 1.3 1.4
Interest Income Recognized .3 .3
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
No increases to the allowance for credit losses account were recorded during
1996 and 1995, and the amount of decreases to the allowance account were $.3
million and $.1 million for the years ended December 31, 1996 and 1995,
respectively. The Company does not accrue interest income on impaired mortgage
loans when the likelihood of collection is doubtful. Cash receipts for interest
payments are recognized as income in the period received.
Noncash investing activities consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Real Estate Assets Acquired Through Foreclosure $.4 $2.2
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Effective December 31, 1995, the Company adopted the implementation guidance
contained in the Financial Accounting Series Special Report, "A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities." Concurrent with the adoption of this implementation
guidance, the Company reclassified all of its held-to-maturity securities to
available-for-sale based upon a reassessment of the appropriateness of the
classifications of all securities held at that time. The amortized cost and net
unrealized appreciation of the securities reclassified were approximately $265
million and $12 million, respectively, at December 31, 1995.
The components or net unrealized investment gains reported in shareholders'
equity are shown below:
<TABLE>
<CAPTION>
DECEMBER 31
-----------
(IN MILLIONS) 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Unrealized Investment Gains $61.5 $106.7
DAC/PVFP Adjustment (18.5) (42.4)
Deferred Income Taxes (15.0) (22.5)
- ----------------------------------------------------------------------------------------------------------------
Net Unrealized Investment Gains $28.0 $41.8
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 4. INCOME TAXES
The income tax liability as reflected on the Balance Sheets consisted of the
following:
<TABLE>
<CAPTION>
DECEMBER 31
-----------
(IN MILLIONS) 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Income Taxes $ (.6) $ .3
Deferred Income Taxes 29.2 30.1
- ------------------------------------------------------------------------------------------------------------------
TOTAL $28.6 $30.4
==================================================================================================================
</TABLE>
The provision for income taxes reflected on the Statements of Income consisted
of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
(IN MILLIONS) 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Currently Payable $ 7.6 $ 9.5
Deferred 6.2 3.9
- ------------------------------------------------------------------------------------------------------------------
TOTAL $13.8 $13.4
==================================================================================================================
</TABLE>
The Internal Revenue Service has accepted, without examination, the Company's
tax returns for all years through 1993.
Deferred income taxes reflect the impact for financial statement reporting
purposes of "temporary differences" between the financial statement carrying
amounts and tax bases of assets and liabilities. The "temporary differences"
that give rise to a significant portion of the deferred tax liabilities relate
to the following:
<TABLE>
<CAPTION>
DECEMBER 31
-----------
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Future Policy and Contract Benefits $(30.7) $(31.7)
Investment Write-offs and Allowances (4.8) (6.6)
Other (6.7) (6.6)
- ------------------------------------------------------------------------------------------------------------------
Gross Deferred Tax Asset (42.2) (44.9)
- ------------------------------------------------------------------------------------------------------------------
Deferred Policy Acquisition Costs 31.7 28.9
Present Value of Future Profits 23.4 25.0
Net Unrealized Investment Gains 5.1 11.4
OTHER 11.2 9.7
- ------------------------------------------------------------------------------------------------------------------
Gross Deferred Tax Liability 71.4 75.0
- ------------------------------------------------------------------------------------------------------------------
NET DEFERRED TAX LIABILITY $29.2 $ 30.1
==================================================================================================================
</TABLE>
Federal income tax regulations allowed certain special deductions for 1983 and
prior years which are accumulated in a memorandum tax account designated as
"policyholders' surplus." Generally, this policyholders' surplus account will
become subject to tax at the then current rates only if the accumulated balance
exceeds certain maximum limitations or if certain cash distributions are deemed
to be paid out of the account. At December 31, 1996, the Company has accumulated
approximately $11.3 million in its separate policyholders' surplus accounts.
Deferred taxes have not been provided on this temporary difference.
The difference between the U.S. federal income tax rate and the Company's tax
provision rate is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Statutory Tax Rate 35.0% 35.0%
Other .9 2.2
- ------------------------------------------------------------------------------------------------------------------
EFFECTIVE TAX RATE 35.9% 37.2%
==================================================================================================================
</TABLE>
Cash paid for federal income taxes was $9.0 million and $13.4 million for 1996
and 1995, respectively.
NOTE 5. EMPLOYEE BENEFIT PLANS
PENSION PLANS
The Company participates in noncontributory defined benefit retirement plans
sponsored by ReliaStar Life covering substantially all employees. The plans,
which may be terminated as to accrual of additional benefits at any time by the
Board of Directors, provide benefits to employees upon retirement.
The benefits under the plans are based on years of service and the employee's
compensation during the last five years of employment. The Company's policy is
to fund the minimum required contribution necessary to meet the present and
future obligations of the plans. Contributions are intended to provide not only
for benefits attributed to service to date but also for those expected to be
earned in the future. Contributions are made to a tax-exempt trust. Plan assets
consist principally of investments in stock and bond mutual funds, common stock
and corporate bonds. Included in plan assets are 616,491 shares of ReliaStar
common stock with a fair value of $35.6 million.
The Company, United Services, ReliaStar Life and ReliaStar also have unfunded
noncontributory defined benefit plans providing for benefits to employees in
excess of limits for qualified retirement plans and for benefits to nonemployee
members of the ReliaStar Board of Directors.
Net periodic pension expense for ReliaStar and its subsidiaries included the
following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
(IN MILLIONS) 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Service Cost - Benefits Earned During the Year $ 3.8 $ 3.4
Interest Cost on Projected Benefit Obligation 13.6 11.9
Actual Return on Plan Assets (23.0) (33.7)
Net Amortization and Deferral 8.4 19.1
- ------------------------------------------------------------------------------------------------------------------
Net Periodic Pension Expense $ 2.8 $ .7
==================================================================================================================
</TABLE>
The above amounts are for ReliaStar and its subsidiaries as the Company's
portion is not determinable.
The following table sets forth for ReliaStar and its subsidiaries the funded
status of the plans as of December 31:
<TABLE>
<CAPTION>
FUNDED PLANS UNFUNDED PLANS
------------ --------------
(IN MILLIONS) 1996 1995 1996 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Accumulated Benefit Obligation
Vested $(164.7) $(157.1) $(11.8) $(10.7)
Nonvested (4.0) (5.1) (.5) (1.2)
Effect of Projected Future Compensation Increases (12.7) (10.6) (2.1) (2.1)
- ----------------------------------------------------------------------------------------------------------------
Projected Benefit Obligation (181.4) (172.8) (14.4) (14.0)
Plan Assets at Fair Value 184.9 169.9 - -
- ----------------------------------------------------------------------------------------------------------------
Plan Assets Greater (Less) Than Projected Benefit Obligation 3.5 (2.9) (14.4) (14.0)
Unrecognized Net Loss and Prior Service Cost 19.0 24.2 5.3 6.2
Unrecognized Transition Obligation (Asset) (.4) (.8) - .1
Additional Minimum Liability - - (3.5) (4.2)
- ----------------------------------------------------------------------------------------------------------------
Net Pension Asset (Liability) $ 22.1 $ 20.5 $(12.6) $(11.9)
================================================================================================================
</TABLE>
The above amounts are for ReliaStar and its subsidiaries as the Company's
portion is not determinable.
The projected benefit obligation was determined using an assumed discount rate
of 7.50% and 7.25% at January 1, 1997 and 1996, respectively, and a
weighted-average assumed long-term rate of compensation increase of 4.5%. The
assumed long-term rate of return on plan assets was 10%.
Prior to 1996, the Company's employees (excluding NALIC) participated in the
USLICO qualified non-contributory defined benefit pension plan covering
substantially all of its employees. The plan provided pension benefits that were
based on the employee's years of service and compensation during three
consecutive years in the last 10 years of employment preceding retirement.
These retirement plans for the Company's employees (excluding NALIC) have been
frozen at the benefit levels as of December 31, 1995. Retirement plan benefits
for employees are currently being provided under the ReliaStar plans.
Net periodic pension expense for all employee retirement plans of the Company
was $.4 million for the year ended December 31, 1996 and a pension credit
totaling $.4 million for the year ended December 31, 1995.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company participates in the postretirement health care and life insurance
benefits plans sponsored by ReliaStar Life or retired employees (and their
eligible dependents). Substantially all of the Company's employees will become
eligible for those benefits if they meet specified age and service requirements
and reach retirement age while working for the Company, unless the plans are
terminated or amended. The postretirement health care plan is contributory, with
retiree contributions adjusted annually; the life insurance plan provides a flat
amount of noncontributory life benefits and optional contributory coverage.
During 1996, ReliaStar Life amended these plans to reduce the level of benefits
provided to current and future retirees. The amendment resulted in a reduction
of the accumulated postretirement benefit obligation for ReliaStar and its
subsidiaries of approximately $9.9 million. The plan amendment will also reduce
current and future net periodic postretirement benefit costs as the unrecognized
prior service cost is amortized.
The postretirement health care plans currently are not funded. The accumulated
postretirement benefit obligation (APBO) and the accrued postretirement benefit
liability were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-----------
(IN MILLIONS) 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Retirees $ 7.3 $ .4
Fully Eligible Active Plan Participants .9 .5
Other Active Plan Participants 1.6 .8
- ------------------------------------------------------------------------------------------------------------------
Unfunded APBO 9.8 1.7
Unrecognized Prior Service Cost 8.9 -
Unrecognized Gain (Loss) 1.5 (.4)
- ------------------------------------------------------------------------------------------------------------------
ACCRUED POSTRETIREMENT BENEFIT LIABILITY $20.2 $1.3
==================================================================================================================
</TABLE>
The above amounts for 1996 are for ReliaStar and its subsidiaries as the
Company's portion is not determinable. Amounts for the prior period are for the
Company only.
Net periodic postretirement benefit costs consisted of the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
(IN MILLIONS) 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Service Cost - Benefits Earned $ .6 $.1
Interest Cost on APBO 1.0 .1
Amortization of Prior Service Cost (1.2) -
- ------------------------------------------------------------------------------------------------------------------
NET PERIODIC POSTRETIREMENT BENEFIT COSTS $ .4 $.2
==================================================================================================================
</TABLE>
The above amounts for 1996 are for ReliaStar and its subsidiaries as the
Company's portion is not determinable. Amounts for the prior period are for the
Company only.
The assumed health care cost trend rate used in measuring the APBO as of January
1, 1997 was 7.0%, decreasing gradually to 5.0% in the year 1999 and thereafter.
The assumed health care cost trend rate used in measuring the APBO as of January
1, 1996 was 10.0%, decreasing gradually to 5.0% in the year 2010 and thereafter.
The assumed discount rate used in determining the APBO was 7.50% and 7.25% at
January 1, 1997 and 1996, respectively. The assumed health care cost trend rate
has a significant effect on the amounts reported. For example, a
one-percentage-point increase in the assumed health care cost trend rate for
each year would increase the APBO for ReliaStar and its subsidiaries as of
December 31, 1996 approximately $.3 million and 1996 net postretirement health
care cost for ReliaStar and its subsidiaries by approximately $.1 million.
Net periodic postretirement benefit costs charged to expense by the Company was
$.2 million for the years ended December 31, 1996 and 1995.
SUCCESS SHARING PLAN AND ESOP
The Success Sharing Plan and ESOP (Success Sharing Plan) was designed to
increase employee ownership and reward employees when certain Company
performance objectives are met. Essentially all employees are eligible to
participate in the Success Sharing Plan. Employees of United Services and
Bankers Security (excluding NALIC) were first eligible to participate in the
Success Sharing Plan effective January 1, 1996. The Success Sharing Plan has
both qualified and nonqualified components. The nonqualified component is equal
to 25% of the annual award and is paid in cash to employees. The qualified
component is equal to 75% of the annual award, with 25% contributed to a
deferred investment account and the remaining 50% contributed to the ESOP
portion of the Success Sharing Plan. Costs charged to expense for the Success
Sharing Plan were $.7 million and $1.0 million for the years ended December 31,
1996 and 1995, respectively.
STOCK-BASED COMPENSATION
Officers and key employees of the Company participate in stock-based
compensation plans of ReliaStar. ReliaStar applies Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for its stock-based compensation plans.
Accordingly, the Company has recorded no compensation expense for these
stock-based compensation plans other than for restricted stock and
performance-based awards.
NOTE 6. RELATED PARTY TRANSACTIONS
The Company and its affiliates have entered into agreements whereby affiliates
and the Company provide certain management, administrative, legal, and other
services for each other. The net amounts billed to the Company were $22.4
million and $9.0 million during 1996 and 1995, respectively. The costs allocated
to the Company under these agreements may not be indicative of costs the Company
might incur if these services were not provided by the Company's affiliates.
ReliaStar Life reinsures certain life policies written by the Company. Premiums
ceded under these agreements were $2.3 million and $2.8 million for the years
ended December 31, 1996 and 1995, respectively, and the net amount recoverable
by the Company under this reinsurance agreement was $3.3 million at December 31,
1996 and 1995.
NOTE 7. SHAREHOLDER'S EQUITY
DIVIDEND RESTRICTIONS
The ability of the Company to pay cash dividends to its parent is restricted by
law or subject to approval of the insurance regulatory authorities of the state
of New York. These authorities recognize only statutory accounting practices for
the ability of an insurer to pay dividends to its shareholders.
Under New York insurance law regulating the payment of dividends by the Company,
any such payment must be paid solely from the earned surplus of the Company and
advance notice thereof must be provided to the Superintendent of the New York
Department of Insurance (the Superintendent). Earned surplus means the earned
surplus as determined in accordance with statutory accounting practices
(unassigned funds), less the amount of such earned surplus which is attributable
to unrealized capital gains. Further, without approval of the Superintendent,
the Company may not pay in any calendar year any dividend which, when combined
with other dividends paid within the preceding 12 months, exceeds the lesser of
(i) 10% of the Company's statutory surplus at the prior year end or (ii) 100% of
the Company's statutory net investment income for the prior calendar year.
STATUTORY SURPLUS AND NET INCOME
Net income of the Company, as determined in accordance with statutory accounting
practices was $11.9 million and $13.5 million for 1996 and 1995, respectively.
The Company's statutory capital and surplus was $149.9 million and $139.6
million at December 31, 1996 and 1995, respectively.
NOTE 8. REINSURANCE
The Company is a member of reinsurance associations established for the purpose
of ceding the excess of life insurance over retention limits. Reinsurance
contracts do not relieve the Company from its obligations to policyholders.
Failure of reinsurers to honor their obligations could result in losses to the
Company; consequently, allowances are established for amounts deemed
uncollectible. The amount of the allowance for uncollectible reinsurance
receivables was immaterial at December 31, 1996 and 1995. The Company evaluates
the financial condition of its reinsurers and monitors concentrations of credit
risk to minimize its exposure to significant losses from reinsurer insolvencies.
At December 31, 1996, approximately 64% of the Company's reinsurance ceded was
with one reinsurer. The Company's retention limit is $300,000 per life for
individual coverage. For group coverage and reinsurance assumed, the retention
is $75,000 per life with per occurrence limitations, subject to certain
maximums. As of December 31, 1996, $3.2 billion of life insurance in force was
ceded to other companies. The Company has assumed $2.2 billion of life insurance
in force from other companies as of December 31, 1996.
The effect of reinsurance on premiums and recoveries is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Direct Premiums $59.8 $66.6
Reinsurance Assumed 2.1 2.2
Reinsurance Ceded (14.8) (15.4)
- ------------------------------------------------------------------------------------------------------------------
NET PREMIUMS $47.1 $53.4
==================================================================================================================
REINSURANCE RECOVERIES $ 7.4 $ 7.8
==================================================================================================================
</TABLE>
NOTE 9. LIABILITY FOR UNPAID ACCIDENT AND HEALTH CLAIMS AND CLAIM ADJUSTMENT
EXPENSE
The change in the liability for unpaid accident and health claims and claim
adjustment expenses is summarized as follows:
<TABLE>
<CAPTION>
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance at January 1 $11.3 $14.1
Less Reinsurance Recoverables 3.4 6.3
- ------------------------------------------------------------------------------------------------------------------
Net Balance at January 1 7.9 7.8
Incurred Related to:
Current Year 3.3 6.2
Prior Year (.2) 2.3
- ------------------------------------------------------------------------------------------------------------------
Total Incurred 3.1 8.5
Paid Related to:
Current Year .9 2.4
Prior Year 2.7 6.0
- ------------------------------------------------------------------------------------------------------------------
Total Paid 3.6 8.4
Net Balance at December 31 7.4 7.9
Plus Reinsurance Recoverables 2.1 3.4
- ------------------------------------------------------------------------------------------------------------------
Balance at December 31 $ 9.5 $11.3
==================================================================================================================
</TABLE>
The liability for unpaid accident and health claims and claim adjustment
expenses is included in Future Policy and Contract Benefits on the Balance
Sheets.
NOTE 10. COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company is a defendant in a number of lawsuits arising out of the normal
course of the business of the Company, some of which include claims for punitive
damages. In the opinion of management, the ultimate resolution of such
litigation will not result in any material adverse impact to the financial
condition of the Company.
FINANCIAL INSTRUMENTS
The Company is a party to financial instruments with off-balance-sheet risk in
the normal course of business to reduce its exposure to fluctuations in interest
rates. These financial instruments include commitments to extend credit and
interest rate swaps. Those instruments involve, to varying degrees, elements of
credit, interest rate, or liquidity risk in excess of the amount recognized in
the Balance Sheets.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit is
represented by the contractual amount of those instruments. The Company uses the
same credit policies in making commitments and conditional obligations as it
does for on-balance-sheet instruments. For interest rate swap transactions, the
contract or notional amounts do not represent exposure to credit loss. The
Company's exposure to credit loss is limited to those swaps where the Company
has an unrealized gain.
Unless otherwise noted, the Company does not require collateral or other
security to support financial instruments with credit risk.
<TABLE>
<CAPTION>
CONTRACT OR NOTIONAL AMOUNT
DECEMBER 31
-----------
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Financial Instruments Whose Contract
Amounts Represent Credit Risk
Commitments to Extend Credit $26.4 $9.0
Financial Instruments Whose Notional
or Contract Amounts Exceed the Amount
of Credit Risk
Interest Rate Swap Agreements 112.0 120.0
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
COMMITMENTS TO EXTEND CREDIT - Commitments to extend credit are legally binding
agreements to lend to a customer. Commitments generally have fixed expiration
dates or other termination clauses and may require payment of a fee. They
generally may be terminated by the Company in the event of deterioration in the
financial condition of the borrower. Since some of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future liquidity requirements. The Company evaluates each
customer's creditworthiness on a case-by-case basis.
INTEREST RATE SWAP AGREEMENTS - The Company also enters into interest rate swap
agreements to manage interest rate exposure. The primary reason for the interest
rate swap agreements is to extend the duration of adjustable rate investments.
Interest rate swap transactions generally involve the exchange of fixed and
floating rate interest payment obligations without the exchange of the
underlying principal amounts. Changes in market interest rates impact income
from adjustable rate investments and have an opposite (and approximately
offsetting) effect on the reported income from the swap portfolio. The risks
under interest rate swap agreements are generally similar to those of futures
contracts. Notional principal amounts are often used to express the volume of
these transactions but do not represent the much smaller amounts potentially
subject to credit risk.
LEASES
The Company has operating leases for office space and certain computer
processing and other equipment. Rental expense for these items was $1.2 million
and $.1 million for 1996 and 1995, respectively.
Future minimum aggregate rental commitments at December 31, 1996 for operating
leases were as follows:
(IN MILLIONS)
- --------------------------------------------------------------------------------
1997 - $1.3 2000 - $1.2
1998 - $1.3 2001 - $1.2
1999 - $1.3 2002 and thereafter - $3.0
- --------------------------------------------------------------------------------
NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures are made in accordance with the requirements of SFAS
No. 107, "Disclosures about Fair Value of Financial Instruments." SFAS No. 107
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate that value. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. In that regard, the
derived fair value estimates, in many cases, could not be realized in immediate
settlement of the instrument.
SFAS No. 107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. Accordingly, the aggregate fair
value amounts presented do not represent the underlying value of the Company.
The fair value estimates presented herein are based on pertinent information
available to management as of December 31, 1996 and 1995. Although Management is
not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these financial statements since that date; therefore, current estimates of
fair value may differ significantly from the amounts presented herein.
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
FIXED MATURITY SECURITIES - The estimated fair value disclosures for debt
securities satisfy the fair value disclosure requirements of SFAS No. 107. (see
Note 3.)
EQUITY SECURITIES - Fair value equals carrying value as these securities are
carried at quoted market value.
MORTGAGE LOANS ON REAL ESTATE - The fair values for mortgage loans on real
estate are estimated using discounted cash flow analyses, using interest rates
currently being offered in the marketplace for similar loans to borrowers with
similar credit ratings. Loans with similar characteristics are aggregated for
purposes of the calculations.
CASH SHORT-TERM INVESTMENTS AND POLICY LOANS - The carrying amounts for these
assets approximate the assets' fair values.
OTHER FINANCIAL INSTRUMENTS REPORTED AS ASSETS - The carrying amounts for these
financial instruments (primarily premiums and other accounts receivable and
accrued investment income) approximate those assets' fair values.
INVESTMENT CONTRACT LIABILITIES - The fair value for deferred annuities was
estimated to be the amount payable on demand at the reporting date, as those
investment contracts have no defined maturity and are similar to a deposit
liability. The amount payable at the reporting date was calculated as the
account balance less applicable surrender charges.
The fair values for supplementary contracts without life contingencies and
immediate annuities were estimated using discounted cash flow analyses. The
discount rate was based upon treasury rates plus a pricing margin.
The carrying amounts reported for other investment contracts, which includes
participating pension contracts and retirement plan deposits, approximate those
liabilities' fair value.
CLAIM AND OTHER DEPOSIT FUNDS - The carrying amounts for claim and other deposit
funds approximate the liabilities' fair value.
OTHER FINANCIAL INSTRUMENTS REPORTED AS LIABILITIES - The carrying amounts for
other financial instruments (primarily normal payables of a short-term nature)
approximate those liabilities' fair values.
INTEREST RATE SWAPS - The fair value for interest rate swaps was estimated using
discounted cash flow analyses. The discount rate was based upon rates currently
being offered for similar interest rate swaps available from similar
counterparties.
The carrying amounts and estimated fair values of the Company's financial
instruments as of December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------- ------------------------
CARRYING FAIR CARRYING FAIR
(IN MILLIONS) AMOUNT VALUE AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial Instruments Recorded as Assets
Fixed Maturity Securities $ 1,356.7 $ 1,356.7 $ 1,413.4 $ 1,413.4
Equity Securities 7.3 7.3 6.6 6.6
Mortgage Loans on Real Estate
Commercial 218.9 224.7 186.0 196.5
Residential and Other 57.4 58.7 47.9 49.1
Policy Loans 73.4 73.4 68.5 68.5
Cash and Short-Term Investments 4.0 4.0 28.3 28.3
Other Financial Instruments Recorded
as Assets 38.9 38.9 39.1 39.1
Financial Instruments Recorded as Liabilities
Investment Contracts
Deferred Annuities (770.4) (748.6) (836.2) (806.2)
Supplementary Contracts and Immediate
Annuities (2.9) (2.8) (4.4) (4.0)
Other Investment Contracts (12.3) (12.3) (.4) (.4)
Claim and Other Deposit Funds (1.1) (1.1) - -
Other Financial Instruments Recorded
as Liabilities (15.5) (15.5) (25.2) (25.2)
Off-Balance-Sheet Financial Instruments
Interest Rate Swaps - 1.4 - 4.7
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from offering
for sale at one time the Company's holdings of a particular financial
instrument. Because no market exists for a significant portion of the Company's
financial instruments, fair value estimates are based on judgments regarding
future expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on and off-balance sheet financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a significant effect on
fair value estimates and have not been considered in the estimates.
NOTE 12. SUBSEQUENT EVENT
On February 23, 1997, ReliaStar signed a definitive agreement to acquire and
merge Security-Connecticut Corporation (SRC) into ReliaStar. SRC is a holding
company with two primary subsidiaries: Security Connecticut Life Insurance
Company of Avon, Connecticut, and Lincoln Security Life Insurance Company (LSL)
of Brewster, New York. As of December 31, 1996, LSL had assets of $365 million
and total shareholders equity of $45 million. Completion of the merger is
expected in the second or third quarter of 1997, and is subject to normal
closing conditions, including approval by SRC shareholders and various
regulatory approvals. It is management's current intent, pending regulatory
approval, to merge LSL with and into the Company.
PART C
OTHER INFORMATION
ITEM 24 FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
(1) Condensed Financial Information is included in Part A.
(2) RELIASTAR BANKERS SECURITY VARIABLE ANNUITY FUNDS P AND Q(1)
----------------------------------------------------------
Independent Auditors' Report
Statements of Assets and Liabilities, December 31, 1996
Statements of Operations and Changes in Net Assets for
Years Ended December 31, 1996 and 1995
Notes to Financial Statements
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
-------------------------------------------------
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 1996 and 1995
Consolidated Statements of Income, Years Ended
December 31, 1996 and 1995
Consolidated Statements of Shareholders' Equity, Years Ended
December 31, 1996 and 1995
Consolidated Statements of Cash Flows, Years Ended
December 31, 1996 and 1995
Notes to Consolidated Financial Statements
(b) Exhibits
(1) Resolutions of the Board of Directors of ReliaStar Bankers
Security Life Insurance Company authorizing the establishment of
the Separate Accounts.(2)
(2) Not applicable
(3a) Form of Underwriting Agreement for Variable Annuity Funds P and
Q.
(3b) Form of Dealer Agreements for Variable Annuity Funds P and Q.
(3c) Underwriting and Dealer Agreements for Variable Annuity Fund
M.(3)
(3d) Participation Agreement with Oppenheimer Management
Corporation.(4)
(3e) Participation Agreement with Alliance Capital Management Corp.(4)
(3f) Participation Agreement with Variable Insurance Products Fund and
Fidelity Distributors Corporation.(5)
(3g) Participation Agreement with Variable Insurance Products Fund II
and Fidelity Distributors Corporation.(5)
(3h) Form of Service Agreement and Service Contract with Fidelity
Investments Institutional Operations Company, Inc., dated January
1, 1997.(6)
(4) Form of Contract.(7)
(5) Contract Application Form.
(6) Certificate of Incorporation and Bylaws.(5)
(7) Not Applicable.
(8) Not Applicable.
(9) Opinion and Consent of Robert B. Saginaw as to legality of
securities being registered.
(10a) Written consent of Deloitte & Touche LLP, Independent Auditors.
(10b) Written consent of KPMG Peat Marwick LLP, Independent Auditors.
(11) Not applicable.
(12) Not applicable.
(13) Schedule for Computation of Performance Data.
(14) Financial Data Schedule.
(15a)Powers of Attorney for Stephen A. Carb, Richard R. Crowl, John
H. Flittie, James T. Hale, Wayne R. Huneke, Kenneth U. Kuk,
Richard E. Nolan, Fioravante G. Perrotta, Robert C. Salipante,
John G. Turner, Charles B. Updike, Ross M. Weale and Steven W.
Wishart.(5)
(15b) Power of Attorney for R. Michael Conley.
(1) Incorporated by reference to Registrant's Annual Report to Variable Annuity
Contract Owners filed on March 7, 1997.
(2) Incorporated by reference to Registrant's Form N-8B-2 Registrant Statement
dated September 29, 1980.
(3) Incorporated by reference to Post-effective Amendment No. 1 to Registrant's
Registration Statement dated January 29, 1981.
(4) Incorporated by reference to Post-effective Amendment No. 5 to Registrant's
Registration Statement dated April 24, 1991.
(5) Incorporated by reference to the initial registration statement, form
S-6EL24, for file 333-19123, submitted December 31, 1996.
(6) Incorporated by reference to Post-Effective Amendment No. 20 to Form N-4
Registration Statement for Select Variable Account, File No. 2-75185, filed
on April 7, 1997.
(7) Incorporated by reference to Registrant's Form N-4 Registration Statement
dated January 13, 1987.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME PRINCIPAL BUSINESS ADDRESS POSITIONS WITH DEPOSITOR
- ---- -------------------------- ------------------------
<S> <C> <C>
Susan M. Bergen 20 Washington Avenue South Secretary
Minneapolis, MN 55401
Stephen A. Carb 529 Fifth Avenue - 7th Floor Director
New York, NY 10017
James G. Cochran 1000 Woodbury Road, Suite 102 Woodbury, Executive Vice President
NY 11797
R. Michael Conley 20 Washington Avenue South Executive Vice President and Director
Minneapolis, MN 55401
Richard R. Crowl 20 Washington Avenue South Senior Vice President and General Counsel
Minneapolis, MN 55401 and Director
John H. Flittie 20 Washington Avenue South Vice Chairman, Chief Executive Officer,
Minneapolis, MN 55401 President and Director
James T. Hale 777 Nicollet Mall Director
Minneapolis, MN 55402
Wayne R. Huneke 20 Washington Avenue South Vice President and Director
Minneapolis, MN 55401
Kenneth U. Kuk 20 Washington Avenue South Vice President and Director
Minneapolis, MN 55401
Richard E. Nolan One Chase Manhattan Plaza Director
New York, NY 10005
Fioravante G. Perrotta 200 Park Avenue Director
New York, NY 10166
Robert C. Salipante 20 Washington Avenue South Executive Vice President and Director
Minneapolis, MN 55401
David J. Sloane 1000 Woodbury Road, Suite 102 Woodbury, Executive Vice President and Chief
NY 11797 Operating Officer
John G. Turner 20 Washington Avenue South Chairman of the Board and Director
Minneapolis, MN 55401
Charles B. Updike 60 East 42nd Street Director
New York, NY 10165
Ross M. Weale 102 Brewster Avenue, Rt. 6 Director
Carmel, NY 10512
Steven W. Wishart 20 Washington Avenue South Vice President and Director
Minneapolis, MN 55401
</TABLE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The following chart identifies the subsidiaries of ReliaStar Financial
Corp. and their relationship to one another, all of which, except where
indicated, are either directly wholly-owned by ReliaStar Financial Corp., except
for directors qualifying shares.
<TABLE>
<CAPTION>
OWNER AND STATE OF
COMPANY PERCENTAGE INCORPORATION
------- ---------- -------------
<S> <C> <C>
ReliaStar Financial Corp. Delaware
ReliaStar Life Insurance Company ("RLIC") RLR-100% Minnesota
Northern Life Insurance Company ("NLIC") RLIC-100% Washington
Norlic, Inc. NLIC-100% Washington
Nova, Inc. NLIC-100% Washington
ReliaStar United Services Life Insurance Company ("RUSL") RLIC-100% Virginia
ReliaStar Bankers Security Life Insurance Company ("RBSL") RUSL-100% New York
North Atlantic Life Agency, Inc. RBSL-100% New York
Delaware Administrators, Inc. RUSL-100% Ohio
USL Services, Inc. RUSL-100% Virginia
NWNL Benefits Corporation ("NBC") RLIC-100% Minnesota
NWNL Health Management Corp. NBC-100% Minnesota
Select Care Health Network, Inc. NBC-50% California
ReliaStar Mortgage Corporation ("RMC") RLIC-100% Iowa
James Mortgage Company RMC-100% Iowa
Washington Square Advisers, Inc. RLR-100% Minnesota
ReliaStar Investment Research, Inc. RLR-100% Minnesota
Washington Square Securities, Inc. RLR-100% Minnesota
ReliaStar Financial Marketing Corporation RLR-100% Delaware
NWNL Northstar, Inc. ("NNI") RLR-80% Delaware
Northstar Investment Management Corp. NNI-80% Delaware
NWNL Northstar Distributors, Inc. NNI-80% Minnesota
Northstar Administrators Corporation NNI-80% Delaware
Bankers Centennial Management Corp. RLR-100% Virginia
IB Holdings, Inc. ("IB") RLR-100% Virginia
International Risks, Inc. IB-100% Delaware
Northeaster Corporation IB-100% Connecticut
The New Providence Insurance Company, Limited IB-100% Cayman Islands
IB Resolution, Inc. IB-100% Virginia
Successful Money Management Seminars, Inc. ("SMMS") RLR-100% Oregon
Successful Money Management Software, Inc. SMMS-100% Oregon
PrimeVest Financial Services, Inc.("PVF") RLR-100% Minnesota
PrimeVest Mortgage, Inc. PVF-100% Minnesota
PrimeVest Insurance Agency of Alabama, Inc. PVF-100% Alabama
PrimeVest Insurance Agency of New Mexico, Inc. PVF-100% New Mexico
PrimeVest Insurance Agency of Oklahoma, Inc. Kevin Kluesner-100% Oklahoma
PrimeVest Insurance Agency of Texas, Inc. Kevin Kluesner-100% Texas
PrimeVest Insurance Agency of Ohio, Inc. Class A Robert Chapman-100% Ohio
Class B PVF-100%
Branson Insurance Agency, Inc. PVF-100% Massachusetts
Granite Investment Services, Inc. PVF-100% Minnesota
</TABLE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of February 28, 1997, there were approximately 4809 Owners of qualified
Contracts and approximately 3655 Owners of non-qualified Contracts offered by
Registrants.
ITEM 28. INDEMNIFICATION
Item 22, Part II and Exhibit A(6)(a) of Registrant's Registration Statement
are hereby incorporated by reference.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the foregoing provisions, or otherwise, the Registrants
have 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 Registrants of expenses incurred
or paid by a director, officer of controlling person of the Registrants 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 Registrants will, unless in the opinion of its counsel the
matter has been settled be controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITER
(a) Prior to February 1, 1997, ReliaStar Financial Marketing Corporation
was the principal underwriter of the Contracts. Effective February 1, 1997,
Washington Square Securities, Inc. ("WSSI") became the principal underwriter of
the Contracts. WSSI also acts as distributor of (i) USLICO Series Fund, which
funds variable life insurance policies of related companies; (ii) Select*Life,
Select*Life II, Select*Life III, Select*Annuity II and Select*Annuity III
contracts, issued by the Company's affiliate, ReliaStar Life Insurance Company;
and (iii) Northern Life Advantage Variable Annuity, issued by the Company's
affiliate, Northern Life Insurance Company.
(b) The directors and officers of WSSI are as follows:
<TABLE>
<CAPTION>
NAME POSITIONS AND OFFICES WITH WSSI
---- -------------------------------
<S> <C>
John H. Flittie Director and Chairman
Roger W. Arnold Director
Michael J. Dubes Director
Robert C. Salipante Director
Steven W. Wishart Director
James R. Gelder President
Michael R. Fanning Executive Vice President and Chief Marketing Officer
Jeffrey A. Montgomery Executive Vice President and Chief Operating Officer
Robert B. Saginaw Vice President
Susan M. Bergen Secretary
David Braun Assistant Vice President
David P. Wilken Treasurer
Julie A. Cooney Assistant Treasurer
Daniel S. Kuntz Assistant Treasurer
David Cox Assistant Secretary
Allen L. Kidd Assistant Secretary
Loralee A. Renelt Assistant Secretary
</TABLE>
The principal business address of each of the foregoing executive officers
is 20 Washington Avenue South, Minneapolis, Minnesota 55401, except for the
following individuals, whose principal business addresses are listed after their
respective names: Julie A. Cooney: 80 Tuscany Way, Danville, California 94506;
Michael J. Dubes: 1110 3rd Avenue, Seattle, Washington 98101; Allen L. Kidd: 222
North Arch Road, Richmond, Virginia 23236.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books or other documents required to be maintained by Section
31(a) of the 1940 Act and the rules promulgated thereunder are maintained by the
Registrant through ReliaStar Bankers Security Life Insurance Company, 4601 N.
Fairfax Drive, Arlington, Virginia 22203.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) The Depositor, ReliaStar Bankers Security Life Insurance Company,
represents that the fees and charges deducted under the flexible
premium variable annuity contract, in the aggregate, are
reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by ReliaStar
Bankers Security Life Insurance Company.
(b) Registrant undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure
that the audited financial statements in the registration
statement are never more than 16 months old for so long as
payments under the variable annuity contracts may be accepted.
(c) Registrants undertake to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a
space that an applicant can check to request a Statement of
Additional Information, or (2) a postcard or similar written
communication affixed to or included in the Prospectus that the
applicant can remove to send for a Statement of Additional
Information.
(d) 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.
(e) With regard to restricted distributions to plan participants in
accordance with the requirements of IRC Section 403(b)(11), the
Registrant, in respect to a no-action letter issued by the
Division of Investment Management (No. IP-6-88, November 28,
1988"), undertakes to:
(1) Include appropriate disclosure regarding the redemption
restrictions imposed by Section 403(b)(11) in each
registration statement, including the prospectus, used in
connection with the offer of the contract;
(2) Include appropriate disclosure regarding the redemption
restrictions imposed by Section 403(b)(11) in any sales
literature used in connection with the offer of the
contract;
(3) Instruct sales representatives who solicit participants to
purchase the contract specifically to bring the redemption
restrictions imposed by Section 403(b)(11) to the attention
of the potential participants;
(4) Obtain from each plan participant who purchases a Section
403(b) annuity contract, prior to or at the time of such
purchase, a signed statement acknowledgment the
participant's understanding of (1) the restrictions on
redemption imposed by Section 403(b)(11), and (2) the
investment alternatives available under the employer's
Section 403(b) arrangement, to which the participant may
elect to transfer his contract value;
(5) The Registrant represents that this said no-action letter is
being relied upon and that the provisions of paragraphs (1)
- (4) above have been complied with.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, Registrant certifies that it meets all of the requirements of
effectiveness of this Amendment to the Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has caused this Amendment to the
Registration Statement to be signed on its behalf, in the City of Minneapolis
and State of Minnesota, on this 30th day of April, 1997.
RELIASTAR BANKERS SECURITY VARIABLE ANNUITY
FUNDS M, P AND Q
(Registrant)
By RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
(Depositor)
By /s/John H. Flittie
--------------------------------------------
John H. Flittie, Vice Chairman,
Chief Executive Officer and President
As required by the Securities Act of 1933 and the Investment Company Act of
1940, Depositor has caused this Amendment to the Registration Statement to be
signed on its behalf, in the City of Minneapolis and State of Minnesota, on this
30th day of April, 1997.
By RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
(Depositor)
By /s/John H. Flittie
--------------------------------------------
John H. Flittie, Vice Chairman,
Chief Executive Officer and President
As required by the Securities Act of 1933, this Amendment to the Registration
Statement has been signed on this 30th day of April, 1997 by the following
directors and officers of Depositor in the capacities indicated:
/s/John H. Flittie Vice Chairman, Chief Executive
------------------ Officer and President
John H. Flittie
/s/Rebecca R. Crunk Vice President and Controller
------------------- (Principal Financial Officer)
Rebecca R. Crunk
Stephen A. Carb Wayne R. Huneke John G. Turner
R. Michael Conley Kenneth U. Kuk Charles B. Updike
Richard R. Crowl Richard E. Nolan Ross M. Weale
John H. Flittie Fioravante G. Perrotta Steven W. Wishart
James T. Hale Robert C. Salipante
Jeffrey A. Proulx, by signing his name hereto, does hereby sign this document on
behalf of each of the above-named directors of ReliaStar Bankers Security Life
Insurance Company pursuant to powers of attorney duly executed by such persons.
/s/Jeffrey A. Proulx
-----------------------------------
Jeffrey A. Proulx, Attorney-In-Fact
EXHIBIT INDEX
(b) Exhibits:
(3a) Underwriting Agreement for Variable Annuity Funds P and Q, effective
February 1, 1997.
(3b) Form of Dealer Agreements for Variable Annuity Funds P and Q.
(5) Contract Application Form.
(9) Opinion and Consent of Robert B. Saginaw as to the legality of the
securities being registered.
(10a) Written Consent of Deloitte & Touche LLP, Independent Auditors.
(10b) Written Consent of KPMG Peat Marwick LLP, Independent Auditors.
(13) Schedule for Computation of Performance Data.
(14) Financial Data Schedule, filed hereto electronically as Exhibit 27 to
Rule 401 of Regulation S-T.
(15b) Power of Attorney for R. Michael Conley.
DISTRIBUTION AGREEMENT
AGREEMENT made this 1st day of February, 1997, between ReliaStar Bankers
Security Life Insurance Company, a New York corporation, (ReliaStar Bankers) on
its own behalf and on behalf of the separate accounts of ReliaStar Bankers as
set forth in Exhibit A (Variable Account) and Washington Square Securities, Inc.
(WSSI) which is a member of the National Association of Securities Dealers, Inc.
(NASD) and is registered as a broker-dealer with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934 (the "1934 Act").
WHEREAS, ReliaStar Bankers sells variable life insurance and variable
annuity contracts (Contracts), assets for which are allocated to a Variable
Account. ReliaStar Bankers proposes to accept premium payments on existing
Contracts and to sell additional Contracts pursuant to the effectiveness of
Registration Statements relating to the Contracts and Variable Account filed
with the Securities and Exchange Commission pursuant to the Securities Act of
1933, as amended (the "1933 Act"); and
WHEREAS, each Variable Account is registered as a unit investment trust
under the Investment Company Act of 1940 (the "1940 Act"); and
WHEREAS, WSSI is an affiliate of ReliaStar Bankers, and ReliaStar Bankers
desires to retain WSSI as the General Distributor and Principal Underwriter to
distribute and sell to the public the Contracts issued by ReliaStar Bankers and
WSSI is willing to render such services.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree as follows:
1. PRINCIPAL UNDERWRITER.
ReliaStar Bankers hereby appoints WSSI, during the term of this Agreement,
subject to the registration requirements of the 1933 Act and the 1940 Act to be
the General Distributor and Principal Underwriter for the sale of Contracts to
the public in each state and other jurisdictions in which the contracts may be
lawfully sold. WSSI shall offer the Contracts for sale and distribution at
prices set by ReliaStar Bankers, through its own representatives and through
other broker dealers contracted under a Selling Agreement as described in
Paragraph 2 of this Agreement.
2. SELLING AGREEMENTS.
WSSI is hereby authorized to enter into separate written agreements, on such
terms and conditions as WSSI and ReliaStar Bankers determine are not
inconsistent with this Agreement, with other broker-dealers that agree to
participate as a broker-dealer in the distribution of the Contracts and to use
their best efforts to solicit applications for Contracts. Any such broker-dealer
(hereinafter "Broker"), shall be registered as a broker-dealer under the 1934
Act and shall be a member of the NASD. ReliaStar Bankers shall undertake to
appoint Broker's qualified agents or representatives as life insurance agents of
ReliaStar Bankers, provided that ReliaStar Bankers reserves the right to refuse
to appoint any proposed representative or agent, or once appointed, to terminate
such appointment.
3. SUITABILITY.
ReliaStar Bankers desires to ensure that Contracts will be sold to purchasers
for whom the Contract will be suitable. WSSI shall take reasonable steps to
ensure that the registered representatives of WSSI shall not make
recommendations to an applicant to purchase a Contract in the absence of
reasonable grounds to believe the purchase of the Contract is suitable for such
applicant, and shall impose similar obligations upon Brokers.
4. CONFORMITY WITH REGISTRATION STATEMENT AND APPROVED SALES MATERIALS.
In performing its duties as General Distributor, WSSI will act in conformity
with the Prospectus and with the instructions and directions of ReliaStar
Bankers, the requirements of the 1933 Act, the 1940 Act, the 1934 Act, and all
other applicable federal and state laws and regulations. WSSI shall not give any
information nor make any representations, concerning any aspect of the Contract
or of ReliaStar Banker's operations to any persons or entity unless such
information or representations are contained in the Registration Statement and
the pertinent prospectus filed with the Securities and Exchange Commission, or
are contained in sales or promotional literature approved by ReliaStar Bankers.
WSSI will not use and will take reasonable steps to ensure by representatives
will not use any sales promotion material and advertising which has not been
previously approved by ReliaStar Bankers. WSSI shall impose similar obligations
upon Brokers contracted under a Selling Agreement as described in Paragraph 2 of
this Agreement.
5. APPLICATIONS.
Completed applications for Contracts solicited by WSSI through its agents or
representatives shall be transmitted directly to ReliaStar Bankers. All payments
under the Contracts shall be made by check payable to ReliaStar Bankers or by
other method acceptable to ReliaStar Bankers, and if received by WSSI, shall be
held at all times in a fiduciary capacity and remitted promptly to ReliaStar
Bankers.
6. STANDARD OF CARE.
WSSI shall be responsible for exercising reasonable care in carrying out the
provisions of this Agreement.
7. RECORDS AND REPORTS.
ReliaStar Bankers shall maintain and preserve such records as are required of
it, WSSI and the Variable Account, by applicable laws and regulations with
regard to the offer and sale of variable life insurance. The books, accounts,
and records of ReliaStar Bankers, the Variable Account and WSSI shall be
maintained by ReliaStar Bankers so as to clearly and accurately disclose the
nature and details of the transactions. ReliaStar Bankers agrees that it will
maintain and preserve all such records in conformity with the requirements of
the 1934 Act, to the extent such requirements are applicable to variable life
insurance. ReliaStar Bankers further agrees that all such records shall be and
are maintained and held in conformity with the 1934 Act and said records are and
shall remain at all times available to WSSI.
8. COMPENSATION.
ReliaStar Bankers shall arrange for the payment of commissions to those Brokers
that sell Contracts under agreements entered into pursuant to Section 2, hereof,
and to wholesalers that solicit brokers to sell Contracts under agreements
entered into pursuant to Section 2, hereof, in amounts as may be agreed to by
ReliaStar Bankers and WSSI specified in such written agreements.
9. INVESTIGATION AND PROCEEDINGS.
WSSI and ReliaStar Bankers agree to cooperate fully in any regulatory
investigation or proceeding or judicial proceeding arising in connection with
the contracts distributed under this Agreement. WSSI further agrees to furnish
regulatory authorities with any information or reports in connection with such
services which may be requested in order to ascertain whether the operations of
ReliaStar Bankers and the Variable Account are being conducted in a manner
consistent with Applicable laws and regulations. WSSI and ReliaStar Bankers
further agree to cooperate fully in any securities regulatory investigation or
proceeding with respect to ReliaStar Bankers, WSSI, their affiliates and their
agents or representatives to the extent that such investigation or proceeding is
in connection with Contracts distributed under this Agreement. Without limiting
the foregoing:
(a) WSSI will be notified promptly of any customer complaint or notice of
any regulatory investigation or proceeding or judicial proceeding
received by ReliaStar Bankers with respect to WSSI or any agent or
representative of a Broker which may affect ReliaStar Banker's
issuance of any Contract sold under this Agreement; and
(b) WSSI will promptly notify ReliaStar Bankers of any customer complaint
or notice of any regulatory investigation or proceeding received by
WSSI or its affiliates with respect to WSSI or any agent or
representative a Broker in connection with any Contract distributed
under this Agreement or any activity in connection with any such
Contract.
10. EMPLOYEES.
WSSI will not employ in any material connection with the handling of the
Variable Accounts assets any person who, to the knowledge of WSSI:
(a) in the last 10 years has been convicted of any felony or misdemeanor
arising out of conduct involving embezzlement, fraudulent conversion,
or misappropriation of funds or securities, or involving violations of
Section 1341, 1342, or 1343 of Title 18, United States Code; or
(b) within the last 10 years has been found by any state regulatory
authority to have violated or has acknowledged violation of any
provision of any state insurance law involving fraud, deceit, or
knowing misrepresentation; or
(c) within the last 10 years has been found by any federal or state
regulatory authorities to have violated or have acknowledged violation
of any revision of federal or state securities laws involving fraud,
deceit, or knowing misrepresentation.
11. TERMINATION.
This Agreement may be terminated at any reason, for any either party on 60 days'
written notice to the other party, without the payment of any penalty. Upon
termination of this Agreement, all authorizations, rights and obligations shall
cease except the obligation to settle accounts hereunder, including commissions
on purchase payments subsequently received for Contracts in effect at time of
termination, and the agreements contained in Sections 8 and 9 hereof.
12. ASSIGNMENT.
This Agreement is not assignable by either party.
13. REGULATION.
This Agreement shall be subject to the provisions of the 1940 Act and the 1934
Act and the rules, regulations and rulings thereunder, and of the applicable
rules and regulations of the NASD, and applicable state insurance law and other
applicable law, from time to time in effect, and the terms hereof shall be
interpreted and construed in accordance therewith.
14. NOTICES.
Notices of any kind to be given to WSSI by ReliaStar Bankers or the Variable
Account shall be in writing and shall be duly given if mailed, first class
postage prepaid, or delivery to the President of WSSI at 20 Washington Avenue
South, Minneapolis, MN 55401, or at such other address or to such individual as
shall be specified by WSSI. Notices of any kind to be given to ReliaStar Bankers
or the Variable Account shall be in writing and shall be duly given if mailed,
first class postage prepaid, or delivered to them at 1000 Woodbury Road,
Woodbury, New York 11797, Attention: Senior Vice President, Individual Insurance
Division, or at such other address or to such individual as shall be specified
by ReliaStar Bankers.
15. SEVERABILITY.
If any provisions of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby.
16. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
RELIASTAR BANKERS SECURITY
LIFE INSURANCE COMPANY
By:_________________________________________
Name: Richard R. Crowl
Title: Senior Vice President and General Counsel
WASHINGTON SQUARE SECURITIES, INC.
By:_________________________________________
Name: Robert B. Saginaw
Title: Vice President
<TABLE>
<CAPTION>
FORM NUMBER OF CONTRACT FUNDED BY VARIABLE
NAME OF VARIABLE ACCOUNT ACCOUNT
- ------------------------------------------------------- ---------------------------------------------
<S> <C>
ReliaStar Bankes Security Variable Annuity Funds A, ORD 75-34 and state exceptions
B, C
ReliaStar Bankers Security Variable Annuity Funds D, ORD 75-32 and state
exceptions E, F, G, H, I
ReliaStar Bankers Security Variable Annuity Fund M ORD-80-1924 and state exceptions
ReliaStar Bankers Security Variable Annuity Funds P & B-ORD-1928-90 and state exceptions
Q
ReliaStar Bankers Security Variable Life Separate 85-251 and state exceptions
Account I
ReliaStar Bankers Security Variable Life Separate Level premium policies
Account I VL82-1195, VL84-1103,
VL84-1102; single premium policy VL84-1101;
and state exceptions
</TABLE>
BROKER-DEALER AGENCY SELLING AGREEMENT
FOR VARIABLE CONTRACTS
This Agreement is made among the following three parties:
1. RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
1000 Woodbury Road, Suite 102
Woodbury, New York 11797
a New York domiciled stock life insurance company
(hereinafter "INSURER"); and,
2. WASHINGTON SQUARE SECURITIES, INC.
20 Washington Avenue South
Minneapolis, Minnesota 55401-1900
an affiliate of Insurer, registered as a broker-dealer with
the Securities and Exchange Commission ("SEC") and a member
of the National Association of Securities Dealers, Inc.
("NASD")(hereinafter "GENERAL DISTRIBUTOR"); and,
3. ______________________________
Company's Full Name
______________________________
Street
______________________________
City State ZIP
registered as a broker-dealer with the SEC and a member of the
NASD and licensed as an insurance agency (hereinafter
"BROKER-DEALER").
RECITALS:
WHEREAS, Broker-Dealer is licensed as an insurance agency in order to
satisfy state insurance law requirements with respect to the sale of variable
insurance products which are registered securities with the SEC.
WHEREAS, the parties wish to enter into an agreement for the distribution
of Variable Contracts by Broker-Dealer; and
WHEREAS, Insurer has appointed General Distributor as principal underwriter
and distributor (as those terms are defined by the Investment Company Act of
1940) of the Variable Contracts and has authorized General Distributor to enter
into selling agreements with registered broker-dealers for the solicitation and
sale of Variable Contracts; and,
WHEREAS, Insurer and General Distributor propose to have Broker-Dealer's
registered representatives who are licensed as life insurance/variable contract
agents in appropriate jurisdictions ("Representatives") solicit and sell
Variable Contracts and,
WHEREAS, Insurer and General Distributor propose to have Broker-Dealer
provide certain supervisory and administrative services as hereinafter described
with respect to the solicitation and sales of Variable Contracts.
NOW THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties now agree as follows:
1. VARIABLE CONTRACTS
In this Agreement, the words "Variable Contract" shall mean those variable life
insurance policies and variable annuity contracts identified in Section 1 of the
Compensation Schedule attached hereto, and as may hereafter be amended.
Insurer may in its sole discretion and without notice to Broker-Dealer, suspend
sales of any Variable Contracts or amend any policies or contracts evidencing
such Variable Contracts if, in Insurer's opinion, such suspension or amendment
is: (1) necessary for compliance with federal, state, or local laws,
regulations, or administrative order(s); or, (2) necessary to prevent
administrative or financial hardship to Insurer. In all other situations,
Insurer shall provide 30 days notice to Broker-Dealer prior to suspending sales
of any Variable Contracts or amending any policies or contracts evidencing such
Variable Contracts.
Insurer may issue and propose additional or successor products, in which event
Broker-Dealer will be informed of the product and its related Commission
Schedule. If Broker-Dealer does not agree to distribute such product(s), it must
notify Insurer in writing within 30 days of receipt of the Commission Schedule
for such product(s). If Broker-Dealer does not indicate disapproval of the new
product(s) or the terms contained in the related Commission Schedule,
Broker-Dealer will be deemed to have thereby agreed to distribute such
product(s) and agreed to the related Commission Schedule which shall be attached
to and made a part of this Agreement.
2. AGENCY APPOINTMENT
On the effective date, Insurer and General Distributor appoint
Broker-Dealer and Broker-Dealer accepts the appointment to solicit sales of and
to sell Variable Contracts, pursuant to the terms of this Agreement.
3. DUTIES OF BROKER-DEALER
(a) SUPERVISION OF REPRESENTATIVES. Broker-Dealer shall have full
responsibility for the training and supervision of all Representatives
who are engaged directly or indirectly in the offer or sale of the
Variable Contracts, and all such persons shall be subject to the
control of Broker-Dealer with respect to such persons' securities
regulated activities in connection with the Variable Contracts.
Broker-Dealer will cause the Representatives to be trained in the sale
of the Variable Contracts, will cause such Representatives to qualify
under applicable federal and state laws to engage in the sale of the
Variable Contracts; will cause such Representatives to be registered
representatives of Broker-Dealer before such Representatives engage in
the solicitation of applications for the Variable Contracts; and will
cause such Representatives to limit solicitation of applications for
the Variable Contracts to jurisdictions where Insurer has authorized
such solicitation. Broker-Dealer shall cause such Representatives'
qualifications to be certified to the satisfaction of General
Distributor and shall notify General Distributor if any Representative
ceases to be a registered representative of Broker-Dealer or ceases to
maintain the proper licensing required for the sale of the Variable
Contracts. All parties shall be liable for their own negligence and
misconduct under this paragraph.
(b) REPRESENTATIVES INSURANCE COMPLIANCE. Broker-Dealer, prior to allowing
its Representatives to solicit for sales or sell the Variable
Contracts, shall require such representatives to be validly insurance
licensed, registered and appointed by Insurer as a variable
contract/life insurance agent in accordance with the jurisdictional
requirements of the place where the solicitations and sales take place
as well as the solicited person's or entity's place of residence.
Broker-Dealer shall assist Insurer in the appointment of
Representatives under the applicable insurance laws to sell Variable
Contracts. Broker-Dealer shall fulfill all Insurer requirements in
conjunction with the submission of licensing/appointment papers for
all applicants as insurance agents of Insurer. All such
licensing/appointment papers shall be submitted to Insurer or its
designee by Broker-Dealer. Notwithstanding such submission, Insurer
shall have sole discretion to appoint, refuse to appoint, discontinue,
or terminate the appointment of any Representative as an insurance
agent of Insurer.
(c) COMPLIANCE WITH NASD RULES OF FAIR PRACTICE AND FEDERAL AND STATE
SECURITIES LAWS. Broker-Dealer shall fully comply with the
requirements of the National Association of Securities Dealers, Inc.,
the Securities Exchange Act of 1934 and all other applicable federal
and state laws. In addition, Broker-Dealer will establish and maintain
such rules and procedures as may be necessary to cause diligent
supervision of the securities activities of the Representatives as
required by applicable law or regulation. Upon request by General
Distributor, Broker-Dealer shall furnish such records as may be
necessary to establish such diligent supervision.
(d) NOTICE OF REPRESENTATIVE'S NONCOMPLIANCE. In the event a
Representative fails or refuses to submit to supervision of
Broker-Dealer or otherwise fails to meet the rules and standards
imposed by Broker-Dealer on its Representatives, Broker-Dealer shall
advise General Distributor of this fact and shall immediately notify
such Representative that he or she is no longer authorized to sell the
Variable Contracts and Broker-Dealer shall take whatever additional
action may be necessary to terminate the sales activities of such
Representative relating to such contracts and policies.
(e) PROSPECTUSES, SALES PROMOTION MATERIAL AND ADVERTISING. Broker-Dealer
shall be provided, without any expense to Broker-Dealer, with
prospectuses relating to the Variable Contracts and such other
supplementary sales material as General Distributor determines is
necessary or desirable for use in connection with sales of the
Variable Contracts.
NO SALES PROMOTION MATERIALS OR ANY ADVERTISING RELATING TO THE
VARIABLE CONTRACTS, INCLUDING WITHOUT LIMITATION GENERIC ADVERTISING
MATERIAL WHICH DOES NOT REFER TO INSURER BY NAME, SHALL BE USED BY
BROKER-DEALER UNLESS THE SPECIFIC ITEM HAS BEEN APPROVED IN WRITING BY
GENERAL DISTRIBUTOR PRIOR TO SUCH USE.
In addition, Broker-Dealer shall not print, publish or distribute any
advertisement, circular or any document relating to Insurer unless
such advertisement, circular or document shall have been approved in
writing by Insurer prior to such use. Upon termination of this
Agreement, all prospectuses, sales promotion material, advertising,
circulars, documents and software relating to the sales of Insurer's
contracts shall be promptly turned over to Insurer free from any claim
or retention of rights by the Broker-Dealer.
Insurer represents that the prospectus and registration statement
relating to the Variable Contracts contain no untrue statements of
material fact or omission to state material fact, the omission of
which makes any statement contained in the prospectus and registration
statement misleading. Insurer agrees to indemnify Broker-Dealer from
and against any claims, liabilities and expenses which may be incurred
under the Securities Act of 1933, the Investment Company Act of 1940,
common law or otherwise arising out of a breach of the agreement in
this paragraph.
Broker-Dealer agrees to hold harmless and indemnify Insurer and
General Distributor against any and all claims, liabilities and
expenses which Insurer or General Distributor may incur from
liabilities arising out of or based upon any alleged or untrue
statement other than statements contained in the registration
statement, prospectus or approved sales material of any Variable
Contract.
In accordance with the requirements of the laws of the several states,
Broker-Dealer shall maintain complete records indicating the manner
and extent of distribution of any such solicitation material, shall
make such records and files available to staff of Insurer or its
designated agent in field inspections and shall make such material
available to personnel of state insurance departments, the NASD or
other regulatory agencies, including the SEC, which have regulatory
authority over Insurer or General Distributor. Broker-Dealer holds
Insurer, General Distributor and their affiliates harmless from any
liability arising from the use of any material which either (a) has
not been specifically approved by Insurer in writing, or (b) although
previously approved, has been disapproved, in writing, for further
use.
(f) SECURING APPLICATIONS. All applications for Variable Contracts shall
be made on application forms supplied by Insurer and all payments
collected by Broker-Dealer or any Representative thereof shall be
remitted promptly in full, together with such application forms and
any other required documentation, directly to Insurer at the address
indicated on such application or to such other address as Insurer may,
from time-to-time, designate in writing. Broker-Dealer shall review
all such applications for accuracy and completeness. Checks or money
orders in payment on any such Variable Contract shall be drawn to the
order of "ReliaStar Bankers Security Life Insurance Company." All
applications are subject to acceptance or rejection by Insurer at its
sole discretion. All records or information obtained hereunder by
Broker-Dealer shall not be disclosed or used except as expressly
authorized herein, and Broker-Dealer will keep such records and
information confidential, to be disclosed only as authorized or if
expressly required by federal or state regulatory authorities.
(g) COLLECTION OF PURCHASE PAYMENTS. Broker-Dealer agrees that all money
or other consideration tendered with or in respect of any application
for a Variable Contract and the Variable Contract when issued is the
property of Insurer and shall be promptly remitted in full to Insurer
without deduction or offset for any reason, including by way of
example but not limitation, any deduction or offset for compensation
claimed by Broker-Dealer.
(h) POLICY DELIVERY. Insurer will transmit Variable Contracts to
Broker-Dealer for delivery to Policyowners. Broker-Dealer hereby
agrees to deliver all such Variable Contracts to Policyowners within
ten (10) days of their receipt by Broker-Dealer from Insurer.
Broker-Dealer agrees to indemnify and hold harmless Insurer for any
and all losses caused by Broker-Dealer's failure to perform the
undertakings described in this paragraph. Broker-Dealer hereby
authorizes Insurer to set off any amount it owes Insurer under this
paragraph against any and all amounts otherwise payable to
Broker-Dealer by Insurer.
(i) FIDELITY BOND. Broker-Dealer represents that all directors, officers,
employees and Representatives of Broker-Dealer who are licensed
pursuant to this Agreement as Insurer's agents for state insurance law
purposes or who have access to funds of Insurer, including but not
limited to funds submitted with applications for the Variable
Contracts, or funds being returned to owners, are and shall be covered
by a blanket fidelity bond, including coverage for larceny and
embezzlement, issued by a reputable bonding company. This bond shall
be maintained by Broker-Dealer at Broker-Dealer's expense. Such bond
shall be, at least, of the form, type and amount required under the
NASD Rules of Fair Practice. Insurer may require evidence,
satisfactory to it, that such coverage is in force and Broker-Dealer
shall give prompt written notice to Insurer of any notice of
cancellation or change of coverage.
Broker-Dealer assigns any proceeds received from the fidelity bonding
company to Insurer to the extent of Insurer's loss due to activities
covered by the bond. If there is any deficiency amount, whether due to
a deductible or otherwise, Broker-Dealer shall promptly pay Insurer
such amount on demand and Broker-Dealer hereby indemnifies and holds
harmless Insurer from any such deficiency and from the costs of
collection thereof (including reasonable attorneys' fees).
(j) Broker Dealer will be governed strictly by all rules, regulations, and
instructions contained in the RBSL administrative handbook, together
with all other regulations instituted from time to time, and observe
and comply with the insurance laws and regulations of all states in
which the Broker Dealer operates.
4. COMPENSATION
(a) VARIABLE CONTRACTS. Insurer, on behalf of General Distributor, shall
pay a dealer concession to Broker-Dealer on all sales of Variable
Contracts through its Representatives, in accordance with the form of
the Compensation Schedule attached hereto, which is in effect when
purchase payment on such Variable Contracts are received by Insurer.
Dealer concessions will be paid as a percentage of premiums received
in cash or other legal tender and accepted by Insurer on applications
obtained by Broker-Dealer's Representatives unless otherwise indicated
in Compensation Schedule A. Upon termination of this Agreement, all
compensation payable hereunder shall cease; however, Broker-Dealer
shall continue to be liable for any chargebacks or for any other
amounts advanced by or otherwise due Insurer hereunder.
Insurer will pay all such Compensation to the Broker-Dealer.
Broker-Dealer agrees to hold Insurer and General Distributor harmless
from all claims of its Representatives for compensation in respect of
Representative's sales of Variable Contracts.
(b) COMMISSION STATEMENTS. Broker-Dealer will be provided with copies of
its Representatives' commission statements together with
Broker-Dealer's own commission statement for each commission payment
period in which commissions are payable. Broker-Dealer agrees that,
except as to clerical errors and material undisclosed facts, if any,
such statements constitutes a complete and accurate statement of the
commission account unless written notice is provided to Insurer within
120 days after the date of the statement, which notice specifically
sets forth the objections or exceptions thereto.
(c) COMPENSATION SCHEDULES. The initial Compensation Schedule is attached
(see Table A). Insurer and General Distributor reserve the right to
change, amend, or cancel any Compensation Schedule as to business
produced after such change by mailing notice of such change in the
form of a new Compensation Schedule to Broker-Dealer. Such change
shall be effective, unless otherwise specified, ten (10) days after
the notice is mailed.
(d) RIGHTS OF REJECTION AND SETTLEMENT. Insurer reserves the right to
reject any and all applications and collections submitted, to
discontinue writing any form of policy, to take possession of and
cancel any policy and return the premium or any part of it, and to
make any compromise settlement in respect of a policy. Broker-Dealer
will not be entitled to receive or retain any compensation on premiums
or parts of premiums Insurer does not receive and retain because of
such rejection, discontinuance, cancellation, or compromise
settlement. If compensation has been paid to which Broker-Dealer is
not entitled, any amount credited will be charged back, and if the
account balance is insufficient to cover the credited amount,
Broker-Dealer as applicable agrees to promptly repay the credited
amount.
5. TERMINATION
This Agreement may be terminated, without cause, by any party upon thirty (30)
days prior written notice; and may be terminated, for failure to perform
satisfactorily or other cause, by any party immediately; and shall be terminated
if Broker-Dealer ceases to be registered as a Broker-Dealer under the Securities
Exchange Act of 1934 and a member of the NASD or, if Broker-Dealer ceases to
maintain its insurance agent license(s) in good standing in the jurisdictions in
which it conducts business.
6. ARBITRATION
Any dispute, claim or controversy arising out of or in connection with this
Agreement shall be submitted to arbitration pursuant to the NASD's arbitration
facilities. If the subject matter of the dispute, claim or controversy is not
within the scope of matters which may arbitrated through the NASD arbitration
facilities, then such dispute, claim or controversy shall, upon the written
request of any party, be submitted to three arbitrators, one to be chosen by
each party, and the third by the two so chosen. If either party refuses or
neglects to appoint an arbitrator within thirty (30) days after the receipt of
the written notice from the other party requesting it to do so, the requesting
party may appoint two arbitrators. If the two arbitrators fail to agree in the
selection of a third arbitrator within thirty (30) days of their appointment,
each of them shall name two, of whom the other shall decline one and the
decision shall be made by drawing lots. All arbitrators shall be active or
retired executive officers of insurance companies not under the control of any
party to this Agreement. Each party shall submit its case to the arbitrators
within thirty (30) days of the appointment of the third arbitrator. The
arbitration shall be held in Minneapolis, Minnesota at the times agreed upon by
the arbitrators. The decision in writing of any two arbitrators, when filed with
the parties hereto shall be final and binding on both parties. Judgment may be
entered upon the final decision of the arbitrators in any court having
jurisdiction. Each party shall bear the expense of its own arbitrator and shall
jointly and equally bear with the other party the expense of the third
arbitrator and of the arbitration.
7. GENERAL PROVISIONS
(a) ADDITIONS, AMENDMENTS, MODIFICATIONS & WAIVERS. This Agreement shall
not be effective until approved by Insurer and General Distributor.
Insurer and General Distributor reserve the right to amend this
Agreement at any time, and the submission of an application for the
purchase of a Variable Contract by Broker-Dealer after notice of any
such amendment has been sent shall constitute Broker-Dealer's
agreement to any such amendment. No additions, amendments or
modifications of this Agreement or any waiver of any provision will be
valid unless approved, in writing, by one of Insurer's duly authorized
officers. In addition, no approved waiver of any default, or failure
of performance by Broker-Dealer will affect Insurer's or General
Distributor's rights with respect to any later default or failure of
performance.
(b) INDEPENDENT CONTRACTOR RELATIONSHIP. This Agreement does not create
the relationship of employer and employee between the parties to this
Agreement. Insurer and General Distributor are independent contractors
with respect to Broker-Dealer and its Representatives.
(c) ASSIGNMENTS. Broker-Dealer will not assign or transfer, either wholly
or partially, this Agreement or any of the benefits accrued or to
accrue under it, without the written prior consent of a duly
authorized officer of the Insurer and General Distributor.
(d) SERVICE OF PROCESS. If Broker-Dealer receives or is served with any
notice or other paper concerning any legal action against Insurer or
General Distributor, Broker-Dealer agrees to notify Insurer
immediately (in any event not later than the first business day after
receipt) by telephone and further agrees to transmit any papers that
are served or received by facsimile to (612) 342-7531 and by overnight
mail to Insurer's Office of General Counsel.
(e) SEVERABILITY. It is understood and agreed by the parties to this
Agreement that if any part, term or provision of this Agreement is
held to be invalid or in conflict with any law or regulation, the
validity of the remaining portions or provisions will not be affected,
and the parties' rights and obligations will be construed and enforced
as if this Agreement did not contain the particular part, term or
provision held to be invalid.
(f) GOVERNING LAW. It is agreed by the parties to this Agreement that the
Agreement and all of its provisions will be governed by the laws of
the State of Minnesota.
(g) LIMITATIONS. No party other than Insurer shall have the authority on
behalf of Insurer to make, alter, or discharge any policy, contract,
or certificate issued by Insurer, to waive any forfeiture or to grant,
permit, nor extend the time for making any payments nor to guarantee
earnings or rates, nor to alter the forms which Insurer may prescribe
or substitute other forms in place of those prescribed by Insurer, nor
to enter into any proceeding in a court of law or before a regulatory
agency in the name of or on behalf of Insurer, nor to open any bank
account in the full legal name of Insurer, any derivation thereof or
any tradename thereof.
8. TERRITORY
Broker-Dealer's territory is limited geographically to those jurisdictions in
which the Variable Contracts may lawfully be offered, provided that
Broker-Dealer's right to solicit sales of and to sell the Variable Contracts in
such jurisdictions is not exclusive.
9. EFFECTIVE DATE
This Agreement shall be effective ________________, 199__.
IN WITNESS WHEREOF, we set our hands this ____ day of _________________,
199__.
INSURER:
RELIASTAR BANKERS SECURITY LIFE
INSURANCE COMPANY
By: _____________________________
Title: _____________________________
GENERAL DISTRIBUTOR:
WASHINGTON SQUARE SECURITIES, INC.
By: _____________________________
Title: _____________________________
BROKER-DEALER:
- --------------------------------------
By: _____________________________
Title: _____________________________
TABLE A
-------
DEALER'S CONCESSION
================================================================================
KIND OF POLICY TOTAL CONCESSIONS
================================================================================
Individual Single Payment Deferred Annuity Contracts 6%
Additional Purchase Payment Deferred Annuity Contract 6%
Immediate Annuity Contract 2.5%
================================================================================
The Dealer hereby agrees that any commissions paid on a Variable Annuity
Contract that is canceled under the provisions of the Contract's right to
examine clause, a/k/a the "20-day free look" clause, will be repaid to ReliaStar
Bankers Security. ReliaStar Bankers Security may also charge such amounts
against the Dealer's account.
No commissions will be paid on purchases on Contracts resulting from exchanges
or transfers from Separate Accounts A through I or M sponsored by ReliaStar
Bankers Security or between Separate Accounts Q and NQ sponsored by ReliaStar
Bankers Security, or for transfers among investment media within each such
Separate Account Q or NQ.
<TABLE>
<CAPTION>
RELIASTAR
[GRAPHIC OMITTED]
APPLICATION FOR VARIABLE ANNUITY TO:
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
Home Office: 1000 Woodbury Road, Suite 102, P.O. Box 9004, Woodbury, NY 11797
Administrative Office:4601 Fairfax Drive, P.O Box 3700, Arlington, VA 22203-0700
Agent/Broker: Send Variable Annuity Application
and check to your Broker-Dealer
Please make check payable to:
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
NEW YORK
USE ONLY
<S> <C>
1. DESIGNATED ANNUITANT (Please Print)
NAME __________________________________________________________SOC. SEC. NO.____________________________________________
ADDRESS_________________________________________________________ SEX [ ] M [ ] F
__________________________________________________________ MO. DAY YR.
ZIP_______________________________________________________BIRTHDATE
RELATIONSHIP TO OWNER___________________________________________
EMPLOYER________________________________________________________ OCCUPATION___________________________________________
- -------------------------------------------------------------------------------------------------------------------------
2. CONTRACT OWNER (If annuitant and Contract Owner are different, please fill in SUCCESSOR OWNER)
NAME __________________________________________________________SOC. SEC. NO.____________________________________________
ADDRESS_________________________________________________________ SEX [ ] M [ ] F
__________________________________________________________ MO. DAY YR.
ZIP ______________________________________BIRTHDATE
SUCCESSOR ______________________________________________________ OCCUPATION___________________________________________
- -------------------------------------------------------------------------------------------------------------------------
3. BENEFICIARY:
NAME __________________________________________________________RELATIONSHIP_____________________________________________
SUCCESSOR BENEFICIARY___________________________________________ RELATIONSHIP_________________________________________
- -------------------------------------------------------------------------------------------------------------------------
4. TYPE OF PLAN:
[ ] Non-Tax Qualified
[ ] Tax Qualified (Check one of the following):
[ ] IRA [ ]Rollover IRA (from a qualified plan) [ ] SEP IRA (established by employer)
[ ] HR-10 Keogh Plan [ ]401(K) Corporate Plan [ ] Other plan [ ]
[ ] 403(b)TSA [ ]457 (Deferred Compensation Plan)
- -------------------------------------------------------------------------------------------------------------------------
5. PURCHASE PAYMENT:
INITIAL PURCHASE payment of $__________________________is attached. If setting
up a pre-authorized check plan, minimum initial payment is waived. Please attach
check for $100 or more for non-tax qualified plans or $50 or more for
tax-qualified plans. Make check payable to ReliaStar Bankers Security Life
Insurance Company.
- -------------------------------------------------------------------------------------------------------------------------
6. DOLLAR COST AVERAGING
[ ] I authorize to have $________________ ($100 min) transferred each month from my _______________________ Fund to:
$ _____________________to the_______________________________________________portfolio
$ _____________________to the_______________________________________________portfolio
$ _____________________to the_______________________________________________portfolio
Please make my first transfer on__________________/_________/________ (mm/dd/yy)
and monthly thereafter.
- -------------------------------------------------------------------------------------------------------------------------
7. PURCHASE PAYMENT ALLOCATION
(Must total 100%, fill in percentages):
__________Alliance Capital Growth and Income Portfolio (143/043) _____________Northstar Growth Fund (179/079)
__________Alliance Capital Short-Term Multi-Market Portfolio _____________Oppenheimer Money Fund (144/044)
(149/049)
__________Fidelity Growth Portfolio (171/071) _____________Oppenheimer Capital Appreciation Fund
(145/045)
__________Fidelity Equity-Income Portfolio (172/072) _____________Oppenheimer High Income Fund (146/046)
__________Fidelity Investment Grade Bond Portfolio (174/074) _____________Oppenheimer Multiple Strategies Fund
(147/047)
__________Fidelity Asset Manager Portfolio (175/075) _____________Oppenheimer Global Securities Fund
(148/048)
__________Fidelity Index 500 Portfolio (176/076) _____________Oppenheimer Strategic Bond Fund (150/050)
__________Fidelity Contrafund Portfolio (178/078) _____________Oppenheimer Bond Fund (151/051)
__________Northstar Income and Growth Fund (120/020) _____________Oppenheimer Growth Fund (152/052)
__________Northstar High Yield Bond Fund (127/027) _____________Fixed Fund (140/040)
If no allocations are indicated above, the total initial purchase payment will
be allocated to Oppenheimer Money Fund pending allocation instructions from the
Owner.
- -------------------------------------------------------------------------------------------------------------------------
8. ANNUITY COMMENCEMENT DATE (Must be completed)
The First Day of__________________/_______ (mm/yy).
The Annuity Commencement Date may not be later than the first day of the first
calendar month after the Annuitant's 90th birthday. Qualified plans may be
subject to distribution prior to 90th birthday.
- -------------------------------------------------------------------------------------------------------------------------
9. REPLACEMENT:
Will the annuity applied for replace or change, in whole or in part, existing
annuity or life insurance? [ ] Yes [ ] No If yes, explain under "No. 11,
Remarks" and request replacement information from your agent if applicable.
- -------------------------------------------------------------------------------------------------------------------------
10. REMARKS:
- -------------------------------------------------------------------------------------------------------------------------
11. AMENDMENTS, CORRECTIONS AND NOTATIONS MADE BY HOME OFFICE (not applicable in CA, PA or WV)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
I hereby represent my answers to the above questions to be correct and true to
the best of my knowledge and belief and agree that this application shall be a
part of any annuity contract issued by the Company. Under penalties of perjury,
I certify (1) that the number shown on this form is my correct taxpayer
identification number and (2) that I am not subject to backup withholding either
because I have not been notified that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or the Internal Revenue
Service has notified me that I am no longer subject to backup withholding. I
UNDERSTAND THAT ANNUITY PAYMENTS AND SURRENDER VALUES, WHEN BASED UPON
INVESTMENT EXPERIENCE OF A SUB-ACCOUNT OF A SEPARATE ACCOUNT, ARE VARIABLE AND
ARE NOT GUARANTEED AS TO A FIXED DOLLAR AMOUNT. RECEIPT OF A VARIABLE ANNUITY
PROSPECTUS DATED ____________________________________ AND PROSPECTUSES OF THE
CURRENT FUNDS ARE HEREBY ACKNOWLEDGED. IN ADDITION TO THE PROSPECTUSES, CHECK
HERE [ ] IF YOU WANT STATEMENTS OF ADDITIONAL INFORMATION.
SIGNED AT_______________________________________________________
(City) (State) (Date)
ANNUITANT_______________________________________________________
(Signature of Annuitant)
OWNER___________________________________________________________
(Signature of Owner if other than Annuitant)
AGENT: Will the annuity applied for replace or change, in whole or in part,
existing annuity or life insurance? Yes [ ] No [ ] If Yes, explain in Remarks on
page 3.
( )----------------------------------------------------
(Owner's Telephone Number)
WITNESSED_______________________________________________________
(Signature of Selling Agent)
<TABLE>
<CAPTION>
<S> <C>
FOR DEALER ONLY Print Selling Agent's
Dealer's Name___________________________________________________ Name__________________________________________________________
(Last) (First)
Branch Office___________________________________________________
Selling Agent's
Authorized Signature____________________________________________ IDNumber______________________________________________________
Selling Agent's
Phone Number__________________________________________________
</TABLE>
DEALER: Make check payable to RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
and mail check and application to: 4601 Fairfax Drive, Arlington, VA 22203;
Attn: Variable Annuity Dept.
April 30, 1997
ReliaStar Bankers Security Life Insurance Company
1000 Woodbury Lane, Suite 102
Woodbury, NY 11797
Madam/Sir:
In connection with the proposed registration under the Securities Act of 1933,
as amended, of individual variable annuity contracts (the "Contracts") and
interests in ReliaStar Bankers Security Variable Annuity Funds P and Q (the
"Separate Account"), I have examined documents relating to the establishment of
the Separate Account by the Board of Directors of ReliaStar Bankers Security
Life Insurance Company (the "Company") as a separate account for assets
applicable to variable annuity contracts, pursuant to New York Insurance Code
Section 4240, as amended, and the Registration Statement, on Form N-4, as
amended by Post-Effective Amendment No. 12 thereto, File No. 33-11489 (the
"Registration Statement"), and I have examined such other documents and have
reviewed such matters of law as I deemed necessary for this opinion, and I
advise you that in my opinion:
1. The Separate Account is a separate account of the Company duly created and
validly existing pursuant to the laws of the State of New York.
2. The contracts, when issued in accordance with the Prospectus constituting a
part of the Registration Statement and upon compliance with applicable
local law, will be legal and binding obligations of the Company in
accordance with their respective terms.
3. The portion of the assets held in the Separate Account equal to reserves
and other contract liabilities with respect to the Separate Account are not
chargeable with liabilities arising out of any other business the Company
may conduct.
I consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of my name under the heading "Legal Opinions" in the
Prospectus constituting a part of the Registration Statement and to the
references to me wherever appearing therein.
Very truly yours,
/s/Robert B. Saginaw
- --------------------
Robert B. Saginaw
Counsel
INDEPENDENT AUDITORS' CONSENT
Board of Directors and Contract Holders
ReliaStar Bankers Security Variable Annuity Funds P and Q
We consent to the incorporation by reference in this Post-Effective Amendment
No. 12 to Registration Statement on Form N-4 (File No. 33-11489) of ReliaStar
Bankers Security Variable Annuity Funds P and Q for The USA Plan filed under the
Securities Act of 1933 and the Investment Company Act of 1940, respectively, of
our report dated February 14, 1997 on the audit of the financial statements of
ReliaStar Bankers Security Variable Annuity Funds P and Q as of December 31,
1996 and for each of the two years in the period then ended, and our report
dated March 31, 1997 on the audit of the consolidated financial statements of
ReliaStar Bankers Life Insurance Company and subsidiaries as of and for the
years ended December 31, 1996 and 1995, and to the reference to us under the the
headings "Custodian and Accountants" and "Financial Statements" appearing in the
Statement of Additional Information, all of which are part of such Registration
Statement.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
April 25, 1997
INDEPENDENT AUDITORS' CONSENT
Board of Directors and Contract Holders
ReliaStar Bankers Security Variable Annuity Funds P and Q
We consent to the use in this Post-Effective Amendment and No. 12 to
Registration Statement on Form N-4 (File No. 33-11489) of ReliaStar Bankers
Security Variable Annuity Funds P and Q filed under the Securities Act of 1933
and the Investment Company Act of 1940, respectively, of our report dated
February 9, 1995 on the audit of the statement of assets and liabilities and the
related statement of operations and changes in net assets of ReliaStar Bankers
Security Variable Annuity Funds P and Q for The USA Plan (formerly Bankers
Security Variable Annuity Funds P and Q) as of and for the year ended December
31, 1994 (not presented herein), and the accumulation unit values of the
ReliaStar Bankers Security Variable Annuity Funds P and Q for The USA Plan for
each of the years in the eight-year period ended December 31, 1994, appearing in
the Statement of Additional Information of such Registration Statement; and to
the references to our firm under the headings "Custodian and Accountants" and
"Financial Statements" appearing in the Statement of Additional Information,
which is part of such registration statement.
/s/ KPMG Peat Marwick LLP
Washington, D.C.
April 25, 1997
<TABLE>
<CAPTION>
USA PLAN VARIABLE ANNUITY
OPPENHEIMER CAPITAL APPRECIATION
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C>
06/16/87 1,000.00 $1.000000 1000.000
06/16/88 $1.026003 1000.000 1,026.00 1,025.24 999.256
06/16/89 $1.277654 999.256 1,276.70 1,275.94 998.658
06/16/90 $1.249977 998.658 1,248.30 1,247.54 998.050
06/16/91 $1.326080 998.050 1,323.49 1,322.73 997.474
06/16/92 $1.465382 997.474 1,461.68 1,460.92 996.955
06/16/93 $1.889019 996.955 1,883.27 1,882.51 996.554
06/16/94 $2.062816 996.554 2,055.71 2,054.95 996.187
06/16/95 $2.346556 996.187 2,337.61 2,336.85 995.864
06/16/96 $3.357293 995.864 3,343.41 3,342.65 995.638
12/31/96 $3.320628 995.638 3,306.14 3,305.38 995.408
Contract Value
Ending Value 3,305.38
Total Return Inception to Date 230.54%
Average Annual Return 15.10%
Number of Years 8.5
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
12/31/91 1,000.00 $1.636956 610.890
12/31/92 $1.861079 610.890 1,136.91 1,136.15 610.479
12/31/93 $2.340500 610.479 1,428.83 1,428.07 610.156
12/31/94 $2.101345 610.156 1,282.15 1,281.39 609.795
12/31/95 $2.782443 609.795 1,696.72 1,695.96 609.522
12/31/96 $3.320628 609.522 2,024.00 2,023.24 609.294
Conract Value Surrender Value
Ending Value 2,023.24 1,942.31
Total Return Five Years 102.32% 94.23%
Average Annual Return 15.14% 14.20%
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
12/31/95 1,000.00 $2.782443 359.396
12/31/96 $3.320628 359.396 1,193.42 1,192.66 359.167
Contract Value Surrender Value
Ending Value 1,192.66 1,109.17
Total Return One Year 19.27% 10.92%
Average Annual Return 19.27% 10.92%
USA PLAN VARIABLE ANNUITY
OPPENHEIMER HIGH INCOME
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
06/16/87 1,000.00 $1.000000 1000.000
06/16/88 $1.078223 1000.000 1,078.22 1,077.46 999.292
06/16/89 $1.173671 999.292 1,172.84 1,172.08 998.644
06/16/90 $1.227578 998.644 1,225.91 1,225.15 998.022
06/16/91 $1.431183 998.022 1,428.35 1,427.59 997.489
06/16/92 $1.778659 997.489 1,774.19 1,773.43 997.06
06/16/93 $2.134781 997.060 2,128.50 2,127.74 996.702
06/16/94 $2.299231 996.702 2,291.65 2,290.89 996.372
06/16/95 $2.454308 996.372 2,445.40 2,444.64 996.061
06/16/96 $2.781033 996.061 2,770.08 2,769.32 995.788
12/31/96 $3.014153 995.788 3,001.46 3,000.70 995.537
Contract Value
Ending Value 3,000.70
Total Return Inception to Date 200.07%
Average Annual Return 13.80%
Number of Years 8.5
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
12/31/91 1,000.00 $1.607244 622.183
12/31/92 $1.870898 622.183 1,164.04 1,163.28 621.776
12/31/93 $2.330994 621.776 1,449.36 1,448.60 621.452
12/31/94 $2.225559 621.452 1,383.08 1,382.32 621.111
12/31/95 $2.653363 621.111 1,648.03 1,647.27 620.823
12/31/96 $3.014153 620.823 1,871.26 1,870.50 620.572
Contract Value Surrender Value
Ending Value 1,870.50 1,795.68
Total Return Five Years 87.05% 79.57%
Average Annual Return 13.34% 12.42%
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
12/31/95 1,000.00 $2.653363 376.880
12/31/96 $3.014153 376.880 1,135.97 1,135.21 376.627
Contract Value Surrender Value
Ending Value 1,135.21 1,1055.75
Total Return One Year 13.52% 5.58%
Average Annual Return 13.52% 5.58%
USA PLAN VARIABLE ANNUITY
OPPENHEIMER MULTIPLE STRATEGIES
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
05/27/87 1,000.00 $1.000000 1000.000
05/27/88 $1.037953 1000.000 1,037.95 1,037.19 999.265
05/27/89 $1.268039 999.265 1,267.11 1,266.35 998.668
05/27/90 $1.284046 998.668 1,282.34 1,281.58 998.080
05/27/91 $1.347173 998.080 1,344.59 1,343.83 997.519
05/27/92 $1.503874 997.519 1,500.14 1,499.38 997.012
05/27/93 $1.679441 997.012 1,674.42 1,673.66 996.558
05/27/94 $1.773634 996.558 1,767.53 1,766.77 996.13
05/27/95 $1.937149 996.130 1,929.65 1,928.89 995.737
05/27/96 $2.229359 995.737 2,219.86 2,219.10 995.398
12/31/96 $2.393640 995.398 2,382.62 2,381.86 995.079
Contract Value
Ending Value 2,381.86
Total Return Inception to Date 138.19%
Average Annual Return 10.64%
Number of Years 8.5833333
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
12/31/91 1,000.00 $1.466843 681.736
12/31/92 $1.579038 681.736 1,076.49 1,075.73 681.257
12/31/93 $1.807794 681.257 1,231.57 1,230.81 680.835
12/31/94 $1.744900 680.835 1,187.99 1,187.23 680.4
12/31/95 $2.109408 680.400 1,435.24 1,434.48 680.039
12/31/96 $2.393640 680.039 1,627.77 1,627.01 679.722
Contract Value Surrender Value
Ending Value 1,627.01 1,561.93
Total Return Five Years 62.70% 56.19%
Average Annual Return 10.22% 9.33%
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
12/31/95 1,000.00 $2.109408 474.067
12/31/96 $2.393640 474.067 1,134.75 1,133.99 473.751
Contract Value Surrender Value
Ending Value 1,133.99 1,054.61
Total Return One Year 13.40% 5.46%
Average Annual Return 13.40% 5.46%
USA PLAN VARIABLE ANNUITY
OPPENHEIMER GLOBAL SECURITIES
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
11/12/90 1,000.00 $1.000000 1000.000
11/12/91 $1.052702 1000.000 1,052.70 1,051.94 999.276
11/12/92 $0.942124 999.276 941.44 940.68 998.467
11/12/93 $1.410618 998.467 1,408.46 1,407.70 997.931
11/12/94 $1.562853 997.931 1,559.62 1,558.86 997.445
11/12/95 $16.474868 997.445 16,432.77 16,432.01 997.399
11/12/96 $1.452753 997.399 1,448.97 1,448.21 996.873
12/31/96 $1.726204 996.873 1,720.81 1,720.05 996.435
Contract Value Surrender Value
Ending Value 1,720.05 1,668.45
Total Return Inception to Date 72.01% 66.85%
Average Annual Return 9.32% 8.78%
Number of Years 6.0833333
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
12/31/91 1,000.00 $1.028315 972.465
12/31/92 $0.943537 972.465 917.56 916.80 971.663
12/31/93 $1.584691 971.663 1,539.79 1,539.03 971.186
12/31/94 $1.467653 971.186 1,425.36 1,424.60 970.665
12/31/95 $1.489840 970.665 1,446.14 1,445.38 970.158
12/31/96 $1.726204 970.158 1,674.69 1,673.93 969.717
Contract Value Surrender Value
Ending Value 1,673.93 1,606.97
Total Return Five Years 67.39% 60.70%
Average Annual Return 10.85% 9.95%
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
12/31/95 1,000.00 $1.489840 671.213
12/31/96 $1.726204 671.213 1,158.65 1,157.89 670.772
Contract Value Surrender Value
Ending Value 1,157.89 1,076.84
Total Return One Year 15.79% 7.68%
Average Annual Return 15.79% 7.68%
USA PLAN VARIABLE ANNUITY
OPPENHEIMER STRATEGIC BOND
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
03/20/95 1,000.00 $1.000000 1000.000
03/20/96 $1.142731 1000.000 1,142.73 1,141.97 999.334
12/31/96 $1.250607 999.334 1,249.77 1,249.01 998.723
Contract Value Surrender Value
Ending Value 1,249.01 1,161.58
Total Return Inception to Date 24.90% 16.16%
Average Annual Return 13.55% 8.94%
Number of Years 1.75
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
12/31/95 1,000.00 $1.131981 883.407
12/31/96 $1.250607 883.407 1,104.79 1,104.03 882.795
Contract Value Surrender Value
Ending Value 1,104.03 1,026.75
Total Return One Year 10.40% 2.68%
Average Annual Return 10.40% 2.68%
USA PLAN VARIABLE ANNUITY
OPPENHEIMER BOND FUND
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
03/14/95 1,000.00 $1.000000 1000.000
03/14/96 $1.089361 1000.000 1,089.36 1,088.60 999.301
12/31/96 $1.148860 999.301 1,148.06 1,147.30 998.642
Contract Value Surrender Value
Ending Value 1,147.30 1,066.99
Total Return Inception to Date 14.73% 6.70%
Average Annual Return 8.17% 3.77%
Number of Years 1.75
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
12/31/95 1,000.00 $1.109861 901.014
12/31/96 $1.148860 901.014 1,035.14 1,034.38 900.353
Contract Value Surrender Value
Ending Value 1,034.38 961.97
Total Return One Year 3.44% -3.80%
Average Annual Return 3.44% -3.80%
USA PLAN VARIABLE ANNUITY
OPPENHEIMER GROWTH FUND
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
03/14/95 1,000.00 $1.000000 1000.000
03/14/96 $1.338910 1000.000 1,338.91 1,338.15 999.432
12/31/96 $1.566806 999.432 1,565.92 1,565.16 998.949
Contract Value Surrender Value
Ending Value 1,565.16 1,455.60
Total Return Inception to Date 56.52% 45.56%
Average Annual Return 29.17% 23.93%
Number of Years 1.75
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
12/31/95 1,000.00 $1.271204 786.656
12/31/96 $1.566806 786.656 1,232.54 1,231.78 786.173
Contract Value Surrender Value
Ending Value 1,231.78 1,145.56
Total Return One Year 23.18% 14.56%
Average Annual Return 23.18% 14.56%
USA PLAN VARIABLE ANNUITY
ALLIANCE GROWTH AND INCOME
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
12/27/90 1,000.00 $1.000000 1000.000
12/27/91 $1.021747 1000.000 1,021.75 1,020.99 999.259
12/27/92 $1.091643 999.259 1,090.83 1,090.07 998.559
12/27/93 $1.196279 998.559 1,194.56 1,193.80 997.928
12/27/94 $1.181668 997.928 1,179.22 1,178.46 997.285
12/27/95 $1.585259 997.285 1,580.96 1,580.20 996.809
12/27/96 $1.967705 996.809 1,961.43 1,960.67 996.425
12/31/96 $1.946624 996.425 1,939.66 1,938.90 996.032
Contract Value Surrender Value
Ending Value 1,938.90 1,880.73
Total Return Inception to Date 93.89% 88.07%
Average Annual Return 11.67% 11.10%
Number of Years 6
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
12/31/91 1,000.00 $1.021607 978.850
12/31/92 $1.089542 978.850 1,066.50 1,065.74 978.154
12/31/93 $1.203015 978.154 1,176.73 1,175.97 977.519
12/31/94 $1.178388 977.519 1,151.90 1,151.14 976.877
12/31/95 $1.597003 976.877 1,560.08 1,559.32 976.404
12/31/96 $1.946624 976.404 1,900.69 1,899.93 976.013
Contract Value Surrender Value
Ending Value 1,899.93 1,823.93
Total Return Five Years 89.99% 82.39%
Average Annual Return 13.70% 12.77%
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
12/31/95 1,000.00 $1.597003 626.173
12/31/96 $1.946624 626.173 1,218.92 1,218.16 625.781
Contract Value Surrender Value
Ending Value 1,218.16 1,132.89
Total Return One Year 21.82% 13.29%
Average Annual Return 21.82% 13.29%
USA PLAN VARIABLE ANNUITY
ALLIANCE SHORT TERM MULTI-MARKET
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
11/26/90 1,000.00 $1.000000 1000.000
11/26/91 $1.054491 1000.000 1,054.49 1,053.73 999.278
11/26/92 $1.049850 999.278 1,049.09 1,048.33 998.552
11/26/93 $1.105307 998.552 1,103.71 1,102.95 997.868
11/26/94 $1.116561 997.868 1,114.18 1,113.42 997.187
11/26/95 $1.074085 997.187 1,071.06 1,070.30 996.476
11/26/96 $1.165714 996.476 1,161.61 1,160.85 995.827
12/31/96 $1.170048 995.827 1,165.17 1,164.41 995.181
Contract Value Surrender Value
Ending Value 1,164.41 1,129.48
Total Return Inception to Date 16.44% 12.95%
Average Annual Return 2.53% 2.02%
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
12/31/91 1,000.00 $1.057214 945.882
12/31/92 $1.053483 945.882 996.47 995.71 945.16
12/31/93 $1.110459 945.160 1,049.56 1,048.80 944.474
12/31/94 $1.008624 944.474 952.62 951.86 943.721
12/31/95 $1.081957 943.721 1,021.07 1,020.31 943.023
12/31/96 $1.170048 943.023 1,103.38 1,102.62 942.372
Contract Value Surrender Value
Ending Value 1,102.62 1,058.52
Total Return Five Years 10.26% 5.85%
Average Annual Return 1.97% 1.14%
Number of Years 6.0833333
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
12/31/95 1,000.00 $1.081957 924.251
12/31/96 $1.170048 924.251 1,081.42 1,080.66 923.603
Contract Value Surrender Value
Ending Value 1,080.66 1,005.01
Total Return One Year 8.07% 0.50%
Average Annual Return 8.07% 0.50%
USA PLAN VARIABLE ANNUITY
FIDELITY GROWTH
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
05/31/95 1,000.00 $1.000000 1000.000
05/31/96 $1.327658 1000.000 1,327.66 1,326.90 999.429
12/31/96 $1.338781 999.429 1,338.02 1,337.26 998.864
Contract Value Surrender Value
Ending Value 1,337.26 1,243.65
Total Return Inception to Date 33.73% 24.37%
Average Annual Return 20.15% 14.76%
Number of Years 1.5833333
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
12/31/95 1,000.00 $1.185259 843.697
12/31/96 $1.338781 843.697 1,129.53 1,128.77 843.133
Contract Value Surrender Value
Ending Value 1,128.77 1,049.76
Total Return One Year 12.88% 4.98%
Average Annual Return 12.88% 4.98%
USA PLAN VARIABLE ANNUITY
FIDELITY EQUITY- INCOME
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
05/16/95 1,000.00 $1.000000 1000.000
05/16/96 $1.227692 1000.000 1,227.69 1,226.93 999.379
12/31/96 $1.308500 999.379 1,307.69 1,306.93 998.8
Contract Value Surrender Value
Ending Value 1,306.93 1,215.44
Total Return Inception to Date 30.69% 21.54%
Average Annual Return 18.42% 13.11%
Number of Years 1.5833333
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
12/31/95 1,000.00 $1.164564 858.690
12/31/96 $1.308500 858.690 1,123.60 1,122.84 858.112
Contract Value Surrender Value
Ending Value 1,122.84 1,044.24
Total Return One Year 12.28% 4.42%
Average Annual Return 12.28% 4.42%
USA PLAN VARIABLE ANNUITY
FIDELITY INVESTMENT GRADE BOND
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
09/16/95 1,000.00 $1.000000 1000.000
09/16/96 $1.033406 1000.000 1,033.41 1,032.65 999.268
12/31/96 $1.062797 999.268 1,062.02 1,061.26 998.554
Contract Value Surrender Value
Ending Value 1,061.26 986.97
Total Return Inception to Date 6.13% -1.30%
Average Annual Return 4.87% -1.04%
Number of Years 1.25
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
12/31/95 1,000.00 $1.044512 957.385
12/31/96 $1.062797 957.385 1,017.51 1,016.75 956.674
Contract Value Surrender Value
Ending Value 1,016.75 945.58
Total Return One Year 1.68% -5.44%
Average Annual Return 1.68% -5.44%
USA PLAN VARIABLE ANNUITY
FIDELITY ASSET MANAGER
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
06/01/95 1,000.00 $1.000000 1000.000
06/01/96 $1.153093 1000.000 1,153.09 1,152.33 999.338
12/31/96 $1.244271 999.338 1,243.45 1,242.69 998.729
Contract Value Surrender Value
Ending Value 1,242.69 1,155.70%
Total Return Inception to Date 24.27% 15.57%
Average Annual Return 15.59% 10.13%
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
12/31/95 1,000.00 $1.109696 901.148
12/31/96 $1.244271 901.148 1,121.27 1,120.51 900.535
Contract Value Surrender Value
Ending Value 1,120.51 1,042.07
Total Return One Year 12.05% 4.21%
Average Annual Return 12.05% 4.21%
Number of Years 1.5
USA PLAN VARIABLE ANNUITY
FIDELITY INDEX 500
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
05/16/95 1,000.00 $1.000000 1000.000
05/16/96 $1.272863 1000.000 1,272.86 1,272.10 999.401
12/31/96 $1.422553 999.401 1,421.70 1,420.94 998.866
Contract Value Surrender Value
Ending Value 1,420.94 1,321.47
Total Return Inception to Date 42.09% 32.15%
Average Annual Return 24.84% 19.25%
Number of Years 1.5833333
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
12/31/95 1,000.00 $1.183960 844.623
12/31/96 $1.422553 844.623 1,201.52 1,200.76 844.088
Contract Value Surrender Value
Ending Value 1,200.76 1,116.71
Total Return One Year 20.08% 11.67%
Average Annual Return 20.08% 11.67%
USA PLAN VARIABLE ANNUITY
FIDELITY CONTRAFUND
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
11/12/96 1,000.00 $1.000000 1000.000
12/31/96 $1.023682 1000.000 1,023.68 1,022.92 999.256
Contract Value Surrender Value
Ending Value 1,022.92 951.32
Total Return Inception to Date 2.29% -4.87%
Number of Years 0.0833333
USA PLAN VARIABLE ANNUITY
NORTHSTAR INCOME AND GROWTH
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
07/17/95 1,000.00 $1.000000 1000.000
07/17/96 $1.035305 1000.000 1,035.31 1,034.55 999.271
12/31/96 $1.175464 999.271 1,174.61 1,173.85 998.627
Contract Value Surrender Value
Ending Value 1,173.85 1,091.68
Total Return Inception to Date 17.39% 9.17%
Average Annual Return 11.98% 6.39%
Number of Years 1.1466667
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
12/31/95 1,000.00 $1.043260 958.534
12/31/96 $1.175464 958.534 1,126.72 1,125.96 957.886
Contract Value Surrender Value
Ending Value 1,125.96 1,047.14
Total Return One Year 12.60% 4.71%
Average Annual Return 12.60% 4.71%
USA PLAN VARIABLE ANNUITY
NORTHSTAR HIGH YIELD BOND
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
08/14/95 1,000.00 $1.000000 1000.000
08/14/96 $1.019415 1000.000 1,019.42 1,018.66 999.259
12/31/96 $1.202364 999.259 1,201.47 1,200.71 998.624
Contract Value Surrender Value
Ending Value 1,200.71 1,116.66
Total Return Inception to Date 20.07% 11.67%
Average Annual Return 14.70% 8.63%
Number of Years 1.33333333
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
12/31/95 1,000.00 $1.007123 992.927
12/31/96 $1.202364 992.927 1,193.86 1,193.10 992.295
Contract Value Surrender Value
Ending Value 1,193.10 1,109.58
Total Return One Year 19.31% 10.96%
Average Annual Return 19.31% 10.96%
USA PLAN VARIABLE ANNUITY
NORTHSTAR GROWTH
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT Q UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ---- ---------- ----- --------- -----
12/10/96 1,000.00 $1.000000 1000.000
12/31/96 $1.012828 1000.000 1,012.83 1,012.83 999.252
Contract Value Surrender Value
Ending Value 1,012.83 941.23
Total Return Inception to Date 1.21% -5.88%
Number of Years 0.0833333
USA PLAN VARIABLE ANNUITY
OPPENHEIMER CAPITAL APPRECIATION
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
07/30/87 1,000.00 $1.000000 1000.000
07/30/88 $0.960667 1000.000 960.67 959.91 999.212
07/30/89 $1.229524 999.212 1,228.56 1,227.80 998.598
07/30/90 $1.164560 998.598 1,162.93 1,162.17 997.948
07/30/91 $1.286292 997.948 1,283.65 1,282.89 997.355
07/30/92 $1.418917 997.355 1,415.16 1,414.40 996.817
07/30/93 $1.834059 996.817 1,828.22 1,827.46 996.402
07/30/94 $1.860899 996.402 1,854.20 1,853.44 995.992
07/30/95 $2.380500 995.992 2,370.96 2,370.20 995.673
07/30/96 $2.723437 995.673 2,711.65 2,710.89 995.393
12/31/96 $3.080421 995.673 3,067.09 3,066.33 995.426
Contract Value
Ending Value 3,066.33
Total Return Inception to Date 206.63%
Average Annual Return 14.24%
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
12/31/91 1,000.00 $1.534073 651.859
12/31/92 $1.730513 651.859 1,128.05 1,127.29 651.42
12/31/93 $2.171995 651.420 1,414.88 1,414.12 651.07
12/31/94 $1.950362 651.070 1,269.82 1,269.06 650.679
12/31/95 $2.582540 650.679 1,680.40 1,679.64 650.383
12/31/96 $3.080421 650.383 2,003.45 2,002.69 650.135
Contract Value Surrender Value
Ending Value 2,002.69 1,922.58
Total Return Five Years 100.27% 92.26%
Average Annual Return 14.90% 13.97%
Number of Years 8.4166667
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
12/31/95 1,000.00 $2.582540 387.216
12/31/96 $3.080421 387.216 1,192.79 1,192.03 386.97
Contract Value Surrender Value
Ending Value 1,192.03 1,108.59
Total Return One Year 19.20% 10.86%
Average Annual Return 19.20% 10.86%
USA PLAN VARIABLE ANNUITY
OPPENHEIMER HIGH INCOME
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
08/28/87 1,000.00 $1.000000 1000.000
08/28/88 $1.065174 1000.000 1,065.17 1,064.41 999.283
08/28/89 $1.182005 999.283 1,181.16 1,180.40 998.642
08/28/90 $1.223118 998.642 1,221.46 1,220.70 998.023
08/28/91 $1.485517 998.023 1,482.58 1,481.82 997.511
08/28/92 $1.803611 997.511 1,799.12 1,798.36 997.089
08/28/93 $2.161863 997.089 2,155.57 2,154.81 996.738
08/28/94 $2.244443 996.738 2,237.12 2,236.36 996.399
08/28/95 $2.460439 996.399 2,451.58 2,450.82 996.091
08/28/96 $2.783674 996.091 2,772.79 2,772.03 995.817
12/31/96 $2.958100 996.091 2,946.54 2,945.78 995.835
Contract Value
Ending Value 2,945.78
Total Return Inception to Date 194.58%
Average Annual Return 13.84%
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
12/31/91 1,000.00 $1.577362 633.970
12/31/92 $1.834506 633.970 1,163.02 1,162.26 633.555
12/31/93 $2.287035 633.555 1,448.96 1,448.20 633.222
12/31/94 $2.184131 633.222 1,383.04 1,382.28 632.874
12/31/95 $2.603984 632.874 1,647.99 1,647.23 632.581
12/31/96 $2.958100 632.581 1,871.24 1,870.48 632.325
Contract Value Surrender Value
Ending Value 1,870.48 1,795.66
Total Return Five Years 87.05% 79.57%
Average Annual Return 13.34% 12.42%
Number of Years 8.333333333
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
12/31/95 1,000.00 $2.603984 384.027
12/31/96 $2.958100 384.027 1,135.99 1,135.23 383.77
Contract Value Surrender Value
Ending Value 1,135.23 1,055.76
Total Return One Year 13.52% 5.58%
Average Annual Return 13.52% 5.58%
Name of Product USA PLAN VARIABLE ANNUITY
Name of Fund OPPENHEIMER MULTIPLE STRATEGIES
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
06/02/87 1,000.00 $1.000000 1000.000
06/02/88 $1.085053 1000.000 1,085.05 1,084.29 999.297
06/02/89 $1.314614 999.297 1,313.69 1,312.93 998.719
06/02/90 $1.320779 998.719 1,319.09 1,318.33 998.146
06/02/91 $1.393750 998.146 1,391.17 1,390.41 997.604
06/02/92 $1.551877 997.604 1,548.16 1,547.40 997.115
06/02/93 $1.726996 997.115 1,722.01 1,721.25 996.673
06/02/94 $1.817590 996.673 1,811.54 1,810.78 996.253
06/02/95 $1.999810 996.253 1,992.32 1,991.56 995.875
06/02/96 $2.277175 995.875 2,267.78 2,267.02 995.541
12/31/96 $2.454658 995.875 2,444.53 2,443.77 995.564
Contract Value
Ending Value 2,443.77
Total Return Inception to Date 144.38%
Average Annual Return 11.08%
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
12/31/91 1,000.00 $1.504125 664.838
12/31/92 $1.730513 664.838 1,150.51 1,149.75 664.398
12/31/93 $1.854495 664.398 1,232.12 1,231.36 663.987
12/31/94 $1.789839 663.987 1,188.43 1,187.67 663.562
12/31/95 $2.163735 663.562 1,435.77 1,435.01 663.21
12/31/96 $2.454658 663.210 1,627.95 1,627.19 662.899
Contract Value Surrender Value
Ending Value 1,627.19 1,562.10
Total Return Five Years 62.72% 56.21%
Average Annual Return 10.23% 9.33%
Number of Years 8.5
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
12/31/95 1,000.00 $2.163735 462.164
12/31/96 $2.454658 462.164 1,134.45 1,133.69 461.853
Contract Value Surrender Value
Ending Value 1,133.69 1,054.33
Total Return One Year 13.37% 5.43%
Average Annual Return 13.37% 5.43%
Name of Product USA PLAN VARIABLE ANNUITY
Name of Fund OPPENHEIMER GLOBAL SECURITIES
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
11/09/90 1,000.00 $1.000000 1000.000
11/09/91 $1.044973 1000.000 1,044.97 1,044.21 999.27
11/09/92 $0.934563 999.270 933.88 933.12 998.456
11/09/93 $1.391577 998.456 1,389.43 1,388.67 997.911
11/09/94 $1.578820 997.911 1,575.52 1,574.76 997.428
11/09/95 $1.472936 997.428 1,469.15 1,468.39 996.914
11/09/96 $1.681428 996.914 1,676.24 1,675.48 996.463
12/31/96 $1.723863 996.463 1,717.77 1,717.01 996.025
Contract Value Surrender Value
Ending Value 1,717.01 1,665.50
Total Return Inception to Date 71.70% 66.55%
Average Annual Return 9.29% 8.75%
Number of Years 6.0833333
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
12/31/91 1,000.00 $1.027487 973.248
12/31/92 $0.942711 973.248 917.49 916.73 972.44
12/31/93 $1.578783 972.440 1,535.27 1,534.51 971.958
12/31/94 $1.466828 971.958 1,425.70 1,424.94 971.443
12/31/95 $1.488999 971.443 1,446.48 1,445.72 970.934
12/31/96 $1.723863 970.934 1,673.76 1,673.00 970.495
Contract Value Surrender Value
Ending Value 1,673.00 1,606.08
Total Return Five Years 67.30% 60.61%
Average Annual Return 10.84% 9.94%
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
12/31/95 1,000.00 $1.488999 671.592
12/31/96 $1.723863 671.592 1,157.73 1,156.97 671.15
Contract Value Surrender Value
Ending Value 1,156.97 1,075.98
Total Return One Year 15.70% 7.60%
Average Annual Return 15.70% 7.60%
Name of Product USA PLAN VARIABLE ANNUITY
Name of Fund OPPENHEIMER STRATEGIC BOND
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
04/03/95 1,000.00 $1.000000 1000.000
04/03/96 $1.139782 1000.000 1,139.78 1,139.02 999.331
12/31/96 $1.240333 999.331 1,239.50 1,238.74 998.716
Contract Value Surrender Value
Ending Value 1,238.74 1,152.03
Total Return Inception to Date 23.87% 15.20%
Average Annual Return 13.71% 8.86%
Number of Years 1.6666667
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
12/31/95 1,000.00 $1.122719 890.695
12/31/96 $1.240333 890.695 1,104.76 1,104.00 890.084
Contract Value Surrender Value
Ending Value 1,104.00 1,026.72
Total Return One Year 10.40% 2.67%
Average Annual Return 10.40% 2.67%
Name of Product USA PLAN VARIABLE ANNUITY
Name of Fund OPPENHEIMER BOND
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
06/22/95 1,000.00 $1.000000 1000.000
06/22/96 $1.024992 1000.000 1,024.99 1,024.23 999.257
12/31/96 $1.082224 999.257 1,081.42 1,080.66 998.555
Contract Value Surrender Value
Ending Value 1,080.66 1,005.01
Total Return Inception to Date 8.07% 0.50%
Average Annual Return 5.63% 0.35%
Number of Years 1.4166667
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
12/31/95 1,000.00 $1.045514 956.467
12/31/96 $1.082224 956.467 1,035.11 1,034.35 955.763
Contract Value Surrender Value
Ending Value 1,034.35 961.95
Total Return One Year 3.43% -3.81%
Average Annual Return 3.43% -3.81%
Name of Product USA PLAN VARIABLE ANNUITY
Name of Fund OPPENHEIMER GROWTH
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
03/24/95 1,000.00 $1.000000 1000.000
03/24/96 $1.309593 1000.000 1,309.59 1,308.83 999.417
12/31/96 $1.542441 999.417 1,541.54 1,540.78 998.923
Contract Value Surrender Value
Ending Value 1,540.78 1,432.93
Total Return Inception to Date 54.08% 43.29%
Average Annual Return 28.02% 22.82%
Number of Years 1.75
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
12/31/95 1,000.00 $1.251419 799.093
12/31/96 $1.542441 799.093 1,232.55 1,231.79 798.598
Contract Value Surrender Value
Ending Value 1,231.79 1,145.56
Total Return One Year 23.18% 14.56%
Average Annual Return 23.18% 14.56%
Name of Product USA PLAN VARIABLE ANNUITY
Name of Fund ALLIANCE GROWTH AND INCOME
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
01/31/91 1,000.00 $1.000000 1000.000
01/31/92 $1.017956 1000.000 1,017.96 1,017.20 999.257
01/31/93 $1.102624 999.257 1,101.80 1,101.04 998.563
01/31/94 $1.226587 998.563 1,224.82 1,224.06 997.940
01/31/95 $1.176667 997.940 1,174.24 1,173.48 997.292
01/31/96 $1.604704 997.292 1,600.36 1,599.60 996.819
12/31/96 $1.922186 996.819 1,916.07 1,915.31 996.423
Contract Value Surrender Value
Ending Value 1,915.31 1,838.70
Total Return Inception to Date 91.53% 83.87%
Average Annual Return 11.61% 10.84%
Number of Years 5.9166667
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
12/31/91 1,000.00 $1.016888 983.392
12/31/92 $1.080242 983.392 1,062.30 1,061.54 982.687
12/31/93 $1.189736 982.687 1,169.14 1,168.38 982.05
12/31/94 $1.163986 982.050 1,143.09 1,142.33 981.395
12/31/95 $1.577491 981.395 1,548.14 1,547.38 980.912
12/31/96 $1.922186 980.912 1,885.50 1,884.74 980.519
Contract Value Surrender Value
Ending Value 1,884.74 1,809.35
Total Return Five Years 88.47% 80.94%
Average Annual Return 13.51% 12.59%
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
12/31/95 1,000.00 $1.577491 633.918
12/31/96 $1.922186 633.918 1,218.51 1,217.75 633.523
Contract Value Surrender Value
Ending Value 1,217.75 1,132.51
Total Return One Year 21.78% 13.25%
Average Annual Return 21.78% 13.25%
Name of Product USA PLAN VARIABLE ANNUITY
Name of Fund ALLIANCE SHORT TERM MULTI-MARKET
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
11/23/90 1,000.00 $1.000000 1000.000
11/23/91 $1.056237 1000.000 1,056.24 1,055.48 999.283
11/23/92 $1.050328 999.283 1,049.57 1,048.81 998.555
11/23/93 $1.106464 998.555 1,104.87 1,104.11 997.873
11/23/94 $1.118443 997.873 1,116.06 1,115.30 997.19
11/23/95 $1.072715 997.190 1,069.70 1,068.94 996.481
11/23/96 $1.167500 996.481 1,163.39 1,162.63 995.829
12/31/96 $1.172902 995.829 1,168.01 1,167.25 995.181
Contract Value Surrender Value
Ending Value 1,167.25 1,132.23
Total Return Inception to Date 16.73% 13.22%
Average Annual Return 2.57% 2.06%
Number of Years 6.0833333
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
12/31/91 1,000.00 $1.059918 943.469
12/31/92 $1.056696 943.469 996.96 996.20 942.75
12/31/93 $1.113236 942.750 1,049.50 1,048.74 942.064
12/31/94 $1.011090 942.064 952.51 951.75 941.311
12/31/95 $1.084599 941.311 1,020.94 1,020.18 940.606
12/31/96 $1.172902 940.606 1,103.24 1,102.48 939.959
Contract Value Surrender Value
Ending Value 1,102.48 1,058.38%
Total Return Five Years 10.25% 5.84%
Average Annual Return 1.97% 1.14%
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
12/31/95 1,000.00 $1.084599 922.000
12/31/96 $1.172902 922.000 1,081.42 1,080.66 921.356
Contract Value Surrender Value
Ending Value 1,080.66 1,005.01
Total Return One Year 8.07% 0.50%
Average Annual Return 8.07% 0.50%
Name of Product USA PLAN VARIABLE ANNUITY
Name of Fund FIDELITY GROWTH
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
05/25/95 1,000.00 $1.000000 1000.000
05/25/96 $1.299908 1000.000 1,299.91 1,299.15 999.417
12/31/96 $1.308100 999.417 1,307.34 1,306.58 998.838
Contract Value Surrender Value
Ending Value 1,306.58 1,215.12
Total Return Inception to Date 30.66% 21.51%
Average Annual Return 18.40% 13.10%
Number of Years 1.5833333
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
12/31/95 1,000.00 $1.158098 863.485
12/31/96 $1.308100 863.485 1,129.52 1,128.76 862.9
Contract Value Surrender Value
Ending Value 1,128.76 1,049.75
Total Return One Year 12.88% 4.98%
Average Annual Return 12.88% 4.98%
Name of Product USA PLAN VARIABLE ANNUITY
Name of Fund FIDELITY EQUITY-INCOME
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
05/25/95 1,000.00 $1.000000 1000.000
05/25/96 $1.244286 1000.000 1,244.29 1,243.53 999.392
12/31/96 $1.315967 999.392 1,315.17 1,314.41 998.817
Contract Value Surrender Value
Ending Value 1,314.41 1,222.40
Total Return Inception to Date 31.44% 22.24%
Average Annual Return 18.85% 13.52%
Number of Years 1.5833333
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
12/31/95 1,000.00 $1.171216 853.813
12/31/96 $1.315967 853.813 1,123.59 1,122.83 853.236
Contract Value Surrender Value
Ending Value 1,122.83 1,044.23
Total Return One Year 12.28% 4.42%
Average Annual Return 12.28% 4.42%
Name of Product USA PLAN VARIABLE ANNUITY
Name of Fund FIDELITY INVESTMENT GRADE BOND
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
06/19/95 1,000.00 $1.000000 1000.000
06/19/96 $1.020302 1000.000 1,020.30 1,019.54 999.253
12/31/96 $1.076070 999.253 1,075.27 1,074.51 998.55
Contract Value Surrender Value
Ending Value 1,074.51 999.29
Total Return Inception to Date 7.45% -0.07
Average Annual Return 4.91% -0.07
Number of Years 1.5
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
12/31/95 1,000.00 $1.055774 947.172
12/31/96 $1.076070 947.172 1,019.22 1,018.46 946.463
Contract Value Surrender Value
Ending Value 1,018.46 947.17
Total Return One Year 1.85% -5.28%
Average Annual Return 1.85% -5.28%
Name of Product USA PLAN VARIABLE ANNUITY
Name of Fund FIDELITY ASSET MANAGER
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
06/08/95 1,000.00 $1.000000 1000.000
06/08/96 $1.557230 1000.000 1,557.23 1,556.47 999.512
12/31/96 $1.249835 999.512 1,249.23 1,248.47 998.908
Contract Value Surrender Value
Ending Value 1,248.47 1,161.08
Total Return Inception to Date 24.85% 16.11%
Average Annual Return 15.95% 10.47%
Number of Years 1.5
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
12/31/95 1,000.00 $1.114654 897.139
12/31/96 $1.249835 897.139 1,121.28 1,120.52 896.534
Contract Value Surrender Value
Ending Value 1,120.52 1,042.08
Total Return One Year 12.05% 4.21%
Average Annual Return 12.05% 4.21%
Name of Product USA PLAN VARIABLE ANNUITY
Name of Fund FIDELITY INDEX 500
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
05/23/95 1,000.00 $1.000000 1000.000
05/23/96 $1.293282 1000.000 1,293.28 1,292.52 999.411
12/31/96 $1.420887 999.411 1,420.05 1,419.29 998.876
Contract Value Surrender Value
Ending Value 1,419.29 1,319.94
Total Return Inception to Date 41.93% 31.99%
Average Annual Return 24.75% 19.16%
Number of Years 8.6666667
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
12/31/95 1,000 $1.82585 845.605
12/31/96 $1.420887 845.605 1,201.51 1,200.75 845.071
Contract Value Surrender Value
Ending Value 1,200.75 1,116.70
Total Return Five Years 20.08% 11.67%
Average Annual Return 20.08% 11.67%
Name of Product USA PLAN VARIABLE ANNUITY
Name of Fund FIDELITY CONTRAFUND
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
11/01/96 1,000.00 $1.000000 1000.000
12/31/96 $1.056670 1000.000 1,056.67 1,055.91 999.281
Contract Value Surrender Value
Ending Value 1,055.91 982.00
Total Return Inception to Date 5.59% -1.80%
Number of Years 0.0833333
Name of Product USA PLAN VARIABLE ANNUITY
Name of Fund NORTHSTAR INCOME AND GROWTH
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
05/31/95 1,000.00 $1.000000 1000.000
05/31/96 $1.115104 1000.000 1,115.10 1,114.34 999.315
12/31/96 $1.237839 999.315 1,236.99 1,236.23 998.7
Contract Value Surrender Value
Ending Value 1,236.23 1,149.69
Total Return Inception to Date 23.62% 14.97%
Average Annual Return 14.33% 9.21%
Number of Years 1.5833333
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
12/31/95 1,000.00 $1.088961 918.307
12/31/96 $1.237839 918.307 1,136.72 1,135.96 917.696
Contract Value Surrender Value
Ending Value 1,135.96 1,056.44
Total Return One Year 13.60% 5.64%
Average Annual Return 13.60% 5.64%
Name of Product USA PLAN VARIABLE ANNUITY
Name of Fund NORTHSTAR HIGH YIELD BOND
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
09/08/95 1,000.00 $1.000000 1000.000
09/08/96 $1.153730 1000.000 1,153.73 1,152.97 999.341
12/31/96 $1.198990 999.341 1,198.20 1,197.44 998.707
Contract Value Surrender Value
Ending Value 1,197.44 1,113.62
Total Return Inception to Date 19.74% 11.36%
Average Annual Return 15.51% 8.99%
Number of Years 1.25
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
12/31/95 1,000.00 $1.012042 988.101
12/31/96 $1.198990 988.101 1,184.72 1,183.96 987.464
Contract Value Surrender Value
Ending Value 1,183.96 1,101.08
Total Return One Year 18.40% 10.11%
Average Annual Return 18.40% 10.11%
Name of Product USA PLAN VARIABLE ANNUITY
Name of Fund NORTHSTAR GROWTH
YEAR END LESS "AVG" YEAR END
DATE DEPOSIT NQ UV # OF UNITS VALUE CONT. FEE UNITS
---- ------- ----- ---------- ----- --------- -----
11/01/96 1,000.00 $1.000000 1000.000
12/31/96 $1.021743 1000.000 1,021.74 1,020.98 999.253
Contract Value Surrender Value
Ending Value 1,020.98 949.51
Total Return Inception to Date 2.10% -5.05%
Number of Years 0.0833333
</TABLE>
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
POWER OF ATTORNEY OF DIRECTOR AND/OR OFFICER
The undersigned director and/or officer of RELIASTAR BANKERS SECURITY LIFE
INSURANCE COMPANY, a New York corporation, does hereby make, constitute and
appoint RICHARD R. CROWL, MICHAEL S. FISCHER, JAMES E. NELSON, ROBERT B.
SAGINAW, STEWART GREGG, JEFFREY A. PROULX, DEBORAH A. LJUNGKULL AND JODY A. ROSE
and each or any one of them, the undersigned's true and lawful
attorneys-in-fact, with full power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director and/or officer of said Company to a Registration Statement
or Registration Statements, under the Securities Act of 1933 (1933 Act) and the
Investment Company Act of 1940 (1940 Act) and any other forms applicable to such
registrations, and all amendments, including pre-effective and post-effective
amendments, thereto, to be filed by said Company with the Securities and
Exchange Commission, Washington, DC, in connection with the registration under
the 1933 and 1940 Acts, as amended, of variable annuity and variable life
contracts and accumulation units in related Separate Accounts and to file those
Separate Accounts with all exhibits thereto and other supporting documents, with
said Commission, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand
this 18th day of February, 1997.
/S/ R. MICHAEL CONLEY
---------------------
R. Michael Conley
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<FISCAL-YEAR-END> DEC-31-1996
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