File No. 33-69892
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File No. 811-3341
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 5 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 6 [X]
RELIASTAR SELECT VARIABLE ACCOUNT
(formerly NWNL Select Variable Account)
(Exact Name of Registrant as Specified in its Charter)
RELIASTAR LIFE INSURANCE COMPANY
(formerly Northwestern National Life Insurance Company)
(Name of Depositor)
20 Washington Avenue South, Minneapolis, Minnesota 55401
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (612) 342-7346
Robert B. Saginaw
ReliaStar 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 August 8, 1997 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:
[ ] 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 21, 1997.
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RELIASTAR SELECT VARIABLE ACCOUNT
Cross Reference Sheet Pursuant to Rule 495(a)
FORM N-4
ITEM NUMBER PART A HEADING IN PROSPECTUS
1. Cover Page
2. Definitions
3. Summary
4. Condensed Financial Information
5. The Company; The Variable Account; Investment of the
Variable Account
6. Charges Made by the Company
7. The Contracts
8. Annuity Provisions
9. The Contracts
10. The Contracts
11. The Contracts
12. Federal Tax Status
13. Legal Proceedings
14. Statement of Additional Information Table of Contents
PART B HEADING IN STATEMENT OF ADDITIONAL INFORMATION
15. Cover Page
16. Table of Contents
17. Introduction
18. Administration of the Contracts
19. Distribution of the Contracts
20. Distribution of the Contracts
21. Calculation of Yield and Return
22. Annuity Provisions (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. Not Applicable
32. Undertakings
Select*Annuity III
August 8, 1997 Prospectus
Individual Deferred
Variable/Fixed
Annuity Contract
RELIASTAR
ReliaStar Life
20 Washington Avenue South
Minneapolis, Minnesota 55401
1-800-621-3750
--------------
INDIVIDUAL DEFERRED VARIABLE/FIXED ANNUITY CONTRACTS
ISSUED BY
THE RELIASTAR SELECT VARIABLE ACCOUNT OF
RELIASTAR LIFE INSURANCE COMPANY
The Individual Deferred Variable/Fixed Annuity Contracts described in this
Prospectus are flexible purchase payment contracts. The Contracts 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 Tax Status"
on page 36.) Annuity payments under the Contracts are deferred until a selected
later date.
Purchase payments may be allocated by the Contract Owner to one or more of
the available Sub-Accounts of ReliaStar Select Variable Account (the "Variable
Account"), a separate account of ReliaStar Life Insurance Company (the
"Company"), and/or to the Fixed Account (which is the general account of the
Company). The Fixed Account is not available to Contract Owners in the States of
Maryland, Oregon, South Carolina and Washington. Purchase payments allocated to
one or more of the available Sub-Accounts of the Variable Account, as selected
by the contract Owner, will be invested in shares at net asset value of one or
more of a group of investment funds (the "Investment Funds"). The Investment
Funds are currently three portfolios of The Alger American Fund, five portfolios
of Fidelity's Variable Insurance Products Fund, four portfolios of Fidelity's
Variable Insurance Products Fund II, four portfolios of Janus Aspen Series, two
portfolios of Neuberger&Berman Advisers Management Trust, five funds of the
Northstar Variable Trust, four portfolios of the OCC Accumulation Trust and six
funds of Putnam Variable Trust. Each Investment Fund pays its investment adviser
certain fees charged against the assets of the Investment Fund. The Variable
Account Contract Value and the amount of variable annuity payments will vary,
primarily based on the investment performance of the Investment Funds whose
shares are held in the Sub-Accounts selected. (For more information about the
Investment Funds, see "Investments of the Variable Account" on page 20.)
Additional information about the Contracts, the Company and the Variable
Account, contained in a Statement of Additional Information dated August 8,
1997, has been filed with the Securities and Exchange Commission and is
available by accessing the SEC's internet web site (http: // www.sec.gov) or
upon request without charge by writing to Washington Square Securities, Inc., 20
Washington Avenue South, Minneapolis, Minnesota 55401 or by calling
1-800-621-3750. The Statement of Additional Information is incorporated by
reference in this Prospectus and its Table of Contents may be found on page 44
of this Prospectus.
INFORMATION ABOUT THE FIXED ACCOUNT MAY BE FOUND IN APPENDIX A, ON PAGE
A-1.
THIS PROSPECTUS SETS FORTH CONCISELY THE INFORMATION ABOUT THE CONTRACT
THAT A PROSPECTIVE INVESTOR OUGHT TO KNOW BEFORE INVESTING AND SHOULD BE
RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES OF THE INVESTMENT FUNDS, AND INTERESTS IN THE CONTRACTS AND THE FIXED
ACCOUNT ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, A
BANK, AND THE SHARES AND INTERESTS ARE NOT FEDERALLY INSURED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER GOVERNMENTAL AGENCY. ANY INVESTMENT IN THE CONTRACT INVOLVES
CERTAIN INVESTMENT RISK WHICH MAY INCLUDE THE POSSIBLE LOSS OF PRINCIPAL.
THE DATE OF THIS PROSPECTUS IS AUGUST 8, 1997.
THIS PROSPECTUS IS ACCOMPANIED BY THE CURRENT PROSPECTUS FOR THE ALGER AMERICAN
FUND, FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND, FIDELITY'S VARIABLE INSURANCE
PRODUCTS FUND II, JANUS ASPEN SERIES, NEUBERGER&BERMAN ADVISERS MANAGEMENT
TRUST, THE NORTHSTAR VARIABLE TRUST, THE OCC ACCUMULATION TRUST AND PUTNAM
VARIABLE TRUST, AND IS VALID ONLY WHEN ACCOMPANIED BY SUCH PROSPECTUSES.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR ACCOMPANYING
INVESTMENT FUND PROSPECTUSES AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
TABLE OF CONTENTS
Definitions...................................................... 4
Summary of Contract Expenses..................................... 7
Summary.......................................................... 13
Condensed Financial Information.................................. 14
Performance Information.......................................... 18
The Company...................................................... 19
The Variable Account............................................. 20
Investments of the Variable Account.............................. 20
Charges Made by the Company...................................... 26
Surrender Charge (Contingent Deferred Sales Charge)......... 26
Annual Contract Charge...................................... 27
Mortality Risk Premium...................................... 28
Expense Risk Premium........................................ 28
Administration Charge....................................... 28
Premium and Other Taxes..................................... 28
Reduction of Charges........................................ 28
Expenses of the Investment Funds............................ 29
Administration of the Contracts.................................. 29
The Contracts.................................................... 29
Allocation of Purchase Payments............................. 29
Sub-Account Accumulation Unit Value......................... 30
Net Investment Factor....................................... 30
Death Benefit Before the Annuity Commencement Date.......... 30
Death Benefit After the Annuity Commencement Date........... 31
Surrender (Redemption)...................................... 31
Systematic Withdrawals...................................... 32
Transfers................................................... 32
Written Transfers........................................... 32
Telephone/Fax Instructions.................................. 33
Dollar Cost Averaging Transfers............................. 33
Assignments................................................. 33
Contract Owner and Beneficiaries............................ 34
Contract Inquiries.......................................... 34
Annuity Provisions............................................... 34
Annuity Commencement Date................................... 34
Annuity Form Selection...................................... 34
Annuity Forms............................................... 35
Frequency and Amount of Annuity Payments.................... 35
Annuity Payments............................................ 35
Sub-Account Annuity Unit Value.............................. 36
Assumed Investment Rate..................................... 36
Federal Tax Status............................................... 36
Introduction................................................ 36
Tax Status of the Contract.................................. 37
Taxation of Annuities....................................... 38
Transfers, Assignments or Exchanges of a Contract........... 39
Withholding................................................. 39
Multiple Contracts.......................................... 40
Taxation of Qualified Plans................................. 40
Possible Charge for the Company's Taxes..................... 41
Other Tax Consequences...................................... 41
Voting of Fund Shares............................................ 41
Distribution of the Contracts.....................................42
Revocation........................................................42
Reports to Owners.................................................42
Legal Proceedings.................................................42
Financial Statements and Experts..................................42
Further Information...............................................43
Statement of Additional Information Table of Contents.............44
Appendix.........................................................A-1
Investment Fund Prospectuses
("Select*Product Mutual Funds")
The Alger American Fund:
Alger American Growth Portfolio.........................Alger-1
Alger American MidCap Growth Portfolio..................Alger-1
Alger American Small Capitalization Portfolio...........Alger-1
Fidelity's Variable Insurance Products Fund (VIP):
Equity-Income Portfolio.....................................VIP
Growth Portfolio............................................VIP
High Income Portfolio.......................................VIP
Money Market Portfolio......................................VIP
Overseas Portfolio..........................................VIP
Fidelity's Variable Insurance Products Fund II (VIP II):
Asset Manager Portfolio.....................................VIP
Contrafund Portfolio........................................VIP
Index 500 Portfolio.........................................VIP
Investment Grade Bond Portfolio.............................VIP
Janus Aspen Series:
Aggressive Growth Portfolio.............................Janus-1
Growth Portfolio........................................Janus-1
International Growth Portfolio..........................Janus-1
Worldwide Growth Portfolio..............................Janus-1
Neuberger&Berman Advisers Management Trust:
Limited Maturity Bond Portfolio...........................N&B-1
Partners Portfolio........................................N&B-1
Northstar Variable Trust:
Northstar Growth Fund...............................Northstar-1
Northstar High Yield Bond Fund......................Northstar-1
Northstar Income and Growth Fund....................Northstar-1
Northstar International Value Fund..................Northstar-1
Northstar Multi-Sector Bond Fund....................Northstar-1
OCC Accumulation Trust:
Equity Portfolio..........................................OCC-1
Global Equity Portfolio...................................OCC-1
Managed Portfolio.........................................OCC-1
Small Cap Portfolio.......................................OCC-1
Putnam Variable Trust:
Putnam VT Asia Pacific Growth Fund..................Putnam VT-1
Putnam VT Diversified Income Fund...................Putnam VT-1
Putnam VT Growth and Income Fund....................Putnam VT-1
Putnam VT New Opportunities Fund....................Putnam VT-1
Putnam VT Utilities Growth and
Income Fund .....................................Putnam VT-1
Putnam VT Voyager Fund..............................Putnam VT-1
DEFINITIONS
THE ALGER AMERICAN FUND -
Alger American Growth Portfolio
Alger American MidCap Growth Portfolio
Alger American Small Capitalization Portfolio
ANNUITANT- The person who is named by the Owner to receive annuity payments and
whose life determines the annuity benefits payable.
ANNUITY COMMENCEMENT DATE (COMMENCEMENT DATE) - The date on which the annuity
payments begin, which must be the first day of a month. The date will be
the first day of the month following the Annuitant's 75th birthday unless
an earlier or later date has been selected by the Owner and, if the date is
later, it has been agreed to by the Company. If the Annuity Commencement
Date selected by the Owner does not occur on a Valuation Date at least 60
days after the date on which the Contract was issued, the Company reserves
the right to adjust the Commencement Date to the first Valuation Date after
the Commencement Date selected by the Owner that is at least 60 days after
the Contract issue date.
BENEFICIARY - The person who is named by the Owner to receive the Contract Value
upon the death of the Owner before the Annuity Commencement Date or to
receive the balance of the annuity payments, if any, under the Annuity Form
in effect at the Annuitant's death.
CODE - The Internal Revenue Code of 1986, as amended.
CONTRACT ANNIVERSARY - Occurs yearly on the same day and month the Contract was
issued.
CONTRACT OWNER (OWNER) - The person who controls all the rights and privileges
under the Contract. The Annuitant owns the Contract unless another Owner is
named as provided for in the Contract. The Contract may be owned by one,
but no more than two, natural persons only, except when it is held under a
retirement plan described in Section 401(a) or 403(a), or a program
described in Section 403(b) of the Code.
CONTRACT VALUE - The sum of (a) the Variable Account Contract Value, which is
the value of the Sub-Account Accumulation Units under the Contract plus (b)
the Fixed Account Contract Value, which is the sum of purchase payments
allocated to the Fixed Account under the Contract, plus credited interest,
minus surrenders, surrender charges previously applied, and any annual
administrative charges applicable to the Fixed Account, and minus any
transfers to the Variable Account.
CONTRACT YEAR - Each twelve-month period starting with the date the Contract was
issued and each Contract Anniversary after that.
DEATH BENEFIT - The amount payable upon the death of a Contract Owner before the
Annuity Commencement Date. (See "Death Benefit Before the Annuity
Commencement Date" on page 30.)
DEATH BENEFIT VALUATION DATE - The Death Benefit Valuation Date is the Valuation
Date next following the date the Company receives proof of death and a
written request from the Beneficiary for a single sum payment or an Annuity
Form permitted by Section 72(s) of the Code.
FIXED ACCOUNT - The Fixed Account is the general account of the Company, which
consists of all assets of the Company other than those allocated to
separate accounts of the Company.
FIXED ANNUITY - An annuity with payments which do not vary as to dollar amount.
INVESTMENT FUNDS - Any open-end management investment company (or portfolio
thereof) or unit investment trust (or series thereof) in which a
Sub-Account invests as described herein.
JANUS ASPEN SERIES -
Aggressive Growth Portfolio
Growth Portfolio
International Growth Portfolio
Worldwide Growth Portfolio
NEUBERGER&BERMAN ADVISERS MANAGEMENT TRUST -
Limited Maturity Bond Portfolio
Partners Portfolio
NORTHSTAR VARIABLE TRUST (NORTHSTAR) -
Northstar Growth Fund
Northstar High Yield Bond Fund
Northstar Income and Growth Fund
Northstar International Value Fund
Northstar Multi-Sector Bond Fund
OCC ACCUMULATION TRUST -
Equity Portfolio
Global Equity Portfolio
Managed Portfolio
Small Cap Portfolio
PUTNAM VARIABLE TRUST - Putnam VT Asia Pacific Growth Fund Putnam VT Diversified
Income Fund Putnam VT Growth and Income Fund Putnam VT New Opportunities
Fund Putnam VT Utilities Growth and Income Fund Putnam VT Voyager Fund
QUALIFIED PLAN - A retirement plan under Sections 401, 403, 408 or 457 or
similar provisions of the Code.
SPECIFIED CONTRACT ANNIVERSARY - Each consecutive six year anniversary date
measured from the date the Contract was issued. The Specified Contract
Anniversary is used to determine the Death Benefit payable if the Contract
Owner dies before the Annuity Commencement Date. (See "Death Benefit Before
the Annuity Commencement Date" on page 30.)
SUB-ACCOUNT - That portion of the Variable Account available under the Contract
which invests in shares of a specific Investment Fund.
SUB-ACCOUNT ACCUMULATION UNIT - A unit of measure used to determine the Variable
Account Contract Value before annuity payments start.
SUCCESSOR BENEFICIARY - The person named to become the Beneficiary if the
Beneficiary is not alive.
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; Martin Luther King
Day; President's Day; Good Friday; Fourth of July; Labor Day; Thanksgiving
Day; and Christmas Day.
VALUATION PERIOD - The time interval between a Valuation Date and the next
Valuation Date.
VARIABLE ACCOUNT - A separate account of the Company consisting of assets set
aside by the Company, the investment performance of which is kept separate
from that of the general assets of the Company.
VARIABLE ANNUITY - A series of periodic payments to the Annuitant which will
vary in amount, primarily based on the investment results of the Variable
Account Sub-Accounts under the Contract.
VARIABLE ANNUITY UNIT - A unit of measure used in the calculation of the second
and each subsequent variable annuity payment from the Variable Account.
VIP. FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND
Equity-Income Portfolio
Growth Portfolio
High Income Portfolio
Money Market Portfolio
Overseas Portfolio
VIP II. FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio
Asset Manager Portfolio
Index 500 Portfolio
Investment Grade Bond Portfolio
SUMMARY OF CONTRACT EXPENSES
CONTRACT OWNER TRANSACTION EXPENSES
Sales Charge Imposed on Purchases...........................................None
Surrender Charge (as a percentage of amounts surrendered attributable to
purchase payments made in the last six Contract Years) (a)
CONTRACT YEAR OF SURRENDER SURRENDER CHARGE
MINUS CONTRACT YEAR OF AS A PERCENTAGE OF
PURCHASE PAYMENT EACH PURCHASE PAYMENT
---------------- ---------------------
0 6%
1 6
2 5
3 5
4 4
5 4
6 and later 0
Transfer Charge(b)..........................................................None
ANNUAL CONTRACT CHARGE......................................................$30
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Premiums........................................1.25%
Other Account Fees and Expenses
(See "Administration Charge" on page 28.)............................... .15%
Total Separate Account Annual Expenses.....................................1.40%
ANNUAL INVESTMENT FUND EXPENSES AFTER REIMBURSEMENTS (d) (e) (f) (g) (h) (i):
(as a percentage of Investment Fund average net assets)
<TABLE>
<CAPTION>
TOTAL INVESTMENT
MANAGEMENT OTHER FUND ANNUAL
FEES EXPENSES EXPENSES
---- -------- --------
<S> <C> <C> <C>
The Alger American Fund
Alger American Growth Portfolio(c) 0.75% 0.04% 0.79%
Alger American MidCap Growth Portfolio(c) 0.80% 0.04% 0.84%
Alger American Small Capitalization Portfolio(c) 0.85% 0.03% 0.88%
Fidelity's Variable Insurance Products Fund (VIP):
Equity-Income Portfolio(c)(d) 0.51% 0.07% 0.58%
Growth Portfolio(c)(d) 0.61% 0.08% 0.69%
High Income Portfolio(c) 0.59% 0.12% 0.71%
Money Market Portfolio 0.21% 0.09% 0.30%
Overseas Portfolio(c)(d) 0.76% 0.17% 0.93%
Fidelity's Variable Insurance Products Fund II (VIP II):
Asset Manager Portfolio(c)(d) 0.64% 0.10% 0.74%
Contrafund Portfolio(c)(d) 0.61% 0.13% 0.74%
Index 500 Portfolio(c)(e) 0.13% 0.15% 0.28%
Investment Grade Bond Portfolio(c) 0.45% 0.13% 0.58%
Janus Aspen Series:
Aggressive Growth Portfolio(c)(f) 0.72% 0.04% 0.76%
Growth Portfolio(c)(f) 0.65% 0.04% 0.69%
International Growth Portfolio(c)(f) 0.05% 1.21% 1.26%
Worldwide Growth Portfolio(c)(f) 0.66% 0.14% 0.80%
Neuberger&Berman Advisers Management Trust:
Limited Maturity Bond Portfolio(c) 0.65% 0.13% 0.78%
Partners Portfolio(c) 0.84% 0.11% 0.95%
Northstar Variable Trust:
Northstar Growth Fund(g) 0.75% 0.05% 0.80%
Northstar High Yield Bond Fund(g) 0.75% 0.05% 0.80%
Northstar Income and Growth Fund(g) 0.75% 0.05% 0.80%
Northstar International Value Fund(g) 0.75% 0.05% 0.80%
Northstar Multi-Sector Bond Fund(g) 0.75% 0.05% 0.80%
OCC Accumulation Trust:
Equity Portfolio(c)(h) 0.80% 0.22% 1.02%
Global Equity Portfolio(c)(h) 0.80% 0.63% 1.43%
Managed Portfolio(c)(h) 0.80% 0.10% 0.90%
Small Cap Portfolio(c)(h) 0.80% 0.22% 1.02%
Putnam Variable Trust:
Putnam VT Asia Pacific Growth Fund 0.80% 0.43% 1.23%
Putnam VT Diversified Income Fund 0.70% 0.13% 0.83%
Putnam VT Growth and Income Fund 0.49% 0.05% 0.54%
Putnam VT New Opportunities Fund 0.63% 0.09% 0.72%
Putnam VT Utilities Growth and Income Fund(i) 0.69% 0.09% 0.78%
Putnam VT Voyager Fund 0.57% 0.06% 0.63%
</TABLE>
The fee and expense information regarding the Investment Funds was provided
by the Investment Funds. Except for the Northstar Variable Trust, neither the
Investment Funds nor their Advisers are affiliated with the Company.
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 a 5%
annual return on assets.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
The Alger American Fund:
Alger American Growth Portfolio $77 $116 $158 $262
Alger American MidCap Growth Portfolio 78 118 161 267
Alger American Small Capitalization Portfolio 78 119 163 271
Fidelity's Variable Insurance Products Fund (VIP):
Equity-Income Portfolio 75 110 147 240
Growth Portfolio 76 113 153 251
High Income Portfolio 76 114 154 253
Money Market Portfolio 72 101 133 211
Overseas Portfolio 79 120 165 276
Fidelity's Variable Insurance Products Fund II (VIP II):
Asset Manager Portfolio 77 115 155 256
Contrafund Portfolio 77 115 155 256
Index 500 Portfolio 72 101 132 208
Investment Grade Bond Portfolio 75 110 147 240
Janus Aspen Series:
Aggressive Growth Portfolio 77 115 156 258
Growth Portfolio 76 113 153 251
International Growth Portfolio 82 130 181 308
Worldwide Growth Portfolio 77 117 159 263
Neuberger&Berman Advisers Management Trust:
Limited Maturity Bond Portfolio 77 116 158 261
Partners Portfolio 79 121 166 278
Northstar Variable Trust:
Northstar Growth Fund 77 117 159 263
Northstar High Yield Bond Fund 77 117 159 263
Northstar Income and Growth Fund 77 117 159 263
Northstar International Value Fund 77 117 159 263
Northstar Multi-Sector Bond Fund 77 117 159 263
OCC Accumulation Trust:
Equity Portfolio 79 123 170 285
Global Equity Portfolio 84 135 190 324
Managed Portfolio 78 120 164 273
Small Cap Portfolio 79 123 170 285
Putnam Variable Trust:
Putnam VT Asia Pacific Growth Fund 82 129 180 305
Putnam VT Diversified Income Fund 78 117 160 266
Putnam VT Growth and Income Fund 75 109 145 236
Putnam VT New Opportunities Fund 76 114 154 254
Putnam VT Utilities Growth and Income Fund 77 116 158 261
Putnam VT Voyager Fund 76 111 150 245
</TABLE>
If you annuitize your contract at the end of the applicable time period,
you would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
The Alger American Fund:
Alger American Growth Portfolio $23 $71 $122 $262
Alger American MidCap Growth Portfolio 24 73 125 267
Alger American Small Capitalization Portfolio 24 74 127 271
Fidelity's Variable Insurance Products Fund (VIP):
Equity-Income Portfolio 75 65 111 240
Growth Portfolio 76 68 117 251
High Income Portfolio 76 69 118 253
Money Market Portfolio 72 56 97 211
Overseas Portfolio 79 75 129 276
Fidelity's Variable Insurance Products Fund II (VIP II):
Asset Manager Portfolio 77 70 119 256
Contrafund Portfolio 77 70 119 256
Index 500 Portfolio 72 56 96 208
Investment Grade Bond Portfolio 75 65 111 240
Janus Aspen Series:
Aggressive Growth Portfolio 23 70 120 258
Growth Portfolio 22 68 117 251
International Growth Portfolio 28 85 145 308
Worldwide Growth Portfolio 23 72 123 263
Neuberger&Berman Advisers Management Trust:
Limited Maturity Bond Portfolio 23 71 122 261
Partners Portfolio 25 76 130 278
Northstar Variable Trust:
Northstar Growth Fund 77 72 123 263
Northstar High Yield Bond Fund 23 72 123 263
Northstar Income and Growth Fund 77 72 123 263
Northstar International Value Fund 23 72 123 263
Northstar Multi-Sector Bond Fund 77 72 123 263
OCC Accumulation Trust:
Equity Portfolio 25 78 134 285
Global Equity Portfolio 30 90 154 324
Managed Portfolio 24 75 128 273
Small Cap Portfolio 25 78 134 285
Putnam Variable Trust:
Putnam VT Asia Pacific Growth Fund 82 84 144 305
Putnam VT Diversified Income Fund 78 72 124 266
Putnam VT Growth and Income Fund 75 64 109 236
Putnam VT New Opportunities Fund 76 69 118 254
Putnam VT Utilities Growth and Income Fund 77 71 122 261
Putnam VT Voyager Fund 76 66 114 245
</TABLE>
*If the Contract's Annuity Commencement Date occurs during the first two
Contract Years following the date the Contract was issued a Surrender Charge is
deducted and the expenses shown in year 1 reflect this deduction.
If you do not surrender or annuitize your contract at the end of the
applicable time period, you would pay the following expenses on a $ 1,000
investment, assuming a 5% annual return on assets.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
The Alger American Fund:
Alger American Growth Portfolio $23 $71 $122 $262
Alger American MidCap Growth Portfolio 24 73 125 267
Alger American Small Capitalization Portfolio 24 74 127 271
Fidelity's Variable Insurance Products Fund (VIP):
Equity-Income Portfolio 21 65 111 240
Growth Portfolio 22 68 117 251
High Income Portfolio 22 69 118 253
Money Market Portfolio 18 56 97 211
Overseas Portfolio 25 75 129 276
Fidelity's Variable Insurance Products Fund II (VIP II):
Asset Manager Portfolio 23 70 119 256
Contrafund Portfolio 23 70 119 256
Index 500 Portfolio 18 56 96 208
Investment Grade Bond Portfolio 21 65 111 240
Janus Aspen Series:
Aggressive Growth Portfolio 23 70 120 258
Growth Portfolio 22 68 117 251
International Growth Portfolio 28 85 145 308
Worldwide Growth Portfolio 23 72 123 263
Neuberger&Berman Advisers Management Trust:
Limited Maturity Bond Portfolio 23 71 122 261
Partners Portfolio 25 76 130 278
Northstar Variable Trust:
Northstar Growth Fund 23 72 123 263
Northstar High Yield Bond Fund 23 72 123 263
Northstar Income and Growth Fund 23 72 123 263
Northstar International Value Fund 23 72 123 263
Northstar Multi-Sector Bond Fund 23 72 123 263
OCC Accumulation Trust:
Equity Portfolio 25 78 134 285
Global Equity Portfolio 30 90 154 324
Managed Portfolio 24 75 128 273
Small Cap Portfolio 25 78 134 285
Putnam Variable Trust:
Putnam VT Asia Pacific Growth Fund 28 84 144 305
Putnam VT Diversified Income Fund 24 72 124 266
Putnam VT Growth and Income Fund 21 64 109 236
Putnam VT New Opportunities Fund 22 69 118 254
Putnam VT Utilities Growth and Income Fund 23 71 122 261
Putnam VT Voyager Fund 22 66 114 245
</TABLE>
(a) Under certain situations amounts may be surrendered free of any surrender
charge. For more information on the Surrender Charge, see page 26,
"Surrender Charge (Contingent Deferred Sales Charge)". The Company reserves
the right to charge a partial surrender processing fee not to exceed the
lesser of 2% of the partial surrender amount or $25. For more information
on the processing fee, see page 31, "Surrender (Redemption)".
(b) The Company currently does not impose a charge on transfers between the
Sub-Accounts or to the Fixed Account, although the Company reserves the
right to impose a charge not to exceed $25 per each transfer.
(c) 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 in some cases, 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.
(d) A portion of the brokerage commissions that certain funds pay was used to
reduce 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, .92% for Overseas Portfolio, .73% for
Asset Manager Portfolio, and .71% for Contrafund Portfolio.
(e) FMR agreed to reimburse a portion of Index 500 Portfolio's expenses during
the period. Without this reimbursement, the funds' management fee, other
expenses and total expenses would have been .28%, .15%, and .43%,
respectively. Expense reimbursements are voluntary. There is no assurance
of ongoing reimbursement.
(f) The fees and expenses of Janus Aspen Series are based on gross expenses
before expense offset arrangements for the fiscal year ended December 31,
1996. The information for each Portfolio is net of fee waivers or
reductions from Janus Capital. Fee reductions for the Aggressive Growth,
Growth, International Growth, and Worldwide Growth Portfolios reduce the
management fee to the level of the corresponding Janus retail fund. Other
waivers, if applicable are first applied against the management fee and
then against other expenses. Without such waivers or reductions, the
Management fee, Other Expenses and Total Operating Expenses would have
been: 0.79%, 0.04% and 0.83% for the Aggressive Growth Portfolio; 0.79%,
0.04%, and 0.83% for the Growth Portfolio; 1.00%, 1.21% and 2.21% for the
International Growth Portfolio; and, 0.77%, 0.14%, and 0.91% for the
Worldwide Growth Portfolio. Janus Capital may modify or terminate the
waivers or reductions at any time upon at least 90 days' notice to the
Trustees of Janus Aspen Series.
(g) The investment adviser to the Northstar Variable Trust has agreed to
reimburse the five Northstar Funds for any expenses in excess of 0.80% of
each Fund's average daily net assets. In the absence of the investment
adviser's expense reimbursements, the actual expenses that would have been
paid by each Fund during its fiscal year ended December 31, 1996 would have
been: Northstar Growth Fund: 1.70%; Northstar High Yield Bond Fund: 1.73%.
Northstar Income and Growth Fund: 1.40%; Northstar Multi-Sector Bond Fund:
1.68%; and The Northstar International Value Fund commenced operations on
August 8, 1997. Absent expense reimbursement, the actual expenses for this
fund are estimated to be 1.90%. Expense Reimbursements are voluntary. There
is no assurance of ongoing reimbursement.
(h) The annual expenses of OCC Accumulation Trust Portfolios (the "Portfolios")
as of December 31, 1996 have been restated to reflect new management fee
and expense limitation arrangements in effect as of May 1, 1996.
Additionally, Other expenses are shown gross of certain expense offsets
afforded the Portfolios which effectively lowered overall custody expenses.
Effective May 1, 1996, the expenses of the Portfolios were contractually
limited by OpCap Advisors so that their respective annualized operating
expenses (net of any expense offsets) do not exceed 1.25% of their
respective average daily net assets. Furthermore, through December 31,
1997, the annualized operating expenses of the Equity, Managed, and Small
Cap Portfolios will be voluntarily limited by OpCap Advisors so that
annualized operating expenses (net of any expense offsets) of these
Portfolios do not exceed 1.00% of their respective average daily net
assets. Without such contractual and voluntary expense limitations and
without giving effect to any expense offsets, the Management Fees, Other
Expenses and Total Investment Fund Expenses incurred for the fiscal year
ended December 31, 1996 would have been .80%, .31% and 1.11% respectively,
for the Equity Portfolio; .80%, 1.04% and 1.84% respectively, for the
Global Equity Portfolio; .80%, .10% and .90% respectively, for the Managed
Portfolio; and .80%, .26% and 1.06% respectively, for the Small Cap
Portfolio. Expense reimbursements are voluntary. There is no assurance of
ongoing reimbursement.
(i) On July 11, 1996, shareholders approved an increase in the fees payable to
Putnam Investment Management, Inc. ("Putnam Management") under the
Management Contract for Putnam VT Utilities Growth and Income Fund. The
management fees and total expenses shown in the table have been restated to
reflect the increase. Actual management fees and total expenses for the
year ended December 31, 1996 were 0.64% and 0.73%, respectively.
THE EXAMPLES SHOWN IN THE TABLE ABOVE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN. THE 5% ANNUAL RETURN ASSUMED IS HYPOTHETICAL AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS, WHICH MAY BE
GREATER OR LESS THAN THE ASSUMED RATE.
The purpose of this table is to assist the Contract Owner in understanding
the various costs and expenses that a Contract Owner will bear either directly
or indirectly. The table reflects the expenses of the Variable Account as well
as those of the Investment Funds. The $30 Annual Contract Charge is reflected as
an annual percentage charge in this table based on the anticipated average net
assets in the Variable Account and Fixed Account, which translates to a charge
equal to an annual rate of 0.090% of the Variable Account and Fixed Account
values.
In addition to the costs and expenses shown in this table, state premium
taxes may also be applicable. For more information on state premium taxes see
page 28, "Premium and Other Taxes".
SUMMARY
The Contracts are flexible premium individual deferred variable/fixed
retirement annuity contracts issued by the Variable Account and the Company.
(See "The Company" and "The Variable Account" on page 20.) 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 Tax Status"
on page 36.) Annuity payments under the Contracts are deferred until a later
date.
Purchase payments may be allocated to one or more of the available
Sub-Accounts of the Variable Account and/or to the Fixed Account (the Fixed
Account is not available to Contract Owners in the States of Maryland, Oregon,
South Carolina and Washington). Purchase payments allocated to one or more
Sub-Accounts of the Variable Account will be invested in shares at net asset
value of one or more of the Investment Funds. The Variable Account Contract
Value and the amount of variable annuity payments will vary, primarily based on
the investment performance of the Investment Funds whose shares are held in the
Sub-Accounts selected. (See "Investments of the Variable Account" on page 20.)
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 six Contract
Years. Except for Contracts issued in the state of Washington, a surrender
charge will also be deducted if the Contract's Annuity Commencement Date occurs
within the first two years after the date the Contract was issued. The amount of
the surrender charge will vary as follows:
CONTRACT YEAR OF SURRENDER MINUS SURRENDER CHARGE AS A
CONTRACT YEAR OF PURCHASE PAYMENT PERCENTAGE OF EACH PURCHASE
PAYMENT
0 - 1 6%
2 - 3 5
4 - 5 4
6 and later 0
(See "Surrender Charge (Contingent Deferred Sales Charge)" on page 26.)
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 an Annual Contract Charge of
$30. During the annuity period the Annual Contract Charge will be separately
assessed against fixed annuity payments and variable annuity payments and will
be deducted from each fixed annuity payment and from each variable annuity
payment in equal installments if both forms of annuity payment are selected.
Otherwise such charge will be deducted from each fixed annuity or variable
annuity payment as applicable. The Annual Contract Charge is to reimburse the
Company for administrative expenses relating to the issue and maintenance of the
Contracts. (See "Annual Contract Charge" on page 27.)
The Company also deducts a Mortality Risk Premium, an Expense Risk Premium
and an Administration Charge, equal to an annual rate of 1.40% of the daily net
assets of the available Sub-Accounts of the Variable Account. (See "Mortality
Risk Premium", "Expense Risk Premium" and "Administration Charge" on page 28.)
The initial purchase payment must be $5,000 or more for a Non-Qualified
Contract and no subsequent individual payment may be less than $500. If the
Contract is being purchased by or in connection with a Qualified Plan, the
minimum initial purchase payment is $2,000, and no subsequent individual payment
may be less than $200. 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 $ 1,000,000. 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 $5,000,
the Contract Value may be distributed in a single sum payment in lieu of annuity
payments. If any annuity payment would be less than $50, the Company has the
right to change the frequency of payments to such intervals as will result in
payments of at least $50 each. (See "Frequency and Amount of Annuity Payments"
on page 35.) 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 and Other Taxes" on page 28.)
The Contract Owner may request early withdrawal of all or part of the
Contract Value before the Annuity Commencement Date. (See "Surrender
(Redemption)" on page 31.) Under the 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 "Taxation of Annuities" on page 38.)
The Contract Owner may return the Contract within ten days after it was
delivered to the Owner, and receive a refund of the Contract Value unless
otherwise required by law. (See "Revocation" on page 42.)
CONDENSED FINANCIAL INFORMATION
The following table shows, for each Sub-Account of the Variable Account,
the value of a Sub-Account Accumulation Unit as they are invested in portfolios
at the dates shown, and the total number of Sub-Account Accumulation Units
outstanding at the end of each period:
<TABLE>
<CAPTION>
SUB-ACCOUNT INVESTING IN YEAR ENDED DECEMBER 31
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
THE ALGER AMERICAN FUND:
ALGER AMERICAN GROWTH PORTFOLIO
(Since August 8, 1997)
Beginning of period --- --- ---
End of period --- --- ---
Units outstanding at end of period --- --- ---
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
(Since August 8, 1997)
Beginning of period --- --- ---
End of period --- --- ---
Units outstanding at end of period --- --- ---
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
(Since August 8, 1997)
Beginning of period --- --- ---
End of period --- --- ---
Units outstanding at end of period --- --- ---
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND (VIP):
EQUITY-INCOME PORTFOLIO
(Since January 6, 1994)
Beginning of period $14.0081 $10.5139 $10.0000
End of period $15.7861 $14.0081 $10.5139
Units outstanding at end of period 3,108,409 1,874,623 709,023
GROWTH PORTFOLIO
(Since January 6, 1994)
Beginning of period $13.1611 $9.8584 $10.0000
End of period $14.8863 $13.1611 $9.8584
Units outstanding at end of period 2,484,915 1,527,407 747,558
HIGH INCOME PORTFOLIO
(Since January 6, 1994)
Beginning of period $11.4563 $9.6317 $10.0000
End of period $12.8821 $11.4563 $9.6317
Units outstanding at end of period 1,104,232 608,287 239,723
MONEY MARKET PORTFOLIO
(Since January 6, 1994)
Beginning of period $10.7316 $10.2767 $10.0000
End of period $11.1555 $10.7316 $10.2767
Units outstanding at end of period 1,558,218 1,002,405 427,592
OVERSEAS PORTFOLIO
(Since January 6, 1994)
Beginning of period $10.7569 $9.9447 $10.0000
End of period $12.0091 $10.7569 $9.9447
Units outstanding at end of period 1,096,743 765,862 503,864
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND II (VIP II):
ASSET MANAGER PORTFOLIO
(Since January 6, 1994)
Beginning of period $10.6096 $9.1981 $10.0000
End of period $11.9898 $10.6096 $9.1981
Units outstanding at end of period 1,562,912 1,333,252 1,089,020
CONTRAFUND PORTFOLIO
(Since May 1, 1995)
Beginning of period $12.1031 $10.0000 ---
End of period $14.4777 $12.1031 ---
Units outstanding at end of period 1,419,399 440,844 ---
INDEX 500 PORTFOLIO
(Since January 6, 1994)
Beginning of period $13.4594 $9.9476 $10.0000
End of period $16.3012 $13.4594 $9.9476
Units outstanding at end of period 1,010,296 314,004 89,274
INVESTMENT GRADE BOND PORTFOLIO
(Since January 6, 1994)
Beginning of period $10.9662 $9.4774 $10.0000
End of period $11.1581 $10.9662 $9.4774
Units outstanding at end of period 709,332 668,429 306,289
JANUS ASPEN SERIES:
AGGRESSIVE GROWTH PORTFOLIO
(Since August 8, 1997)
Beginning of period --- --- ---
End of period --- --- ---
Units outstanding at end of period --- --- ---
GROWTH PORTFOLIO
(Since August 8, 1997)
Beginning of period --- --- ---
End of period --- --- ---
Units outstanding at end of period --- --- ---
INTERNATIONAL GROWTH PORTFOLIO
(Since August 8, 1997)
Beginning of period --- --- ---
End of period --- --- ---
Units outstanding at end of period --- --- ---
WORLDWIDE GROWTH PORTFOLIO
(Since August 8, 1997)
Beginning of period --- --- ---
End of period --- --- ---
Units outstanding at end of period --- --- ---
NEUBERGER&BERMAN ADVISERS MANAGEMENT TRUST:
LIMITED MATURITY BOND PORTFOLIO
(Since August 8, 1997)
Beginning of period --- --- ---
End of period --- --- ---
Units outstanding at end of period --- --- ---
PARTNERS PORTFOLIO
(Since August 8, 1997)
Beginning of period --- --- ---
End of period --- --- ---
Units outstanding at end of period --- --- ---
NORTHSTAR VARIABLE TRUST :
NORTHSTAR GROWTH FUND
(Since January 3, 1995)
Beginning of period $12.3714 $10.0000 ---
End of period $15.0172 $12.3714 ---
Units outstanding at end of period 376,557 16,298 ---
NORTHSTAR HIGH YIELD BOND FUND
(Since August 8, 1997)
Beginning of period --- --- ---
End of period --- --- ---
Units outstanding at end of period --- --- ---
NORTHSTAR INCOME AND GROWTH FUND
(Since January 3, 1995):
Beginning of period $12.0224 $10.0000 ---
End of period $13.4910 $12.0224 ---
Units outstanding at end of period 143,393 38,118 ---
NORTHSTAR INTERNATIONAL VALUE FUND
(Since August 8, 1997)
Beginning of period --- --- ---
End of period --- --- ---
Units outstanding at end of period --- --- ---
NORTHSTAR MULTI-SECTOR BOND FUND
(Since January 3, 1995)
Beginning of period $11.3881 $10.0000 ---
End of period $12.7208 $11.3881 ---
Units outstanding at end of period 152,651 21,964 ---
OCC ACCUMULATION TRUST:
EQUITY PORTFOLIO
(Since August 8, 1997)
Beginning of period --- --- ---
End of period --- --- ---
Units outstanding at end of period --- --- ---
GLOBAL EQUITY PORTFOLIO
(Since August 8, 1997)
Beginning of period --- --- ---
End of period --- --- ---
Units outstanding at end of period --- --- ---
MANAGED PORTFOLIO
(Since August 8, 1997)
Beginning of period --- --- ---
End of period --- --- ---
Units outstanding at end of period --- --- ---
SMALL CAP PORTFOLIO
(Since August 8, 1997)
Beginning of period --- --- ---
End of period --- --- ---
Units outstanding at end of period --- --- ---
PUTNAM VARIABLE TRUST:
PUTNAM VT ASIA PACIFIC GROWTH FUND
(Since May 1, 1995)
Beginning of period $10.1361 $10.0000 ---
End of period $10.9048 $10.1361 ---
Units outstanding at end of period 281,445 77,407 ---
PUTNAM VT DIVERSIFIED INCOME FUND
(Since January 6, 1994)
Beginning of period $11.0666 $9.4193 $10.0000
End of period $11.8740 $11.0666 $9.4193
Units outstanding at end of period 685,507 574,909 334,112
PUTNAM VT GROWTH AND INCOME FUND
(Since January 6, 1994)
Beginning of period $13.3162 $9.8762 $10.0000
End of period $16.0091 $13.3162 $9.8762
Units outstanding at end of period 1,639,863 719,095 228,484
PUTNAM VT NEW OPPORTUNITIES FUND
(Since May 1, 1995)
Beginning of period $13.3506 $10.0000 ---
End of period $14.5039 $13.3506 ---
Units outstanding at end of period 1,312,658 279,170 ---
PUTNAM VT UTILITIES GROWTH AND INCOME FUND
(Since January 6, 1994)
Beginning of period $12.0072 $9.2881 $10.0000
End of period $13.7107 $12.0072 $9.2881
Units outstanding at end of period 384,868 237,434 109,160
PUTNAM VT VOYAGER FUND
(Since January 6, 1994)
Beginning of period $13.9272 $10.0386 $10.0000
End of period $15.5144 $13.9272 $10.0386
Units outstanding at end of period 2,244,324 1,090,262 338,970
</TABLE>
PERFORMANCE INFORMATION
From time to time, the Company may advertise or include in sales literature
yields, effective yields, and total returns for the available Sub-Accounts.
THESE FIGURES ARE BASED ON HISTORICAL EARNINGS AND DO NOT INDICATE OR PROJECT
FUTURE PERFORMANCE. Each Sub-Account may, from time to time, advertise or
include in sales literature performance relative to certain performance rankings
and indices compiled by independent organizations. More detailed information as
to the calculation of performance information, as well as comparisons with
unmanaged market indices, appears in the Statement of Additional Information.
Yields, effective yields and total returns for the Sub-Accounts are based
on the investment performance of the corresponding portfolios of the Investment
Funds. The performance in part reflects the Investment Funds' expenses. See the
prospectuses for the Investment Funds.
The yield of the Sub-Account investing in Fidelity's VIP Money Market
Portfolio refers to the annualized income generated by an investment in the
Sub-Account over a specified seven-day period. The yield is calculated by
assuming that the income generated for that seven-day period is generated each
seven-day period over a 52-week period and is shown as a percentage of the
investment. The effective yield is calculated similarly but, when annualized,
the income earned by an investment in the Sub-Account is assumed to be
reinvested. The effective yield will be slightly higher than the yield because
of the compounding effect of this assumed reinvestment.
The yield of a Sub-Account (except the Money Market Sub-Account investing
in Fidelity's VIP Money Market Portfolio) refers to the annualized income
generated by an investment in the Sub-Account over a specified 30-day or
one-month period. The yield is calculated by assuming that the income generated
by the investment during that 30-day or one-month period is generated each
period over a 12-month period and is shown as a percentage of the investment.
The total return of a Sub-Account refers to return quotations assuming an
investment under a Contract has been held in the Sub-Account for various periods
of time including, but not limited to, a period measured from the date the
Sub-Account commenced operations. Average annual total return refers to total
return quotations that are annualized based on an average return over various
periods of time.
The average annual total return quotations 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 for which total return quotations are provided. Average
annual total return information shows the average percentage change in the value
of an investment in the Sub-Account from the beginning date of the measuring
period to the end of that period. This version of average annual total return
reflects all historical investment results, less all charges and deductions
applied against the Sub-Account (including any surrender charge that would apply
if an Owner terminated the Contract at the end of each period indicated, but
excluding any deductions for premium taxes).
When a Sub-Account has been in operation for one, five, and ten years,
respectively, the total return for these periods will be provided. For periods
prior to the date the Sub-Account commenced operations, performance information
for Contracts funded by the Sub-Accounts will be calculated based on the
performance of the Investment Funds' portfolios and the assumption that the
Sub-Accounts were in existence for the same periods as those indicated for the
Investment Funds' portfolios, with the level of Contract charges that were in
effect at the inception of the Sub-Accounts for the Contracts.
Average total return information may be presented and computed on the same
basis as described above, except deductions will not include the surrender
charge. In addition, the Company may from time to time disclose average annual
total return in non-standard formats and cumulative total return for Contracts
funded by the Sub-Accounts.
The Company may, from time to time, also disclose yield and total returns
for the portfolios of the Investment Funds, including such disclosure for
periods prior to the dates the Sub-Accounts commenced operations.
For additional information regarding the calculation of other performance
data, please refer to the Statement of Additional Information.
In advertising and sales literature, the performance of each Sub-Account
may be compared to the performance of other variable annuity issuers in general
or to the performance of particular types of variable annuities investing in
mutual funds, or investment series of mutual funds with investment objectives
similar to each of the Sub-Accounts. Lipper Analytical Services, Inc. ("Lipper")
and the Variable Annuity Research Data Service ("VARDS") are independent
services which monitor and rank the performance of variable annuity issuers in
each of the major categories of investment objectives on an industry-wide basis.
Lipper's rankings include variable life insurance issuers as well as
variable annuity issuers. VARDS rankings compare only variable annuity issuers.
The performance analyses prepared by Lipper and VARDS each rank such issuers on
the basis of total return, assuming reinvestment of distributions, but do not
take sales charges, redemption fees or certain expense deductions at the
separate account level into consideration. In addition, VARDS prepares risk
adjusted rankings, which consider the effects of market risk on total return
performance. This type of ranking provides data as to which funds provide the
highest total return within various categories of funds defined by the degree of
risk inherent in their investment objectives.
Advertising and sales literature may also compare the performance of each
Sub-Account to the Standard & Poor's Composite Index of 500 Stocks, a widely
used measure of stock performance. This unmanaged index assumes the reinvestment
of dividends but does not reflect any "deduction" for the expense of operating
or managing an investment portfolio. Other independent ranking services and
indices may also be used as a source of performance comparison.
The Company may also report other information including the effect of
tax-deferred compounding on a Sub-Account's investment returns, or returns in
general, which may be illustrated by tables, graphs or charts. All income and
capital gains derived from Sub-Account investments are reinvested and can lead
to substantial long-term accumulation of assets, provided that the underlying
portfolio's investment experience is positive.
THE COMPANY
The Company, organized in 1885, is a stock life insurance company
incorporated under the laws of the State of Minnesota. The Company is a direct,
wholly-owned subsidiary of ReliaStar Financial Corp., a publicly-traded holding
company incorporated under the laws of the State of Delaware, whose shares are
listed on the New York Stock Exchange. The Company offers individual life
insurance and annuities, employee benefits, and retirement contracts. The
Company is admitted to do business in the District of Columbia and all states
except New York. Its home office is at 20 Washington Avenue South, Minneapolis,
Minnesota 55401 (telephone 612/372-5507). The Contracts described in this
Prospectus are nonparticipating. The capital and surplus of the Company should
be considered as bearing only upon the ability of the Company to meet its
obligations under the Contracts.
THE VARIABLE ACCOUNT
The Variable Account is a Separate Account of the Company established by
the Board of Directors of the Company on November 12, 1981, pursuant to the laws
of the State of Minnesota. The Variable Account is registered with the
Securities and Exchange Commission as a unit investment trust under the
Investment Company Act of 1940, as amended ("1940 Act"). Such registration does
not involve supervision by the Commission of the management or investment
policies or practices of the Variable Account, the Company or the Funds. The
Company has complete ownership and control of the assets in the Variable
Account, but these assets are held separately from the Company's other assets
and are not part of the Company's General Account.
The portion of the assets of the Variable Account equal to the reserves and
other contract liabilities of the Variable Account will not be charged with
liabilities incurred in any other business that the Company may conduct. The
Company has the right to transfer to its General Account any assets of the
Variable Account which are in excess of such reserves and other liabilities. The
income, if any, and gains and losses, realized or unrealized, of the Variable
Account will be credited to or charged against the amount allocated to the
Variable Account, in accordance with the contracts supported by the Variable
Account, without regard to the other income, gains or losses of the Company.
Purchase payments allocated to the Variable Account under a Contract are
invested in one or more Sub-Accounts of the Variable Account. The purchase
payments under a Contract are allocated to the Sub-Account or Sub-Accounts
selected by the Owner, and the future Variable Account Contract Value depends
primarily on the investment performance of the Investment Funds whose shares are
held in the Sub-Accounts selected.
Shares of the Investment Funds are also available to other variable
contracts funded by the Variable Account and to separate accounts for other
types of variable contracts.
INVESTMENTS OF THE VARIABLE ACCOUNT
When a Contract is applied for, the Owner may elect to have purchase
payments allocated to one or more of the available Sub-Accounts each of which
invests in shares of one of the Investment Funds at its net asset value. The
Owner may change a purchase payment allocation for future purchase payments and
may at any time transfer all or part of any existing values in a Sub-Account to
another Sub-Account that invests in shares of another Investment Fund.
The following are the investment advisers for the Investment Funds offered
through the Contract. The advisers are paid fees for their services by the Funds
they manage. Fred Alger Management, Inc. is the investment adviser for the three
portfolios of The Alger American Fund. Fidelity Management & Research Company
("FMR") is the investment adviser for the nine portfolios of Fidelity's Variable
Insurance Products Funds I and II (VIP and VIP II); Janus Capital Corporation
("Janus Capital") is the investment adviser for the four portfolios of Janus
Aspen Series; Neuberger&Berman Management is the investment adviser for the two
portfolios of the Advisers Management Trust; Northstar Investment Management
Corporation is the investment adviser for the five funds of the Northstar
Variable Trust; OpCap Advisors is the investment adviser for the four portfolios
of the OCC Accumulation Trust; and Putnam Management is the investment adviser
for the six portfolios of Putnam Variable Trust.
The Company has entered into service agreements with the managers or
distributors of certain of the Funds pursuant to which the Company or its
affiliates may receive from affiliates of the Funds compensation for providing
administrative, record keeping, or distribution in some cases, and other
services to the Funds or their affiliates. Such compensation is paid based upon
aggregated net asset goals. Currently, the Company has service arrangements with
Fred Alger Management, Inc., Fidelity Management & Research Company, Janus
Capital, Neuberger&Berman Management, and OpCap Advisors.
The Investment Funds currently offered, together with their investment
objectives are briefly described below. More detailed information concerning the
investment objectives, policies and restrictions pertaining to the Investment
Funds and the expenses, investment advisory services and charges and the risks
attendant to investing in the portfolios of the Investment Funds and other
aspects of their operations can be found in the current prospectus for each
Investment Fund which accompany this Prospectus in a book entitled
"Select*Product Mutual Funds", and the current Statement of Additional
Information for each Investment Fund. The Investment Fund prospectuses should be
read carefully before any decision is made concerning the allocation of premium
payments or transfers among the Sub-Accounts.
THE ALGER AMERICAN FUND:
ALGER AMERICAN GROWTH PORTFOLIO has the investment objective of long term
capital appreciation. Except during temporary defensive periods, the Portfolio
invests at least 65% of its total assets in equity securities of companies that,
at the time of purchase of the securities, have total market capitalization of
$1 billion or greater. The Portfolio may invest up to 35% of its total assets in
equity securities companies that, at the time of purchase, have total market
capitalization of less than $1 billion.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO has the investment objective of long
term capital appreciation. Except during temporary defensive periods, the
Portfolio invests at least 65% of its total assets in equity securities of
companies that, at the time of purchase of the securities, have total market
capitalization within the range of companies included in the S&P MidCap 400
Index, updated quarterly. The S&P MidCap 400 Index is designed to track the
performance of medium capitalization companies. The Portfolio may invest up to
35% of its total assets in equity securities of companies that, at the time of
purchase, have total market capitalization outside the range of companies
included in the S&P Mid-Cap 400 Index and in excess of that amount (up to 100%
of its assets) during temporary defensive periods.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO has the investment objective
of long term capital appreciation. Except during temporary defensive periods,
the Portfolio invests at least 65% of its total assets in equity securities of
companies that, at the time of purchase, have "total market capitalization" -
present market value per share multiplied by the total number of shares
outstanding - within the range of companies included in the Russell 2000 Growth
Index ("Russell Index") or the S&P Small Cap 600 Index ("S&P Index"). Both
indexes are broad indexes of small capitalization stocks. The Portfolio may
invest up to 35% of its total assets in equity securities of companies that, at
the time of purchase, have total market capitalization outside of the combined
range of these indices, and in excess of that amount (up to 100% of its assets)
during temporary defensive periods.
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND (VIP):
EQUITY-INCOME PORTFOLIO seeks reasonable income by investing primarily in
income-producing equity securities. In choosing these securities the portfolio
will also consider the potential for capital appreciation. The portfolio's goal
is to achieve a yield which exceeds the composite yield on the securities
comprising the Standard & Poor's Composite Index of 500 Stocks.
GROWTH PORTFOLIO seeks to achieve capital appreciation. The portfolio
normally purchases common stocks, although its investments are not restricted to
any one type of security. Capital appreciation may also be found in other types
of securities, including bonds and preferred stocks.
HIGH INCOME PORTFOLIO seeks to obtain a high level of current income by
investing primarily in lower-rated, fixed-income securities (sometimes referred
to as "junk bonds"), while also considering growth of capital. Lower-rated,
fixed-income securities are considered speculative and involve greater risk of
default than higher-rated, fixed-income securities and are more sensitive to the
issuer's capacity to pay. Consult the VIP prospectus for further information on
the risks associated with the portfolio's investment in lower-rated, fixed
income securities.
MONEY MARKET PORTFOLIO seeks to obtain as high a level of current income as
is consistent with preserving capital and providing liquidity. The portfolio
will invest only in high-quality U.S. dollar denominated money market
instruments of domestic and foreign issuers. An investment in the portfolio is
not insured or guaranteed by the U.S. Government, and there can be no assurance
that the portfolio will maintain a stable asset value per share of $1.00.
OVERSEAS PORTFOLIO seeks long term growth of capital primarily through
investments in foreign securities. Overseas Portfolio provides a means for
investors to diversify their own portfolios by participating in companies and
economies outside of the United States.
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND II (VIP II):
ASSET MANAGER PORTFOLIO seeks 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.
CONTRAFUND PORTFOLIO seeks capital appreciation by investing in companies
believed to be under-valued due to an overly pessimistic appraisal by the
public. The portfolio invests primarily in common stock and securities
convertible into common stock, but it has the flexibility to invest in any type
of security that may produce capital appreciation.
INDEX 500 PORTFOLIO seeks to provide 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. In seeking this objective, the
portfolio attempts to duplicate the composition and total return of the Standard
& Poor's Composite Index of 500 Stocks while keeping transaction costs and other
expenses low. The portfolio is designed as a long-term investment option.
INVESTMENT GRADE BOND PORTFOLIO seeks as high a level of current income as
is consistent with the preservation of capital by investing in a broad range of
investment-grade, fixed-income securities.
JANUS ASPEN SERIES:
AGGRESSIVE GROWTH PORTFOLIO is a nondiversified fund that seeks long-term
growth of capital by investing primarily in common stocks. The Portfolio intends
to normally invest at least 50% of its equity assets in securities issued by
medium-sized companies.
GROWTH PORTFOLIO is a diversified fund that seeks long-term growth of
capital in a manner consistent with the preservation of capital by investing in
common stocks of issuers of any size. Generally, this Portfolio emphasizes
issuers with larger market capitalizations.
INTERNATIONAL GROWTH PORTFOLIO is a diversified fund that seeks long-term
growth of capital by investing primarily in common stocks of foreign issuers of
any size. The Portfolio normally invests at least 65% of its total assets in
issuers from at least five different countries excluding the United States.
WORLDWIDE GROWTH PORTFOLIO is a diversified fund that seeks long-term
growth of capital in a manner consistent with the preservation of capital by
investing primarily in common stocks of foreign and domestic issuers of any
size. Worldwide Growth Portfolio normally invests in issuers from at least five
different countries including the United States.
NEUBERGER&BERMAN ADVISERS MANAGEMENT TRUST ("AMT"):
LIMITED MATURITY BOND PORTFOLIO seeks to provide the highest current income
consistent with low risk to principal and liquidity; and secondarily, total
return. It invests in a diversified portfolio primarily consisting of U.S.
Government and Agency securities and investment grade debt securities issued by
financial institutions, corporations, and others. "Investment grade" debt
securities are those receiving one of the four highest ratings from Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's Rating Group ("S&P"), or
another nationally recognized statistical rating organization. Securities in
which the portfolio may invest include mortgage-backed and asset backed
securities, repurchase agreements with respect to U.S. Government and Agency
securities, and foreign investments. The portfolio may also invest in fixed,
variable or inflation-indexed debt securities.
PARTNERS PORTFOLIO seeks capital growth through an investment approach that
is designed to increase capital with reasonable risk. It invests in a portfolio,
which in turn, invests principally in common stocks of medium to large
capitalization established companies, using a value-oriented approach.
Neuberger&Berman Management looks for securities believed to be undervalued
based on strong fundamentals, including a low price-to-earnings ratio,
consistent cash flow, and the company's track record through all parts of the
market cycle. Up to 15% of the portfolio's net assets measured at the time of
investment may be invested in corporate debt securities that are below
investment grade or in comparable unrated securities. Securities rated below
investment grade, as well as comparable unrated securities, are often considered
to be speculative and usually entail greater risk.
NORTHSTAR VARIABLE TRUST (NORTHSTAR)
NORTHSTAR GROWTH FUND is a diversified portfolio with an investment
objective of long-term growth of capital through investments in equity
securities of companies that are believed to provide above average potential for
capital appreciation. Navellier Fund Management, Inc. serves as sub-adviser to
the Fund and is responsible for the day-to-day investment management of the
Fund, subject to the supervision of the investment adviser and the Trustees of
the Fund. All fees and expenses of the subadvisory arrangement are borne by the
investment adviser.
NORTHSTAR HIGH YIELD BOND FUND is a diversified portfolio with an
investment objective of seeking high income consistent with the preservation of
capital. Under normal market conditions, this Investment Fund invests
predominantly in high-yield, high-risk, lower-rated U.S. dollar denominated debt
securities. These securities are commonly known as "junk bonds." Most of the
securities in which the Investment Fund invests are rated, at the time of
investment, at least Caa by Moody's Investors Service, Inc. ("Moody's") or CCC
by Standard & Poor's Corporation ("S&P") or, if not rated, are of comparable
quality in the opinion of the investment adviser. The Investment Fund may,
however, invest in securities in the lowest ratings categories of Moody's and
S&P, which arc "C" in the case of Moody's and "D" in the case of S&P.
NORTHSTAR INCOME AND GROWTH FUND is a diversified portfolio with an
investment objective of seeking current income balanced with the objective of
achieving capital appreciation. This Fund will seek to achieve its objective
through investments in common and preferred stocks, convertible securities,
investment grade corporate debt securities and government securities, selected
for their prospects of producing income and capital appreciation. Wilson/Bennett
Capital Management, Inc. ("Wilson/Bennett") is the sub-adviser to this Fund and
is responsible for the day-to-day investment management of the Fund, subject to
the supervision of the investment adviser and the Trustees of the Fund. All fees
and expenses of the subadvisory arrangement are borne by the investment adviser.
NORTHSTAR INTERNATIONAL VALUE FUND is a diversified portfolio with the
objective of long-term capital appreciation. The Fund invests primarily in
equity securities of foreign companies with a market capitalization of greater
than $1 billion, but may hold up to 25% of its assets in companies with smaller
market capitalization. It generally invests at least 65% of its total assets in
equities of issuers located in at least three countries other than the U.S.,
including, Western Europe, North and South America, Australia, Asia and other
nations. Brandes Investment Partners, L.P. ("Brandes") is the sub-adviser to
this Fund and is responsible for the day-to-day investment management of the
Fund, subject to the supervision of the investment adviser and the Trustees of
the Fund. All fees and expenses of the sub-advisory agreement are borne by the
investment adviser.
NORTHSTAR MULTI-SECTOR BOND FUND is a diversified portfolio with an
investment objective of maximizing current income. This Fund will seek to
achieve its objective by investment in the following sectors of the fixed income
securities markets: (a) securities issued or guaranteed as to principal and
interest by the U.S. Government, its agencies, authorities or instrumentalities;
(b) investment grade corporate debt securities; (c) investment grade or
comparable quality debt securities issued by foreign corporate issuers, and
securities issued by foreign governments and their political subdivisions,
limited to 35% of assets determined at the time of investment; and (d)
high-yield high-risk fixed income securities of U.S. and foreign issuers,
limited to 50% of assets determined at the time of investment.
OCC ACCUMULATION TRUST:
EQUITY PORTFOLIO seeks long term capital appreciation through investment in
securities (primarily equity securities) of companies that are believed by the
Manager to be undervalued in the marketplace in relation to factors such as the
companies' assets or earnings. It is the manager's intention to invest in
securities of companies which in the Manager's opinion possess one or more of
the following characteristics: undervalued assets, valuable consumer or
commercial franchises, securities valuation below peer companies, substantial
and growing cash flow and/or a favorable price to book value relationship. The
Portfolio will invest primarily in stocks listed on the New York Stock exchange.
In addition, it may also purchase securities listed on other domestic securities
exchanges, securities traded in the domestic over-the-counter market and foreign
securities provided that they are listed on a domestic or foreign securities
exchange or represented by American depository receipts listed on a domestic
securities exchange or traded in domestic or foreign over-the-counter markets.
GLOBAL EQUITY PORTFOLIO seeks long term capital appreciation through
pursuit of a global investment strategy primarily involving equity securities.
The Portfolio may invest anywhere in the world with no requirement that any
specific percentage of its assets be committed to any given country. Under
normal circumstances, at least 65 percent of the Portfolio's total assets will
be invested in equity securities in at least three different countries, one of
which may be the United States. Opportunities for capital appreciation may also
be presented by debt securities. The Portfolio may invest up to 35 percent of
its total assets in debt obligations with remaining maturities of one year or
more of U.S. or foreign corporate, governmental or bank issuers. It is the
present intention of the Portfolio, although not a fundamental policy, not to
invest more than 5 percent of its total assets in debt securities rated below
investment-grade. Although there is no minimum rating for this category of debt
instruments, the Portfolio does not intend to invest in bonds which are in
default.
MANAGED PORTFOLIO seeks to achieve growth of capital over time through
investment in a portfolio consisting of common stocks, bonds and cash
equivalents, the percentages of which will vary based on the Manager's
assessments of the relative outlook for such investments. In seeking to achieve
its investment objective, the types of equity securities in which the Portfolio
may invest are likely to be the same as those in which the Equity Portfolio
invests, although securities of the type in which the Small Cap Portfolio
invests may, to a lesser extent, be included. Debt securities are expected to be
predominately investment grade intermediate to long term U.S. Government and
corporate debt, although the Portfolio will also invest in high quality short
term money market and cash equivalent securities and may invest almost all of
its assets in such securities when the Manager deems it advisable in order to
preserve capital. In addition, the Portfolio may also purchase foreign
securities provided that they are listed on a domestic or foreign securities
exchange or are represented by American depository receipt listed on a domestic
securities exchange or traded in domestic or foreign over-the counter markets.
SMALL CAP PORTFOLIO seeks capital appreciation through investments in a
diversified portfolio consisting primarily of equity securities of companies
with market capitalizations of under $1 billion. The Portfolio may purchase
securities in initial public offerings, or shortly after such offerings have
been completed, when the Manager believes that such securities have
greater-than-average market appreciation potential. Under normal circumstances
at least 65% of the Portfolio's assets will be invested in equity securities.
The majority of securities purchased by the Portfolio will be traded on the New
York Stock Exchange, the American Stock Exchange or in the over-the-counter
market, and will also include options, warrants, bonds, notes and debentures
which are convertible into or exchangeable for, or which grant a right to
purchase or sell securities. In addition, the Portfolio may also purchase
foreign securities provided that they are listed on a domestic or foreign
securities exchange or are represented by American depository receipts listed on
a domestic securities exchange or traded in domestic or foreign over-the counter
markets.
PUTNAM VARIABLE TRUST
PUTNAM VT ASIA PACIFIC GROWTH FUND seeks capital appreciation by investing
primarily in securities of companies located in Asia and the Pacific Basin. The
Fund's investments will normally include common stocks, preferred stocks,
securities convertible into common stocks or preferred stocks, and warrants to
purchase common stocks or preferred stocks.
PUTNAM VT DIVERSIFIED INCOME FUND seeks high current income consistent with
capital preservation by investing in the following three sectors of the fixed
income securities markets: a U.S. Government Sector, a High Yield Sector (which
invests primarily in securities that are commonly known as "junk bonds"), and an
International Sector. Consult the Putnam Variable Trust Prospectus for further
information on the risks associated with this Fund's investments in high-yield,
higher-risk fixed income securities.
PUTNAM VT GROWTH AND INCOME FUND seeks capital growth and current income by
investing primarily in common stocks that offer potential for capital growth,
current income, or both.
PUTNAM VT NEW OPPORTUNITIES FUND seeks long-term capital appreciation by
investing principally in common stocks of companies in sectors of the economy
which Putnam Management believes possess above-average long-term growth
potential.
PUTNAM VT UTILITIES GROWTH AND INCOME FUND seeks capital growth and current
income by concentrating its investments in debt and equity securities issued by
companies in the public utilities industries.
PUTNAM VT VOYAGER FUND seeks capital appreciation by investing primarily in
common stocks of companies that Putnam Management believes have potential for
capital appreciation that is significantly greater than that of market averages.
THERE IS NO ASSURANCE THAT THE STATED OBJECTIVES AND POLICIES OF ANY OF THE
INVESTMENT FUNDS WILL BE ACHIEVED.
The Company reserves the right, subject to compliance with the law, to
offer additional Investment Funds.
An investment in the Variable Account, or in any portfolio of an Investment
Fund, including the VIP Money Market Portfolio, is not insured or guaranteed by
the U.S. Government, and there can be no assurance that the VIP Money Market
Portfolio will be able to maintain a stable net asset value of $1.00 per share.
The Investment Funds are available to registered separate accounts of the
Company and of insurance companies, other than the Company, offering variable
annuity contracts and variable life insurance policies.
The Company currently does not foresee any disadvantages to Owners
resulting from the Investment Funds selling shares to fund products other than
the Contracts. However, there is a possibility that a material conflict may
arise between Owners whose Contract Values are allocated to the Variable Account
and the owners of variable life insurance policies and variable annuity
contracts issued by the Company or by such other companies whose assets are
allocated to one or more other separate accounts investing in any one of the
Investment Funds. In the event of a material conflict, the Company will take any
necessary steps, including removing the Variable Account from that Investment
Fund, to resolve the matter. The Board of Directors or Trustees of each
Investment Fund will monitor events in order to identify any material conflicts
that possibly may arise and determine what action, if any, should be taken in
response to those events or conflicts. See each individual Investment Fund
prospectus for more information.
REINVESTMENT
The Investment Funds described above have as a policy the distribution of
income dividend and capital gains. However, under the Contracts described in
this Prospectus there is an automatic reinvestment of such distributions.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENT FUND SHARES
The Company reserves the right, subject to applicable law, to make
additions to, deletions from, or substitutions for the shares that are held in
the Variable Account or that the Variable Account may purchase. If the shares of
a portfolio of an Investment Fund are no longer available for investment or if
in the Company's judgment further investment in any portfolio of an Investment
Fund should become inappropriate in view of the purposes of the Variable
Account, the Company may redeem the shares, if any, of that portfolio and
substitute shares of another registered open-end management investment company.
The Company will not substitute any shares attributable to a Contract's interest
in a Sub-Account of the Variable Account without notice and prior approval of
the SEC and state insurance authorities, as required by law.
The Company also reserves the right to establish additional Sub-Accounts of
the Variable Account, each of which would invest in shares corresponding to a
new portfolio of an Investment Fund or in shares of another investment company
having a specified investment objective or delete Sub-Accounts pursuant to the
process described in this section. Subject to applicable law and any required
SEC approval, the Company may, in its sole discretion, establish new
Sub-Accounts or eliminate one or more Sub-Accounts if marketing needs, tax
considerations or investment conditions warrant. Any new Sub-Accounts may be
made available to existing Contract Owners on a basis to be determined by the
Company.
There are currently thirty-three Sub-Accounts and their corresponding
Investment Funds in this Contract. You are only permitted to participate in a
maximum of seventeen investment options over the lifetime of your Contract. You
do 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 of 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 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.
The Company currently plans to discontinue offering certain of the Funds as
investment options. It is anticipated that this will occur in the first half of
1998 , subject to and contingent upon receipt of various approvals. It is
expected that any Contract Owner monies that are invested in Sub-Accounts
investing in the discontinued Funds will be transferred to alternate Funds with
similar investment objectives. The proposed discontinued and transferee Funds
are as follows: Fidelity VIP II Asset Manager Portfolio to OCC Managed
Portfolio; Fidelity's VIP Overseas Portfolio to Northstar International Value
Fund; Putnam VT Asia Pacific Fund to Janus Worldwide Growth Portfolio; Putnam VT
Utilities Growth and Income Fund to Putnam VT Growth Fund; Putnam VT New
Opportunities Fund to Putnam VT Voyager Fund. Policyholders who have investments
in any of discontinued Funds will be permitted for a period of 30 days to
transfer their investment into a non-discontinued Fund without payment of any
transfer charge.
If any of these substitutions or changes are made, the Company may, by
appropriate endorsement, change the Contract to reflect the substitution or
change. If the Company deems it to be in the best interest of Contract Owners
and Annuitants, and subject to any approvals that may be required under
applicable law, the Variable Account may be operated as a management investment
company under the 1940 Act, it may be deregistered under the Act if registration
is no longer required, or it may be combined with other separate accounts of the
Company.
If a purchase payment for a selected Sub-Account is unable to be invested
because shares of the applicable Investment Fund are no longer available for
investment or if in the judgment of the Company's management further investment
in such Investment Fund shares would be inappropriate in view of the purposes of
the Contract, the portion of the purchase payment designated to be invested in
such Investment Fund will be returned to the Owner. The Owner may then direct
investment of such purchase payment to a different Sub-Account.
CHARGES MADE BY THE COMPANY
SURRENDER CHARGE (CONTINGENT DEFERRED SALES CHARGE)
No deduction for a sales charge is made from the purchase payments for the
Contracts. However, the surrender charge described below (which may be deemed a
contingent deferred sales charge), when it is applicable, is intended to
reimburse the Company for expenses relating to the sale of the Contracts,
including commissions to sales personnel, costs of sales material and other
promotional activities and sales administration costs.
If part or all of a Contract's value is surrendered, or if the Contract's
Annuity Commencement Date occurs within the first two years after the Contract
was issued, surrender charges may be made by the Company. (See "Annuity
Commencement Date" on page 34.) For purposes of the following surrender charge
description, "New Purchase Payments" are those Contract purchase payments
received by the Company during the Contract Year in which the surrender occurs
or in the five immediately preceding Contract Years; "Old Purchase Payments" are
those Contract purchase payments not defined as New Purchase Payments; and
"Contract Earnings" at any Valuation Date is the Contract Value less the sum of
New Purchase Payments and Old Purchase Payments.
For purposes of determining surrender charges, surrenders shall first be
taken from Old Purchase Payments until they are exhausted, then from New
Purchase Payments until they are exhausted, and thereafter from Contract
Earnings.
Surrenders taken from the following amounts ("Free Surrenders") are not
subject to a surrender charge during any Contract Year: (a) any Old Purchase
Payments not already surrendered; (b) 10% of all New Purchase Payments that have
been received by the Company (with the exception of Systematic Withdrawals, this
does not apply to surrenders made during the first Contract Year nor to any
surrenders after the first surrender made in each Contract Year thereafter); and
(c) any Contract Earnings being surrendered.
TOTAL SURRENDERS - The surrender charge for a total surrender is determined
by multiplying the amount of each New Purchase Payment surrendered, that is not
eligible for a free surrender, by the applicable surrender charge percentage as
set forth in the following table:
SURRENDER CHARGE PERCENTAGE TABLE
CONTRACT YEAR OF SURRENDER MINUS SURRENDER CHARGE AS A
CONTRACT YEAR OF PURCHASE PAYMENT PERCENTAGE OF EACH PURCHASE
PAYMENT
0 6%
1 6
2 5
3 5
4 4
5 4
6 and later 0
PARTIAL SURRENDERS - The amount of the partial surrender subject to a
surrender charge is determined by dividing (a) the portion of each New Purchase
Payment to be surrendered which is not eligible for a Free Surrender by (b) one
minus the applicable surrender charge percentage from the Surrender Charge
Percentage Table set forth above. The resulting amount for each New Purchase
Payment to be surrendered is then multiplied by the applicable surrender charge
percentage from the Surrender Charge Percentage Table shown above to arrive at
the amount of surrender charge to be assessed by the Company.
If the surrender charge is less than the Contract Value that remains
immediately after surrender, it will be deducted proportionately from the
Sub-Accounts that make up such Contract Value. If the surrender charge is more
than such remaining Contract Value, the portion of the surrender charge that can
be deducted from such remaining Contract Value will be so deducted and the
balance will be deducted from the surrender payment. In computing surrenders,
any portion of a surrender charge that is deducted from the remaining Contract
Value will be deemed a part of the surrender.
ANNUAL CONTRACT CHARGE
Each year on the Contract Anniversary, the Company deducts an Annual
Contract Charge of $30 from the Contract Value to reimburse it for
administrative expenses relating to the Contract, the Variable Account and the
Sub-Accounts. The Company will not increase the Annual Contract Charge. In any
Contract Year when a Contract is surrendered for its full value on other than
the Contract Anniversary, the Annual Contract Charge will be deducted at the
time of such surrender. During the annuity period if both a fixed annuity
payment and a variable annuity payment are selected, then an Annual Contract
Charge will be separately assessed against each payment type. The charges will
be deducted in equal installments from each such payment made during a
twelve-month period. If only a fixed annuity payment or a variable annuity
payment is selected, then only one Annual Contract Charge will be assessed and
deducted in equal installments.
MORTALITY RISK PREMIUM
The variable annuity payments made to Annuitants will vary in accordance
with the investment performance of the Sub-Accounts selected by the Owner.
However, they will not be affected by the mortality experience (death rate) of
persons receiving annuity payments from the Variable Account. The Company
assumes this "mortality risk" and has guaranteed the annuity rates incorporated
in the Contract, which cannot be changed.
To compensate the Company for assuming this mortality risk and the
mortality risk that Beneficiaries of Annuitants dying before the Annuity
Commencement Date may receive amounts in excess of the then current Contract
Value (see "Death Benefit Before the Annuity Commencement Date" on page 30), the
Company deducts a Mortality Risk Premium from the Variable Account Contract
Value. The deduction is made daily in an amount that is equal to an annual rate
of 0.85% of the daily Contract Values under the Variable Account. The Company
may not change the rate charged for the Mortality Risk Premium under any
Contract.
EXPENSE RISK PREMIUM
The Company will not increase charges for administrative expenses
regardless of its actual expenses. To compensate the Company for assuming this
expense risk, the Company deducts an Expense Risk Premium from the Variable
Account Contract Value. The deduction is made daily in an amount that is equal
to an annual rate of 0.40% of the daily Variable Account Contract Values. The
Company may not change the rate of the Expense Risk Premium under any Contract.
ADMINISTRATION CHARGE
The Company deducts a daily Administration Charge from the Variable Account
Contract Value in an amount equal to an annual rate of 0.15% of the daily
Contract Values under the Variable Account. This charge is deducted to reimburse
the Company for the cost of providing administrative services under the
Contracts and the Variable Account. The Company may not change the rate of the
Administration Charge under any Contract.
PREMIUM AND OTHER TAXES
Various states and other governmental entities levy a premium tax,
currently ranging up to 3.50%, on annuity contracts issued by insurance
companies. If the Owner of the Contract lives in a governmental jurisdiction
that levies such a tax, the Company will pay the taxes when due and reserves the
right to deduct the amount of the tax either from purchase payments as they are
received or from the Contract Value at the Annuity Commencement Date
(immediately before the Contract Value is applied to an Annuity Form) as
permitted or required by applicable law.
The current range of premium tax rates is a guide only and should not be
relied on to determine actual premium taxes on any purchase payment or Contract
because the taxes are subject to change from time to time by legislative and
other governmental action. The timing of tax levies also varies from one taxing
authority to another. Consequently, in many cases the purchaser of a Contract
will not be able to accurately determine the premium tax applicable to the
Contract by reference to the range of tax rates described above. The Company
reserves the right to deduct charges for any other tax or economic burden
resulting from the application of the tax laws that it determines to be
applicable to the Contract.
REDUCTION OF CHARGES
Any of the charges under the Contract, as well as the minimum purchase
payment requirements set forth in this Prospectus, 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.
EXPENSES OF THE INVESTMENT FUNDS
There are fees deducted from and expenses paid out of the assets of the
Investment Funds that are described in the accompanying prospectuses for the
Funds.
ADMINISTRATION OF THE CONTRACTS
The Company assumes the responsibilities of performing certain
administrative functions relating to the Contracts and the Variable Account.
These functions include, among other things, maintaining the books and records
of the Variable Account and the Sub-Accounts, and maintaining records of the
name, address, taxpayer identification number, Contract number, type of Contract
issued to each Owner, Contract Value and other pertinent information necessary
to the administration and operation of the Contracts. These administrative
functions are located at: the Variable Annuity Administration Center, P.O. Box
59218, Minneapolis, Minnesota 55459-0218; Telephone 1-800-621-3750.
THE CONTRACTS
The Contracts described in this Prospectus are designed for retirement
plans which may or may not be Qualified Plans. Often a single purchase payment
is made for a deferred annuity, but this Contract freely permits subsequent
purchase payments up to the maximum level of funding set forth below. The
minimum amount the Company will accept as an initial purchase payment is $5,000
for Non-Qualified Contracts and $2,000 for Qualified Contracts. The Company may
choose not to accept any subsequent purchase payment for a Non-Qualified
Contract if it is less than $500 and for a Qualified Contract if it is less than
$200. The Company may also choose not to accept any subsequent purchase payment
if the purchase payment together with the Contract Value at the next Valuation
Date exceeds $1,000,000. Any purchase payment not accepted by the Company will
be refunded. The Company reserves the right to accept smaller or larger initial
and subsequent purchase payments in connection with special circumstances, such
as sales through group or sponsored arrangements.
ALLOCATION OF PURCHASE PAYMENTS
Purchase payments may be allocated to the available Sub-Accounts of the
Variable Account selected by the Owner and/or the Fixed Account. (See Appendix
A). The Fixed Account is not available to Contract Owners in the States of
Maryland, Oregon, South Carolina and Washington. Any purchase payment or portion
thereof for which no allocation election is made will be returned to the Owner.
The initial purchase payment will be allocated to the selected Sub-Accounts
and/or the Fixed Account not later than two business days after receipt, if the
application and all information necessary for processing the Contract are
complete. The Company may retain purchase payments for up to five business days
while attempting to complete an incomplete application. If the application
cannot be made complete within this period, the applicant will be informed of
the reasons for the delay and the purchase payment will be returned immediately
unless the applicant consents to retention of the payment by the Company until
the application is made complete. Once the completed application is received,
the payment must be allocated within two business days. For any subsequent
purchase payments, the payments will be credited at the Sub-Account Accumulation
Unit Value next determined after receipt of the purchase payment.
Upon allocation to Sub-Accounts of the Variable Account, a purchase payment
is converted into Accumulation Units of the Sub-Account. The amount of the
purchase payment allocated to a particular Sub-Account is divided by the value
of an Accumulation Unit for the Sub-Account to determine the number of
Accumulation Units of the Sub-Account to be held in the Variable Account with
respect to the Contract. The net investment results of each Sub-Account vary
primarily with the investment performance of the Investment Fund whose shares
are held in the Sub-Account.
An Investment Fund may impose a minimum purchase requirement. If that
minimum purchase requirement exceeds the aggregate of all purchase payments
received by the Company, less any redemption of Investment Fund shares resulting
from transfers or surrenders, on any given day that are to be applied to a
Sub-Account for the purchase of shares of such Investment Fund, such purchase
payments will be refunded.
SUB-ACCOUNT ACCUMULATION UNIT VALUE
Each Sub-Account Accumulation Unit was initially valued at $10 when the
first Investment Fund shares were purchased. Thereafter the value of each
Sub-Account Accumulation Unit will vary up or down according to a Net Investment
Factor, which is primarily based on the investment performance of the applicable
Investment Fund. Investment Fund shares in the Sub-Accounts will be valued at
their net asset value.
Dividend and capital gain distributions from an Investment Fund will be
automatically reinvested in additional shares of such Investment Fund and
allocated to the appropriate Sub-Account. The number of Sub-Account Accumulation
Units does not increase because of the additional shares, but the Accumulation
Unit value may increase.
NET INVESTMENT FACTOR
The Net Investment Factor is an index number which reflects charges under
the Contract and the investment performance during a Valuation Period of the
Investment Fund whose shares are held in the particular Sub-Account. If the Net
Investment Factor is greater than one, the value of a Sub-Account Accumulation
Unit has increased. If the Net Investment Factor is less than one, the value of
a Sub-Account Accumulation Unit has decreased. The Net Investment Factor is
determined by dividing (1) by (2) then subtracting (3) from the result, where:
(1) is the net result of:
(a) the net asset value per share of the Investment Fund shares held
in the Sub-Account, determined at the end of the current
Valuation Period, plus
(b) the per share amount of any dividend or capital gain
distributions made on the Investment Fund shares held in the
Sub-Account during the current Valuation Period, plus or minus
(c) a per share charge or credit for any taxes reserved for which the
Company determines to have resulted from the investment
operations of the Sub-Account and to be applicable to the
Contract;
(2) is the net result of:
(a) the net asset value per share of the Investment Fund shares held
in the Sub-Account, determined at the end of the last prior
Valuation Period, plus or minus
(b) a per share charge or credit for any taxes reserved for during
the last prior Valuation Period which the Company determines to
have resulted from the investment operations of the Sub-Account
and to be applicable to the Contract; and
(3) is a factor representing the Mortality Risk Premium, the Expense Risk
Premium and the Administration Charge deducted from the Sub-Account
which factor is equal, on an annual basis, to 1.40% of the daily net
asset value of the Sub-Account.
DEATH BENEFIT BEFORE THE ANNUITY COMMENCEMENT DATE
If the Owner, including any joint Owner, dies before the Annuity
Commencement Date, the Beneficiary will be entitled to receive the Death
Benefit. For this purpose the Death Benefit will be:
(1) if any Owner (including the Annuitant) dies on or before the first day
of the month following the Owner's 85th birthday, the greater of (i)
the Contract Value on the Death Benefit Valuation Date, or (ii) the
sum of the purchase payments received by the Company under the
Contract to the Death Benefit Valuation Date, less any surrender
payments previously made by the Company; or (iii) the Contract Value
on the Specified Contract Anniversary (immediately preceding the
Owner's death), plus any Purchase Payments and less any surrender
payments since that anniversary;
(2) if any Owner (including the Annuitant) dies after the first day of the
month following the Owner's 85th birthday, the Contract Value on the
Death Benefit Valuation Date.
If a single sum is requested, it will be paid within seven days after the
Death Benefit Valuation Date. If an Annuity Form is requested, it may be any
Annuity Form permitted by Section 72(s) of the Code and which the Company is
willing to issue. An Annuity Form selection must be in writing and must be
received by the Company within 60 days after the date of the Owner's death,
otherwise the Death Benefit as of the Death Benefit Valuation Date will be paid
in a single sum to the Beneficiary and the Contract will be canceled.
If the only Beneficiary is the Owner's surviving spouse, such spouse may
continue the Contract as the Owner, and then (1) select a single sum payment, or
(2) select any Annuity Form which does not exceed such spouse's life expectancy.
If the Beneficiary elects to receive annuity payments under an Annuity
Form, the amount and duration of payments may vary depending on the Annuity Form
selected and whether fixed and/or variable annuity payments are requested. (See
"Annuity Provisions" beginning on page 34.)
DEATH BENEFIT AFTER THE ANNUITY COMMENCEMENT DATE
If the Annuitant dies after the Annuity Commencement Date, the Death
Benefit, if any, shall be as stated in the Annuity Form in effect.
SURRENDER (REDEMPTION)
If a written request therefor from the Owner is received by the Company
before the Annuity Commencement Date, all or part of the Contract Value will be
paid to the Owner after deducting any applicable surrender charge and taxes.
(See "Surrender Charge (Contingent Deferred Sales Charge)" on page 26.) Partial
surrenders may be made in amounts not less than $500 and no partial surrender
may cause the Contract Value to fall below $1,000. In addition, if a total
surrender occurs other than on a Contract Anniversary the Annual Contract Charge
will be deducted from the Contract Value before the surrender payment is made.
Surrenders must be consented to by each collateral assignee. The Company
reserves the right to require that surrenders in excess of $50,000 be signature
guaranteed by a member firm of the New York, American, Boston, Midwest,
Philadelphia, or Pacific Stock Exchange, or by a commercial bank (not a savings
bank) which is a member of the Federal Deposit Insurance Corporation, or, in
certain cases, by a member firm of the National Association of Securities
Dealers, Inc. that has entered into an appropriate agreement with the Company.
The Company may require that the Contract be returned before a surrender
takes place. A surrender will take place on the next Valuation Date after the
requirements for surrender are completed and payment will be made within seven
days after such Valuation Date. Unless the Owner requests a partial surrender to
be made from the Fixed Account or particular Sub-Accounts, a partial surrender
will be taken proportionately from the Fixed Account and all Sub-Accounts on a
basis that reflects their proportionate percentage of the Contract Value.
The Company reserves the right to limit the number of partial surrenders,
and to assess a processing fee not to exceed the lesser of 2% of the partial
surrender amount or $25. No processing fee will be charged in connection with
total surrenders.
The Company may cancel the Contract on any Contract Anniversary, or if such
Contract Anniversary is not a Valuation Date, on the next Valuation Date
thereafter, by paying to the Owner the Contract Value as of such Valuation Date
if such Contract Value after all charges is less than $1,000.
If this Contract is purchased as a "tax-sheltered annuity" under Section
403(b) of the Internal Revenue Code (the "Code"), it is subject to certain
restrictions on redemption imposed by Section 403(b)(11) of the Code. (See
"Tax-Sheltered Annuities" on page 40.) These restrictions on redemption are
imposed by the Variable Account and the Company in full compliance with and in
reliance upon the terms and conditions of a no-action letter issued by the
Office of Insurance Products and Legal Compliance of the Securities and Exchange
Commission to the American Council of Life Insurance (publicly available
November 28, 1988).
For tax purposes, surrender payments may be taxable. Such payments shall be
deemed to be from earnings and then gains until cumulative surrender payments
equal all accumulated earnings and gains, and thereafter from purchase payments
received by the Company. Consideration should be given to the tax implications
of a surrender prior to making a surrender request, including a surrender in
connection with a Qualified Plan.
SYSTEMATIC WITHDRAWALS
A Systematic Withdrawal is a specialized form of Partial Surrender. (See
"Surrender (Redemption)" on page 31.) The Owner may elect to take Systematic
Withdrawals by surrendering a specified dollar amount or percentage of
cumulative purchase payments on a monthly, quarterly, semi-annual or annual
basis from Sub-Accounts. Systematic Withdrawals may be taken from Variable
Account Contract Value and/or Fixed Account Contract Value, but are limited
annually to 10% of total cumulative purchase payments made under the Contract. A
Surrender Charge will be imposed on the amount of any Systematic Withdrawal,
Partial Surrender or any combination thereof which is not a Free Surrender. (See
"Surrender Charge (Contingent Deferred Sales Charge)" on page 26.) Systematic
Withdrawals may be discontinued by the Owner at any time by notifying the
Company in writing.
The Company reserves the right to modify or discontinue offering Systematic
Withdrawals, however, any such modification or discontinuation will not affect
any Systematic Withdrawal programs already commenced. While the Company does not
currently charge a processing fee for Partial Surrenders under this program, it
reserves the right to charge a processing fee not to exceed the lesser of 2% of
the Systematic Withdrawal payment or $25.
Systematic Withdrawals may be subject to tax, including a penalty tax, and
the Owner should consult with his or her tax advisor before requesting any
Systematic Withdrawal. (See "Taxation of Annuities" on page 38.)
Contract Owners interested in participating in the Systematic Withdrawal
program may obtain a separate application form and full information concerning
the program and its restrictions from their registered representative.
TRANSFERS
Before the Annuity Commencement Date, the Owner may transfer amounts
between the Sub-Accounts or from the Sub-Accounts to the Fixed Account. Subject
to certain restrictions, amounts may also be transferred from the Fixed Account
to the Sub-Accounts. Currently, there are three methods by which transfers may
be made: in writing, by telephone and by Dollar Cost Averaging. Telephone/fax
transfers are available when you complete a telephone/fax form. See
"Telephone/Fax Instructions."
WRITTEN TRANSFERS - Before the Annuity Commencement Date the Owner may
request a transfer in writing, subject to any conditions or charges the
Investment Funds whose shares are involved may impose, of all or part of a
Sub-Account's value to other Sub-Accounts or to the Fixed Account. The transfer
will be made by the Company on the first Valuation Date after the request for
such a transfer is received by the Company. Currently, there is no charge for
such a transfer, other than those that may be made by the Funds. The Company
reserves the right, however, to charge a transfer fee not to exceed $25 per
transfer and to limit the number of transfers made by the Owner. To accomplish
the transfer, the Variable Account will surrender Accumulation Units in the
particular Sub-Accounts and reinvest that value in Accumulation Units of one or
more of the available Sub-Accounts as directed in the request. After the Annuity
Commencement Date, an Annuitant who has selected Variable Annuity Payments may
request transfer of Annuity Unit values in the same manner and subject to the
same requirements as for an Owner-transfer of Sub-Account Accumulation Unit
values. However, no transfers may be made to the Fixed Account after the Annuity
Commencement Date.
Before the Annuity Commencement Date, transfers may also be made from the
Fixed Account to the Variable Account, provided, however, that (a) transfers may
only be made during the period starting 30 days before and ending 30 days after
the Contract Anniversary, and only one transfer may be made during each such
period, (b) no more than 50% of the Fixed Account Contract Value may be the
subject of any such transfer (unless the balance, after such transfer, would be
less than $1,000, in which case the full Fixed Account Contract Value may be
transferred), and (c) such transfer must involve at least $500 (or the total
Fixed Account Contract Value, if less). No transfers may be made from the Fixed
Account after Annuity Commencement Date.
The conditions applicable to Written Transfers also apply to Telephone/Fax
Transfers and Dollar Cost Averaging Transfers.
TELEPHONE/FAX INSTRUCTIONS - An Owner is allowed to enter certain types of
instructions either by telephone or by fax if the Owner completes a
telephone/fax instruction authorization form. If the Owner completes the form,
the Owner can enter the following types of instructions by telephone or fax:
transfers between funds, withdrawals, changes of allocations among fund options,
change of source funds for systematic withdrawals, and change of source funds
for variable annuitization payouts. If the Owner completes the telephone/fax
form, the Owner thereby agrees that the Company will not be liable for any loss,
liability, cost or expense when the Company acts in accordance with the
telephone/fax instructions which are received and, if received by telephone, are
recorded on voice recording equipment. If a telephone/fax transaction, processed
after the Owner has completed the telephone/fax form, is later determined not to
have been made by the Owner or was made without the Owner's authorization, and a
loss results, the Owner bears the risk of this loss. Any requests via fax are
considered telephone requests and are bound by the conditions in the
telephone/fax authorization form you sign. Any fax request 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 or withdrawn and
the allocation percentage. The Company will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. In the event
the Company does not employ such procedures, the Company may be liable for any
losses due to unauthorized or fraudulent instructions. Such procedures may
include, among others, requiring forms of personal identification prior to
acting upon telephone instructions, providing written confirmation of such
instructions and/or tape recording telephone instructions.
DOLLAR COST AVERAGING TRANSFERS - The Owner may direct the Company to
automatically transfer a fixed dollar amount or a specified percentage of
Sub-Account Value to any one or more other Sub-Accounts or to the Fixed Account.
No transfers from the Fixed Account are permitted under this service. Transfers
of this type may be made on a monthly, quarterly, semi-annual or annual basis.
This service is intended to allow the Owner to utilize "Dollar Cost Averaging,"
a long-term investment method which provides for regular, level investments over
time. The Company makes no guarantees that Dollar Cost Averaging will result in
a profit or protect against loss. The Owner may discontinue Dollar Cost
Averaging at any time by notifying the Company in writing.
Contract Owners interested in Dollar Cost Averaging may obtain a separate
application form and full information concerning this service and its
restrictions from their registered representatives.
The Company reserves the right to modify or discontinue offering Dollar
Cost Averaging. Any such modification or discontinuation would not affect Dollar
Cost Averaging transfer programs already commenced. Although the Company
currently charges no fees for transfers made under the Dollar Cost Averaging
program, the Company reserves the right to charge a processing fee for Dollar
Cost Averaging transfers not to exceed $25 per transfer.
ASSIGNMENTS
If the Contract is issued pursuant to or in connection with a Qualified
Plan, it may not be sold, transferred, pledged or assigned to any person or
entity other than the Company. In other circumstances, an assignment of the
Contract is permitted, but only before the Annuity Commencement Date, by giving
the Company the original or a certified copy of the assignment. The Company
shall not be bound by any assignment until it is actually received by the
Company and shall not be responsible for the validity of any assignment. Any
payments made or actions taken by the Company before the Company actually
receives any assignment shall not be affected by the assignment.
CONTRACT OWNER AND BENEFICIARIES
Unless someone else is named as the Owner in the application for the
Contract, the applicant is the Owner of the Contract and before the Annuity
Commencement Date may exercise all of the Owner's rights under the Contract. No
more than two (2) natural persons may be named as Owner.
The Owner may name a Beneficiary and a Successor Beneficiary. In the event
an Owner dies before the Annuity Commencement Date, the Beneficiary shall
receive a Death Benefit as provided in the Contract. In the event an Owner dies
on or after the Annuity Commencement Date, the Beneficiary, if the Annuity Form
in effect at the Owner's death so provides, may continue receiving payments, be
paid a lump sum, or be paid nothing. If the Beneficiary or Successor Beneficiary
is not living on the date payment is due or if no Beneficiary or Successor
Beneficiary has been named, the Owner's estate will receive the applicable
proceeds.
A person named as an Annuitant, a Beneficiary or a Successor Beneficiary
shall not be entitled to exercise any rights relating to the Contract or to
receive any payments or settlements under the Contract or any Annuity Form,
unless such person is living on the earlier of (a) the day due proof of death of
the Owner, the Annuitant or the Beneficiary, whichever is applicable, is
received by the Company or (b) the tenth day after the death of the Owner, the
Annuitant or the Beneficiary, whichever is applicable.
Unless different arrangements have been made with the Company by the Owner,
if more than one Beneficiary is entitled to payments from the Company the
payments shall be in equal shares.
Before the Annuity Commencement Date, the Owner may change the Annuitant,
the Beneficiary or the Successor Beneficiary by giving the Company written
notice of the change, but the change shall not be effective until actually
received by the Company. Upon receipt by the Company of a notice of change, it
will be effective as of the date it was signed but shall not affect any payments
made or actions taken by the Company before the Company received the notice, and
the Company shall not be responsible for the validity of any change.
CONTRACT INQUIRIES
Inquiries regarding a Contract may be made by writing to the ReliaStar Life
Insurance Company, Variable Annuity Administration Center, Route 4300, P.O. Box
59218, Minneapolis, Minnesota 55459-0218, or by calling 1-800-621-3750.
ANNUITY PROVISIONS
ANNUITY COMMENCEMENT DATE
The Owner selects the Annuity Commencement Date, which must be the first
day of a month, when making application for the Contract. The date will be the
first day of the month following the Annuitant's 75th birthday unless an earlier
or later date has been selected by the Owner and, if the date is later, it has
been agreed to by the Company. The Owner may change an Annuity Commencement Date
selection by written notice received by the Company at least 30 days before both
the Annuity Commencement Date currently in effect and the New Annuity
Commencement Date. The new date selected must satisfy the requirements for an
Annuity Commencement Date. If the Annuity Commencement Date selected by the
Owner does not occur on a Valuation Date at least 60 days after the date on
which the Contract was issued, the Company reserves the right to adjust the
Annuity Commencement Date to the first Valuation Date after the Annuity
Commencement Date selected by the Owner which is at least 60 days after the
Contract issue date. If the Annuity Commencement Date occurs before the second
Contract Anniversary, the Company will deduct Surrender Charges. (See "Surrender
Charge (Contingent Deferred Sales Charge)" on page 26.)
ANNUITY FORM SELECTION
The Owner may select a Variable Annuity Form, a Fixed Annuity Form, or
both, with payments starting at the Annuity Commencement Date when making
application for the Contract. Thereafter, the Owner may change the Annuity
Form(s) by written notice received by the Company before the Annuity
Commencement Date. If no election has been made before the Annuity Commencement
Date, the Company will apply the Fixed Account Contract Value to provide a Fixed
Annuity and the Variable Account Contract Value to provide a Variable Annuity,
both in the form of a Life Annuity with Payments Guaranteed for 10 years (120
months), which shall be automatically effective.
ANNUITY FORMS
Variable Annuity Payments and Fixed Annuity Payments are available in any
of the following Annuity Forms:
LIFE ANNUITY - An annuity payable on the first day of each month during the
Annuitant's life, starting with the first payment due according to the Contract.
Payments cease with the payment made on the first day of the month in which the
Annuitant's death occurs. IT WOULD BE POSSIBLE UNDER THIS ANNUITY FORM FOR THE
ANNUITANT TO RECEIVE ONLY ONE PAYMENT IF HE OR SHE DIED BEFORE THE SECOND
ANNUITY PAYMENT, ONLY TWO PAYMENTS IF HE OR SHE DIED BEFORE THE THIRD ANNUITY
PAYMENT, ETC.
LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 YEARS (120 MONTHS) OR 20 YEARS
(240 MONTHS) - An annuity payable on the first day of each month during the
Annuitant's life, starting with the first payment due according to the Contract.
If the Annuitant receives all of the guaranteed payments, payments will continue
thereafter but cease with the payment made on the first day of the month in
which the Annuitant's death occurs. If all of the guaranteed payments have not
been made before the Annuitant's death, the unpaid installments of the
guaranteed payments will be continued to the Beneficiary.
JOINT AND FULL SURVIVOR ANNUITY - An annuity payable on the first day of
each month during the Annuitant's life and the life of a named person (the
"Joint Annuitant"), starting with the first payment due according to the
Contract. Payments will continue while either the Annuitant or the Joint
Annuitant is living and cease with the payment made on the first day of the
month in which the death of the Annuitant or the Joint Annuitant, whichever
lives longer, occurs. THERE IS NO MINIMUM NUMBER OF PAYMENTS GUARANTEED UNDER
THIS ANNUITY FORM. PAYMENTS CEASE UPON THE DEATH OF THE LAST SURVIVOR OF THE
ANNUITANT AND THE JOINT ANNUITANT REGARDLESS OF THE NUMBER OF PAYMENTS RECEIVED.
The Company also has other annuity forms available and information about
them can be obtained by writing to the Company.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Annuity payments will be paid as monthly installments, unless the Annuitant
and the Company agree to a different payment schedule. However, if the Contract
Value at the Annuity Commencement Date is less than $5,000, the Company may pay
the Contract Value in a single sum and the Contract will be canceled. Also if a
monthly payment would be or become less than $50, the Company may change the
frequency of payments to intervals that will result in payments of at least $50
each. The minimum frequency and amount of annuity payments or the minimum
Contract Value required for annuity payments may vary by state.
ANNUITY PAYMENTS
The amount of the first fixed annuity payment is determined by applying the
Contract Value to be used for a fixed annuity at the Annuity Commencement Date
to the annuity table in the Contract for the fixed Annuity Form selected. The
table shows the amount of the initial annuity payment for each $1,000 applied
and all subsequent payments shall be equal to this amount. The amount of the
first variable annuity payment is determined by applying the Contract Value to
be used for a variable annuity at the Annuity Commencement Date to the annuity
table in the Contract for the Annuity Form selected.
Subsequent variable annuity payments vary in amount in accordance with the
investment performance of the applicable Sub-Account. Assuming annuity payments
are based on the unit values of a single Sub-Account, the dollar amount of the
first annuity payment, determined as set forth above, is divided by the
Sub-Account Annuity Unit Value as of the Annuity Commencement Date to establish
the number of Variable Annuity Units representing each annuity payment. This
number of Variable Annuity Units remains fixed during the annuity payment
period. The dollar amount of the second and subsequent payments is not
predetermined and may change from month to month. The dollar amount of the
second and each subsequent payment is determined by multiplying the fixed number
of Variable Annuity Units by the Sub-Account Annuity Unit Value for the
Valuation Period with respect to which the payment is due. If the monthly
payment is based upon the Annuity Unit Values of more than one Sub-Account, the
foregoing procedure is repeated for each applicable Sub-Account and the sum of
the payments based on each Sub-Account is the amount of the monthly annuity
payment.
The Annual Contract Charge is deducted in equal installments from each
annuity payment. When a fixed annuity payment is made in conjunction with a
variable annuity payment, an Annual Contract Charge is assessed against each
type of payment and is deducted in equal installments from each annuity payment.
The annuity tables in the Contracts are based on the 1983 Individual
Annuity Mortality Table (set back three years).
The Company guarantees that the dollar amount of each variable annuity
payment after the first payment will not be affected by variations in expenses
(including those related to the Variable Account) or in mortality experience
from the mortality assumptions used to determine the first payment.
SUB-ACCOUNT ANNUITY UNIT VALUE
A Sub-Account's Variable Annuity Units will initially be valued at $10 each
at the time Accumulation Units with respect to the Sub-Account are first
converted into Variable Annuity Units. The Sub-Account Annuity Unit Value for
any subsequent Valuation Period is determined by multiplying the Sub-Account
Annuity Unit Value for the immediately preceding Valuation Period by the Net
Investment Factor for the Sub-Account for the Valuation Period for which the
Sub-Account Annuity Unit Value is being calculated, and multiplying the result
by an interest factor to neutralize the assumed investment rate of 4% per annum
built into the annuity tables contained in the Contracts. (See "Net Investment
Factor" on page 30.)
ASSUMED INVESTMENT RATE
A 4% assumed investment rate is built into the annuity tables contained in
the Contracts. If the actual net investment rate on the assets of the Variable
Account is the same as the assumed investment rate of 4% per year, variable
annuity payments will remain level. If the actual net investment rate exceeds
the assumed investment rate, variable annuity payments will increase and
conversely, if it is less than the assumed investment rate the payments will
decrease.
FEDERAL TAX STATUS
INTRODUCTION
THIS DISCUSSION IS GENERAL AND NOT INTENDED AS TAX ADVICE. The discussion
is not intended to address the tax consequences resulting from all of the
situations in which a person may be entitled to or may receive a distribution
under the Contract. The Contracts are designed for use by individuals in
connection with retirement plans which may or may not be Qualified Plans under
the provisions of the Internal Revenue Code (the "Code"). The ultimate effect of
federal income taxes on the Contract Value, on annuity payments and on the
economic benefit to the Owner, the Annuitant or the Beneficiary depends upon the
type of retirement plan for which the Contract is purchased, and upon the tax
and employment status of the individual concerned. No attempt is made to
consider any applicable state or other tax laws. The discussion is based on the
Company's understanding of Federal Income Tax Laws as currently interpreted. No
representation is made regarding the likelihood of the continuation of the
present Federal Income Tax Laws or the current interpretation by the Internal
Revenue Service ("IRS").
The Contract may be purchased on a non-qualified basis ("Non-Qualified
Contract") or purchased and used in connection with plans qualifying for
favorable tax treatment ("Qualified Contract"). The Qualified Contract is
designed for use by individuals whose premium payments are comprised solely of
proceeds from and/or contributions under retirement plans which are intended to
qualify as plans entitled to special income tax treatment under Sections 401(a),
403(b), 408 or 457 of the Code. The ultimate effect of Federal income taxes on
the amounts held under a Contract, or annuity payments, and on the economic
benefit to the Owner, the Annuitant, or the Beneficiary depends on the type of
retirement plan, on the tax and employment status of the individual concerned,
and on the Company's tax status. In addition, certain requirements must be
satisfied in purchasing a Qualified Contract with proceeds from a tax-qualified
plan and receiving distributions from a Qualified Contract in order to continue
receiving favorable tax treatment. Therefore, purchasers of Qualified Contracts
should seek competent legal and tax advice regarding the suitability of a
Contract for their situation, the applicable requirements, and the tax treatment
of the rights and benefits of a Contract. The following discussion assumes that
Qualified Contracts are purchased with proceeds from and/or contributions under
retirement plans that qualify for the intended special Federal income tax
treatment.
TAX STATUS OF THE CONTRACT
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 Variable Account, through each of the
Investment Funds, intends 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 the Company does
not have control over the Investment Funds in which the Variable Account
invests, the Company expects that each Investment Fund in which the Variable
Account owns shares will meet the diversification requirements and that the
Contract will be treated as an annuity contract under the Code.
The Treasury has also announced that the diversification regulations do not
provide guidance concerning the extent to which Owners may direct their
investments to particular Sub-Accounts of a variable account or how concentrated
the investments of the Investment Funds underlying a variable account may be.
The number of underlying investment options available under a variable product
may also be relevant in determining whether the product qualifies for the
desired tax treatment. It is possible that if additional rules, regulations or
guidance in this regard are issued, the Contract may need to be modified to
comply with such additional rules or guidance. For these reasons, the Company
reserves the right to modify the Contract as necessary to attempt to prevent the
Owner from being considered the owner of the assets of the Investment Funds or
otherwise to qualify the Contract for favorable tax treatment.
REQUIRED DISTRIBUTIONS
In order to be treated as an annuity contract for Federal income tax
purposes, Section 72(s) of the Code also requires any Non-Qualified Contract to
provide that: (a) if any Owner dies on or after the Annuity Commencement Date
but prior to the time the entire interest in the Contract has been distributed,
the remaining portion of such interest will be distributed at least as rapidly
as under the method of distribution being used as of the date of that Owner's
death; and (b) if any Owner dies prior to the Annuity Commencement Date, the
entire interest in the Contract will be distributed within five years after the
date of the Owner's death. These requirements will be considered satisfied as to
any portion of the Owner's interest which is payable to or for the benefit of a
"designated Beneficiary" and which is distributed over the life of such
Beneficiary or over a period not extending beyond the life expectancy of that
Beneficiary, provided that such distributions begin within one year of that
Owner's death. The Owner's "designated Beneficiary" is the person designated by
such owner as a Beneficiary and to whom ownership of the Contract passes by
reason of death and must be a natural person. However, if the Owner's
"designated Beneficiary" is the surviving spouse of the Owner, the Contract may
be continued with the surviving spouse as the new Owner. If the Owner is not an
individual, any change in the primary Annuitant is treated as a change of Owner
for tax purposes.
The Non-Qualified Contracts contain provisions which are intended to comply
with the requirements of Section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. The Company intends to
review such provisions and modify them if necessary to assure that they comply
with the requirements of Code Section 72(s) when clarified by regulation or
otherwise. Other rules may apply to Qualified Contracts.
TAXATION OF ANNUITIES
IN GENERAL
Section 72 of the Code governs taxation of annuities in general. The
Company believes that an Owner who is a natural person generally is not taxed on
increases in the value of a Contract until distribution occurs by withdrawing
all or part of the Contract Value (e.g., partial withdrawals and complete
surrenders) or as annuity payments under the Annuity Form selected. For this
purpose, the assignment, pledge, or agreement to assign or pledge any portion of
the Contract Value (and in the case of a Qualified Contract, any portion of an
interest in the qualified plan) generally will be treated as a distribution. The
taxable portion of a distribution (in the form of a single sum payment or
annuity) is taxable as ordinary income.
The Owner of any annuity contract who is not a natural person generally
must include in income any increase in the excess of the net surrender value
over the "investment in the contract" during the taxable year. The Company
restricts ownership of Non-Qualified Contracts to no more than two natural
persons.
The following discussion generally applies to Contracts owned by natural
persons.
SURRENDERS
In the case of a surrender from a Qualified Contract, under Section 72(e)
of the Code a ratable portion of the amount received is taxable, generally based
on the ratio of the "investment in the contract" to the participant's total
accrued benefit or balance under the retirement plan. The "investment in the
contract" generally equals the portion, if any, of any premium payments paid by
or on behalf of any individual under a Contract which was not excluded from the
individual's gross income. For Contracts issued in connection with qualified
plans, the "investment in the contract" can be zero. Special tax rules may be
available for certain distributions from Qualified Contracts.
In the case of a surrender (including Systematic Withdrawals) from a
Non-Qualified Contract before the Annuity Commencement Date, under Code Section
72(e) amounts received are generally first treated as taxable income to the
extent that the Contract Value immediately before surrender exceeds the
"investment in the contract" at that time. Any additional amount surrendered is
not taxable.
In the case of a full surrender under a Qualified or Non-Qualified
Contract, the amount received generally will be taxable only to the extent it
exceeds the "investment in the contract."
A Federal penalty tax may apply to certain surrenders from Qualified and
Non-Qualified Contracts. (See "Penalty Tax on Certain Distributions" on page
39.)
ANNUITY PAYMENTS
Although tax consequences may vary depending on the Annuity Form selected
under the Contract, in general, only the portion of the Annuity Payment that
represents the amount by which the Contract Value exceeds the investment in the
Contract will be taxed, after the investment in the Contract is recovered, the
full amount of any additional annuity payments is taxable. For variable annuity
payments, the taxable portion is generally determined by an equation that
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. However, the entire distribution
will be taxable once the recipient has recovered the dollar amount of his or her
investment in the contract. For fixed annuity payments, in general, there is no
tax on the portion of each payment which represents the same ratio that the
investment in the contract bears to the total expected value of the annuity
payments for the term of the payments; however, the remainder of each annuity
payment is taxable until the recovery of the investment in the Contract, and
thereafter the full amount or each annuity payment is taxable.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed from a Contract because of the death of an Owner
or an 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 a
payment option, they are taxed in the same way as annuity payments.
PENALTY TAX ON CERTAIN DISTRIBUTIONS
In the case of a distribution pursuant to a Non-Qualified Contract, a
Federal penalty equal to 10% of the amount treated as taxable income may be
imposed. In general, however, there is no penalty on distributions:
1. made on or after the taxpayer reaches age 59 1/2;
2. made on or after the death of the holder (a holder is considered an
Owner) (or if the holder is not an individual, the death of the
primary annuitant);
3. attributable to the taxpayer's becoming disabled;
4. a part of a series of substantially equal periodic payments (not less
frequently than annually) for the life (or life expectancy) of the
taxpayer or the joint lives (or joint life expectancies) of the
taxpayer and his or her designated beneficiary;
5. made under an annuity contract that is purchased with a single premium
when the annuity starting date is no later than a year from purchase
of the annuity and substantially equal periodic payments are made, not
less frequently than annually, during the annuity period; and
6. made under certain annuities issued in connection with structured
settlement agreements.
Other tax penalties may apply to certain distributions under a Qualified
Contract, as well as to certain contributions to, loans from, and other
circumstances, applicable to the Qualified Plan of which the Qualified Contract
is part.
POSSIBLE CHANGES IN TAXATION
In past 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 non-qualified 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 tax treatment of annuities could change by legislation or
other means (such as IRS regulations, revenue rulings, judicial decisions,
etc.). Moreover, it is also possible that any change could be retroactive (that
is, effective prior to the date of the change).
TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A CONTRACT
A transfer of ownership or assignment of a Contract, the designation of an
Annuitant, Payee or other Beneficiary who is not also the Owner, 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, or
exchange of a Contract should contact a competent tax adviser with respect to
the potential tax effects of such a transaction.
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, distributions from certain qualified
plans are generally subject to mandatory withholding. Withholding for Contracts
issued to retirement plans established under Section 401 of the Code is the
responsibility of the plan trustee.
MULTIPLE CONTRACTS
Section 72(e)(11) of the Code treats all non-qualified deferred annuity
contracts entered into after October 21, 1988 that are issued by the Company (or
its affiliates) to the same Owner during any calendar year 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, an Owner should consult a competent
tax adviser before purchasing more than one annuity contract.
TAXATION OF QUALIFIED PLANS
The Contracts are designed for use with several types of Qualified Plans.
The tax rules applicable to participants in these Qualified Plans vary according
to the type of plan and the terms and conditions of the plan itself. Special
favorable tax treatment may be available for certain types of contributions and
distributions. Adverse tax consequences may result from contributions in excess
of specified limits; distributions prior to age 59 1/2 (subject to certain
exceptions); distributions that do not conform to specified commencement and
minimum distribution rules; aggregate distributions in excess of a specified
annual amount; and in other specified circumstances. Therefore, no attempt is
made to provide more than general information about the use of the Contracts
with the various types of Qualified Plans. Contract Owners, the Annuitants, and
Beneficiaries are cautioned that the rights of any person to any benefits under
these Qualified Plans will be subject to the terms and conditions of the plans
themselves, regardless of the terms and conditions of the Contracts issued in
connection with the plans. The Company shall not be bound by the terms and
conditions of such plans to the extent such terms contradict the Contract,
unless the Company consents. Brief descriptions follow of the various types of
Qualified Plans in connection with a Contract.
PENSION AND PROFIT SHARING PLANS
Section 401(a) of the Code permits employers and self-employed persons to
establish various types of retirement plans for employees. Such retirement plans
may permit the purchaser of the Contract to provide benefits under the plans.
Persons intending to use the Contract with such plans should seek competent
advice.
INDIVIDUAL RETIREMENT ANNUITIES
Section 408 of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity" or
"IRA". These IRAs are subject to limits on the amount that may be contributed,
the persons who may be eligible, and on the time when distributions may
commence. Also, distributions from certain other types of qualified retirement
plans may be "rolled over" on a tax-deferred basis into an IRA. Sales of the
Contract for use with IRAs may be subject to special requirements of the IRS.
TAX SHELTERED ANNUITIES
Section 403(b) of the Code allows employees of certain Section 501(c)(3)
organizations and public schools to exclude from their gross income the premiums
paid, within certain limits, on a Contract that will provide an annuity for the
employee's retirement. Code section 403(b)(11) restricts the distribution under
Code section 403(b) annuity contracts of: (1) elective contributions made in
years beginning after December 31, 1988; (2) earnings on those contributions;
and (3) earnings in such years on amounts held as of the last year beginning
before January 1, 1989. Distribution of those amounts may only occur upon death
of the employee, attainment of age 59 1/2, separation from service, disability,
or financial hardship. In addition, income attributable to elective
contributions may not be distributed in the case of hardship.
DEFERRED COMPENSATION PLANS FOR PUBLIC EMPLOYEES AND EMPLOYEES OF TAX
EXEMPT ORGANIZATIONS
Section 457 of the Code permits state and local government employers and
tax exempt employers to establish deferred compensation plans for eligible
employees and independent contractors. Eligible plans limit the amount of
compensation which may be deferred. Distribution from eligible plans may occur
only upon the death of the employee, attainment of age 70, separation from
service or in the event of an unforseeable emergency. Amounts deferred may be
transferred directly to another eligible deferred compensation plan. Contracts
issued to 457 plans will be owned by the employer and are subject to the claims
of the employer's general creditors. An employee has no present legal right or
vested interest in such Contracts; an employee is entitled to distributions only
in accordance with eligible plan provisions.
POSSIBLE CHARGE FOR THE COMPANY'S TAXES
At the present time, the Company makes no charge to the Sub-Accounts for
any Federal, state, or local taxes that the Company incurs which may be
attributable to such Sub-Accounts or to the Contracts. The Company, however,
reserves the right in the future to make a charge for any such tax laws that it
determines to be properly attributable to the Sub-Accounts of the Contracts.
OTHER TAX CONSEQUENCES
As noted above, the foregoing comments about the Federal tax consequences
under these Contracts are not exhaustive, and special rules are provided with
respect to other tax situations not discussed in this Prospectus. Further, the
Federal income tax consequences discussed herein reflect the Company's
understanding of current law and the law may change. Federal estate and state
and local estate, inheritance, and other tax consequences of ownership or
receipt of distributions under a Contract depend on the individual circumstances
of each Owner or recipient of the distribution. A competent tax adviser should
be consulted for further information.
VOTING OF FUND SHARES
As long as the Variable Account is registered as a unit investment trust
under the Investment Company Act of 1940 and the assets of the Variable Account
are allocated to Sub-Accounts that are invested in Investment Fund shares, the
Investment Fund shares held in the Sub-Accounts will be voted by the Company in
accordance with instructions received from the person having voting interests
under the Contracts as described below. If the Company determines pursuant to
applicable law or regulation that Investment Fund shares held in the
Sub-Accounts and attributable to the Contracts need not be voted pursuant to
instructions received from persons otherwise having the voting interests, then
the Company may vote such Investment Fund shares held in the Sub-Accounts in its
own right.
Before the Annuity Commencement Date, the Owner shall have the voting
interest with respect to the Investment Fund shares attributable to the
Contract.
On and after the Annuity Commencement Date, the person then entitled to
receive annuity payments shall have the voting interest with respect to the
Investment Fund shares. Such voting interest will generally decrease during the
annuity payout period.
Any Investment Fund shares held in the Variable Account for which we do not
receive timely voting instructions, or which are not attributable to Contract
Owners, will be voted by us in proportion to the instructions received from all
Contract Owners having a voting interest in the Investment Fund. Any Investment
Fund shares held by us or any of our affiliates in general accounts will, for
voting purposes, be allocated to all separate accounts having voting interests
in the Investment Fund in proportion to each account's voting interest in the
respective Investment Fund and will be voted in the same manner as are the
respective account's vote.
All Investment Fund proxy material will be sent to persons having voting
interests together with appropriate forms which may be used to give voting
instructions. Persons entitled to voting interests and the number of votes which
they may cast shall be determined as of a record date, to be selected by the
Company, not more than 90 days before the meeting of the applicable Fund.
Persons having voting interests under the Contracts as described above will
not, as a result thereof, have voting interests with respect to meetings of the
stockholders of the Company.
DISTRIBUTION OF THE CONTRACTS
The Contracts will be sold by licensed insurance agents in those states
where the Contracts may be lawfully sold. Such agents will be registered
representatives of broker-dealers registered under the Securities Exchange Act
of 1934 who are members of the National Association of Securities Dealers, Inc.
The Contracts will be distributed by the General Distributor, Washington Square
Securities, Inc., 20 Washington Avenue South, Minneapolis, Minnesota 55401,
which is controlled by the Company. Commissions and other distribution
compensation will be paid by the Company. Generally such payments will not
exceed 7.00% of the purchase payments. In some cases a trail commission based on
the Contract Value may also be paid.
REVOCATION
The Contract Owner may revoke the contract at any time between the date of
Application and the date 10 days after receipt of the Contract and receive a
refund of the Contract Value unless otherwise required by state and/or federal
law. All Individual Retirement Annuity refunds will be return of purchase
payments. In order to revoke the Contract, it must be mailed or delivered to the
Company's Contract Administrator at the mailing address shown below or the agent
through whom it was purchased. Mailing or delivery must occur on or before 10
days after receipt of the Contract for revocation to be effective. In order to
revoke the Contract if it has not been received, written notice must be mailed
or delivered to the Company's Contract Administrator at the mailing address
shown below.
ReliaStar Life Insurance Company
c/o Variable Annuity Administration Center
Route 4300
P.O. Box 59218
Minneapolis, MN 55429-0218
The liability of the Variable Account under this provision is limited to
the Contract Value in each Sub-Account on the date of revocation. Any additional
amounts refunded to the Contract Owner will be paid by the Company.
REPORTS TO OWNERS
The Company will mail to the Contract Owner, at the last known address of
record at the home office of the Company, at least annually after the first
Contract Year, a report containing such information as may be required by any
applicable law or regulation and a statement showing the Contract Value.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account is a party.
The Company is a defendant in various lawsuits in connection with the normal
conduct of its operations. In the opinion of management, the ultimate resolution
of such litigation will not result in any significant liability to the Company.
FINANCIAL STATEMENTS AND EXPERTS
The annual financial statements of ReliaStar Select Variable Account as of
December 31, 1996 and for each of the three years in the period then ended and
the annual financial statements of ReliaStar Life Insurance Company, which are
incorporated by reference 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 herein and have been so incorporated
by reference in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
FURTHER INFORMATION
A Registration Statement under the Securities Act of 1933 has been filed
with the Securities and Exchange Commission, with respect to the contracts
described herein. The Prospectus does not contain all of the information set
forth in the Registration Statement and exhibits thereto, to which reference is
hereby made for further information concerning the Variable Account, the Company
and the Contracts. The information so omitted may be obtained from the
Commission's principal office in Washington, D.C., upon payment of the fee
prescribed by the Commission, or examined there without charge. Statements
contained in this Prospectus as to the provisions of the Contracts and other
legal documents are summaries, and reference is made to the documents as filed
with the Commission for a complete statement of the provisions thereof.
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Introduction................................................................S-2
Administration of the Contracts.............................................S-2
Custody of Assets...........................................................S-3
Independent Auditors........................................................S-3
Distribution of the Contracts...............................................S-3
Calculation of Yield and Return.............................................S-3
Financial Statements.......................................................S-14
================================================================================
If you would like to receive a copy of the ReliaStar Select Variable Account
Statement of Additional Information, please call 1-800-621-3750 or return this
request to:
RELIASTAR LIFE INSURANCE COMPANY
VARIABLE ANNUITY ADMINISTRATION CENTER
ROUTE 4300
P.O. BOX 59218
MINNEAPOLIS, MN 55429-0218
Your name_______________________________________________________________________
Address_________________________________________________________________________
City_______________________________________State____________Zip________________
Please send me a copy of the ReliaStar Select Variable Account Statement of
Additional Information.
================================================================================
APPENDIX A
THE FIXED ACCOUNT
CONTRIBUTIONS UNDER THE FIXED PORTION OF THE CONTRACT AND TRANSFERS TO THE
FIXED PORTION BECOME PART OF THE GENERAL ACCOUNT OF THE COMPANY (THE "FIXED
ACCOUNT"), WHICH SUPPORTS INSURANCE AND ANNUITY OBLIGATIONS. BECAUSE OF
EXEMPTIVE AND EXCLUSIONARY PROVISIONS, INTERESTS IN THE FIXED ACCOUNT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 ("1933 ACT") NOR IS THE FIXED
ACCOUNT REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF
1940 ("1940 ACT"). ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTEREST
THEREIN ARE GENERALLY SUBJECT TO THE PROVISIONS OF THE 1933 OR 1940 ACTS AND THE
COMPANY HAS BEEN ADVISED THAT THE STAFF OF THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT REVIEWED THE DISCLOSURES IN THIS PROSPECTUS WHICH RELATE TO
THE FIXED PORTION OF THE CONTRACT. DISCLOSURES REGARDING THE FIXED PORTION OF
THE ANNUITY CONTRACT AND THE FIXED ACCOUNT, HOWEVER, MAY BE SUBJECT TO CERTAIN
GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE
ACCURACY AND COMPLETENESS OF STATEMENTS MADE IN PROSPECTUSES.
The Fixed Account is made up of all of the general assets of the Company
other than those allocated to any separate account. Purchase payments will be
allocated to the Fixed Account as elected by the Owner at the time of purchase
or as subsequently changed. The Company will invest the assets of the Fixed
Account in those assets chosen by the Company and allowed by applicable law.
Investment income from such Fixed Account assets will be allocated between the
Company and the contracts participating in the Fixed Account, in accordance with
the terms of such contracts.
Fixed annuity payments made to Annuitants under the Contract will not be
affected by the mortality experience (death rate) of persons receiving such
payments or of the general population. The Company assumes this "mortality risk"
by virtue of annuity rates incorporated in the Contract which cannot be changed.
In addition, the Company guarantees that it will not increase charges for
maintenance of the Contracts regardless of its actual expenses.
Investment income from the Fixed Account allocated to the Company includes
compensation for mortality and expense risks borne by the Company in connection
with Fixed Account Contracts. The Company expects to derive a profit from this
compensation. The amount of such investment income allocated to the Contracts
will vary from year to year at the sole discretion of the Company. However, the
Company guarantees that it will credit interest at a rate of not less than 3%
per year, compounded annually, to amounts allocated to the Fixed Account under
the Contract. The Company may credit interest at a rate in excess of 3% per
year; however, the Company is not obligated to credit any interest in excess of
3% per year. There is no specific formula for the determination of excess
interest credits. Such credits, if any, will be determined by the Company based
on information as to expected investment yields. Some of the factors that the
Company may consider in determining whether to credit interest to amounts
allocated to the Fixed Account and the amount thereof, are general economic
trends, rates of return currently available and anticipated on the Company's
investments, regulatory and tax requirements and competitive factors. ANY
INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE FIXED ACCOUNT IN EXCESS OF 3% PER
YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF THE COMPANY. THE OWNER ASSUMES
THE RISK THAT INTEREST CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE
MINIMUM GUARANTEE OF 3% FOR ANY GIVEN YEAR.
The Company is aware of no statutory limitations on the maximum amount of
interest it may credit, and the Board of Directors has set no limitations.
However, inherent in the Company's exercise of discretion in this regard is the
equitable allocation of distributable earnings and surplus among its various
policyholders and Contract Owners and to its stockholders.
Excess interest, if any, will be credited on the Fixed Account Contract
Value. The Company guarantees that, at any time, the Fixed Account Contract
Value will not be less than the amount of purchase payments and transfers
allocated to the Fixed Account, plus interest at the rate of 3% per year,
compounded annually, plus any additional interest which the Company may, in its
discretion, credit to the Fixed Account, less the sum of all annual
administrative or surrender charges levied, any applicable premium taxes, and
less any amounts surrendered or transferred from the Fixed Account. If the Owner
surrenders the Contract, the amount available from the Fixed Account will be
reduced by any applicable surrender charge and annual administration charge.
(See "Charges Made by the Company" on page 26).
RELIASTAR
ReliaStar Life Insurance Company
20 Washington Avenue South
Minneapolis, Minnesota 55401
SELECT*ANNUITY III PROSPECTUS AUGUST 8, 1997
STATEMENT OF ADDITIONAL INFORMATION
----------
INDIVIDUAL DEFERRED VARIABLE/FIXED ANNUITY CONTRACTS
ISSUED BY
RELIASTAR SELECT VARIABLE ACCOUNT
(FORMERLY NWNL SELECT VARIABLE ACCOUNT)
AND
RELIASTAR LIFE INSURANCE COMPANY
(FORMERLY NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY)
This Statement of Additional Information is not a Prospectus, but should be
read in conjunction with the Prospectus, dated August 8, 1997 (the "Prospectus")
relating to the Individual Deferred Variable/Fixed Annuity Contracts issued by
ReliaStar Select Variable Account (the "Variable Account") and ReliaStar Life
Insurance Company (the "Company"). Much of the information contained in this
Statement of Additional Information expands upon subjects discussed in the
Prospectus. A copy of the Prospectus may be obtained from Washington Square
Securities, Inc., 20 Washington Avenue South, Minneapolis, Minnesota 55401.
Capitalized terms used in this Statement of Additional Information that are
not otherwise defined herein shall have the meanings given to them in the
Prospectus.
-------------
TABLE OF CONTENTS
PAGE
Introduction.............................................................. S-2
Administration of the Contracts........................................... S-2
Custody of Assets......................................................... S-3
Independent Auditors...................................................... S-3
Distribution of the Contracts............................................. S-3
Calculation of Yield and Return........................................... S-3
Financial Statements...................................................... S-14
---------
The date of this Statement of Additional Information is August 8, 1997.
INTRODUCTION
The Individual Deferred Variable/Fixed Annuity Contracts described in the
Prospectus are flexible purchase payment contracts. The Contracts 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 Tax Status"
on page 36 of the Prospectus.) Annuity payments under the Contracts are deferred
until a selected later date.
Purchase payments may be allocated to one or more of the available
Sub-Accounts of the Variable Account, a separate account of the Company, and/or
to the Fixed Account (which is the general account of the Company).
Purchase payments allocated to one or more of the available Sub-Accounts of
the Variable Account, as selected by the Contract Owner, will be invested in
shares at net asset value of one or more of a group of investment funds (the
"Investment Funds"). The Investment Funds are currently the five portfolios of
the Variable Insurance Products Fund, and four portfolios of the Variable
Insurance Products Fund II, which are managed by Fidelity Management & Research
Company of Boston, Massachusetts; five funds of the Northstar Variable Trust,
which are managed by Northstar Investment Management Corporation of Greenwich,
Connecticut; six portfolios of Putnam Variable Trust, which are managed by
Putnam Investment Management, Inc. of Boston, Massachusetts; four portfolios of
Janus Aspen Series, which are managed by Janus Capital of Denver, Colorado; four
portfolios of the OCC Accumulation Trust, which are managed by OpCap Advisors of
New York, New York; three portfolios of The Alger American Fund, which are
managed by Fred Alger Management, Inc. of New York, New York; and two Portfolios
of the Neuberger&Berman Advisers Management Trust, which are managed by
Neuberger&Berman Management of New York, New York. Each Investment Fund pays its
investment adviser certain fees charged against the assets of the Investment
Fund. The Variable Account Contract Value and the amount of variable annuity
payments will vary, primarily based on the investment performance of the
Investment Funds whose shares are held in the Sub-Accounts selected. (For more
information about the Investment Funds, see "Investments of the Variable
Account" on page 20 of the Prospectus.)
Purchase payments allocated to the Fixed Account, which is the general
account of the Company, will be credited with interest at a rate not less than
3% per year. Interest credited in excess of 3%, if any, will be determined at
the sole discretion of the Company. That part of the Contract relating to the
Fixed Account is not registered under the Securities Act of 1933 and the Fixed
Account is not subject to the restrictions of the Investment Company Act of
1940. (See Appendix A to the Prospectus.)
ADMINISTRATION OF THE CONTRACTS
The Company performs certain administrative functions ("Administrative
Functions") relating to the Contracts and the Variable Account. These functions
include, among other things, maintaining the books and records of the Variable
Account and the Sub-Accounts, and maintaining records of the name, address,
taxpayer identification number, Contract number, type of Contract issued to each
Owner, Contract Value and other pertinent information necessary to the
administration and operation of the Contracts. The Company received no payment
for performing any of the Administrative Functions in 1996. Effective July 14,
1997, the Company performs the Administrative Functions in Minneapolis,
Minnesota. Prior to that date, Continuum Administrative Services Corporation,
Kansas City, Missouri ("CASC"), performed, by agreement, many of the
Administrative Functions. For the years ended December 31, 1994, 1995 and 1996
the Company paid fees to CASC under the agreement in the amounts of $129,682,
$218,214 and $638,881 respectively, in connection with administration of the
Contracts.
CUSTODY OF ASSETS
The Company, whose address appears on the cover of the Prospectus,
maintains custody of the assets of the Variable Account.
INDEPENDENT AUDITORS
The annual financial statements of ReliaStar Select Variable Account and
ReliaStar Life Insurance Company, which are incorporated by reference in the
Statement of Additional Information, have been audited by Deloitte & Touche LLP,
400 One Financial Plaza, 120 South 6th Street, Minneapolis, Minnesota 55402,
independent auditors, as stated in their reports which are incorporated by
reference herein, and have been so incorporated by reference in reliance upon
the reports of such firm given upon their authority as experts in accounting and
auditing.
DISTRIBUTION OF THE CONTRACTS
The Contracts are sold by licensed insurance agents in those states where
the Contracts may be lawfully sold. Such agents will be registered
representatives of broker-dealers registered under the Securities Exchange Act
of 1934 who are members of the National Association of Securities Dealers, Inc.
The Contracts will be distributed by the General Distributor, Washington Square
Securities, Inc., which is a direct wholly-owned subsidiary of ReliaStar
Financial Corp. and is an affiliate of the Company.
For the years ended December 31, 1994, 1995 and 1996, the General
Distributor was paid fees by the Company with respect to distribution of the
Contracts aggregating $731,073, $397,000 and $666,703 respectively.
The offering of the Contracts is continuous.
There are no special purchase plans or exchange privileges not described in
the Prospectus (see "Transfers" at page 32 of the Prospectus).
No deduction for a sales charge is made from the purchase payments for the
Contracts. However, if part or all of a Contract's value is surrendered,
surrender charges (which may be deemed to be contingent deferred sales charges)
may be made by the Company. The method used to determine the amount of such
charge is described in the Prospectus under the heading "Charges Made By The
Company - Surrender Charge (Contingent Deferred Sales Charge)" on page 26. There
is no difference in the amount of this charge or any of the other charges
described in the Prospectus as between Contracts purchased by members of the
public as individuals or groups, and Contracts purchased by any class of
individuals, such as officers, directors or employees of the Company or of
Washington Square Securities, Inc.
CALCULATION OF YIELD AND RETURN
CURRENT YIELD AND EFFECTIVE YIELD. Current yield and effective yield will
be calculated only for the VIP Money Market Portfolio Sub-Account.
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 VIP Money
Market Portfolio, 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 VIP Money Market Portfolio Sub-Account'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:
Yield: 3.79%
Effective Yield: 3.86%
STANDARDIZED YIELD. A standardized yield computation may be used for bond
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.
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 Premiums, the Administration Charge, and the Annual
Contract Charge. The calculation assumes that the Annual Contract 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 Annual Contract
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 six 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.
Such average annual total return information for the Sub-Accounts is as
follows:
<TABLE>
<CAPTION>
FOR THE 1-YEAR FOR THE 5-YEAR FOR THE 10-YEAR FOR THE PERIOD FROM DATE OF
PERIOD ENDED PERIOD ENDED PERIOD ENDED INCEPTION OF SUB-ACCOUNT TO
SUB-ACCOUNT 12/31/96 12/31/96 12/31/96 12/31/96
- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Fidelity's VIP Equity-Income Portfolio 7.20% N/A N/A 15.31%
(Sub-Account Inception: 1/6/94)
Fidelity's VIP Growth Portfolio 7.62% N/A N/A 13.00%
(Sub-Account Inception: 1/6/94)
Fidelity's VIP High Income Portfolio 6.96% N/A N/A 7.47%
(Sub-Account Inception: 1/6/94)
Fidelity's VIP Overseas Portfolio 6.15% N/A N/A 4.88%
(Sub-Account Inception: 1/6/94)
Fidelity's VIP II Asset Manager Portfolio 7.52% N/A N/A 4.82%
(Sub-Account Inception: 1/6/94)
Fidelity's VIP II Contrafund Portfolio 14.13% N/A N/A 18.03%
(Sub-Account Inception: 5/1/95)
Fidelity's VIP II Index 500 Portfolio 15.62% N/A N/A 16.59%
(Sub-Account Inception: 1/6/94)
Fidelity's VIP II Investment Grade Bond Portfolio -3.74% N/A N/A 2.23%
(Sub-Account Inception: 1/6/94)
Northstar Growth Fund 15.90% N/A N/A 20.30%
(Sub-Account Inception: 1/3/95)
Northstar Income and Growth Fund 6.73% N/A N/A 13.76%
(Sub-Account Inception: 1/3/95)
Northstar Multi-Sector Bond Fund 6.21% N/A N/A 10.31%
(Sub-Account Inception: 1/3/95)
Putnam VT Asia Pacific Growth Fund 2.09% N/A N/A 2.06%
(Sub-Account Inception: 5/1/95)
Putnam VT Diversified Income Fund 1.81% N/A N/A 4.52%
(Sub-Account Inception: 1/6/94)
Putnam VT Growth and Income Fund 14.73% N/A N/A 15.87%
(Sub-Account Inception: 1/6/94)
Putnam VT New Opportunities Fund 3.15% N/A N/A 22.02%
(Sub-Account Inception: 5/1/95)
Putnam VT Utilities Growth and Income Fund 8.70% N/A N/A 9.82%
(Sub-Account Inception: 1/6/94)
Putnam VT Voyager Fund 5.91% N/A N/A 14.62%
(Sub-Account Inception: 1/6/94)
</TABLE>
From time to time, sales literature or advertisements may quote average
annual total returns for periods prior to the date the Sub-Accounts commenced
operations. Such performance information for the Sub-Accounts will be calculated
based on the performance of the Portfolios and the assumption that the
Sub-Accounts were in existence for the same periods as those indicated for the
Portfolios, with the level of Contract charges currently in effect.
Such average annual total return information for the Sub-Accounts is as
follows:
<TABLE>
<CAPTION>
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 FUND
SUB-ACCOUNT 12/31/96 12/31/96 12/31/96 PORTFOLIO TO 12/31/96
- ----------- -------- -------- -------- ---------------------
<S> <C> <C> <C> <C>
Alger American Growth Portfolio 7.18% 14.95% N/A 16.94%
(Portfolio Inception: 1/6/89)
Alger American MidCap Growth Portfolio 5.75% N/A N/A 21.54%
(Portfolio Inception: 4/30/93)
Alger American Small Capitalization Portfolio -1.86% 9.40% N/A 18.49%
(Portfolio Inception: 9/20/88)
Fidelity's VIP Equity-Income Portfolio 7.20% 15.88% 12.10% 11.80%
(Portfolio Inception: 10/9/86)
Fidelity's VIP Growth Portfolio 7.62% 13.06% 13.50% 13.17%
(Portfolio Inception: 10/9/86)
Fidelity's VIP High Income Portfolio 6.96% 12.86% 9.51% 10.39%
(Portfolio Inception: 9/19/85)
Fidelity's VIP Overseas Portfolio 6.15% 6.99% N/A 6.32%
(Portfolio Inception: 1/28/87)
Fidelity's VIP II Asset Manager Portfolio 7.52% 9.14% N/A 10.08%
(Portfolio Inception: 9/6/89)
Fidelity's VIP II Contrafund Portfolio 14.13% N/A N/A 26.59%
(Portfolio Inception: 1/3/95)
Fidelity's VIP II Index 500 Portfolio 15.62% N/A N/A 14.88%
(Portfolio Inception: 8/27/92)
Fidelity's VIP II Investment Grade Bond Portfolio -3.74% 4.48% N/A 6.63%
(Portfolio Inception: 12/5/88)
Janus Aggressive Growth Portfolio 1.86% N/A N/A 18.60%
(Portfolio Inception: 9/13/93)
Janus Growth Portfolio 12.22% N/A N/A 13.46%
(Portfolio Inception: 9/13/93)
Janus International Growth Portfolio 28.25% N/A N/A 16.57%
(Portfolio Inception: 5/2/94)
Janus Worldwide Growth Portfolio 22.65% N/A N/A 20.46%
(Portfolio Inception: 9/13/93)
Neuberger&Berman AMT Limited Maturity Bond Portfolio -1.74% 3.78% 5.13% 6.73%
(Portfolio Inception: 9/10/84)
Neuberger&Berman AMT Partners Portfolio 23.18% N/A N/A 18.78%
(Portfolio Inception: 3/22/94)
Northstar Growth Fund 15.90% N/A N/A 15.97%
(Portfolio Inception: 5/6/94)
Northstar High Yield Bond Fund 10.21% N/A N/A 9.73%
(Portfolio Inception: 5/6/94)
Northstar Income and Growth Fund 6.73% N/A N/A 10.67%
(Portfolio Inception: 5/6/94)
Northstar International Value Fund N/A N/A N/A N/A
(Portfolio Inception: 8/8/97)
Northstar Multi-Sector Bond Fund 6.21% N/A N/A 8.16%
(Portfolio Inception: 5/6/94)
OCC Equity Portfolio 17.06% 16.04% N/A 14.87%
(Portfolio Inception: 8/1/88)
OCC Global Equity Portfolio 14.21% N/A N/A 7.96%
(Portfolio Inception: 3/1/95)
OCC Managed Portfolio 16.48% 17.45% N/A 18.40%
(Portfolio Inception: 8/1/88)
OCC Small Cap Portfolio 12.48% 12.84% N/A 13.05%
(Portfolio Inception: 8/1/88)
Putnam VT Asia Pacific Growth Fund 2.09% N/A N/A 2.08%
(Portfolio Inception: 5/1/95)
Putnam VT Diversified Income Fund 1.81% N/A N/A 4.73%
(Portfolio Inception: 9/15/93)
Putnam VT Growth and Income Fund 14.73% 13.87% N/A 14.17%
(Portfolio Inception: 2/1/88)
Putnam VT New Opportunities Fund 3.15% N/A N/A 19.58%
(Portfolio Inception: 5/2/94)
Putnam VT Utilities Growth and Income Fund 8.70% N/A N/A 10.07%
(Portfolio Inception: 5/1/92)
Putnam VT Voyager Fund 5.91% 13.93% N/A 15.49%
(Portfolio Inception: 2/1/88)
</TABLE>
The Company may also disclose average annual total returns for the
Investment Fund's Portfolios since their inception, including such disclosure
for periods prior to the date the Variable Account commenced operations.
Such average annual total return information for the Portfolios of the
Investment Funds is as follows:
<TABLE>
<CAPTION>
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 FUND
SUB-ACCOUNT 12/31/96 12/31/96 12/31/96 PORTFOLIO TO 12/31/96
- ----------- -------- -------- -------- ---------------------
<S> <C> <C> <C> <C>
Alger American Growth Portfolio 13.35% 16.63% N/A 18.64%
(Portfolio Inception: 1/6/89)
Alger American MidCap Growth Portfolio 11.90% N/A N/A 24.06%
(Portfolio Inception: 4/30/93)
Alger American Small Capitalization Portfolio 4.18% 11.02% N/A 20.21%
(Portfolio Inception: 9/20/88)
Fidelity's VIP Equity-Income Portfolio 14.28% 17.98% 13.74% 13.44%
(Portfolio Inception: 10/9/86)
Fidelity's VIP Growth Portfolio 14.71% 15.16% 15.15% 14.83%
(Portfolio Inception: 10/9/86)
Fidelity's VIP High Income Portfolio 14.03% 14.96% 11.12% 12.01%
(Portfolio Inception: 9/19/85)
Fidelity's VIP Overseas Portfolio 13.22% 9.13% N/A 7.91%
(Portfolio Inception: 1/28/87)
Fidelity's VIP II Asset Manager Portfolio 14.60% 11.26% N/A 11.70%
(Portfolio Inception: 9/6/89)
Fidelity's VIP II Investment Grade Bond Portfolio 3.19% 6.64% N/A 8.20%
(Portfolio Inception: 12/5/88)
Fidelity's VIP II Index 500 Portfolio 22.82% N/A N/A 17.11%
(Portfolio Inception: 8/27/92)
Fidelity's VIP II Contrafund Portfolio 21.31% N/A N/A 30.33%
(Portfolio Inception: 1/3/95)
Janus Aggressive Growth Portfolio 7.95% N/A N/A 21.28%
(Portfolio Inception: 9/13/93)
Janus Growth Portfolio 18.45% N/A N/A 16.18%
(Portfolio Inception: 9/13/93)
Janus International Growth Portfolio 34.71% N/A N/A 19.63%
(Portfolio Inception: 5/2/94)
Janus Worldwide Growth Portfolio 29.04% N/A N/A 23.15%
(Portfolio Inception: 9/13/93)
Neuberger&Berman AMT Limited Maturity Bond 4.31% 5.32% 6.68% 8.29%
Portfolio
(Portfolio Inception: 9/10/84)
Neuberger&Berman AMT Partners Portfolio 29.57% N/A N/A 21.75%
(Portfolio Inception: 3/22/94)
Northstar Growth Fund 22.78% N/A N/A 18.76%
(Portfolio Inception: 5/6/94)
Northstar High Yield Bond Fund 16.42% N/A N/A 12.83%
(Portfolio Inception: 5/6/94)
Northstar Income and Growth Fund 13.80% N/A N/A 13.75%
(Portfolio Inception: 5/6/94)
Northstar International Value Fund N/A N/A N/A N/A
(Portfolio Inception: 8/8/97)
Northstar Multi-Sector Bond Fund 13.28% N/A N/A 11.27%
(Portfolio Inception: 5/6/94)
OCC Equity Portfolio 23.36% 17.72% N/A 16.54%
(Portfolio Inception: 8/1/88)
OCC Global Equity Portfolio 15.01% N/A N/A 18.57%
(Portfolio Inception: 3/1/95)
OCC Managed Portfolio 22.77% 19.15% N/A 20.11%
(Portfolio Inception: 8/1/88)
OCC Small Cap Portfolio 18.72% 14.48% N/A 14.69%
(Portfolio Inception: 8/1/88)
Putnam VT Asia Pacific Growth Fund 9.10% N/A N/A 6.81%
(Portfolio Inception: 5/1/95)
Putnam VT Diversified Income Fund 8.81% N/A N/A 7.53%
(Portfolio Inception: 9/15/93)
Putnam VT Growth and Income Fund 21.92% 15.97% N/A 15.88%
(Portfolio Inception: 2/1/88)
Putnam VT New Opportunities Fund 10.17% N/A N/A 22.56%
(Portfolio Inception: 5/2/94)
Putnam VT Utilities Growth and Income Fund 15.80% N/A N/A 12.24%
(Portfolio Inception: 5/1/92)
Putnam VT Voyager Fund 12.97% 16.03% N/A 17.23%
(Portfolio Inception: 2/1/88)
</TABLE>
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. Such performance information may quote average annual
total returns for periods during which the Sub-Accounts were operating and for
periods prior to the date the Sub-Accounts commenced operations. 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:
<TABLE>
<CAPTION>
RETURNS SINCE DATE SUB-ACCOUNTS COMMENCED OPERATIONS
----------------------------------------------------
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>
Fidelity's VIP Equity-Income Portfolio 12.60% N/A N/A 16.44%
(Sub-Account Inception: 1/6/94)
Fidelity's VIP Growth Portfolio 13.02% N/A N/A 14.17%
(Sub-Account Inception: 1/6/94)
Fidelity's VIP High Income Portfolio 12.36% N/A N/A 8.76%
(Sub-Account Inception: 1/6/94)
Fidelity's VIP Overseas Portfolio 11.55% N/A N/A 6.23%
(Sub-Account Inception: 1/6/94)
Fidelity's VIP II Asset Manager Portfolio 12.92% N/A N/A 6.17%
(Sub-Account Inception: 1/6/94)
Fidelity's VIP II Contrafund Portfolio 19.53% N/A N/A 20.30%
(Sub-Account Inception: 5/1/95)
Fidelity's VIP II Index 500 Portfolio 21.02% N/A N/A 17.69%
(Sub-Account Inception: 1/6/94)
Fidelity's VIP II Investment Grade Bond Portfolio 1.66% N/A N/A 3.65%
(Sub-Account Inception: 1/6/94)
Northstar Growth Fund 21.30% N/A N/A 22.53%
(Sub-Account Inception: 1/3/95)
Northstar Income and Growth Fund 12.13% N/A N/A 16.12%
(Sub-Account Inception: 1/3/95)
Northstar Multi-Sector Bond Fund 11.61% N/A N/A 12.74%
(Sub-Account Inception: 1/3/95)
Putnam VT Asia Pacific Growth Fund 7.49% N/A N/A 5.21%
(Sub-Account Inception: 5/1/95)
Putnam VT Diversified Income Fund 7.21% N/A N/A 5.89%
(Sub-Account Inception: 1/6/94)
Putnam VT Growth and Income Fund 20.13% N/A N/A 16.98%
(Sub-Account Inception: 1/6/94)
Putnam VT New Opportunities Fund 8.55% N/A N/A 24.83%
(Sub-Account Inception: 5/1/95)
Putnam VT Utilities Growth and Income Fund 14.10% N/A N/A 11.06%
(Sub-Account Inception: 1/6/94)
Putnam VT Voyager Fund 11.31% N/A N/A 15.76%
(Sub-Account Inception: 1/6/94)
</TABLE>
RETURNS INCLUDING PERIOD PRIOR TO DATE SUB-ACCOUNTS COMMENCED OPERATIONS
------------------------------------------------------------------------
<TABLE>
<CAPTION>
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 FUND
SUB-ACCOUNT 12/31/96 12/31/96 12/31/96 PORTFOLIO TO 12/31/96
- ----------- -------- -------- -------- ---------------------
<S> <C> <C> <C> <C>
Alger American Growth Portfolio 11.68% 14.95% N/A 16.94%
(Portfolio Inception: 1/6/89)
Alger American MidCap Growth Portfolio 10.25% N/A N/A 22.26%
(Portfolio Inception: 4/30/93)
Alger American Small Capitalization Portfolio 2.64% 9.40% N/A 18.49%
(Portfolio Inception: 9/20/88)
Fidelity's VIP Equity-Income Portfolio 12.60% 16.28% 12.10% 11.80%
(Portfolio Inception: 10/9/86)
Fidelity's VIP Growth Portfolio 13.02% 13.50% 13.50% 13.17%
(Portfolio Inception: 10/9/86)
Fidelity's VIP High Income Portfolio 12.36% 13.30% 9.51% 10.39%
(Portfolio Inception: 9/19/85)
Fidelity's VIP Overseas Portfolio 11.55% 7.54% N/A 6.32%
(Portfolio Inception: 1/28/87)
Fidelity's VIP II Asset Manager Portfolio 12.92% 9.64% N/A 10.08%
(Portfolio Inception: 9/6/89)
Fidelity's VIP II Contrafund Portfolio 19.53% N/A N/A 28.36%
(Portfolio Inception: 1/3/95)
Fidelity's VIP II Index 500 Portfolio 21.02% N/A N/A 15.40%
(Portfolio Inception: 8/27/92)
Fidelity's VIP II Investment Grade Bond 1.66% 5.08% N/A 6.63%
Portfolio
(Portfolio Inception: 12/5/88)
Janus Aggressive Growth Portfolio 6.36% N/A N/A 19.51%
(Portfolio Inception: 9/13/93)
Janus Growth Portfolio 16.72% N/A N/A 14.47%
(Portfolio Inception: 9/13/93)
Janus International Growth Portfolio 32.75% N/A N/A 17.86%
(Portfolio Inception: 5/2/94)
Janus Worldwide Growth Portfolio 27.15% N/A N/A 21.34%
(Portfolio Inception: 9/13/93)
Neuberger&Berman AMT Limited Maturity Bond 2.76% 3.78% 5.13% 6.73%
Portfolio
(Portfolio Inception: 9/10/84)
Neuberger&Berman AMT Partners Portfolio 27.68% N/A N/A 19.96%
(Portfolio Inception: 3/22/94)
Northstar Growth Fund 21.30% N/A N/A 17.28%
(Portfolio Inception: 5/6/94)
Northstar High Yield Bond Fund 14.71% N/A N/A 11.17%
(Portfolio Inception: 5/6/94)
Northstar Income and Growth Fund 12.13% N/A N/A 12.08%
(Portfolio Inception: 5/6/94)
Northstar International Value Fund N/A N/A N/A N/A
(Portfolio Inception: 8/8/97)
Northstar Multi-Sector Bond Fund 11.61% N/A N/A 9.63%
(Portfolio Inception: 5/6/94)
OCC Equity Portfolio 21.56% 16.04% N/A 14.87%
(Portfolio Inception: 8/1/88)
OCC Global Equity Portfolio 16.81% N/A N/A 10.68%
(Portfolio Inception: 3/1/95)
OCC Managed Portfolio 20.98% 17.45% N/A 18.40%
(Portfolio Inception: 8/1/88)
OCC Small Cap Portfolio 16.98% 12.84% N/A 13.05%
(Portfolio Inception: 8/1/88)
Putnam VT Asia Pacific Growth Fund 7.49% N/A N/A 5.23%
(Portfolio Inception: 5/1/95)
Putnam VT Diversified Income Fund 7.21% N/A N/A 5.94%
(Portfolio Inception: 9/15/93)
Putnam VT Growth and Income Fund 20.13% 14.29% N/A 14.17%
(Portfolio Inception: 2/1/88)
Putnam VT New Opportunities Fund 8.55% N/A N/A 20.82%
(Portfolio Inception: 5/2/94)
Putnam VT Utilities Growth and Income Fund 14.10% N/A N/A 10.60%
(Portfolio Inception: 5/1/92)
Putnam VT Voyager Fund 11.31% 14.36% N/A 15.49%
(Portfolio Inception: 2/1/88)
</TABLE>
The Investment Funds have provided the total return information for the
Portfolios, including the Portfolio total return information used to calculate
the total returns of the Sub-Accounts for periods prior to the inception of the
Sub-Accounts. The Alger American Fund, Fidelity's Variable Insurance Products
Fund, Fidelity's Variable Insurance Products Fund II, Janus Aspen Series,
Neuberger&Berman Advisers Management Trust, OCC Accumulation Trust, and Putnam
Variable Trust are not affiliated with the Company.
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 CONTRACT CHARGE ON PERFORMANCE DATA. The Contract
provides for a $30 Annual Contract 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 Annual Contract 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
This Statement of Additional Information incorporates by reference audited
Financial Statements for the Variable Account as of December 31, 1996 and for
each of the three years in the period then ended. Deloitte & Touche LLP serves
as independent auditors for the Variable Account. Although the financial
statements, are audited, the period they cover is not necessarily indicative of
the longer term performance of the assets held in the Variable Account.
The Company's statements of financial condition as of December 31, 1996 and
1995, and the related statements of operations, shareholder's equity and cash
flows for the years ended December 31, 1996 and 1995 which are incorporated by
reference 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 SELECT VARIABLE ACCOUNT
Independent Auditors' Report*
Statement of Assets and Liabilities*
Statement of Operations and Changes in Contract Owners' Equity*
Notes to Financial Statements*
December 31, 1996
* Incorporated by reference to the Registrant's 1996 Annual Report to
Contract Holders filed February 20, 1997.
RELIASTAR LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
Independent Auditors' Report**
Consolidated Balance Sheets**
Consolidated Statements of Income**
Consolidated Statements of Shareholder's Equity**
Consolidated Statements of Cash Flows**
Notes to Consolidated Financial Statements**
December 31, 1996
** Incorporated by reference to the financial statements contained in the
Prospectus filed as part of Pre-effective Amendment No. 1 to the Form S-6
Registration Statement of Select*Life Variable Account, File No. 333-18517,
filed March 31, 1997.
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Part A: None
Part B: RELIASTAR SELECT VARIABLE ACCOUNT*
----------------------------------
Independent Auditors' Report
Statement of Assets and Liabilities,
December 31, 1996
Combined Statements of Operations and Changes
in Contract Owners' Equity, Years Ended
December 31, 1996, 1995 and 1994
Notes to Financial Statements
RELIASTAR LIFE INSURANCE COMPANY**
----------------------------------
Independent Auditors' Report
Consolidated Balance Sheets
December 31, 1996 and 1995
Consolidated Statements of Operations,
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. Resolution of the Board of Directors of ReliaStar Life Insurance
Company ("Depositor") authorizing the establishment of NWNL Select
Variable Account ("Registrant").+
Resolution of the Board of Directors of Depositor changing the name of
Registrant to ReliaStar Select Variable Account. +++
2. Not Applicable.
3. (a) Form of General Distributor Agreement between Depositor and
Washington Square Securities, Inc. ("WSSI").+
(b) Forms of agreements between Depositor and broker-dealers with
respect to the sale of Contracts. +
4. Form of Contract. +
5. Contract Application Form. +
6. (a) Amended Articles of Incorporation of Depositor ++
(b) Amended Bylaws of Depositor ++
7. Not Applicable.
8. (a) Participation Agreement with Fidelity's Variable Insurance
Products Fund and Fidelity Distributors Corporation and Amendments
Nos. 1-8.++
(b) Participation Agreement with Fidelity's Variable Insurance
Products Fund II and Fidelity Distributors Corporation and
Amendments Nos. 1-7.++
(c) Form of Service Agreement and Contract between ReliaStar Life
Insurance Company, WSSI, and Fidelity Investments Institutional
Operations Company and Fidelity Distributors Corporation dated
January 1, 1997.+++
(d) Participation Agreement with Putnam Capital Manager Trust and
Putnam Mutual Funds Corp. and Amendments Nos. 1-2.++
(e) Form of Service Agreement by and between ReliaStar Life Insurance
Company and Janus Capital Corporation.++++
(f) Form of Service Agreement by and between ReliaStar Life Insurance
Company and Fred Alger Management, Inc.++++
(g) Form of Service Agreement by and between ReliaStar Life Insurance
Company and OpCap Advisors.++++
(h) Form of Service Agreement by and between ReliaStar Life Insurance
Company and NBMI, Neuberger&Berman Advisers Management, Inc., and
Advisers Managers Trust.++++
(i) Form of Participation Agreement by and between ReliaStar Life
Insurance Company and Neuberger&Berman Advisers Management, Inc.,
and Advisers Management Trust and NBMI.++++
(j) Form of Participation Agreement by and between ReliaStar Life
Insurance Company and Janus Aspen Series.++++
(k) Form of Participation Agreement by and between ReliaStar Life
Insurance Company and Fred Alger Management, Inc.++++
(l) Form of Participation Agreement by and between ReliaStar Life
Insurance Company and OpCap Advisors.++++
9. Consent and Opinion of Robert B. Saginaw as to the legality of the
securities being registered.
10. Independent Auditors' Consent of Deloitte & Touche LLP.
11. Not Applicable.
12. Not Applicable.
13. Schedules for Computation of Performance Quotations.+++
14. Financial Data Schedule, filed hereto electronically as Exhibit 27
pursuant to Rule 401 of Regulation S-T.+++
15. Powers of Attorney. ++
* Incorporated by reference to the Registrant's 1996 Annual Report to
Contract Holders filed February 20, 1997.
** Incorporated by reference to the financial statements contained in the
Prospectus filed as part of Pre-effective Amendment No. 1 of the Form S-6
Registration Statement of Select*Life Variable Account, File No. 333-18517,
filed March 31, 1997.
+ Incorporated by reference to Post-effective Amendment No. 3 to the
Registrant's Form N-4 Registration Statement File No. 33-69892, filed April
16, 1996.
++ Incorporated by reference to the Form S-6 Registration Statement of
Select*Life Variable Account, File No. 333-18517, filed December 23, 1996.
+++ Incorporated by reference to Post-effective Amendment No. 4 to the
Registrant's Form N-4 Registration Statement File No. 33-69892, filed April
14, 1997.
++++ To be filed by Post-effective Amendment.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME POSITIONS AND OFFICES WITH DEPOSITOR
---- ------------------------------------
<S> <C>
John G. Turner Director, Chairman, and Chief Executive Officer
John H. Flittie Director, Vice Chairman, President, and Chief Operating Officer
Susan M. Bergen Secretary
R. Michael Conley Director and Senior Vice President - ReliaStar Employee Benefits
Richard R. Crowl Director, Senior Vice President, and General Counsel
Wayne R. Huneke Director, Senior Vice President, Chief Financial Officer, and Treasurer
William R. Merriam Director and Senior Vice President - ReliaStar Reinsurance Group
Robert C. Salipante Director and Senior Vice President - Personal Financial Operations
Donald L. Swanson Director and Senior Vice President - ReliaStar Retirement Plans
Steven W. Wishart Director, Senior Vice President and Chief Investment Officer
Kenneth U. Kuk Director and Senior Vice President - ReliaStar Asset Division and Strategic
Marketing
</TABLE>
The principal business address of each of the foregoing executive officers is 20
Washington Avenue South, Minneapolis, Minnesota 55401.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
Registrant is a separate account of Depositor, established by the Board of
Directors of Depositor in 1981 pursuant to the laws of the State of Minnesota.
Depositor is a direct, wholly-owned subsidiary of ReliaStar Financial Corp., a
Delaware Corporation.
A chart identifying the subsidiaries of ReliaStar Financial Corp. and their
relationship to one another is incorporated by reference to Item 26 of
Post-effective Amendment No. 4 to the Form N-4 Registration Statement of
Northstar Variable Account, File No. 33-73058, filed July 9, 1997.
The financial statements of each subsidiary of Depositor, other than those
of the mutual funds, are consolidated with those of Depositor. The financial
statements of the mutual funds are separately filed with the Securities and
Exchange Commission.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of May 31, 1997, there were 10,421 owners of the Contracts, 6,476 of
which were owners of qualified Contracts.
ITEM 28. INDEMNIFICATION
Reference is hereby made to Section 5.01 of Depositor's Bylaws, filed as an
Exhibit to this Registration Statement. The Bylaws of Depositor mandate
indemnification by Depositor of its directors, officers and certain others,
including directors, officers, employees and agents of Management, under certain
conditions. Section 4.01 of the Bylaws of Management mandates indemnification by
Management of its directors and officers under certain conditions. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of Depositor or
Management, pursuant to the foregoing provisions or otherwise, Depositor and
Management 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 Depositor of expenses
incurred or paid by a director or officer or controlling person of Depositor or
Management in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person of Depositor or
Management in connection with the securities being registered, Depositor or
Management, as the case may be, will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether or not such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
An insurance company blanket bond is maintained providing $25,000,000
coverage for Depositor and Management, subject to a $500,000 deductible.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) WSSI is the principal underwriter of the Contracts. WSSI also acts as
the principal underwriter of other variable annuity contracts issued by
Depositor through the ReliaStar Select Variable Account; flexible premium
variable life insurance contracts issued by Depositor through Select*Life
Variable Account, a separate account of Depositor registered as a unit
investment trust under the Investment Company Act of 1940; variable annuity
contracts issued by Northern Life Insurance Company ("Northern"), a subsidiary
of Depositor, through Separate Account One, a separate account of Northern
registered as a unit investment trust under the Investment Company Act of 1940;
and variable annuity contracts issued by ReliaStar Bankers Security Life
Insurance Company, ("RBSL") an indirect subsidiary of Depositor, through
Separate Accounts M, P and Q, a separate account of RBSL registered as unit
investment trusts under the Investment Company Act of 1940. WSSI also
distributes, but is not the principal underwriter of, variable annuity contracts
issued by Depositor through the Northstar Variable Account, which is a separate
account of Depositor and is registered as a unit investment trust under the
Investment Company Act of 1940.
(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) For the year ended December 31, 1996, WSSI received $666,703 in fees in
connection with distribution of the Contracts.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts and records of Registrant are located at the offices of
Depositor at 20 Washington Avenue South, Minneapolis, Minnesota 55401.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
Registrant will file a post-effective amendment to this Registration
Statement as frequently as is necessary to ensure that the audited financial
statements in this Registration Statement are never more than 16 months old for
so long as payments under the Contracts may be accepted.
Registrant will 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.
Registrant will deliver any Statement of Additional Information and any
financial statements required to be made available under this form promptly upon
written or oral request.
The Depositor and the Registrant rely on a no-action letter issued by the
Division of Investment Management to the American Council of Life Insurance on
November 28, 1988 and represent that the conditions enumerated therein have been
or will be compiled with.
The Depositor represents that the fees and charges deducted under the
Contract in the aggregate are reasonable in relation to the services rendered,
the expenses expected to be incurred, and the risks assumed by ReliaStar Life
Insurance Company.
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 18th day of July, 1997.
RELIASTAR SELECT VARIABLE ACCOUNT
(Registrant)
By RELIASTAR LIFE INSURANCE COMPANY
(Depositor)
By /S/ JOHN G. TURNER
----------------------------
John G. Turner, Chairman
and Chief Executive Officer
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
18th day of July, 1997.
By RELIASTAR LIFE INSURANCE COMPANY
(Depositor)
By /S/ JOHN G. TURNER
----------------------------
John G. Turner, Chairman
and Chief Executive Officer
As required by the Securities Act of 1933, this Amendment to the Registration
Statement has been signed on this 18th day of July, 1997 by the following
directors and officers of Depositor in the capacities indicated:
<TABLE>
<CAPTION>
<S> <C>
/S/ JOHN G. TURNER Chairman and Chief Executive Officer
-----------------
John G. Turner
/S/ WAYNE R. HUNEKE Senior Vice President, Chief Financial Officer and Treasurer
------------------
Wayne R. Huneke
/S/ CHRIS D. SCHREIER Second Vice President and Controller
--------------------
Chris D. Schreier
R. Michael Conley John H. Flittie Kenneth U. Kuk Robert C. Salipante John G. Turner
Richard R. Crowl Wayne R. Huneke William R. Merriam Donald L. Swanson Steven W. Wishart
</TABLE>
A majority of the Board of Directors
Robert B. Saginaw, by signing his name hereto, does hereby sign this document on
behalf of each of the above-named directors of ReliaStar Life Insurance Company
pursuant to powers of attorney duly executed by such persons.
/S/ ROBERT B. SAGINAW
---------------------
Robert B. Saginaw, Attorney-In-Fact
EXHIBIT INDEX
(b) Exhibits:
9. Consent and Opinion of Robert B. Saginaw as to the legality of the
securities being registered.
10. Independent Auditors' Consent of Deloitte & Touche LLP.
July 18, 1997
ReliaStar Life Insurance Company
20 Washington Avenue South
Minneapolis, Minnesota 55401
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 Select Variable Account (the "Separate Account"), I have
examined documents relating to the establishment of the Separate Account by the
Board of Directors of ReliaStar Life Insurance Company (the "Company") as a
separate account for assets applicable to variable annuity contracts, pursuant
to Minnesota Statutes Sections 61A.13 to 61A.21, as amended, and the
Registration Statement, on Form N-4, as amended by Post-Effective Amendment No.
5 thereto, File No. 33-69892 (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 Minnesota.
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 Select Variable Account
We consent to the incorporation by reference in this Post-Effective Amendment
No. 5 to Registration Statement on Form N-4 (File No. 33-69892) of the ReliaStar
Select Variable Account filed under the Securities Act of 1933 and Amendment No.
6 to the Registration Statement under the Investment Company Act of 1940,
respectively, of our report dated February 7, 1997 on the audit of the financial
statements of ReliaStar Select Variable Account as of December 31, 1996 and for
each of the three years in the period then ended, and our report dated January
31, 1997, except for Note 14, as to which the date is February 23, 1997, on the
audit of the consolidated financial statements of ReliaStar Life Insurance
Company and subsidiaries as of and for the years ended December 31, 1996 and
1995 incorporated by reference in the Statement of Additional Information of
such Registration Statement, and to the references to us under the heading
"Financial Statements and Experts" appearing in the Prospectus and under the
headings "Independent Auditors" and "Financial Statements" appearing in the
Statement of Additional Information, all of which are part of such Registration
Statement.
/s/Deloitte & Touche
Minneapolis, Minnesota
July 18, 1997
