A MESSAGE TO VARIABLE LIFE POLICYOWNERS
We are now in the fourth year of significant increases in the U.S. Stock
Markets, as measured by the Dow Jones Industrial Average and the Standard &
Poor's 500' Index. Propelled by a second quarter increase of 2.2%, the Dow's
increase for the six months ended June 30, 1998, was 14.1%. The S&P increased
3.3% in the second quarter and 17.7% in the first half of 1998. Both the Dow
Jones Industrial Average and the S&P 500 are unmanaged indices.
The yield on the 30 year Treasury Bond has stabilized recently, so that at the
middle of July, 1998, it was approximately 5.7%. Short term rates, as measured
by the 3 month Treasury Bill, are yielding 5.1%, which is slightly ahead of a
year ago.
The U.S. Gross Domestic Product for the second quarter of 1998 has increased
1.4% while inflation remains low with the Consumer Price Index increasing by
1.7% year-over-year on June 30, 1998.
The Variable Life Insurance Policies which are the subject of this report are
distributed by Washington Square Securities, Inc. ("WSSI"), 20 Washington Avenue
South, Minneapolis, Minnesota 55401, (612) 372-5507. WSSI, a registered
broker-dealer, is an affiliated company of ReliaStar United Services, the issuer
of your insurance policy.
THE STOCK ACCOUNT. On June 30, 1998, the invested assets were allocated 99.8% to
63 different stock positions with the remainder in a high quality money market
fund. Our emphasis within the stock portfolio continues to be in issues which we
believe will perform well in the current environment and tend to hold their
values during market weakness.
THE MONEY MARKET ACCOUNT. On June 30, 1998, this portfolio held 20 different
issues of the highest quality commercial paper with maturities ranging from 1
week to 7 weeks.
THE INVESTMENT GRADE BOND ACCOUNT. Bonds and other assets and liabilities
represented 100.0% of the investable funds on June 30, 1998. The portfolio was
comprised of 25 bond issues, with scheduled maturities ranging from 16 months to
51 years.
THE ASSET ALLOCATION ACCOUNT. On June 30, 1998, invested assets were allocated
56.0% to common stocks, 44.0% to bonds and other assets and liabilities. There
were 63 different common stock issues in the portfolio and 34 different bond
positions.
THE OUTLOOK. For the remainder of 1998, we expect economic growth to slow by
0.5% to 1.0% given the Asian financial crisis. Inflation and interest rates
should remain near current levels. At the time of this report, macroeconomic
indicators are showing signs of moderation and low unemployment. While the
business expansion has been underway for almost 8 years, it is likely to be
sustained throughout 1998. Nevertheless, profits are expected to grow albeit at
a slower rate than in the past few years.
ReliaStar United Services is a wholly owned subsidiary of ReliaStar Financial
Corporation.
Respectfully,
/s/ Robert C. Salipante
-------------------------
Robert C. Salipante
Executive Vice President
ReliaStar United Services Life Insurance Company
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
RELIASTAR UNITED SERVICES VARIABLE LIFE SEPARATE ACCOUNT I
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
SUB-ACCOUNTS
------------
COMMON MONEY ASSET TOTAL
STOCK MARKET BOND ALLOCATION SUB-ACCOUNTS
------- ------- ------ ------------ ------------
ASSETS:
Investments in USLICO Series
Fund Portfolios (see below) ................................. $15,895,873 $ 896,982 $ 1,662,732 $10,742,232 $29,197,819
Policy loans ................................................ 2,029,048 63,829 99,322 1,391,498 3,583,697
----------- ----------- ----------- ----------- -----------
TOTAL ASSETS .............................................. 17,924,921 960,811 1,762,054 12,133,730 32,781,516
----------- ----------- ----------- ----------- -----------
LIABILITIES:
Net accrued for policy related
transactions due to (from) ReliaStar United Services ........ 266,549 27,926 63,965 339,772 698,212
Amounts payable to ReliaStar United Services ................. 500,000 500,000 1,000,000 1,000,000 3,000,000
----------- ----------- ----------- ----------- -----------
TOTAL LIABILITIES .......................................... 766,549 527,926 1,063,965 1,339,772 3,698,212
----------- ----------- ----------- ----------- -----------
NET ASSETS - FOR VARIABLE LIFE INSURANCE POLICIES ............ $17,158,372 $ 432,885 $ 698,089 $10,793,958 $29,083,304
=========== =========== =========== =========== ===========
Investments basis data:
Shares Owned ............................................... 1,083,563 896,982 165,118 852,558
Cost ....................................................... $13,316,928 $ 896,982 $ 1,664,545 $ 9,570,980
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
RELIASTAR UNITED SERVICES VARIABLE LIFE SEPARATE ACCOUNT I
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SUB-ACCOUNTS
------------
COMMON MONEY ASSET TOTAL
STOCK MARKET BOND ALLOCATION SUB-ACCOUNTS
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Reinvested dividends .............................. $ 110,146 $ 21,427 $ 42,183 $ 156,022 $ 329,778
Expenses:
Moitality and expense risk charges ................ 38,050 2,188 4,037 25,866 70,141
------------ ------------ ------------ ------------ ------------
Net investment income ............................. 72,096 19,239 38,146 130,156 259,637
------------ ------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAINS (LOSSES):
Net unrealized gains on investments ............... 1,387,780 -- 14,665 588,208 1,990,653
Net realized gains on investments ................. -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net increase resulting from investments ........... 1,387,780 -- 14,665 588,208 1,990,653
------------ ------------ ------------ ------------ ------------
Net increase resulting from operations .......... 1,459,876 19,239 52,811 718,364 2,250,290
------------ ------------ ------------ ------------ ------------
POLICY RELATED TRANSACTIONS:
Transfers in for net premiums ..................... 944,675 32,787 42,988 621,152 1,641,602
Transfers between sub-accounts .................... 51,585 (10,110) (7,307) (34,168) --
Transfers for withdrawal/surrender ................. (646,939) (5,701) (29,215) (447,764) (1,129,619)
TRANSFER OF INVESTMENT AND OPERATING RESULTS TO
RELIASTAR UNITED SERVICES ........................ (251,793) (17,505) (46,929) (244,625) (560,852)
------------ ------------ ------------ ------------ ------------
Net increase in net assets ....................... 1,557,404 18,710 12,348 612,959 2,201,421
NET ASSETS, BEGINNING OF PERIOD .................... 15,600,968 414,175 685,741 10,180,999 26,881,883
------------ ------------ ------------ ------------ ------------
NET ASSETS,END OF PERIOD ........................... $ 17,158,372 $ 432,885 $ 698,089 $ 10,793,958 $ 29,083,304
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
RELIASTAR UNITED SERVICES VARIABLE LIFE SEPARATE ACCOUNT I
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SUB-ACCOUNTS
------------
COMMON MONEY ASSET TOTAL
STOCK MARKET BOND ALLOCATION SUB-ACCOUNTS
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Reinvested dividends ............................. $ 118,871 $ 21,165 $ 48,469 $ 179,051 $ 367,556
Expenses:
Mortality and expense risk charges ................ 31,095 2,222 3,879 22,867 60,063
------------ ------------ ------------ ------------ ------------
Net Investment Income .............................. 87,776 18,943 44,590 156,184 307,493
NET UNREALIZED GAINS (LOSSES) ON INVESTMENTS ....... 1,491,367 -- (12,339) 530,229 2,009,257
NET REALIZED GAINS (LOSSES) ON INVESTMENTS ......... 9,412 -- (471) 14,725 23,666
------------ ------------ ------------ ------------ ------------
Net Increase In Net Assets
Resulting From Operations ........................ 1,588,555 18,943 31,780 701,138 2,340,416
FROM POLICY RELATED TRANSACTIONS:
Transfers in for net premiums ...................... 1,017,483 40,269 51,153 664,450 1,773,355
Transfers between sub-accounts ..................... 10,113 2,567 (952) (11,728) --
Transfers for withdrawal/surrender ................. (501,733) (9,067) (11,800) (428,291) (950,891)
TRANSFER OF INVESTMENT AND OPERATING
RESULTS TO RELIASTAR UNITED SERVICES ............... (306,576) (19,056) (37,563) (267,258) (630,453)
------------ ------------ ------------ ------------ ------------
Net increase in net assets .............. 1,807,842 33,656 32,618 658,311 2,532,427
NET ASSETS, BEGINNING OF PERIOD .................... 12,634,747 398,660 615,387 8,875,099 22,523,893
------------ ------------ ------------ ------------ ------------
NET ASSETS, END OF PERIOD .......................... $ 14,442,589 $ 432,316 $ 648,005 $ 9,533,410 $ 25,056,320
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
RELIASTAR UNITED SERVICES VARIABLE LIFE SEPARATE ACCOUNT I
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SUB-ACCOUNTS
------------
COMMON MONEY ASSET TOTAL
STOCK MARKET BOND ALLOCATION SUB-ACCOUNTS
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Reinvested dividends ............................. $ 137,897 $ 20,454 $ 54,071 $ 189,245 $ 401,667
Expenses:
Mortality and expense risk charges ................ 26,465 2,146 4,213 21,335 54,159
------------ ------------ ------------ ------------ ------------
Net investment income .............................. 111,432 18,308 49,858 167,910 347,508
NET UNREALIZED GAINS (LOSSES) ON INVESTMENTS ....... 846,043 -- (97,334) 80,574 829,283
NET REALIZED GAINS (LOSSES) ON INVESTMENTS ......... 24,719 -- (2,780) 31,574 53,513
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations ........................ 982,194 18,308 (50,256) 280,058 1,230,304
FROM POLICY RELATED TRANSACTIONS:
Transfers in for net premiums ..................... 1,073,826 41,710 56,371 741,442 1,913,349
Transfers between sub-accounts .................... 37,299 21,540 (5,283) (53,556) --
Transfers for withdrawal/surrender ................ (550,880) (18,814) (21,982) (288,151) (879,827)
TRANSFER OF INVESTMENT AND OPERATING
RESULTS (TO) FROM RELIASTAR UNITED SERVICES ........ (336,925) (20,676) 19,130 (230,607) (569,078)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets 1,205,514 42,068 (2,020) 449,186 1,694,748
NET ASSETS, BEGINNING OF PERIOD .................... 9,889,730 350,193 567,901 7,637,765 18,445,589
------------ ------------ ------------ ------------ ------------
NET ASSETS, END OF PERIOD .......................... $ 11,095,244 $ 392,261 $ 565,881 $ 8,086,951 $ 20,140,337
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
RELIASTAR UNITED SERVICES VARIABLE LIFE SEPARATE ACCOUNT I - NOTES TO
FINANCIAL STATEMENTS - JUNE 30, 1998
(1) ORGANIZATION - ReliaStar United Services Variable Life Separate Account I
("Separate Account I") was established by ReliaStar United Services Life
Insurance Company ("ReliaStar United Services"), previously United Services Life
Insurance Company, in 1986 under the insurance laws of the Commonwealth of
Virginia. Separate Account I operates as a unit investment trust under the
Investment Company Act of 1940 and is used to fund certain benefits for
variable life insurance policies issued by ReliaStar United Services. The assets
of Separate Account I and its sub-accounts are the property of ReliaStar United
Services. The portion of Separate Account I assets applicable to the variable
life policies, will not be charged with liabilities arising out of any other
business ReliaStar United Services may conduct. The net assets maintained in the
sub-accounts provide the basis for the periodic determination of the amount of
increased or decreased benefits under the policies. The net assets may not be
less than the amount required under the state insurance law to provide for
death benefits (without regard to the minimum death benefit guarantee) and other
policy benefits. Additional assets are held in ReliaStar United Services'
general account to cover the contingency that the guaranteed minimum death
benefit might exceed the death benefit which would have been payable in the
absence of such guarantee.
In January 1995, ReliaStar United Services became an indirect wholly-owned
subsidiary of ReliaStar Financial Corp. ("ReliaStar"), a financial services
company based in Minneapolis, Minnesota. Prior to that time ReliaStar United
Services was a wholly-owned subsidiary of USLICO Corporation. USLICO Series Fund
("Series Fund") is an open-end diversified management investment company whose
shares are sold only to ReliaStar United Services and other affiliates' separate
accounts.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Valuation of investments - Investments in shares of the Series Fund are
valued at the reported net asset value of the respective portfolios. The
aggregate cost of the investments acquired and the aggregate proceeds of
investments sold, for the six months ended June 30, 1998, were:
Cost of Shares Proceeds from
Sub-account Acquired Shares Sold
----------- -------- ------
Common Stock ................... $110,146 $ --
Money Market ................... 21,427 --
Bond ........................... 42,183 --
Asset Allocation ............... 156,022 --
-------- ------
Total .......................... $329,778 $ --
(b) Security Transactions - Purchases and sales are recorded on the trade
date.
(c) Federal Income Taxes - ReliaStar United Services is taxed as a life
insurance company under the Internal Revenue Code of 1986, as amended (the
"Code"). Since the sub-accounts are not separate entities from ReliaStar United
Services, and their operations form a part of ReliaStar United Services, they
will not be taxed separately as a "regulated investment company" under
Sub-chapter M of the Code. Under existing Federal income tax law, investment
income of the sub-accounts, to the extent that it is applied to increase
reserves under a contract, is not taxed and may be compounded for reinvestment
without additional tax to ReliaStar United Services.
(d) Charges Deducted from Premiums - Transfers to the sub-accounts of Separate
Account I for net premiums represent gross premiums payable for a policy year,
less deductions for sales loads, administrative expenses, premium taxes, risk
charges and additional premiums, if any, for optional insurance benefits.
(e) Amounts Payable to ReliaStar United Services - The amounts payable to
ReliaStar United Services in each sub-account arises from the amount allocated
from ReliaStar United Services to facilitate commencement of operations.
(f) Dividends - Dividends received on the shares held by the sub-accounts of
Separate Account I are reinvested to purchase additional shares of the
applicable portfolio of the Series Fund.
(g) Transfer of Investment and Operating Results from (to) ReliaStar United
Services - The sub-accounts transfer their investment and operating results in
excess of amounts required to meet policyholder reserve and liability amounts to
ReliaStar United Services. When investment and operating results are
insufficient to meet reserve requirements, ReliaStar United Services transfers
to the sub-accounts amounts sufficient to fund the deficiency. Also included in
this transfer are cost of insurance charges totaling $477,865, $507,200 and
$525,900 for all sub-accounts for the six months ended June 30, 1998, 1997 and
1996. respectively.
(3) ADMINISTRATION AND RELATED PARTY TRANSACTIONS - A daily charge is made by
Reliastar United Services against each sub-account's investments for mortality
and expense risks at an effective annual rate of .50%. The mortality risk
assumed is that the insured may live for a shorter period of time than estimated
and, therefore, a greater amount of death benefits than expected will be payable
in relation to the amount of premiums received. The expense risk assumed is that
expenses incurred in issuing and administering the policies will be greater than
estimated. Other costs of administering Separate Account I are absorbed by
ReliaStar United Services.
Washington Square Securities, Inc., a direct wholly-owned ReliaStar subsidiary,
acts as principal underwriter (as defined in the Investment Company Act of 1940)
of Separate Account I policies. Washington Square Advisers, Inc., previously
known as Washington Square Capital, Inc., also a direct wholly-owned ReliaStar
subsidiary, serves as investment adviser to the Series Fund with respect to
short-term and fixed maturity securities. Pilgrim Baxter Value Investors, Inc.
serves as investment sub-adviser to the Series Fund with respect to equity
securities.
Certain officers and directors of ReliaStar and ReliaStar United Services are
also officers and directors of Washington Square Securities, Inc., the Series
Fund and Washington Square Advisers, Inc.
6
<PAGE>
USLICO SERIES FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON MONEY ASSET TOTAL
STOCK MARKET BOND ALLOCATION PORTFOLIOS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO COMBINED
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents ........................... $ 567,213 $ 10,350 $ 42,024 $ 339,475 $ 959,062
Common stock, at fair value (cost
$24,741,373 and $7,840,913 respectively) .......... 30,025,518 -- -- 9,548,742 39,574,260
Bonds, at fair value (cost
$2,975,782 and $7,538,314 respectively) ........... -- -- 3,022,049 7,730,330 10,752,379
Commercial paper, at amortized
cost which approximates fair value ................ -- 5,965,842 -- -- 5,965,842
Dividends receivable ................................ 40,095 -- -- 12,790 52,885
Interest receivable ................................. 752 -- 35,051 80,069 115,872
Securities not settled, net ......................... (372,353) -- (184,542) (595,966) (1,152,861)
------------ ------------ ------------ ------------ ------------
Total assets ...................................... 30,261,225 5,976,192 2,914,582 17,115,440 56,267,439
------------ ------------ ------------ ------------ ------------
LIABILITIES
Accrued expenses .................................... 166,729 50,360 16,372 63,107 296,568
------------ ------------ ------------ ------------ ------------
TOTAL LIABILITIES ................................. 166,729 50,360 16,372 63,107 296,568
------------ ------------ ------------ ------------ ------------
NET ASSETS .......................................... $ 30,094,496 $ 5,925,832 $ 2,898,210 $ 17,052,333 $ 55,970,871
============ ============ ============ ============ ============
NET ASSET VALUE PER SHARE ........................... $ 14.78 $ 1.00 $ 10.08 $ 12.66
============ ============ ============ ============
SHARES OUTSTANDING .................................. 2,035,744 5,925,832 287,627 1,347,295
============ ============ ============ ============
NET ASSETS CONSIST OF:
Capital stock ($.001 par value) ..................... $ 2,036 $ 5,926 $ 288 $ 1,347
Additional paid-in capital .......................... 24,139,412 5,919,906 2,838,995 14,897,972
Accumulated undistributed
net investment income ............................. 18,271 -- 4,074 18,496
Accumulated undistributed net
realized gains from
investment transactions ........................... 650,631 -- 8,586 234,673
Net unrealized appreciation of investments .......... 5,284,146 -- 46,267 1,899,845
------------ ------------ ------------ ------------
Net assets ........................................ $ 30,094,496 $ 5,925,832 $ 2,898,210 $ 17,052,333
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
USLICO SERIES FUND-COMMON STOCK PORTFOLIO
STATEMENT OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
CNMMON STOCK
FAIR
SHARES VALUE
COMPUTERS & ELECTRONICS - 2.86%
- -------------------------------
International Business Machines Corp. ............ 4,100 $ 470,731
Lexmark Intemational Group ....................... 6,400 390,400
-----------
861,131
-----------
DRUGS & HEALTH CARE - 2.45%
- ---------------------------
Columbia/HCA Healthcare Corp ..................... 20,000 582,500
Tenet Healthcare Corp. ........................... 5,000 155,300
-----------
737,800
-----------
ENERGY-10.58%
- -------------
Atlantic Richfield Co. ........................... 7,500 585,937
Mobil Corp. ...................................... 8,000 613,000
R & B Falcon Corp. ............................... 15,000 339,375
Repsol S.A. ADR .................................. 9,000 495,000
Rowan Co. ........................................ 14,200 276,013
Santa Fe International Corp. ..................... 10,000 302,500
Texaco, Inc. ..................................... 9,600 573,000
-----------
3,184,825
-----------
FINANCE - 31.55%
- ----------------
Allstate Corp. ................................... 3,000 274,687
American General Corp. ........................... 7,300 519,669
Banc One Corp. ................................... 11,550 644,634
Bear Stearns Companies, Inc. ..................... 6,000 341,250
Chase Manhattan Corp. ............................ 12,200 921,100
Cigna Corp. ...................................... 4,000 276,000
Citicorp ......................................... 1,200 179,100
Conseco, Inc. .................................... 10,000 467,500
First Union Corp. ................................ 15,000 873,750
Fleet Financial Group, Inc. ...................... 9,000 751,500
Hartford Financial Services Group ................ 8,000 915,000
Morgan Stanley Dean Witter & Co. ................. 5,300 484,287
NationsBank Corp. ................................ 11,000 841,500
Nationwide Financial Services, Inc. .............. 13,000 663,000
The PMI Group, Inc. .............................. 8,800 645,700
Republic New York Corp. .......................... 5,000 314,688
Travelers Group, Inc. ............................ 6,300 381,938
-----------
9,495,303
-----------
FOOD, HOUSE & PERSONAL PRODUCTS - 3.76%
- ---------------------------------------
Albertson's, Inc. ................................ 4,500 233,156
Centex Corp. ..................................... 11,900 449,225
Philip Morris Companies, Inc. .................... 11,400 448,875
-----------
1,131,256
-----------
INDUSTRIAL - 16.70%
- -------------------
B.F. Goodrich Co. ................................ 4,500 $223,312
Borg Warner Automotive, Inc. ..................... 7,000 336,437
Case Corp ........................................ 4,100 197,825
Deere & Co. ...................................... 8,500 449,437
Ford Motor Co. ................................... 2,800 165,200
General Dynamics Corp. ........................... 11,000 511,500
Ingersoll Rand Co. ............................... 9,000 396,563
Johnson Controls, Inc. ........................... 9,400 537,563
Lafarge Corp. .................................... 16,000 629,000
PPG Industries, Inc. ............................. 4,000 278,250
Southdown Inc. ................................... 7,200 513,900
Sundstrand Corp. ................................. 5,000 286,250
United Technologies Corp. ........................ 5,400 499,500
-----------
5,024,737
-----------
REALTY - 4.80%
- --------------
Equity Residential Properties Trust .............. 7,000 332,062
First Industrial Realty Trust .................... 10,000 318,125
Nationwide Health Properties, Inc. ............... 10,000 238,750
Simon Debartolo Group, Inc. ...................... 17,100 555,750
-----------
1,444,687
-----------
RETAIL TRADE - 7.76%
- --------------------
Federated Department Stores, Inc. ................ 10,000 538,125
J.C. Penney Company, Inc. ........................ 7,500 542,344
Nieman Marcus Group, Inc. ........................ 20,000 868,750
V F Corp. ........................................ 7,500 386,250
-----------
2,335,469
-----------
TELECOMMUNICATIONS - 8.74%
- --------------------------
A T &T Corp. ..................................... 12,000 685,500
Bell Atlantic Corp. .............................. 16,164 737,483
GTE Corp.......................................... 15,400 856,625
SBC Communications, Inc. ......................... 8,800 352,000
-----------
2,631,608
-----------
TRANSPORTATION - 7.97%
- ----------------------
AMR Corp. ........................................ 4,800 399,600
Burlington Northern Santa Fe ..................... 5,500 540,031
Canadian National Railway Co. .................... 3,000 159,933
Delta Air Lines, Inc. ............................ 5,000 646,250
Southwest Air Lines Co. .......................... 22,000 651,750
-----------
2,397,564
-----------
UTILITIES - 2.60%
- -----------------
Florida Progress Corp. ........................... 12,900 530,513
Potomac Electric Power Co. ....................... 10,000 250,625
-----------
781,138
-----------
TOTAL COMMON STOCK ............................... 99.77% 30,025,518
OTHER ASSETS AND LIABILITIES, NET ................ 0.23% 68,978
-----------
NET ASSETS ....................................... 100.00% $30,094,496
===========
See accompanying notes to financial statements
8
<PAGE>
USLICO SERIES FUND-MONEY MARKET PORTFOLIO
STATEMENT OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST
COMMERCIAL PAPER ------------ -----------
<S> <C> <C>
Bank of New York, 5.53%, Due July 6, 1998 .............. $ 300,000 $ 299,770
Clorox Co., 5.51%, Due July 7, 1998 .................... 300,000 299,724
Du Pont E I De Nemours & Co., 5.49%, Due July 7, 1998 .. 300,000 299,726
Banc One Corp., 5.50%, Due July 8, 1998 ................ 300,000 299,679
General Electric Capital Corp., 5.47%, Due July 13, 1998 300,000 299,453
Gannett Inc., 5.53%, Due July 14, 1998 ................. 300,000 299,401
Motorola Inc., 5.52%, Due July 14, 1998 ................ 300,000 299,402
Chevron USA Inc., 5.50%, Due July 17, 1998 ............. 300,000 299,267
Unilever Corp., 5.48%, Due July 17, 1998 ............... 300,000 299,269
AT&T Co., 5.49%, Due July 20, 1998 ..................... 300,000 299,131
Coca Cola Co., 5.46%, Due July 20, 1998 ................ 300,000 299,136
American General Finance Corp., 5.51%, Due July 24, 1998 300,000 298,944
Heinz H J Co., 5.50%, Due July 24, 1998 ................ 300,000 298,946
Eastman Kodak Co., 5.51%, Due July 28, 1998 ............ 300,000 298,760
Florida Power Corp., 5.51%, Due July 29, 1998 .......... 300,000 298,714
Wisconsin Electric Power Co., 5.54%, Due July 30, 1998 . 300,000 298,661
Beneficial Corp., 5.53%, Due August 3, 1998 ............ 300,000 298,479
Procter & Gamble Co., 5.52%, Due August 7, 1998 ........ 300,000 298,298
American Express Co., 5.52%, Due August 10, 1998 ....... 285,000 283,252
Merrill Lynch & Co., 5.54%, Due August 17, 1998 ........ 300,000 297,830
----------- ----------
TOTAL COMMERCIAL PAPER 100.68% ............ $ 5,985,000 5,965,842
===========
OTHER ASSETS AND LIABILITIES, NET (0.68%) ........... (40,010)
-----------
NET ASSETS 100.00% ............ $ 5,925,832
===========
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
USLICO SERIES FUND-BOND PORTFOLIO
STATEMENT OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PAR FAIR
VALUE VALUE
BONDS ---------- ----------
<S> <C> <C>
GOVERNMENT - 40.64%
- ------------------
FHLMC, 5.58%, Due December, 2026 # ................................................. $ 183,722 $ 187,115
FNMA, 5.84%, Due July, 2027 # ...................................................... 68,840 70,254
FNMA, 6.00%, Due July, 2027 # ...................................................... 275,312 279,885
GNMA Pool 181826, 9.00%, Due March, 2021 # ......................................... 27,889 29,920
US Treasury Note, 5.50%, Due March, 2000 ........................................... 381,000 381,080
US Trust Security Strips, 6.97%, Due February, 2019 ................................ 300,000 92,343
US Trust Security Strips, 6.93%, Due February, 2021 ................................ 500,000 137,260
---------- ----------
1,736,763 1,177,857
---------- ----------
FINANCE - 58.46%
- ----------------
Abbey National PLC, 7.35%, Due October, 2049 # ..................................... 100,000 106,186
Advanta Mortgage Loan Trust, 6.06%, Due March, 2028 ................................ 50,000 49,990
Amerco, 6.65%, Due October, 1999 ................................................... 150,000 149,943
Amresco Residential Securities Corp., 6.30%, Due January, 2028 ..................... 100,000 100,172
BHP Finance USA, 6.42%, Due March, 2026 # .......................................... 100,000 100,304
Equity Office Properties Trust, 6.38%, Due February, 2003 .......................... 150,000 149,363
Hyder PLC, 6.75%, Due December, 2004 ............................................... 100,000 101,405
IBJ Preferred Capital Co., 8.79%, Due December, 2049 # ............................. 25,000 22,887
Lehman Brothers, 7.36%, Due December, 2003 ......................................... 100,000 105,074
Macsaver Financial Services, 7.40%, Due February, 2002 ............................. 150,000 147,333
Malayan Banking Berhad-NY, 7.13%, Due September, 2005 .............................. 100,000 82,352
MBNA Corp., 7.25%, Due September, 2002 ............................................. 100,000 103,645
Noranda Forest Inc., 6.88%, Due November, 2005 ..................................... 100,000 101,753
SB Treasury Co., 9.40%, Due December, 2049 # ....................................... 25,000 24,846
Salomon Brothers Mortgage Securities VII, 6.30%, Due May, 2028 ..................... 145,000 145,000
TriNet Corporate Realty Trust, 6.75%, Due March, 2003 .............................. 100,000 100,102
United Companies Financial Corp., 9.35%, Due November, 1999 ........................ 100,000 103,853
---------- ----------
1,695,000 1,694,208
---------- ----------
INDUSTRIAL - 5.18%
- ------------------
US Filter Corp., 6.38%, Due May, 2011 .............................................. 150,000 149,984
---------- ----------
TOTAL BONDS 104.27% .................................... $3,581,763 3,022,049
==========
OTHER ASSETS AND LIABILITIES, NET (4.27)% .................................... (l23,839)
----------
NET ASSETS 100.00% .................................... $2,898,210
==========
</TABLE>
# - Callable at the option of the issuer.
See accompanying notes to financial statements.
10
<PAGE>
USLICO SERIES FUND-ASSET MLOCALION PORTFOLIO
STATEMENT OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
COMMON STOCK
FAIR
SHARES VALUE
-------- ---------
COMPUTERS & ELECTRONICS - 1.59%
International Business Machines Cor ............ 1,300 $ 149,256
Lexmark ........................................ 2,000 122,000
---------
271,256
---------
DRUGS & HEALTH CARE - 1.30%
Columbia/HCA Healthcare Corp. .................. 6,000 174,750
Tenet Healthcare Corp. ......................... 1,500 46,590
---------
221,340
---------
ENERGY - 6.06%
- --------------
Atlantic Richfield Co. ......................... 2,500 195,312
Mobil Corp. .................................... 2,500 191,563
R & B Falcon Corp. ............................. 5,000 113,125
Repsol S.A. ADR ................................ 3,000 165,000
Rowan Co. ...................................... 4,500 87,469
Santa Fe International Corp. ................... 3,200 96,800
Texaco,Inc ..................................... 3,100 185,031
---------
1,034,300
---------
FINANCE - 17.57%
- ----------------
Allstate Corp. ................................. 900 82,406
American General Corp. ......................... 2,300 163,731
Banc One Corp. ................................. 3,630 202,599
Bear Stearns Companies, Inc. ................... 2,000 113,750
Chase Manhattan Corp. .......................... 3,900 294,450
Cigna Corp. .................................... 1,200 82,800
Citicorp ....................................... 300 44,775
Conseco, Inc. .................................. 3,000 140,250
First Union Corp. .............................. 4,400 256,300
Fleet Financial Group, Inc. .................... 2,900 242,150
Hartford Financial Services Group .............. 2,600 297,375
Morgan Stanley Dean Witter & Co. ............... 1,700 155,338
NationsBank Corp. .............................. 3,300 252,450
Nationwide Financial Services, Inc. ............ 4,000 204,000
The PMI Group, Inc. ............................ 2,800 205,450
Republic New York Corp. ........................ 1,800 113,288
Travelers Group, Inc. .......................... 2,400 145,500
---------
2,996,612
---------
FOOD, HOUSE & PERSONAL PRODUCTS - 2.13%
- ---------------------------------------
Albertson's, Inc. .............................. 1,500 77,719
Centex Corp. ................................... 3,800 143,450
Philip Morris Companies, Inc. .................. 3,600 141,750
---------
362,919
---------
INDUSTRIAL - 9.79%
- ------------------
B. F. Goodrich Co. ............................. 1,400 $ 69,475
Borg Warner Automotive, Inc. ................... 2,500 120,156
Case Corp. ..................................... 1,200 57,900
Deere & Co. .................................... 2,500 132,187
Ford Motor Co. ................................. 900 53,100
General Dynamics Corp. ......................... 3,200 148,800
Ingersoll Rand Co. ............................. 3,100 136,594
Johnson Controls, Inc. ......................... 3,000 171,563
Lafarge Corp. .................................. 5,300 208,356
PPG Industries, Inc. ........................... 1,500 104,344
Southdown Inc. ................................. 2,500 178,438
Sundstrand Corp. ............................... 1,800 103,050
United Technologies Corp. ...................... 2,000 185,000
---------
1,668,963
---------
REALTY-2.78%
- ------------
Equity Residential Properties Trust ............ 2,000 94,875
First Industrial Realty Trust .................. 3,500 111,344
Nationwide Health Properties, Inc. ............. 3,700 88,337
Simon Debartolo Group, Inc. .................... 5,500 178,750
---------
473,306
---------
RETAIL TRADE - 4.09%
- ---------------------
Federated Department Stores, Inc. .............. 3,600 193,725
J.C. Penney Company, Inc........................ 2,000 144,625
Nieman Marcus Group, Inc........................ 6,000 260,625
V F Corp. ...................................... 1,900 97,850
---------
696,825
---------
TELECOMMUNICATIONS - 4.92%
- --------------------------
AT&T Corp. ..................................... 3,800 217,075
Bell Atlantic Corp. ........................... 5,142 234,604
GTE Corp. ...................................... 4,950 275,344
SBC Communications, Inc. ....................... 2,800 112,000
---------
839,023
---------
TRANSPORTATION - 4.41%
- ----------------------
AMR Corp. ...................................... 1,600 133,200
Burlington Northern Santa Fe ................... 1,800 176,737
Canadian National Railway Co. .................. 1,000 53,311
Delta Air Lines, Inc. .......................... 1,400 180,950
Southwest Air Lines Co. ........................ 7,000 207,375
---------
751,573
---------
UTILITIES - 1.36%
- ------------------
Florida Progress Corp........................... 2,000 82,250
Potomac Electric Power Co. ..................... 6,000 150,375
---------
232,625
---------
TOTAL COMMON STOCK 56.00%...... 9,548,742
---------
See accompanying notes to financial statements.
(continued)
11
<PAGE>
USLICO SERIES FUND-ASSET ALLOCATION PORTFOLIO
STATEMENT OF INVESTMENTS JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PAR FAIR
VALUE VALUE
BONDS ---------- ----------
<S> <C> <C>
GOVERNMENT - 19.03%
- -------------------
FHLMC, 9.00%, Due October, 2019 # ......................................... $ 11,831 $ 12,496
FHLMC, 5.58%, Due December, 2026 # ........................................ 480,504 459,379
FNMA, 5.84%, Due July, 2027 # ............................................. 344,201 351,270
FNMA, 6.00%, Due July, 2027 # ............................................. 732,331 744,495
GNMA, 10.00%, Due February, 2016 # ........................................ 8,820 9,758
US Treasury Note, 5.50%, Due March, 2000 .................................. 840,000 840,176
US Trust Security Strips, Interest, 6.93%, Due February, 2015 ............. 200,000 77,638
US Trust Security Strips, Interest, 6.71%, Due February, 2019 ............. 1,000,000 307,810
US Trust Security Strips, Interest, 6.93%, Due February, 2021 ............. 1,500,000 411,780
---------- ----------
5,117,687 3,244,802
---------- ----------
FINANCE - 22.45%
- ----------------
Abbey National PLC, 7.35%, Due October, 2049 # ............................ 100,000 106,186
Advanta Mortgage Loan Trust, 6.06%, Due March, 2028 ....................... 100,000 99,980
Amerco, 6.65%, Due October, 1999 .......................................... 250,000 249,905
Amerco Medium Term Notes, 6.89%, Due September, 1998 ...................... 110,000 110,371
Amresco Residential Securities Corp., 6.30%, Due January, 2028 ............ 200,000 200,343
BHP Finance USA, 6.42%, Due March, 2026 # ................................. 100,000 100,304
Discover Card Trust 1991-D, 8.00%, Due October, 2000 ...................... 100,000 100,367
Equity Office Properties Trust, 6.375%, Due February, 2003 ................ 300,000 298,725
Hyder PLC, 6.75%, Due December, 2004 ...................................... 300,000 304,215
IBJ Preferred Capital Co., 8.79%, Due December, 2049 ...................... 125,000 114,437
Lehman Brothers Inc., 7.36%, Due December, 2003 ........................... 300,000 315,222
Malayan Banking Berhad-NY, 7.125%, Due September, 2005 .................... 100,000 82,352
Macsaver Financial Services Inc., 7.40%, Due February, 2002 ............... 350,000 343,777
MBNA Corp.. 7.25%, Due September, 2002 .................................... 100,000 103,645
Nomura Depositor Trust, 6.76%, Due January, 2003 .......................... 100,000 100,031
Noranda Forest Inc., 6.88%, Due November, 2005 ............................ 100,000 101,753
SB Treasury Co., 9.40% Due December, 2049 # ............................... 125,000 124,230
Salomon Brothers Mortgage Securities VII, 6.30%, Due May, 2028 ............ 365,000 365,000
Time Warner Pass Through Asset Trust, 6.10%, Due December, 2001 ........... 200,000 199,750
TriNet Corporate Realty Trust, 6.75%, Due March, 2003 ..................... 200,000 200,204
United Companies Financial Corp., 9.35%, Due November, 1999 ............... 200,000 207,706
---------- ----------
3,825,000 3,828,503
---------- ----------
INDUSTRIAL - 2.65%
- ------------------
Canadian Pacific, 6.875%, Due April, 2003 ................................. 100,000 102,779
US Filter Corp., 6.38%, Due May, 2011 ..................................... 350,000 349,962
---------- ----------
450,000 452,741
---------- ----------
# - Callable at the option of the issuer.
(continued)
See accompanying notes to financial statements
12
<PAGE>
USLICO SERIES FUND-ASSET ALLOCATION PORTFOLIO
STATEMENT OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
PAR FAIR
VALUE VALUE
BONDS, CONTINUED ---------- ----------
UTILITIES - 1.20%
- ------------------
Illinois Bell Telephone, 7.625%, Due April, 2006 # ........................ $100,000 $100,990
Kansas City Power & Light, 7.40%, Due February, 2008 # .................... 100,000 103,294
-------- --------
200,000 204,284
-------- --------
TOTAL BONDS 45.33% ......................... $9,592,687 7,730,330
========== ---------
TOTAL INVESTMENTS 101.33% ......................... 17,279,072
OTHER ASSETS AND LIABILITIES, NET (1.33)% ......................... (226,739)
----------
NET ASSETS 100.00% ......................... $17,052,333
===========
</TABLE>
# - Callable at the option of the issuer.
See accompanying notes to financial statements.
13
<PAGE>
USLICO SERIES FUND
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON MONEY ASSET
STOCK MARKET BOND ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Dividends ........................................... $ 303,843 $ -- $ -- $ 97,765
Interest ............................................ 20,772 163,293 86,487 219,682
------------ ------------ ------------ ------------
Total income ...................................... 324,615 163,293 86,487 317,447
------------ ------------ ------------ ------------
Expenses:
Accounting fee ...................................... 18,151 2,235 707 7,529
Custodian fee ....................................... 13,540 6,431 4,104 16,243
Management fee ...................................... 35,922 7,258 3,531 20,534
Other administrative ................................ 40,152 5,849 2,252 17,297
------------ ------------ ------------ ------------
Total expenses .................................... 107,765 21,773 10,594 61,603
------------ ------------ ------------ ------------
NET INVESTMENT INCOME ................................... 216,850 141,520 75,893 255,844
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS:
Net proceeds from sales ................................ 12,298,975 -- 1,243,009 6,637,587
Cost of securities sold ................................ (11,695,271) -- (1,234,423) (6,413,738)
------------ ------------ ------------ ------------
NET REALIZED GAINS ON INVESTMENTS ....................... 603,704 -- 8,586 223,849
NET UNREALIZED GAINS ON INVESTMENTS ..................... 1,982,297 -- 11,357 672,546
------------ ------------ ------------ ------------
NET GAINS ON INVESTMENTS ................................ 2,586,001 -- 19,943 896,395
------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .......................... 2,802,851 141,520 95,836 1,152,239
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................................. (206,937) (141,520) (73,481) (246,561)
CAPITAL SHARE TRANSACTIONS .............................. 206,937 141,520 73,481 246,561
------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS .......................... 2,802,851 141,520 95,836 1,152,239
NET ASSETS, BEGINNING OF YEAR ........................... 27,291,645 5,784,312 2,802,374 15,900,094
------------ ------------ ------------ ------------
NET ASSETS, END OF PERIOD ............................... $ 30,094,496 $ 5,925,832 $ 2,898,210 $ 17,052,333
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
USLICO SERIES FUND
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON MONEY ASSET
STOCK MARKET BOND ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Dividends ........................................... $ 309,536 $ -- $ -- $ 99,581
Interest ............................................ 15,548 158,989 95,822 243,600
------------ ------------ ------------ ------------
Total income ...................................... 325,084 158,989 95,822 343,181
------------ ------------ ------------ ------------
Expenses:
Accounting fee ...................................... 6,716 1,705 793 4,166
Custodian fee ....................................... 7,237 5,648 1,120 6,004
Management fee ...................................... 29,353 7,101 3,342 17,857
Other administrative ................................ 44,753 6,849 4,772 25,543
------------ ------------ ------------ ------------
Total expenses .................................... 88,059 21,303 10,027 53,570
------------ ------------ ------------ ------------
NET INVESTMENT INCOME ................................... 237,025 137,686 85,795 289,611
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS:
Net proceeds from sales ................................ 10,805,263 -- 855,011 4,512,921
Cost of securities sold ................................ (9,333,389) -- (830,363) (4,008,914)
------------ ------------ ------------ ------------
NET REALIZED GAINS ON INVESTMENTS ....................... 1,471,874 -- 24,648 504,007
NET UNREALIZED GAINS ON INVESTMENTS ..................... 1,396,495 -- (48,031) 356,608
------------ ------------ ------------ ------------
NET GAINS ON INVESTMENTS ................................ 2,868,369 -- (23,383) 860,615
------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .......................... 3,105,394 137,686 62,412 1,150,226
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................................. (227,980) (137,686) (85,005) (284,617)
CAPITAL SHARE TRANSACTIONS .............................. (303,436) (205,117) 40,938 (59,187)
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS .............. 2,573,978 (205,117) 18,345 806,422
NET ASSETS, BEGINNING OF YEAR ........................... 23,558,091 5,979,861 2,783,385 14,614,568
------------ ------------ ------------ ------------
NET ASSETS, END OF PERIOD ............................... $ 26,132,069 $ 5,774,744 $ 2,801,730 $ 15,420,990
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
USLICO SERIES FUND - NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1998
(1) ORGANIZATION - USLICO Series Fund (the Fund) is an open-end, diversified
management investment company registered under the Investment Company Act of
1940 and consisting of four separate series (Portfolios), each of which has its
own investment objectives and policies. The Fund was organized as a business
trust under the laws of Massachusetts on January 19, 1988. Shares of the
Portfolios are sold only to separate accounts of ReliaStar United Services Life
Insurance Company (ReliaStar United Services) and ReliaStar Life Insurance
Company of New York (ReliaStar Life of New York), previously ReliaStar Bankers
Security Life Insurance Society, to serve as the investment medium for variable
life insurance policies issued by these companies. The separate accounts invest
in shares of one or more of the Portfolios, in accordance with allocation
instructions received from policyowners. Each Portfolio share outstanding
represents a beneficial interest in the respective Portfolio and carries a par
value of $.001. The Fund has an unlimited number of shares authorized.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) VALUATION OF INVESTMENTS
1. Common Stock, Bond and Asset Allocation Portfolios--Equity securities
for which market quotations are readily available are stated at that fair
value. Fair value is determined on the basis of last reported sales price,
or, if no sales are reported, the latest available bid price obtained from a
quotation reporting system or from established market makers. Money market
instruments are valued at fair value, except that instruments maturing in
sixty days or less are valued using amortized cost which approximates fair
value. Debt securities (other than obligations having a maturity of sixty
days or less at their date of acquisition) are valued on the basis of market
quotations obtained from brokers and dealers or pricing services, which take
into account appropriate factors such as institutional-size trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics, and other market data. Debt obligations
having a maturity of sixty days or less are generally valued at amortized
cost, which approximates fair value.
2. Money Market Portfolio - Investment securities held by the Money Market
Portfolio are all carried at amortized cost.
(B) INCOME RECOGNITION - Dividend income is recorded on the ex-dividend
date. Interest income is accrued daily. Realized gains and losses on the
sale of securities are computed on the basis of the identified cost of the
related securities sold and are recognized at the date of trade.
(C) OTHER ADMINISTRATIVE FEES - Other administrative fees are charged
to the Portfolios at an annual percentage rate of .5%. Fund expenses
directly attributable to a Portfolio are charged to that Portfolio. All
other expenses are allocated proportionately among all Portfolios in
relation to respective net assets.
(D) FEDERAL INCOME TAXES - Each Portfolio intends to qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code. Accordingly, a Portfolio will not be subject to Federal income taxes
if it makes distributions of net investment income and net realized gains
in compliance with subchapter M and meets certain other requirements.
Normally, however, such distributions are automatically reinvested in
additional portfolio shares.) As the Fund is believed to be in compliance
with these requirements, no federal income tax provision has been
provided.
(E) MANAGEMENT FEES - The Fund's investment advisers are compensated
with a quarterly management fee based on an annual percentage of the
average daily net assets of each Portfolio. During 1998, 1997, i996 and
1995, the adviser was paid a fee at an annual rate of .25% of the net
asset value of the Portfolios except for the period from January 1, 1995
to June 30, 1995 during which no investment advisory fee was charged
pending approval of new advisory agreements which were received on June
30, 1995. The maximum management fee which may be charged is an annual
percentage rate of.50% on the first $100 million of average daily net
assets and .45% of average daily net assets in excess thereof.
(F) CONTRIBUTIONS AND WITHDRAWALS - Net funds contributed into or
withdrawn from the Fund are made on the basis of the net asset value per
share prevailing at the close of business on the preceding business day.
(G) RECLASSIFICATIONS - Certain prior year amounts have been
reclassified to conform to current year presentation.
(3) AFFILIATIONS AND RELATED PARTY TRANSACTIONS - ReliaStar United Services and
ReliaStar Life of New York are indirect wholly-owned subsidiaries of ReliaStar
Financial Corp. ("ReliaStar"), a financial services company based in
Minneapolis, Minnesota. Washington Square Advisers, Inc., previously Washington
Square Capital, Inc., a direct wholly-owned ReliaStar subsidiary, serves as
investment adviser to the Fund. The Fund's distributor, Washington Square
Securities, Inc., is also a direct wholly-owned ReliaStar subsidiary. Newbold's
Asset Management, Inc. serves as investment sub-adviser for the Common Stock
Portfolio and the common stock portion of the Asset Allocation Portfolio. The
Fund purchases securities through Newbold's Asset Management, Inc. in the normal
course of business. Effective January 1, 1998, Newbold's Asset Management, Inc.
changed its name to Pilgrim Baxter Value Investors, Inc.
Officers of the Fund are also officers of ReliaStar, Washington Square
Securities, Inc.. ReliaStar United Services and ReliaStar Life of New York and
receive compensation therefrom. They do not receive additional compensation for
services rendered to the Fund. Trustees of the Board receive a fee of $1,000 for
each meeting attended during 1998. $500 was paid for each meeting attended
during 1997 and 1996. For the six months ended June 30, 1998, 1997, and 1996,
total fees paid to the Trustees aggregated $8,000, $4,000, and $3,000,
respectively, for all Portfolios combined.
16
<PAGE>
(4) INVESTMENTS - As of June 30, 1998, net unrealized appreciation for each
portfolio was as follows:
Net
Unrealized
Portfolio Appreciation Depreciation Appreciation
- ------------ ------------ ------------ ------------
Common Stock $5,794,532 $(510,386) $5,284,146
Money Market N/A N/A N/A
Bond 62,449 (23,182) 46,267
Asset Allocation 2,102,718 (202,873) 1,899,845
(5) CAPITAL SHARE TRANSACTIONS - Transactions in capital stock for the six
months ended June 30, were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
---------------------------- ----------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
COMMON STOCK PORTFOLIO:
Shares sold .............................................. -- -- $ -- $ --
Shares issued in reinvestment of dividends ............... 14,060 15,488 206,937 227,980
---------- ---------- ---------- ----------
14,060 15,488 206,937 227,980
Shares redeemed .......................................... -- (38,901) -- (531,416)
---------- ---------- ---------- ----------
Net increase (decrease) ................................ 14,060 (23.413) $3,982,104 $ (303.436)
========== ========== ========== ==========
MONEY MARKET PORTFOLIO:
Shares sold .............................................. -- -- $- $-
Shares issued in reinvestment of dividends ............... 141,520 137,686 141,520 137,686
---------- ---------- ---------- ----------
141,520 137,686 141,520 137,686
Shares redeemed .......................................... -- (342,803) -- (342,803)
---------- ---------- ---------- ----------
Net increase (decrease) .................................. 141,520 (205,117) $ 141,520 $ (205,117)
========== ========== ========== ==========
BOND PORTFOLIO:
Shares sold .............................................. -- -- $ -- $ --
Shares issued in reinvestment of dividends ............... 7,329 8,387 73,481 85,005
---------- ---------- ---------- ----------
7,329 8,387 73,481 85,005
Shares redeemed .......................................... -- (4,475) -- (44,067)
---------- ---------- ---------- ----------
Net increase (decrease) ................................. 7,329 3,912 $ 73,481 $ 40,938
========== ========== ========== ==========
ASSET ALLOCATION PORTFOLIO:
Shares sold .............................................. -- -- $ -- $ --
Shares issued in reinvestment of dividends ............... 19,580 22,632 246,561 284,617
---------- ---------- ---------- ----------
19,580 22,632 246,561 284,617
Shares redeemed .......................................... -- (28,781) -- (343,804)
---------- ---------- ---------- ----------
Net increase (decrease) ................................ 19,580 (6,149) $ 246,561 $ (59,187)
========== ========== ========== ==========
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
USLICO SERIES FUND
CONDENSED FINANCIAL INFORMATION
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
COMMON MONEY ASSET
STOCK MARKET BOND ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- --------- -----------
FINANCIAL HIGHLIGHTS (per share)
Net asset value, beginning of period....................... $ 13.50 $ 1.00 $ 10.00 $ 11.98
Income from investment operations:
Net investment income...................................... 0.11 0.02 0.27 0.19
Net realized and unrealized
gains (losses) on securities.............................. 1.27 0.00 0.07 0.67
----------- ---------- ------------- --------------
Total from investment operations .......................... 1.38 0.02 0.34 0.86
Distributions:
Distribution of income..................................... (0.10) (0.02) (0.26) (0.18)
Distribution of capital gains.............................. - - - -
----------- ---------- ------------- --------------
Net asset value, end of period............................. $ 14.78 $ 1.00 $ 10.08 $ 12.66
=========== ========= ============== ==============
Total return............................................... 10.22% 2.00% 3.40% 7.18%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period.................................. $30,094,496 $5,925,832 $2,898,210 $17,052,333
Expenses to average net assets............................ 0.37% 0.37% 0.37% 0.37%
Net investment income to average net assets............... 0.75% 2.42% 2.67% 1.55%
Portfolio turnover rate .................................. 43.31% N/A 44.71% 40.91%
Weighted average number of shares outstanding
for six months ended June 30, 1998....................... 2,025,571 5,854,271 282,265 1,332,971
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
FINANCIAL HIGHLIGHTS (per share)
Net asset value, beginning of period...................... $ 13.25 $ 1.00 $ 10.02 $ 11.85
Income from investment operations:
Net investment income..................................... 0.13 0.02 0.31 0.24
Net realized and unrealized
gains (losses) on securities............................ 1.65 - (0.07) 0.71
---------- ---------- ----------- -------------
Total from investment operations ......................... 1.78 0.02 0.24 0.95
Distributions:
Distribution of income.................................... (0.13) (0.02) (0.31) (0.23)
Distribution of capital gains............................. - - - -
---------- --------- ---------- -------------
Net asset value, end of period............................ $ 14.90 $ 1.00 $ 9.95 $ 12.57
=========== ========== ============== ==============
Total return.............................................. l3.43% 2.00% 2.40% 8.02%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period................................. $26,132,069 $5,774,744 $ 2,801,730 $ 15,420,990
Expenses to average net assets............................ 0.36% 0.36% 0.36% 0.36%
Net investment income to average net assets............... 0.98% 2.35% 3.11% 1.96%
Portfolio turnover rate................................... 40.94% N/A 22.09% 31.38%
Weighted average number of shares outstanding
for six months ended June 30, 1997....................... 1,759,005 5,858,375 277,117 1,222,311
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USLICO SERIES FUND
CONDENSED FINANCIAL INFORMATION
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
COMMON MONEY ASSET
STOCK MARKET BOND ALLOCATION
PORTFOLLO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- --------------- -------------
FINANCIAL HIGHLIGHTS (per share)
Net asset value, beginning of period $ 12.62 $ 1.00 $ 10.38 $ 11.82
Income from investment operations:
Net investment income 0.18 0.02 0.32 0.27
Net realized and unrealized
gains (losses) on securities 1.08 - (0.61) 0.14
---------- ---------- ----------- -------------
Total from investment operations 1.26 0.02 (0.29) 0.41
Distributions:
Distribution of income (0.17) (0.02) (0.32) (0.26)
Distribution of capital gains - - - -
---------- ---------- ----------- -------------
Net asset value, end of period $ 13.71 $ 1.00 $ 9.77 $ 11.97
============= ========== ============= =============
Total return 9.98% 2.00% (2.79%) 3.47%
RATIOS/SUPPLEMENTAL DATA
Net assets,end of period $21,331,637 $5,837,918 $ 2,628,032 $13,495,050
Expenses to average net assets 0.37% 0.37% 0.37% 0.37%
Net investment income to average net assets 1.36% 2.38% 3.25% 2.25%
Portfolio turnover rate 38.57% N/A 18.37% 29.82%
Weighted average number of shares outstanding
for six months ended June 30, 1996 1,585,079 5,886,655 297,054 1,161,799
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED)
FINANCIAL HIGHLIGHTS (PER SHARE)
Net asset value, beginning of period $ 10.37 $ 1.00 $ 9.41 $ 10.18
Income from investment operations:
Net investment income 0.20 0.03 0.35 0.28
Net realized and unrealized
gains on securities 1.56 - 0.74 1.18
---------- ---------- ----------- -------------
Total from investment operations 1.76 0.03 1.09 1.46
Distributions:
Distribution of income (0.18) (0.03) (0.33) (0.27)
Distribution of capital gains - - - -
---------- ---------- ----------- -------------
Net asset value, end of period $ 11.95 $ 1.00 $ 10.17 $ 11.37
========== ========== =========== =============
Total return 16.97% 3.00% 11.58% 14.34%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period $ 17,192,186 $5,635,745 $2,858,249 $12,030,713
Expenses to average net assets 0.25% 0.25% 0.25% 0.25%
Net investment income to average net assets 1.76% 2.80% 3.47% 2.64%
Portfolio turnover rate 22.18% N/A 8.39% 13.58%
Weighted average number of shares outstanding
for six months ended June 30, 1995 1,422,300 5,809,244 266,922 1,042,143
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USLICO SERIES FUND
CONDENSED FINANCIAL INFORMATION
FOR THE SIX MONTHS ENDED JUNE 30, 1994
(UNAUDITED)
COMMON MONEY ASSET
STOCK MARKET BOND ALLOCATION
PORTFOLLO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- --------------- -------------
FINANCIAL HIGHLIGHTS (PER SHARE)
Net asset value, beginning of period $ 11.23 $ 1.00 $ 10.49 $ 11.26
Income from investment operations:
Net investment income 0.17 0.01 0.33 0.28
Net realized and unrealized
losses on securities (0.30) - (0.66) (0.58)
----------- ---------- ------------ -----------
Total from investment operations (0.13) 0.01 (0.33) (0.30)
Distributions:
Distribution of income (0.16) (0.01) (0.31) (0.26)
Distribution of capital gains - - - -
----------- ---------- ------------ -----------
Net asset value, end of period $ 10.94 $ 1.00 $ 9.85 $ 10.70
=========== ========== ============ ===========
Total return (1.16%) 1.00% (3.15%) (2.66%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period $13,106,990 $ 5,541,252 $ 2,548,853 $ 9,643,909
Expenses to average net assets 0.37% 0.37% 0.37% 0.37%
Net investment income to average net assets 1.51% 1.43% 3.24% 2.49%
Portfolio turnover rate 27.89% N/A 4.61% 12.40%
Weighted average number of shares outstanding
for six months ended June 30, 1994 1,127,581 5,422,913 252,884 830,763
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[RELIASTAR LOGO]
ReliaStar United Services
Life Insurance Company of New York JUNE 30, 1998
4601 Fairfax Drive, PO Box 3700
Arlington, VA 22203
SEMI-ANNUAL
REPORT
to Variable Life Policyowners
DYNAMIC
VARIABLE LIFE
Dynamic Variable Life
ReliaStar United Services Life
Variable Separate Account
USLICO Series Fund
This report is for the
information of Policyowners
and not an offering of the sale
of the Variable Life policy, which can
only be made by a current prospectus.
BULK RATE
U.S. POSTAGE [RELIASTAR LOGO HERE]
PAID
CHARLOTTE, NC ReliaStar United Services Life
Insurance Company 4601 Fairfax Drive,
PERMIT NO. 136 PO Box 3700 Arlington, VA 22203
HO 1078 (8/98)
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