<PAGE>
Filed Pursuant to Rule 424(b)(2)
File No. 333-26881
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 27, 1997)
5,000,000 PREFERRED SECURITIES
RELIASTAR FINANCING II
8.10% TRUST ORIGINATED PREFERRED SECURITIESSM ("TOPRSSM")
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED BY
RELIASTAR FINANCIAL CORP.
----------------
The 8.10% Trust Originated Preferred Securities (the "Preferred Securities")
offered hereby represent preferred undivided beneficial interests in the
assets of ReliaStar Financing II, a statutory business trust formed under the
laws of the State of Delaware (the "Trust"). ReliaStar Financial Corp., a
Delaware corporation ("ReliaStar" or the "Company"), will directly or
indirectly own all the common securities (the "Common
(continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE S-4 FOR CERTAIN INFORMATION RELEVANT TO
AN INVESTMENT IN THE PREFERRED SECURITIES, INCLUDING THE PERIOD AND
CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS ON THE
PREFERRED SECURITIES MAY BE DEFERRED AND THE RELATED UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES OF SUCH DEFERRAL.
The Preferred Securities have been approved for listing, subject to notice
of issuance, on the New York Stock Exchange, Inc. (the "NYSE"). Trading of the
Preferred Securities on the NYSE is expected to commence within a 30-day
period after the initial delivery of the Preferred Securities. See
"Underwriting".
----------------
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 SUPPLEMENT OR
THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) COMMISSION(2) TRUST(3)(4)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Preferred Security............ $25.00 (3) $25.00
- --------------------------------------------------------------------------------
Total............................. $125,000,000 (3) $125,000,000
- --------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) Plus accrued distributions, if any, from June 3, 1997.
(2) The Trust and the Company have each agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting".
(3) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in the Junior Subordinated Debt Securities (as
defined herein), the Company has agreed to pay to the Underwriters as
compensation (the "Underwriters' Compensation") for their arranging the
investment therein of such proceeds $.7875 per Preferred Security (or
$3,937,500 in the aggregate). See "Underwriting".
(4) Expenses of the offering which are payable by the Company are estimated to
be $225,000.
----------------
The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that delivery of the Preferred Securities will be made only in book-
entry form, through the facilities of The Depository Trust Company, on or
about June 3, 1997.
----------------
MERRILL LYNCH & CO.
DAIN BOSWORTH
INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
THE ROBINSON-HUMPHREY COMPANY, INC.
SMITH BARNEY INC.
----------------
The date of this Prospectus Supplement is May 29, 1997.
SM"Trust Originated Preferred Securities" and "TOPrS" are service marks of
Merrill Lynch & Co., Inc.
<PAGE>
(continued from previous page)
Securities" and, together with the Preferred Securities, the "Trust
Securities") representing undivided beneficial interests in the assets of the
Trust. The Trust exists for the sole purpose of issuing the Preferred
Securities and Common Securities and investing the proceeds thereof in an
equivalent amount of 8.10% Subordinated Deferrable Interest Notes due June 3,
2027 (the "Junior Subordinated Debt Securities") of the Company. The Junior
Subordinated Debt Securities will mature on June 3, 2027 (or such date to
which the maturity of the Junior Subordinated Debt Securities may be extended
as described under "Description of the Junior Subordinated Debt Securities--
General.") The obligations of the Company under the Junior Subordinated Debt
Securities are unsecured and are subordinate and junior in right of payment to
all present and future Senior Debt (as defined herein) of the Company, which
aggregated approximately $449.1 million at March 31, 1997 and will rank pari
passu with the Trust Related Securities (as defined herein) of the Company. As
of March 31, 1997, there were approximately $125.0 million of outstanding
Trust Related Securities. Upon an event of default under the Declaration (as
defined herein), the holders of Preferred Securities will have a preference
over the holders of the Common Securities with respect to payments in respect
of distributions and payments upon redemption, liquidation and otherwise. The
Junior Subordinated Debt Securities purchased by the Trust may be subsequently
distributed pro rata to holders of the Preferred Securities and Common
Securities in connection with the dissolution of the Trust, upon the
occurrence of certain events.
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions at an annual rate of 8.10% of the liquidation amount of $25 per
Preferred Security, accruing from the date of original issuance and payable
quarterly in arrears on March 31, June 30, September 30 and December 31 of
each year, commencing June 30, 1997 ("distributions"). The payment of
distributions out of moneys held by the Trust or payments upon the redemption
of Preferred Securities and payments on liquidation of the Trust, as set forth
below, are guaranteed by the Company (the "Preferred Securities Guarantee") to
the extent described herein and under the heading "The Preferred Securities
Guarantee" in the accompanying Prospectus. The Preferred Securities Guarantee
covers distributions and other payments on the Preferred Securities only if
and to the extent that ReliaStar has made a payment of interest or principal,
as the case may be, on the Junior Subordinated Debt Securities held by the
Trust. The Preferred Securities Guarantee, when taken together with
ReliaStar's obligations under the Junior Subordinated Debt Securities and the
Junior Subordinated Indenture (as defined herein) and its obligations under
the Declaration, including its obligations to pay costs, expenses and certain
liabilities of the Trust, provides a full and unconditional guarantee of
amounts due on the Preferred Securities. See "Risk Factors--Rights Under the
Preferred Securities Guarantee." The obligations of the Company under the
Preferred Securities Guarantee are subordinate and junior in right of payment
to all other liabilities of the Company and pari passu with the Company's
guarantee of Trust Related Securities and the most senior preferred stock
issued, from time to time, if any, by the Company.
The distribution rate and the distribution payment dates and other payment
dates for the Preferred Securities will correspond to the interest rate and
interest payment dates and other payment dates on the Junior Subordinated Debt
Securities, which will be the sole assets of the Trust. As a result, if
principal or interest is not paid on the Junior Subordinated Debt Securities,
no amounts will be paid on the Preferred Securities. If the Company does not
make principal or interest payments on the Junior Subordinated Debt
Securities, the Trust will not have sufficient funds to make distributions on
the Preferred Securities, in which event the Preferred Securities Guarantee
will not apply to such distributions until the Trust has sufficient funds
available therefor.
The Company has the right to defer payments of interest on the Junior
Subordinated Debt Securities by extending the interest payment period on the
Junior Subordinated Debt Securities at any time for up to 20 consecutive
quarters (each, an "Extension Period"). If interest payments are so deferred,
distributions on the Preferred Securities will also be deferred. During such
Extension Period, distributions will continue to accrue with interest thereon
(to the extent permitted by applicable law) at an annual rate of 8.10% per
annum, compounded quarterly, and during any Extension Period, holders of
Preferred Securities will be required to
(continued on next page)
S-2
<PAGE>
(continued from previous page)
include deferred interest income in their gross income for United States
federal income tax purposes in advance of receipt of the cash distributions
with respect to such deferred interest payments. There could be multiple
Extension Periods of varying lengths throughout the term of the Junior
Subordinated Debt Securities. See "Risk Factors--Option to Extend Interest
Payment Period", "Description of the Junior Subordinated Debt Securities
- --Option to Extend Interest Payment Period", and "United States Federal Income
Taxation--Original Issue Discount". In the event of any such deferral, the
holders of Preferred Securities do not have the right to appoint a special
representative or trustee or otherwise act to protect their interests.
The Junior Subordinated Debt Securities are redeemable by the Company, in
whole or in part, from time to time, on or after June 3, 2002, or at any time
in certain circumstances upon the occurrence of a Tax Event (as defined
herein). If the Company redeems Junior Subordinated Debt Securities, the Trust
must redeem Trust Securities having an aggregate liquidation amount equal to
the aggregate principal amount of the Junior Subordinated Debt Securities so
redeemed at $25 per Preferred Security plus accrued and unpaid distributions
thereon (the "Redemption Price") to the date fixed for redemption. See
"Description of the Preferred Securities--Mandatory Redemption". The Preferred
Securities will be redeemed upon maturity of the Junior Subordinated Debt
Securities. In addition, upon the occurrence of a Tax Event arising from a
change in law or a change in legal interpretation regarding tax matters,
unless the Junior Subordinated Debt Securities are redeemed in the limited
circumstances described herein, the Trust shall be dissolved, with the result
that the Junior Subordinated Debt Securities will be distributed to the
holders of the Preferred Securities, on a pro rata basis, in lieu of any cash
distribution. See "Description of the Preferred Securities--Tax Event
Redemption or Distribution". If the Junior Subordinated Debt Securities are
distributed to the holders of the Preferred Securities, the Company will use
its best efforts to have the Junior Subordinated Debt Securities listed on the
NYSE or on such other exchange, the Nasdaq National Market or other
organization on which the Preferred Securities are then listed. See
"Description of the Preferred Securities--Tax Event Redemption or
Distribution" and "Description of the Junior Subordinated Debt Securities".
In the event of the involuntary or voluntary dissolution, winding up or
termination of the Trust, the holders of the Preferred Securities will be
entitled to receive, for each Preferred Security, a liquidation amount of $25
plus accrued and unpaid distributions thereon (including interest thereon) to
the date of payment, unless, in connection with such dissolution, the Junior
Subordinated Debt Securities are distributed to the holders of the Preferred
Securities. See "Description of the Preferred Securities--Liquidation
Distribution Upon Dissolution".
FOR NORTH CAROLINA RESIDENTS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA
NOR HAS THE COMMISSIONER OF INSURANCE RULED UPON THE ACCURACY OR ADEQUACY OF
THIS DOCUMENT.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF THE PREFERRED
SECURITIES OFFERED HEREBY. SUCH TRANSACTIONS MAY INCLUDE STABILIZING
TRANSACTIONS, THE PURCHASE OF PREFERRED SECURITIES TO COVER SYNDICATE SHORT
POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
The following information concerning the Company, the Trust, the Preferred
Securities, the Preferred Securities Guarantee and the Junior Subordinated
Debt Securities supplements, and should be read in conjunction with, the
information contained in the accompanying Prospectus. Capitalized terms used
in this Prospectus Supplement and not otherwise defined herein have the same
meaning as in the accompanying Prospectus.
S-3
<PAGE>
RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review the
information contained or incorporated by reference elsewhere in this
Prospectus Supplement and in the accompanying Prospectus and should
particularly consider the following matters:
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE PREFERRED SECURITIES GUARANTEE
AND JUNIOR SUBORDINATED DEBT SECURITIES
The Company's obligations under the Preferred Securities Guarantee are
subordinate and junior in right of payment to all other liabilities of the
Company and pari passu with the Company's guarantee of Trust Related
Securities and the most senior preferred stock issued, from time to time, if
any, by the Company. See "Description of Capital Stock--Preferred Stock" in
the accompanying Prospectus. The obligations of the Company under the Junior
Subordinated Debt Securities are subordinate and junior in right of payment to
all present and future Senior Debt of the Company and will rank pari passu
with any Trust Related Securities. As of March 31, 1997, Senior Debt
aggregated approximately $449.1 million and approximately $125.0 of Trust
Related Securities were outstanding. There are no terms in the Preferred
Securities, the Junior Subordinated Debt Securities or the Preferred
Securities Guarantee that limit the Company's ability to incur additional
indebtedness, including indebtedness that ranks senior to the Junior
Subordinated Debt Securities and the Preferred Securities Guarantee. See
"Description of the Junior Subordinated Debt Securities--Subordination", and
"Particular Terms of Junior Subordinated Debt Securities Issued in Connection
with Preferred Securities" and "The Preferred Securities Guarantee--Status of
the Preferred Securities Guarantee" in the accompanying Prospectus.
RIGHTS UNDER THE PREFERRED SECURITIES GUARANTEE
The Preferred Securities Guarantee will be qualified as an indenture under
the Trust Indenture Act. The Property Trustee will act as indenture trustee
under the Preferred Securities Guarantee for the purposes of compliance with
the provisions of the Trust Indenture Act. The Guarantee Trustee (as defined
herein) will hold the Preferred Securities Guarantee on behalf of the Trust
for the benefit of the holders of the Preferred Securities.
The Preferred Securities Guarantee guarantees to the holders of the
Preferred Securities the payment of (i) any accrued and unpaid distributions
that are required to be paid on the Preferred Securities, to the extent the
Trust has funds available therefor, (ii) the Redemption Price, including all
accrued and unpaid distributions with respect to Preferred Securities called
for redemption by the Trust, to the extent the Trust has funds available
therefor, and (iii) upon a voluntary or involuntary dissolution, winding-up or
termination of the Trust (other than in connection with the distribution of
Junior Subordinated Debt Securities to the holders of Preferred Securities or
a redemption of all the Preferred Securities), the lesser of (a) the aggregate
of the liquidation amount and all accrued and unpaid distributions on the
Preferred Securities to the date of the payment, to the extent the Trust has
funds available therefor, or (b) the amount of assets of the Trust remaining
available for distribution to holders of the Preferred Securities in
liquidation of the Trust. The holders of a majority in liquidation amount of
the Preferred Securities have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Guarantee Trustee
or to direct the exercise of any trust or power conferred upon the Guarantee
Trustee under the Preferred Securities Guarantee. If the Company fails to make
any payments under the Preferred Securities Guarantee, any holder of Preferred
Securities may institute a legal proceeding directly against the Company to
enforce such holder's rights under the Preferred Securities Guarantee to
receive such payments without first instituting a legal proceeding against the
Trust, the Guarantee Trustee or any other person or entity. If the Company
were to default on its obligation to pay amounts payable on the Junior
Subordinated Debt Securities, the Trust would lack available funds for the
payment of distributions or amounts payable on redemption of the Preferred
Securities or otherwise, and, in such event, holders of the Preferred
Securities would not be able to rely upon the Preferred Securities Guarantee
for payment of such amounts. Instead, holders of the Preferred Securities
would rely on the enforcement (i) by the Property Trustee (as defined herein)
of its rights as
S-4
<PAGE>
registered holder of the Junior Subordinated Debt Securities against the
Company pursuant to the terms of the Junior Subordinated Debt Securities or
(ii) by such holder of the holder's rights against the Company to enforce the
Junior Subordinated Debt Securities. See "Description of the Junior
Subordinated Debt Securities-- Subordination", "Particular Terms of the Junior
Subordinated Debt Securities Issued in Connection with Preferred Securities"
and "The Preferred Securities Guarantee" in the accompanying Prospectus. The
Declaration provides that each holder of Preferred Securities, by acceptance
thereof, agrees to the provisions of the Preferred Securities Guarantee and
the Junior Subordinated Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Declaration Event of Default (as defined herein) occurs and is
continuing, then the holders of Preferred Securities would rely on the
enforcement by the Property Trustee of its rights as a holder of the Junior
Subordinated Debt Securities against the Company. The holders of a majority in
liquidation amount of the Preferred Securities will have the right to direct
the time, method, and place of conducting any proceeding for any remedy
available to the Property Trustee or to direct the exercise of any trust or
power conferred upon the Property Trustee under the Declaration, including the
right to direct the Property Trustee to exercise the remedies available to it
as a holder of the Junior Subordinated Debt Securities. If the Property
Trustee fails to enforce its rights under the Junior Subordinated Debt
Securities, a holder of Preferred Securities may institute a legal proceeding
directly against the Company to enforce the Property Trustee's rights under
the Junior Subordinated Debt Securities without first instituting any legal
proceeding against the Property Trustee or any other person or entity.
Notwithstanding the foregoing, if the Company has failed to pay interest or
principal on the Junior Subordinated Debt Securities on the date such interest
or principal is otherwise payable, then a holder of Preferred Securities may
directly institute a proceeding for enforcement of payment to such holder of
the principal of or interest on the Junior Subordinated Debt Securities having
a principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such holder (a "Direct Action") on or after the respective due
date specified in the Junior Subordinated Debt Securities. In connection with
such Direct Action, the Company will be subrogated to the rights of such
holder of Preferred Securities under the Declaration to the extent of any
payment made by the Company to such holder of Preferred Securities in such
Direct Action. The holders of Preferred Securities will not be able to
exercise directly any other remedy available to the Holders of the Junior
Subordinated Debt Securities unless the Property Trustee fails to do so. See
"Description of the Preferred Securities--Voting Rights" and "Description of
the Junior Subordinated Debt Securities--Indenture Events of Default".
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company has the right under the Junior Subordinated Indenture to defer
payments of interest on the Junior Subordinated Debt Securities by extending
the interest payment period at any time, and from time to time, on the Junior
Subordinated Debt Securities. As a consequence of such an extension, quarterly
distributions on the Preferred Securities would be deferred (but despite such
deferral would continue to accrue with interest thereon compounded quarterly)
by the Trust during any such extended interest payment period. Such right to
extend the interest payment period for the Junior Subordinated Debt Securities
is limited to a period not exceeding 20 consecutive quarters. In the event
that the Company exercises this right to defer interest payments, then (i) the
Company shall not declare or pay dividends on, make any distribution with
respect to, redeem, purchase or acquire, or make a liquidation payment with
respect to, any of its capital stock, provided, however, the Company may
declare and pay a stock dividend where the dividend is the same stock as that
on which the dividend is being paid, and (ii) the Company shall not make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities issued by the Company that rank pari passu with or
junior to the Junior Subordinated Debt Securities. Prior to the termination of
any such Extension Period, the Company may further delay payment of interest
by further extending the interest payment period; provided, that such
Extension Period, together with all such previous and further extensions
thereof, may not exceed 20 consecutive quarters or extend beyond the maturity
of the Junior Subordinated Debt Securities. Upon the termination of any
Extension Period and the payment of all amounts then due, the Company may
commence a
S-5
<PAGE>
new Extension Period, subject to the above requirements. See "Description of
the Preferred Securities-- Distributions" and "Description of the Junior
Subordinated Debt Securities--Option to Extend Interest Payment Period".
Should the Company exercise its right to defer payments of interest by
extending the interest payment period, each holder of Preferred Securities
will continue to accrue income (as original issue discount ("OID")) in respect
of the deferred interest allocable to its Preferred Securities for United
States federal income tax purposes, which will be allocated but not
distributed to holders of record of Preferred Securities. As a result, each
such holder of Preferred Securities will recognize income for United States
federal income tax purposes in advance of the receipt of cash and will not
receive the cash from the Trust related to such income if such holder disposes
of its Preferred Securities prior to the record date for the date on which
distributions of such amounts are made. The Company has no current intention
of exercising its right to defer payments of interest by extending the
interest payment period on the Junior Subordinated Debt Securities. However,
should the Company determine to exercise such right in the future, the market
price of the Preferred Securities is likely to be affected. A holder that
disposes of its Preferred Securities during an Extension Period, therefore,
might not receive the same return on its investment as a holder that continues
to hold its Preferred Securities. In addition, as a result of the existence of
the Company's right to defer interest payments, the market price of the
Preferred Securities (which represents an undivided beneficial interest in the
Junior Subordinated Debt Securities) may be more volatile than other
securities on which OID accrues that do not have such rights. See "United
States Federal Income Taxation-- Original Issue Discount".
PROPOSED CHANGES TO U.S. TAX LAWS; POSSIBLE TAX EVENT
On February 6, 1997, the Clinton Administration released its budget proposal
for fiscal year 1998. The proposal contains certain tax law changes that, if
enacted, would prohibit an issuer from deducting interest payments or original
issue discount on an instrument such as the Junior Subordinated Debt
Securities if such instrument has a maximum weighted average maturity of more
than 40 years. Under the proposal, for purposes of determining the term of an
instrument, any right to extend would be treated as exercised. The
Administration's proposal, if enacted, would also treat a corporate issuer
that files annual financial statements with the Commission as having
characterized an instrument such as the Junior Subordinated Debt Securities as
equity for purposes of Section 385(c) of the Internal Revenue Code of 1986, as
amended (the "Code"), if the instrument (i) has a maximum term exceeding 15
years and (ii) is not shown as indebtedness on the applicable balance sheet of
the issuer or, in the case of indebtedness issued to a related party that
issues a related instrument, such related instrument is not reflected as
indebtedness on the applicable consolidated balance sheet. Under Section
385(c), the characterization by the issuer of an instrument as equity is
binding on the issuer and all holders of the instrument unless a holder
discloses on his tax return that he is treating such instrument in a manner
inconsistent with the issuer's characterization. The Administration's proposal
specifies that the changes would be effective for instruments issued on or
after the date of first Congressional committee action.
There can be no assurance that legislation affecting the Company's ability
to deduct interest paid on the Junior Subordinated Debt Securities or the
characterization of the Junior Subordinated Debt Securities for U.S. federal
income tax purposes, including legislation similar to the proposals described
above, will not be enacted in the future or that any such legislation would
not be effective retroactively. In the event tax law changes are enacted and
apply retroactively to the Junior Subordinated Debt Securities, such changes
could give rise to a Tax Event, which would, in certain circumstances, require
the dissolution of the Trust or permit the Company to redeem the Junior
Subordinated Debt Securities. See "Risk Factors--Tax Event Redemption or
Distribution", "Description of the Preferred Securities--Tax Event Redemption
or Distribution", "Description of the Junior Subordinated Debt Securities--
Proposed Tax Legislation" and "United States Federal Income Taxation--Proposed
Tax Legislation".
TAX EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Tax Event, the Trust shall be dissolved, except in
the limited circumstance described below, with the result that the Junior
Subordinated Debt Securities would be distributed to the holders
S-6
<PAGE>
of the Trust Securities in connection with the liquidation of the Trust. In
certain circumstances, the Company shall have the right to redeem the Junior
Subordinated Debt Securities, in whole or in part, in lieu of a distribution
of the Junior Subordinated Debt Securities by the Trust, in which event the
Trust will redeem the Trust Securities on a pro rata basis to the same extent
as the Junior Subordinated Debt Securities are redeemed by the Company. See
"Description of the Preferred Securities--Tax Event Redemption or
Distribution".
Under current United States federal income tax law, a distribution of Junior
Subordinated Debt Securities upon the dissolution of the Trust would not be a
taxable event to holders of the Preferred Securities. However, a dissolution
of the Trust in which holders of the Preferred Securities receive cash would
be a taxable event to such holders. See "United States Federal Income
Taxation--Receipt of Junior Subordinated Debt Securities or Cash Upon
Liquidation of the Trust".
There can be no assurance as to the market prices for the Preferred
Securities or the Junior Subordinated Debt Securities that may be distributed
in exchange for Preferred Securities if a dissolution or liquidation of the
Trust were to occur. Accordingly, the Preferred Securities that an investor
may purchase, whether pursuant to the offer made hereby or in the secondary
market, or the Junior Subordinated Debt Securities that a holder of Preferred
Securities may receive on dissolution and liquidation of the Trust, may trade
at a discount to the price that the investor paid to purchase the Preferred
Securities offered hereby. Because holders of Preferred Securities may receive
Junior Subordinated Debt Securities upon the occurrence of a Tax Event,
prospective purchasers of Preferred Securities are also making an investment
decision with regard to the Junior Subordinated Debt Securities and should
carefully review all the information regarding the Junior Subordinated Debt
Securities contained herein. See "Description of the Preferred Securities--Tax
Event Redemption or Distribution", "Description of the Junior Subordinated
Debt Securities" and "Description of Debt Securities" in the accompanying
Prospectus.
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights and will not
be entitled to vote to appoint, remove or replace, or to increase or decrease
the number of, ReliaStar Trustees (as defined herein), due to such voting
rights being vested exclusively in the Company, as the holder of the Common
Securities. See "Description of the Preferred Securities--Voting Rights".
TRADING PRICE
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debt Securities. A holder who disposes of Preferred Securities
between record dates for payments of distributions thereon will be required to
include accrued but unpaid interest on the Junior Subordinated Debt Securities
through the date of disposition in income as ordinary income (i.e., interest
or, possibly, OID), and to add such amount to the holder's adjusted tax basis
in such holder's pro rata share of the underlying Junior Subordinated Debt
Securities deemed disposed of. To the extent the selling price is less than
the holder's adjusted tax basis (which will include all accrued but unpaid
interest or OID), a holder will recognize a capital loss. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes. See "United States Federal
Income Taxation--Original Issue Discount" and "--Sales of Preferred
Securities".
CONSEQUENCES OF HIGHLY LEVERAGED TRANSACTION
The Junior Subordinated Debt Securities do not contain provisions that
afford holders protection in the event of a highly leveraged transaction,
including a change of control, or other similar transactions involving the
Company that may adversely affect such holders. See "Description of the Junior
Subordinated Debt Securities--General".
S-7
<PAGE>
ABSENCE OF PRIOR PUBLIC MARKET
Prior to this offering, there as been no public market for the Preferred
Securities. There can be no assurance that an active trading market will
develop for the Preferred Securities or that, if such market develops, the
market price will equal or exceed the public offering price set forth on the
cover page of this Prospectus Supplement.
THE TRUST
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) a declaration of trust, dated as of May 8, 1997, executed by ReliaStar,
as sponsor (the "Sponsor"), and the trustees of the Trust (the "ReliaStar
Trustees") and (ii) the filing of a certificate of trust with the Secretary of
State of the State of Delaware on May 8, 1997. Such declaration will be
amended and restated in its entirety (as so amended and restated, the
"Declaration") substantially in the form filed as an exhibit to the
Registration Statement of which this Prospectus Supplement and the
accompanying Prospectus form a part. The Declaration will be qualified as an
indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Upon issuance of the Preferred Securities, the purchasers
thereof will own all of the Preferred Securities. ReliaStar will directly or
indirectly acquire all of the Common Securities which constitute an aggregate
liquidation amount equal to 3% of the total capital of the Trust. The Trust
exists for the exclusive purposes of (i) issuing the Trust Securities
representing undivided beneficial interests in the assets of the Trust, (ii)
investing the gross proceeds of the Trust Securities in the Junior
Subordinated Debt Securities, and (iii) engaging in only those other
activities necessary or incidental thereto.
Pursuant to the Declaration, the number of ReliaStar Trustees will initially
be three. Two of the ReliaStar Trustees (the "Regular Trustees") will be
persons who are employees or officers of, or who are affiliated with,
ReliaStar. The third trustee will be a financial institution that maintains
its principal place of business in the State of Delaware and is unaffiliated
with ReliaStar, which trustee will serve as property trustee under the
Declaration and as indenture trustee for the purposes of compliance with the
provisions of the Trust Indenture Act (the "Property Trustee"). Initially,
Wilmington Trust Company, a Delaware banking corporation, will be the Property
Trustee until removed or replaced by the holder of the Common Securities. The
Property Trustee will also act as indenture trustee under the Preferred
Securities Guarantee for the purposes of compliance with the provisions of the
Trust Indenture Act (the "Guarantee Trustee"). See "The Preferred Securities
Guarantee" in the accompanying Prospectus.
The Property Trustee will hold title to the Junior Subordinated Debt
Securities on behalf of the Trust for the benefit of the holders of the Trust
Securities and the Property Trustee will have the power to exercise all
rights, powers and privileges under the Junior Subordinated Indenture (as
defined herein) as the holder of the Junior Subordinated Debt Securities. In
addition, the Property Trustee will maintain exclusive control of a segregated
non-interest bearing trust account (the "Property Account") to hold all
payments made in respect of the Junior Subordinated Debt Securities for the
benefit of the holders of the Trust Securities. The Property Trustee will make
payments of distributions and payments on liquidation, redemption and
otherwise to the holders of the Trust Securities out of funds from the
Property Account. The Guarantee Trustee will hold the Preferred Securities
Guarantee on behalf of the Trust for the benefit of the holders of the
Preferred Securities. ReliaStar, as the direct or indirect holder of all the
Common Securities, will have the right to appoint, remove or replace any
ReliaStar Trustee subject to the limitations set forth in the Declaration and
to increase or decrease the number of ReliaStar Trustees. See "Description of
the Preferred Securities--Voting Rights."
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are set forth in the
Declaration, the Delaware Business Trust Act (the "Trust Act") and the Trust
Indenture Act. See "Description of the Preferred Securities".
RELIASTAR FINANCIAL CORP.
The Company is a holding company whose subsidiaries specialize in life
insurance and related financial services businesses. Through ReliaStar Life
Insurance Company, Minneapolis, Minnesota, and other subsidiaries,
S-8
<PAGE>
the Company issues and distributes individual life insurance and annuities;
group life and health insurance; life and health reinsurance; and markets and
manages mutual funds. The Company operates in four business segments:
Individual Insurance, Employee Benefits, Life and Health Reinsurance and
Pension.
The Company's strategy is to compete by focusing on the needs of its
customers and striving to provide innovative products in a service-oriented,
cost-efficient manner. It is the Company's goal to form lifetime partnerships
with its customers and deliver integrated financial solutions.
Other life insurance subsidiaries, each of which is owned directly or
indirectly by ReliaStar Life, are Northern Life Insurance Company, Seattle,
Washington; ReliaStar United Services Life Insurance Company, Arlington,
Virginia; and ReliaStar Bankers Security Life Insurance Company, Woodbury, New
York. ReliaStar Life, United Services and Bankers Security were formerly known
as Northwestern National Life Insurance Company, United Services Life
Insurance Company and Bankers Security Life Insurance Society, respectively.
Additional subsidiaries include Washington Square Advisors, Inc., Minneapolis,
Minnesota; Washington Square Securities, Inc., Minneapolis, Minnesota;
ReliaStar Mortgage Corporation, West Des Moines, Iowa; NWNL Northstar, Inc.,
Greenwich, Connecticut; PrimeVest Financial Services, Inc., St. Cloud,
Minnesota; and Successful Money Management Seminars, Inc., Portland, Oregon.
On February 23, 1997, ReliaStar agreed to acquire (the "SCC Acquisition")
Security-Connecticut Corporation ("SCC"), an insurance holding company, in a
stock for stock exchange in which SCC will merge with and into ReliaStar. The
SCC Acquisition is valued at approximately $488 million and is expected to be
completed in late June or early July 1997. For more information on the SCC
Acquisition, see the Company's Current Report on Form 8-K dated February 23,
1997 which is incorporated herein by reference.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following pro forma combined condensed financial statements reflect the
acquisition of SCC. The SCC Acquisition will be accounted for as a "purchase"
of SCC by ReliaStar under generally accepted accounting principles. The pro
forma combined condensed financial statements are unaudited and combine the
operations of ReliaStar and SCC for the three months ended March 31, 1997 and
for the year ended December 31, 1996. The pro forma balance sheet assumes the
SCC Acquisition occurred at March 31, 1997. The pro forma statements of income
assume the SCC Acquisition occurred on January 1, 1996. The pro forma combined
condensed financial statements have not been compiled, reviewed or audited by
independent accountants.
The unaudited pro forma combined condensed financial statements have been
included for information only and were prepared pursuant to the rules and
regulations of the Securities and Exchange Commission (the "Commission"). As
further discussed in the accompanying notes, the pro forma combined condensed
financial statements do not purport to be indicative of the financial position
or operating results that would have been achieved had the SCC Acquisition
been consummated as of the dates indicated and should not be construed as
representative of future financial position or operating results.
S-9
<PAGE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET AS OF MARCH 31, 1997
(UNAUDITED)
(IN MILLIONS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------- ADJUSTMENTS
INCREASE NOTE
RELIASTAR SCC (DECREASE) REFERENCE PRO FORMA
--------- -------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments.............. $11,920.6 $1,793.3 $ 3.7 (a) $13,717.6
Deferred Policy
Acquisition
Costs/Present Value of
Future Profits.......... 1,299.0 414.2 (65.3) (b) 1,647.9
Other Assets............. 1,143.8 125.0 (20.4) (b) 1,335.3
101.5 (c)
(7.8) (d)
(6.8) (e)
Participation Fund
Account Assets.......... 315.9 0.0 0.0 315.9
Assets Held in Separate
Accounts................ 2,254.6 0.0 0.0 2,254.6
--------- -------- ------ ---------
TOTAL ASSETS........... $16,933.9 $2,332.5 $ 4.9 $19,271.3
========= ======== ====== =========
LIABILITIES
Future Policy and
Contract Benefits....... $11,902.2 $1,811.9 $(52.3) (b) $13,661.8
Notes and Mortgages
Payable................. 449.1 75.0 0.0 524.1
Other Liabilities........ 512.3 95.4 4.9 (f) 603.9
0.0 (g)
(8.7) (h)
Participation Fund
Account Liabilities..... 315.9 0.0 0.0 315.9
Liabilities Related to
Separate Accounts....... 2,249.1 0.0 0.0 2,249.1
--------- -------- ------ ---------
TOTAL LIABILITIES...... 15,428.6 1,982.3 (56.1) 17,354.8
--------- -------- ------ ---------
Trust-Originated
Preferred Securities.... 121.0 0.0 0.0 121.0
SHAREHOLDERS' EQUITY
Common Stock............. 578.9 0.1 (0.1) (i) 990.1
411.2 (j),(q)
Additional Paid-In
Capital................. 0.0 83.1 (83.1) (i) 0.0
Net Unrealized Investment
Gains (Losses).......... 60.1 (2.1) 2.1 (i) 60.1
Retained Earnings........ 834.5 269.1 (269.1) (i) 834.5
Other, Net............... (89.2) 0.0 0.0 (89.2)
--------- -------- ------ ---------
TOTAL SHAREHOLDERS'
EQUITY................ 1,384.3 350.2 61.0 1,795.5
--------- -------- ------ ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY.. $16,933.9 $2,332.5 $ 4.9 $19,271.3
========= ======== ====== =========
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
S-10
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------- ADJUSTMENTS
INCREASE NOTE
RELIASTAR SCC (DECREASE) REFERENCE PRO FORMA
--------- ----- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES
Premiums....................... $204.7 $13.0 $ 0.0 $217.7
Net Investment Income.......... 234.7 33.9 0.0 (k) 268.6
Realized Investment Gains...... 2.2 0.2 0.0 2.4
Other Income................... 121.6 34.8 0.0 (l) 156.4
------ ----- ----- ------
TOTAL........................ 563.2 81.9 0.0 645.1
------ ----- ----- ------
BENEFITS AND EXPENSES
Benefits to Policyholders...... 317.5 44.7 0.0 362.2
Sales and Operating Expenses... 121.4 11.6 0.0 (m) 133.6
0.6 (n)
Amortization of Deferred Policy
Acquisition Costs/Present
Value of Future Profits....... 28.4 10.9 (4.7) (o) 34.6
Interest Expense............... 7.4 1.4 0.0 8.8
Dividends and Experience
Refunds to Policyholders...... 7.1 0.1 0.0 7.2
------ ----- ----- ------
TOTAL........................ 481.8 68.7 (4.1) 546.4
------ ----- ----- ------
Income Before Income Taxes..... 81.4 13.2 4.1 98.7
Income Tax Expense............. 28.4 4.6 1.6 (p) 34.6
Dividends on Preferred
Securities of Subsidiary, Net
of Tax........................ 1.7 0.0 0.0 1.7
------ ----- ----- ------
Net Income..................... $ 51.3 $ 8.6 $ 2.5 (q) $ 62.4
====== ===== ===== ======
PER COMMON SHARE
Net Income:
Primary...................... $ 1.26 $0.99 N/A $ 1.31
Fully Diluted................ $ 1.26 $0.99 N/A (q) $ 1.31
WEIGHTED AVERAGE SHARES
Common and Common Equivalent
Shares (Primary).............. 40.7 8.6 (1.7) 47.6
Common Shares Assuming Maximum
Dilution (Fully Diluted)...... 40.7 8.7 (1.8) 47.6
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
S-11
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS
---------------- INCREASE NOTE
RELIASTAR SCC (DECREASE) REFERENCE PRO FORMA
--------- ------ ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES
Premiums..................... $ 836.9 $ 58.3 $0.0 $ 895.2
Net Investment Income........ 940.7 135.3 (0.1) (k) 1,075.9
Realized Investment Gains.... 11.2 7.3 0.0 18.5
Other Income................. 401.8 137.4 0.0 (l) 539.2
-------- ------ ---- --------
TOTAL...................... 2,190.6 338.3 (0.1) 2,528.8
-------- ------ ---- --------
BENEFITS AND EXPENSES
Benefits to Policyholders.... 1,287.7 192.9 0.0 1,480.6
Sales and Operating Expenses. 437.4 49.9 0.0 (m) 489.8
2.5 (n)
Amortization of Deferred
Policy Acquisition
Costs/Present Value of
Future Profits.............. 113.0 36.2 (5.3) (o) 143.9
Interest Expense............. 28.7 5.4 0.0 34.1
Dividends and Experience
Refunds to Policyholders.... 19.7 0.4 0.0 20.1
-------- ------ ---- --------
TOTAL...................... 1,886.5 284.8 (2.8) 2,168.5
-------- ------ ---- --------
Income Before Income Taxes... 304.1 53.5 2.7 360.3
Income Tax Expense........... 106.1 18.2 1.8 (p) 126.1
Dividends on Preferred
Securities of Subsidiary,
Net of Tax.................. 5.0 0.0 0.0 5.0
-------- ------ ---- --------
Net Income................... $ 193.0 $ 35.3 $0.9 (q) $ 229.2
======== ====== ==== ========
PER COMMON SHARE
Net Income:
Primary.................... $ 5.03 $ 4.10 N/A $ 5.07
Fully Diluted.............. $ 4.73 $ 4.07 N/A (q) $ 4.81
WEIGHTED AVERAGE SHARES
Common and Common Equivalent
Shares (Primary)............ 37.3 8.6 (1.7) 44.2
Common Shares Assuming
Maximum Dilution (Fully
Diluted).................... 40.1 8.7 (1.8) 47.0
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
S-12
<PAGE>
Notes to Unaudited Pro Forma Combined
Condensed Financial Statements
The pro forma combined condensed financial statements assume all shares of
Common Stock of SCC, as described, are converted, pursuant to the SCC
Acquisition, into shares of Common Stock of ReliaStar at an exchange ratio of
.7932 and at an assumed market price of $59.25 per share of ReliaStar Common
Stock, the closing sale price per share of Common Stock of ReliaStar on
February 21, 1997, the last trading day prior to the public announcement of
the SCC Acquisition. It is further assumed that cash to be paid for fractional
shares will not be significant.
ReliaStar's preliminary allocation of the purchase price was based upon the
estimated fair value of the assets acquired and liabilities assumed. The
actual allocation will be based on further studies and valuations as of the
effective time of the SCC Acquisition (the "Effective Time") and will be
primarily affected by the impact of market interest rates as of the Effective
Time upon the valuation of assets and liabilities of SCC, the effect of the
ReliaStar Common Stock price as of the Effective Time upon the determination
of the purchase price and the accrual at the Effective Time of estimated costs
to eliminate duplicative facilities and equipment and to record the estimated
liability for severance and other employee termination costs. The actual
adjustments (other than those related to the accruals of certain costs at the
Effective Time described above) are not, at the present time, expected to be
significantly different, however, there can be no assurance that significant
differences will not arise.
The pro forma combined condensed financial statements do not include all
adjustments to conform the accounting policies of SCC to those followed by
ReliaStar. The nature and extent of such adjustments, if any, will be based
upon further study and analysis and would not be expected to be significant to
the pro forma financial results.
The following describes the pro forma adjustments reflected in the
accompanying unaudited pro forma combined condensed financial statements:
(a) To value SCC's commercial mortgage loans at estimated fair value.
(b) To eliminate SCC's deferred policy acquisition costs, goodwill,
acquired insurance in-force and unearned revenue balances and to record the
present value of future profits of the in-force business acquired. Present
value of future profits reflects the estimated fair value of the business
in-force and represents the portion of the cost to acquire SCC that is
allocated to the value of the right to receive future cash flows from
insurance contracts existing at the assumed date of acquisition. Such value
is the present value of the actuarially determined projected cash flows
from the acquired policies.
The 15% discount rate used to determine such value is the rate of return
required by ReliaStar to invest in the business being acquired. In determining
the rate of return used to value the policies purchased, the following factors
are considered:
. The magnitude of the risk associated with each of the actuarial
assumptions used in determining expected future cash flows.
. Cost of capital available to fund the acquisition.
. The perceived likelihood of changes in insurance regulations and tax
laws.
. Complexity of the acquired company.
The value allocated to present value of future profits is based on a
preliminary determination of such value; accordingly, this allocation may be
adjusted upon final determination of such value. On a pro forma basis,
assuming an acquisition date of March 31, 1997, expected gross amortization
using current assumptions and accretion of interest based on an interest rate
equal to the liability or contract rate (such rates ranging from 5.25%
S-13
<PAGE>
to 7.0% ) on the cost of policies purchased for each of the years in the five
year period ended March 31, 2002, is as follows (dollars in millions):
<TABLE>
<CAPTION>
YEAR
ENDED BEGINNING GROSS ACCRETION OF NET ENDING
MARCH 31, BALANCE AMORTIZATION INTEREST AMORTIZATION BALANCE
--------- --------- ------------ ------------ ------------ -------
<S> <C> <C> <C> <C> <C>
1998.................... $348.9 $50.8 $19.9 $30.9 $318.0
1999.................... 318.0 43.2 18.3 24.9 293.1
2000.................... 293.1 37.9 16.8 21.1 272.0
2001.................... 272.0 32.5 15.8 16.7 255.3
2002.................... 255.3 29.7 14.7 15.0 240.3
</TABLE>
(c) To record the excess of the cost to acquire SCC over the sum of the
amounts assigned to identifiable assets acquired less liabilities assumed.
(d) To record the direct out-of-pocket costs of acquisition.
(e) To remove SCC's capitalized software costs to conform to ReliaStar's
accounting policies.
(f) To record lease related fair value adjustments, net.
(g) At the Effective Time, the estimated liability for severance and
other employee costs for certain executive officers and employees of SCC
and the estimated costs to eliminate duplicative facilities and equipment
and merge such operations will be accrued. These estimated costs have not
been accrued on the pro forma balance sheet. The present estimate of these
costs to be accrued at the Effective Time is approximately $8.0 million.
The estimated $8.0 million liability will be accrued on the initial post-
acquisition balance sheet of SCC and will increase annual goodwill
amortization by approximately $130,000.
(h) To adjust the deferred tax liability of SCC to the tax effected
difference between the estimated fair value of the net assets acquired and
the estimated tax basis of the net assets acquired.
(i) To eliminate SCC equity.
(j) To record the fair value of the pro forma 6.94 million shares of
Common Stock of ReliaStar to be issued to acquire SCC, using a share price
of $59.25 per share of ReliaStar Common Stock.
(k) To record the amortization of the pro forma fair value adjustment to
the cost basis of SCC investments. The pro forma adjustments to investments
and investment income are based upon interest rates at March 31, 1997 and
are not likely to be reflective of future results as the actual fair value
adjustment and related future income statement effects will be dependent
upon the interest rate environment at the time the SCC Acquisition is
completed. The fair value adjustment to the cost basis of investments has
been amortized over the estimated average remaining investment life.
(l) It is expected that cross-selling of life insurance products between
ReliaStar and SCC will produce incremental profits to the combined company.
For purposes of the pro forma combined condensed statements of income,
these incremental profits have not been included because they are not
assured.
(m) It is expected that certain costs and expenses of the combined
companies will be less than those reflected in the accompanying pro forma
combined condensed statements of income due to consolidation of operations.
The estimated expense reductions are primarily related to the elimination
of duplicative facilities, equipment and other personnel and functions. For
purposes of the pro forma combined condensed statements of income, these
expense reductions have not been included because they are not assured
until ReliaStar takes affirmative actions to implement the cost reductions
which cannot take place until the Effective Time. Until such time, they are
not permitted to be reflected in the pro forma financial information
according to accounting rules. The pro forma pre-tax annualized expense
reductions are currently estimated to total approximately $7.0 million. In
addition to the $7.0 million, the combined company expects to realize cost
savings from the potential merger of the New York operations of ReliaStar
and SCC.
(n) To record the amortization of goodwill over the estimated periods to
be benefited (40 years).
S-14
<PAGE>
(o) To record the adjustment to historical amortization of deferred
policy acquisition costs to reflect the new amortization of the present
value of future profits intangible asset established on the pro forma
combined condensed balance sheet as of March 31, 1997.
(p) To record income tax expense (benefit) of the pro forma adjustments
(excluding goodwill amortization) at the applicable statutory federal
effective rate of 35%.
(q) Pro Forma Net Income and Fully Diluted Net Income per share for the
year ended December 31, 1996, and the pro forma increase to shareholders'
equity using the pro forma share price of $59.25 per share of ReliaStar
Common Stock and the floor and ceiling share price of $49.00 and $64.30 are
shown in the following table:
<TABLE>
<CAPTION>
PRO FORMA
------------------------------------------
RELIASTAR COMMON INCREASE TO FULLY DILUTED
STOCK PRICE EXCHANGE SHAREHOLDERS' NET NET INCOME
ASSUMED RATIO EQUITY INCOME PER SHARE
---------------- -------- ------------- ------ -------------
<S> <C> <C> <C> <C>
$59.25 .7932 $411.2 $229.2 $4.81
$49.00 .8927 $382.1 $229.9 $4.73
$64.30 .7749 $436.5 $228.6 $4.81
</TABLE>
CERTAIN FORWARD-LOOKING INFORMATION
This Prospectus Supplement contains certain forward-looking information
including information provided in "Unaudited Pro Forma Combined Condensed
Financial Statements." The Private Securities Litigation Reform Act of 1995
provides a "safe harbor" for forward-looking information to encourage
companies to provide prospective information about their companies without
fear of litigation so long as such information is identified as forward-
looking and is accompanied by meaningful cautionary statements identifying
important factors that could cause actual results to differ materially from
those projected in the information. ReliaStar identifies the following
important factors which could cause actual results to differ materially from
any such results which might be projected, forecast, estimated or budgeted by
ReliaStar in forward-looking information. All of such factors are difficult to
predict and many are beyond the control of ReliaStar. Accordingly, while
ReliaStar believes that the assumptions underlying the forward-looking
information are reasonable, there can be no assurances that such assumptions
will approximate actual experience. These important factors include: (i)
general economic conditions, changes in interest rates and the performance of
stock markets, each of which may impact the profitability of the combined
company, the market value of the combined company's investment portfolio, the
credit quality of the combined company's loan portfolio and the demand for
life insurance products; (ii) regulatory developments affecting financial
institutions, generally, and life insurance companies, specifically; (iii)
changes in federal and state income tax laws and regulations which affect the
relative tax advantage of life insurance products; (iv) industry consolidation
and increased competition; (v) the combined company's ability to control costs
and realize estimated cost savings; (vi) the integration of ReliaStar's and
SCC's products, sales and operations in a timely and cost effective manner;
and (vii) the timing, cost and successful completion of ReliaStar's announced
stock repurchase program. Investors are also directed to consider other risks
and uncertainties discussed in documents filed by ReliaStar with the
Commission. ReliaStar disclaims any obligation to update forward-looking
information.
S-15
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following selected financial data for the five years ended December 31,
1996 and three months ended March 31, 1997 and 1996 are derived from the
consolidated financial statements of ReliaStar. The table below reflects the
consolidated results of operations and financial position of ReliaStar. All
material intercompany transactions and balances have been eliminated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- -------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- --------- -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Premiums............... $ 204.7 $ 205.0 $ 836.9 $ 851.5 $ 726.9 $ 659.6 $ 589.9
Net Investment Income.. 234.7 232.3 940.7 891.1 618.3 635.0 606.7
Realized Investment
Gains (Losses)........ 2.2 6.2 11.2 4.9 (27.4) (32.4) (33.7)
Other Income........... 121.6 89.9 401.8 342.9 253.0 228.2 215.1
--------- --------- --------- --------- -------- -------- --------
Total Revenues...... 563.2 533.4 2,190.6 2,090.4 1,570.8 1,490.4 1,378.0
Benefits and Expenses.. 481.8 459.1 1,886.5 1,830.6 1,404.2 1,361.8 1,288.4
Income Tax Expense..... 28.4 26.2 106.1 90.7 58.9 46.1 29.0
Dividends on Preferred
Securities of
Subsidiary, Net of
Tax................... 1.7 .1 5.0 -- -- -- --
--------- --------- --------- --------- -------- -------- --------
Income from Continuing
Operations............ 51.3 48.0 193.0 169.1 107.7 82.5 60.6
Loss from Discontinued
Operations............ -- -- -- (5.4) (2.6) -- --
--------- --------- --------- --------- -------- -------- --------
Income Before
Extraordinary Charges
and Cumulative Effect
of Accounting Changes. 51.3 48.0 193.0 163.7 105.1 82.5 60.6
Extraordinary Charges.. -- -- -- -- -- (9.7) (1.3)
Cumulative Effect of
Accounting Changes.... -- -- -- -- -- (7.5) --
--------- --------- --------- --------- -------- -------- --------
Net Income............. $ 51.3 $ 48.0 $ 193.0 $ 163.7 $ 105.1 $ 65.3 $ 59.3
========= ========= ========= ========= ======== ======== ========
Net Income Available to
Common Shareholders... $ 51.3 $ 45.9 $ 187.8 $ 155.4 $ 96.8 $ 57.0 $ 50.1
========= ========= ========= ========= ======== ======== ========
BALANCE SHEET DATA
(end of period):
Invested Assets......... $11,920.6 $11,785.4 $11,996.3 $11,814.2 $7,918.2 $7,716.3 $7,159.6
Other Assets............ 5,013.3 3,986.9 4,710.7 3,705.0 2,448.6 2,196.6 1,915.6
--------- --------- --------- --------- -------- -------- --------
Total Assets.......... 16,933.9 15,772.3 16,707.0 15,519.2 10,366.8 9,912.9 9,075.2
Notes and Mortgages
Payable................ 449.1 423.3 407.5 422.3 194.6 230.3 220.5
Other Liabilities....... 14,979.5 13,884.2 14,760.9 13,676.8 9,373.7 8,882.0 8,174.9
--------- --------- --------- --------- -------- -------- --------
Total Liabilities..... 15,428.6 14,307.5 15,168.4 14,099.1 9,568.3 9,112.3 8,395.4
Trust-Originated
Preferred Securities... 121.0 120.8 120.9 -- -- -- --
Shareholders' Equity:
Preferred............. -- 69.0 -- 68.7 67.9 66.7 65.8
Common................ 1,384.3 1,275.0 1,417.7 1,351.4 730.6 733.9 614.0
</TABLE>
S-16
<PAGE>
CAPITALIZATION OF THE COMPANY
The following table sets forth the consolidated summary capitalization at
March 31, 1997 of the Company and its consolidated subsidiaries on a
historical basis, as adjusted to reflect the application of the proceeds
(without giving effect to the payment of Underwriters' Compensation or other
offering expenses) from the sale of the Preferred Securities (the "Offering")
and as adjusted on a pro forma basis to reflect the SCC Acquisition. See "Use
of Proceeds." The table should be read in conjunction with the Company's
consolidated financial statements and notes thereto, other financial data
incorporated by reference herein, and the "Unaudited Pro Forma Combined
Condensed Financial Statements" included herein. See "Incorporation of Certain
Documents by Reference" in the accompanying Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1997
--------------------------------
AS AS ADJUSTED
ADJUSTED FOR OFFERING
FOR AND THE SCC
ACTUAL OFFERING ACQUISITION
-------- -------- ------------
(IN MILLIONS)
<S> <C> <C> <C>
Notes and Mortgages Payable--Current (a)...... $ 211.3 $ 211.3 $ 211.3
Notes and Mortgages Payable--Noncurrent....... 237.8 237.8 312.8
-------- -------- --------
Total Notes and Mortgages Payable.......... 449.1 449.1 524.1
Company-Obligated Mandatorily Redeemable
Preferred Securities of Subsidiary ReliaStar
Financing I Holding Solely Junior
Subordinated Debt Securities of the Company
(b).......................................... 121.0 121.0 121.0
Company-Obligated Mandatorily Redeemable
Preferred Securities of Subsidiary ReliaStar
Financing II Holding Solely Junior
Subordinated Debt Securities of the Company
(b).......................................... -- 125.0 125.0
Shareholders' Equity:
Preferred Stock (c)........................... -- -- --
Common Stock--100.0 million shares authorized;
42.6 million shares issued (49.5 million
shares as adjusted for SCC Acquisition)...... 578.9 578.9 990.1
Note Receivable from ESOP..................... (21.2) (21.2) (21.2)
Unauthorized Restricted Stock Awards.......... (1.7) (1.7) (1.7)
Net Unrealized Investment Gains............... 60.1 60.1 60.1
Retained Earnings............................. 834.5 834.5 834.5
Less Treasury Common Stock, at cost--2.4
million shares held (4.0 million shares as
adjusted for SCC Acquisition)................ (66.3) (66.3) (166.3)
-------- -------- --------
Total Shareholders' Equity................. 1,384.3 1,384.3 1,695.5
-------- -------- --------
Total Capitalization....................... $1,954.4 $2,079.4 $2,465.6
======== ======== ========
</TABLE>
(a) "Notes and Mortgages Payable--Current" consists primarily of $164.0
million of commercial paper and $47.3 million of short term bank debt,
each as of March 31, 1997.
(b) One hundred percent of the assets of the ReliaStar Financing I Trust
consists of approximately $128.9 million in principal amount of the Junior
Subordinated Debt Securities of ReliaStar with an interest rate of 8.2%
and maturity date of March 15, 2016.
One hundred percent of the assets of the ReliaStar Financing II Trust
consists of approximately $128.9 million in principal amount of the Junior
Subordinated Debt Securities of ReliaStar with an interest rate of 8.1% and
maturity date of June 3, 2027.
(c) There are reserved for issuance up to 2,500,000 shares of Series A Junior
participating Preferred Stock issuable upon exercise of certain preferred
share purchase rights.
S-17
<PAGE>
ACCOUNTING TREATMENT
The financial statements of the Trust will be consolidated into the
Company's consolidated financial statements, with the Preferred Securities
treated as minority interest and shown in the Company's consolidated balance
sheet as "Company-Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary ReliaStar Financing II Holding Solely Junior Subordinated Debt
Securities of the Company." The financial statement footnotes of the Company
will reflect that the sole asset of the Trust will be $128.9 million principal
amount of the Junior Subordinated Debt Securities, bearing interest at 8.10%
and maturing on June 3, 2027. All reports filed by the Company under the
Exchange Act present information regarding the Trust, ReliaStar Financing I
and other similar trusts in the manner described above. In addition, a
footnote to the Company's audited financial statements reflects that (i) each
trust is wholly-owned by the Company; (ii) the sole assets of each trust are
junior subordinated debt securities, in each case specifying as to each trust
the principal amount, interest rate and maturity date of the junior
subordinated debt securities held; and (iii) the Preferred Securities
Guarantee, when taken together with the Company's obligations under the Junior
Subordinated Debt Securities and the Junior Subordinated Indenture and its
obligations under the Declaration, including its obligations to pay costs,
expenses, debts and liabilities of the Company (other than with respect to the
Trust Securities), and the corresponding obligations of the Company with
respect to such other trusts, provide a full and unconditional guarantee of
amounts on the Preferred Securities and the preferred securities issued by
such other trusts. See "Capitalization."
USE OF PROCEEDS
The proceeds from the sale of the Preferred Securities will be invested by
the Trust in Junior Subordinated Debt Securities issued pursuant to the Junior
Subordinated Indenture described herein and ultimately will be used by the
Company to repurchase up to an aggregate of $100 million of shares of the
Company's Common Stock after consummation of the SCC Acquisition and for
general corporate purposes.
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration. The Declaration will be qualified as an indenture under the Trust
Indenture Act. The Property Trustee, Wilmington Trust Company, will act as
indenture trustee under the Declaration for purposes of compliance with the
provisions of the Trust Indenture Act. The terms of the Preferred Securities
will include those stated in the Declaration and those made part of the
Declaration by the Trust Indenture Act. The following summary of the principal
terms and provisions of the Preferred Securities does not purport to be
complete and is subject to, and qualified in its entirety by reference to, the
Declaration (a copy of which is filed as an exhibit to the Registration
Statement of which this Prospectus Supplement is a part), the Trust Act and
the Trust Indenture Act.
GENERAL
The Declaration authorizes the Regular Trustees to issue, on behalf of the
Trust, the Trust Securities, which represent undivided beneficial interests in
the assets of the Trust. All of the Common Securities will be owned by the
Company. The Common Securities rank pari passu, and payments will be made
thereon on a pro rata basis, with the Preferred Securities, except that upon
the occurrence and during the continuance of a Declaration Event of Default,
the rights of the holders of the Common Securities to receive payment of
periodic distributions and payments upon redemption, liquidation and otherwise
will be subordinated to the rights to payment of the holders of the Preferred
Securities. The Declaration does not permit the issuance by the Trust of any
securities other than the Trust Securities or the incurrence of any
indebtedness by the Trust. Pursuant to the Declaration, the Property Trustee
will hold legal title to the Junior Subordinated Debt Securities purchased by
the Trust for the benefit of the holders of the Trust Securities. The payment
of distributions out of money held by the Trust, and payments upon redemption
of the Preferred Securities or liquidation of the Trust, are guaranteed by the
Company to the extent described under "The Preferred Securities Guarantee" in
the accompanying Prospectus.
S-18
<PAGE>
The Preferred Securities Guarantee will be held by Wilmington Trust Company,
the Guarantee Trustee, for the benefit of the holders of the Preferred
Securities. The Preferred Securities Guarantee does not cover payment of
distributions when the Trust does not have sufficient available funds to pay
such distributions. In such event, the remedy of a holder of Preferred
Securities is to vote (i) to direct the Property Trustee to enforce the
Property Trustee's rights under the Junior Subordinated Debt Securities, or
(ii) if the failure of the Trust to pay distributions is attributable to the
failure of the Company to pay interest or principal on the Junior Subordinated
Debt Securities, to institute a proceeding directly against the Company for
enforcement of payment to such holder of the principal of or interest on the
Junior Subordinated Debt Securities having a principal amount equal to the
aggregate liquidation amount of the Preferred Securities of such holder on or
after the respective due date specified in the Junior Subordinated Debt
Securities. See "Description of the Preferred Securities--Voting Rights" and
"Description of the Junior Subordinated Debt Securities--Indenture Events of
Default".
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per annum
of 8.10% of the stated liquidation amount of $25 per Preferred Security.
Distributions in arrears for more than one quarter will bear interest thereon
at the rate per annum of 8.10% thereof compounded quarterly (to the extent
permitted by applicable law). The term "distribution" as used herein includes
such cash distributions and any such interest payable unless otherwise stated.
The amount of distributions payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months.
Distributions on the Preferred Securities will be cumulative, will accrue
from June 3, 1997, and will be payable quarterly in arrears on March 31, June
30, September 30 and December 31 of each year, commencing June 30, 1997 when,
as and if available for payment. Distributions will be made by the Property
Trustee, except as otherwise described below.
The Company has the right under the Junior Subordinated Indenture to defer
payments of interest on the Junior Subordinated Debt Securities by extending
the interest payment period from time to time on the Junior Subordinated Debt
Securities, which, if exercised, would defer quarterly distributions on the
Preferred Securities (though such distributions would continue to accrue
interest since interest would continue to accrue on the Junior Subordinated
Debt Securities) during any such extended interest payment period. Such right
to extend the interest payment period for the Junior Subordinated Debt
Securities is limited to a period not exceeding 20 consecutive quarters. In
the event that the Company exercises this right, then (a) the Company shall
not declare or pay dividends on, make distributions with respect to, or
redeem, purchase or acquire, or make a liquidation payment with respect to,
any of its capital stock, provided, however, the Company may declare and pay a
stock dividend where the dividend is the same stock as that on which the
dividend is being paid, and (b) the Company shall not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities issued by the Company that rank pari passu with or junior to
such Junior Subordinated Debt Securities. Prior to the termination of any such
Extension Period, the Company may further extend the interest payment period;
provided, that such Extension Period, together with all such previous and
further extensions thereof, may not exceed 20 consecutive quarters or extend
beyond the maturity of the Junior Subordinated Debt Securities. Upon the
termination of any Extension Period and the payment of all amounts then due,
the Company may select a new Extension Period, subject to the above
requirements. See "Description of the Junior Subordinated Debt Securities--
Interest" and "--Option to Extend Interest Payment Period". If distributions
are deferred, the deferred distributions and accrued interest thereon shall be
paid to holders of record of the Preferred Securities as they appear on the
books and records of the Trust on the record date next following the
termination of such Extension Period.
Distributions on the Preferred Securities must be paid on the dates payable
to the extent that the Trust has funds available for the payment of such
distributions in the Property Account. The Trust's funds available for
distribution to the holders of the Preferred Securities will be limited to
payments received from the Company on the Junior Subordinated Debt Securities.
See "Description of the Junior Subordinated Debt Securities". The payment of
distributions out of moneys held by the Trust is guaranteed by the Company to
the extent set forth under "The Preferred Securities Guarantee" in the
accompanying Prospectus.
S-19
<PAGE>
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the books and records of the Trust on the relevant
record dates, which, as long as the Preferred Securities remain in book-entry
only form, will be one Business Day prior to the relevant payment dates, which
payment dates correspond to the interest payment dates on the Junior
Subordinated Debt Securities. Such distributions will be paid through the
Property Trustee who will hold amounts received in respect of the Junior
Subordinated Debt Securities in the Property Account for the benefit of the
holders of the Trust Securities. Subject to any applicable laws and
regulations and the provisions of the Declaration, each such payment will be
made as described under "Book-Entry Only Issuance--The Depository Trust
Company" below. In the event that the Preferred Securities do not continue to
remain in book-entry only form, the relevant record dates for the Preferred
Securities shall conform to the rules of any stock exchange on which the
securities are listed, and, if none, the Regular Trustees shall have the right
to select relevant record dates, which shall be more than one Business Day but
less than 60 Business Days prior to the relevant payment dates. In the event
that any date on which distributions are to be made on the Preferred
Securities is not a Business Day, then payment of the distributions payable on
such date will be made on the next succeeding day which is a Business Day (and
without any interest or other payment in respect of any such delay), except
that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such payment date. A "Business
Day" shall mean any day other than Saturday, Sunday or any other day on which
banking institutions in New York City (in the State of New York) or Wilmington
(in the State of Delaware) are permitted or required by any applicable law to
close.
MANDATORY REDEMPTION
The Junior Subordinated Debt Securities will mature on June 3, 2027 (or such
other date to which the maturity of the Junior Subordinated Debt Securities
may be extended, as described under "Description of Junior Subordinated Debt
Securities--General") and may be redeemed, in whole or in part, at any time on
or after June 3, 2002, or at any time in certain circumstances upon the
occurrence of a Tax Event. Upon the repayment of the Junior Subordinated Debt
Securities, whether at maturity or upon redemption, the proceeds from such
repayment or payment shall simultaneously be applied to redeem Trust
Securities having an aggregate liquidation amount equal to the aggregate
principal amount of the Junior Subordinated Debt Securities so repaid or
redeemed at the Redemption Price; provided, that holders of Trust Securities
shall be given not less than 30 nor more than 60 days notice of such
redemption. See "Description of the Junior Subordinated Debt Securities--
Optional Redemption". In the event that fewer than all of the outstanding
Preferred Securities are to be redeemed, the Preferred Securities will be
redeemed pro rata as described under "Book-Entry Only Issuance--The Depository
Trust Company" below.
TAX EVENT REDEMPTION OR DISTRIBUTION
"Tax Event" means that the Regular Trustees shall have received an opinion
of a nationally recognized independent tax counsel experienced in such matters
(a "Dissolution Tax Opinion") to the effect that, on or after the date of this
Prospectus Supplement, as a result of (a) any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein or (b) any amendment to or change in an
interpretation or application of such laws or regulations by any legislative
body, court, governmental agency or regulatory authority (including the
enactment of any legislation and the publication of any judicial decision or
regulatory determination on or after the date of this Prospectus Supplement),
(c) any interpretation or pronouncement by any such body, court, agency or
authority that provides for a position with respect to such laws or
regulations that differs from the theretofore generally accepted position, or
(d) any action taken by any governmental agency or regulatory authority, which
amendment or change is enacted, promulgated or effective, or which
interpretation or pronouncement is issued or announced, or which action is
taken, in each case on or after the date of this Prospectus Supplement, there
is more than an insubstantial risk that (i) the Trust is, or within 90 days of
the date thereof would be, subject to United States federal income tax with
respect to income accrued or received on the Junior Subordinated Debt
Securities, (ii) interest payable to the Trust on the Junior Subordinated Debt
Securities is not, or within 90 days of the date thereof would not be,
deductible by the Company for United States federal
S-20
<PAGE>
income tax purposes or (iii) the Trust is, or within 90 days of the date
thereof would be, subject to more than a de minimis amount of other taxes,
duties or other governmental charges.
If, at any time, a Tax Event shall occur and be continuing, the Trust shall,
except in the limited circumstances described below, be dissolved with the
result that the Junior Subordinated Debt Securities with an aggregate
principal amount equal to the aggregate stated liquidation amount of, with an
interest rate identical to the distribution rate of, and accrued and unpaid
interest equal to accrued and unpaid distributions on, the Trust Securities,
would be distributed to the holders of the Trust Securities in liquidation of
such holders' interests in the Trust on a pro rata basis within 90 days
following the occurrence of such Tax Event; provided, that such dissolution
and distribution shall be conditioned on (i) the Regular Trustees' receipt of
an opinion of nationally recognized independent tax counsel experienced in
such matters (a "No Recognition Opinion"), which opinion may rely on published
revenue rulings of the Internal Revenue Service, to the effect that the
holders of the Trust Securities will not recognize any gain or loss for United
States federal income tax purposes as a result of such dissolution and
distribution of Junior Subordinated Debt Securities and (ii) the Company being
unable to avoid such Tax Event within such 90 day period by taking some
ministerial action or pursuing some other reasonable measure that will have no
adverse effect on the Trust, the Company or the holders of the Trust
Securities. Furthermore, if after receipt of a Dissolution Tax Opinion by the
Regular Trustees (i) the Company has received an opinion (a "Redemption Tax
Opinion") of nationally recognized independent tax counsel experienced in such
matters that, as a result of a Tax Event, there is more than an insubstantial
risk that the Company would be precluded from deducting the interest on the
Junior Subordinated Debt Securities for United States federal income tax
purposes, even after the Junior Subordinated Debt Securities were distributed
to the holders of Trust Securities in liquidation of such holders' interests
in the Trust as described above, or (ii) the Regular Trustees shall have been
informed by such tax counsel that it cannot deliver a No Recognition Opinion
to the Trust, the Company shall have the right, upon not less than 30 nor more
than 60 days notice, to redeem the Junior Subordinated Debt Securities, in
whole or in part, for cash within 90 days following the occurrence of such Tax
Event, and, following such redemption, Trust Securities with an aggregate
liquidation amount equal to the aggregate principal amount of the Junior
Subordinated Debt Securities so redeemed shall be redeemed by the Trust at the
Redemption Price on a pro rata basis; provided, however, that if at the time
there is available to the Company or the Trust the opportunity to eliminate,
within such 90 day period, the Tax Event by taking some ministerial action,
such as filing a form or making an election or pursuing some other similar
reasonable measure that has no adverse effect on the Trust, the Company or the
holders of the Trust Securities, the Company or the Trust will pursue such
measure in lieu of redemption.
If the Junior Subordinated Debt Securities are distributed to the holders of
the Preferred Securities, the Company will use its best efforts to cause the
Junior Subordinated Debt Securities to be listed on the NYSE or on such other
exchange, the Nasdaq National Market or other organization on which the
Preferred Securities are then listed.
After the date for any distribution of Junior Subordinated Debt Securities
upon dissolution of the Trust, (i) the Preferred Securities will no longer be
deemed to be outstanding, (ii) the depositary or its nominee, as the record
holder of the Preferred Securities, will receive a registered global
certificate or certificates representing the Junior Subordinated Debt
Securities to be delivered upon such distribution, and (iii) any certificates
representing Preferred Securities not held by the depositary or its nominee
will be deemed to represent Junior Subordinated Debt Securities having an
aggregate principal amount equal to the aggregate stated liquidation amount
of, with an interest rate identical to the distribution rate of, and accrued
and unpaid interest equal to accrued and unpaid distributions on, such
Preferred Securities until such certificates are presented to the Company or
its agent for transfer or reissuance.
There can be no assurance as to the market prices for either the Preferred
Securities or the Junior Subordinated Debt Securities that may be distributed
in exchange for the Preferred Securities if a dissolution and liquidation of
the Trust were to occur. Accordingly, the Preferred Securities that an
investor may purchase, whether pursuant to the offer made hereby or in the
secondary market, or the Junior Subordinated Debt Securities
S-21
<PAGE>
that an investor may receive if a dissolution and liquidation of the Trust
were to occur, may trade at a discount to the price that the investor paid to
purchase the Preferred Securities offered hereby. See "Risk Factors--Trading
Price".
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Preferred Securities for all quarterly distribution periods terminating on or
prior to the date of redemption.
If the Trust gives a notice of redemption in respect of Preferred Securities
(which notice will be irrevocable), then, by 12:00 noon, New York City time,
on the redemption date, provided that the Company has paid to the Property
Trustee a sufficient amount of cash in connection with the related redemption
or maturity of the Junior Subordinated Debt Securities, the Trust will
irrevocably deposit with the depositary funds sufficient to pay the applicable
Redemption Price and will give the depositary irrevocable instructions and
authority to pay the Redemption Price to the holders of the Preferred
Securities. See "Book-Entry Only Issuance--The Depository Trust Company"
below. If notice of redemption shall have been given and funds deposited as
required, then, immediately prior to the close of business on the date of such
deposit, distributions will cease to accrue and all rights of holders of such
Preferred Securities so called for redemption will cease, except the right of
the holders of such Preferred Securities to receive the Redemption Price but
without interest on such Redemption Price. In the event that any date fixed
for redemption of Preferred Securities is not a Business Day, then payment of
the Redemption Price payable on such date will be made on the next succeeding
day that is a Business Day (without any interest or other payment in respect
of any such delay), except that, if such Business Day falls in the next
calendar year, such payment will be made on the immediately preceding Business
Day. In the event that payment of the Redemption Price in respect of Preferred
Securities is improperly withheld or refused and not paid either by the Trust,
or by the Company pursuant to the Preferred Securities Guarantee,
distributions on such Preferred Securities will continue to accrue at the then
applicable rate from the original redemption date to the date of payment, in
which case the actual payment date will be considered the date fixed for
redemption for purposes of calculating the Redemption Price.
In the event that fewer than all of the outstanding Preferred Securities are
to be redeemed, the Preferred Securities will be redeemed pro rata as
described below under "Book-Entry Only Issuance--The Depository Trust
Company".
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), the Company or its subsidiaries may at
any time, and from time to time, purchase outstanding Preferred Securities by
tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each a "Liquidation"), the then
holders of the Preferred Securities will be entitled to receive out of the
assets of the Trust, after satisfaction of liabilities to creditors,
distributions in an amount equal to the aggregate of the stated liquidation
amount of $25 per Preferred Security plus accrued and unpaid distributions
thereon to the date of payment (the "Liquidation Distribution"), unless, in
connection with such Liquidation, Junior Subordinated Debt Securities in an
aggregate stated principal amount equal to the aggregate stated liquidation
amount of, with an interest rate identical to the distribution rate of, and
accrued and unpaid interest equal to accrued and unpaid distributions on, the
Preferred Securities have been distributed on a pro rata basis to the holders
of the Preferred Securities in exchange for such Preferred Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid only
in part because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Preferred Securities shall be paid on a pro rata basis. The
holders of the Common Securities will be entitled to receive distributions
upon any such dissolution pro rata with the holders of the
S-22
<PAGE>
Preferred Securities, except that if a Declaration Event of Default has
occurred and is continuing, the Preferred Securities shall have a preference
over the Common Securities with regard to such distributions.
Pursuant to the Declaration, the Trust shall terminate (i) on June 3, 2046,
the expiration of the term of the Trust, (ii) upon the bankruptcy of the
Company or the holder of the Common Securities, (iii) upon the filing of a
certificate of dissolution or its equivalent with respect to the holder of the
Common Securities or the Company, the filing of a certificate of cancellation
with respect to the Trust, or the revocation of the charter of the holder of
the Common Securities or the Company and the expiration of 90 days after the
date of revocation without a reinstatement thereof, (iv) upon the distribution
of Junior Subordinated Debt Securities upon the occurrence of a Tax Event, (v)
upon the entry of a decree of a judicial dissolution of the holder of the
Common Securities, the Company or the Trust, or (vi) upon the redemption of
all the Trust Securities.
DECLARATION EVENTS OF DEFAULT
An Event of Default under the Junior Subordinated Indenture constitutes an
event of default under the Declaration with respect to the Trust Securities (a
"Declaration Event of Default"); provided, that pursuant to the Declaration,
the holder of the Common Securities will be deemed to have waived any
Declaration Event of Default with respect to the Common Securities until all
Declaration Events of Default with respect to the Preferred Securities have
been cured, waived or otherwise eliminated. Until such Declaration Events of
Default with respect to the Preferred Securities have been so cured, waived,
or otherwise eliminated, the Property Trustee will be deemed to be acting
solely on behalf of the holders of the Preferred Securities and only the
holders of the Preferred Securities will have the right to direct the Property
Trustee with respect to certain matters under the Declaration, and therefore
the Junior Subordinated Indenture. If the Property Trustee fails to enforce
its rights under the Declaration, any holder of Preferred Securities may
institute a legal proceeding against the Company to enforce the Property
Trustee's rights under the Declaration and the Junior Subordinated Debt
Securities. Notwithstanding the foregoing, if the Company has failed to pay
interest or principal on the Junior Subordinated Debt Securities on the date
such interest or principal is otherwise payable, then a holder of Preferred
Securities may directly institute a proceeding for enforcement of payment to
such holder directly of the principal of or interest on the Junior
Subordinated Debt Securities having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities of such holder on or after the
respective due date specified in the Junior Subordinated Debt Securities. In
connection with such Direct Action, the Company will be subrogated to the
rights of such holder of Preferred Securities under the Declaration to the
extent of any payment made by the Company to such holder of Preferred
Securities in such Direct Action. The holders of Preferred Securities will not
be able to exercise directly any other remedy available to the holders of the
Junior Subordinated Debt Securities unless the Property Trustee fails to do
so.
Upon the occurrence of a Declaration Event of Default, the Property Trustee
as the sole holder of the Junior Subordinated Debt Securities will have the
right under the Junior Subordinated Indenture to declare the principal of and
interest on the Junior Subordinated Debt Securities to be immediately due and
payable. The Company and the Trust are each required to file annually with the
Property Trustee an officer's certificate as to its compliance with all
conditions and covenants under the Declaration.
VOTING RIGHTS
Except as described herein, under the Trust Act, the Trust Indenture Act and
under "The Preferred Securities Guarantee--Modifications of the Preferred
Securities Guarantee; Assignment" in the accompanying Prospectus, and as
otherwise required by law and the Declaration, the holders of the Preferred
Securities will have no voting rights. In the event that the Company elects to
defer payments of interest on the Junior Subordinated Debt Securities, the
holders of the Preferred Securities do not have the right to appoint a special
representative or trustee or otherwise act to protect their interests.
Subject to the requirement of the Property Trustee obtaining a tax opinion
in certain circumstances set forth in the last sentence of this paragraph, the
holders of a majority in aggregate liquidation amount of the Preferred
S-23
<PAGE>
Securities have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Property Trustee, or direct the
exercise of any trust or power conferred upon the Property Trustee under the
Declaration including the right to direct the Property Trustee, as holder of
the Junior Subordinated Debt Securities, to (i) exercise the remedies
available under the Junior Subordinated Indenture with respect to the Junior
Subordinated Debt Securities, (ii) waive any past Indenture Event of Default
that is waivable under Section 513 of the Junior Subordinated Indenture, or
(iii) exercise any right to rescind or annul a declaration that the principal
of all the Junior Subordinated Debt Securities shall be due and payable. In
addition, if the Company fails to make interest and/or principal payments on
the Junior Subordinated Debt Securities when due (taking account of any
Extension Period), a holder of Preferred Securities may directly institute a
proceeding for enforcement of payment to such holder of the principal or
interest on the Junior Subordinated Debt Securities having a principal amount
equal to the aggregate liquidation amount of the Preferred Securities of such
holder on or after the respective due dates specified in the Junior
Subordinated Debt Securities. With respect to the Property Trustee's rights
other than the right to receive payment on the Junior Subordinated Debt
Securities, if the Property Trustee fails to enforce its rights under the
Junior Subordinated Debt Securities, any record holder of Preferred Securities
may, after such holder's written request to the Property Trustee to enforce
such rights, institute a legal proceeding directly against the Company to
enforce the Property Trustee's rights under the Junior Subordinated Debt
Securities without first instituting any legal proceeding against the Property
Trustee or any other person or entity. The Property Trustee shall notify all
holders of the Preferred Securities of any notice of default received from the
Indenture Trustee with respect to the Junior Subordinated Debt Securities.
Such notice shall state that such Indenture Event of Default also constitutes
a Declaration Event of Default. Except with respect to directing the time,
method and place of conducting a proceeding for a remedy, the Property Trustee
shall not take any of the actions described in clauses (i), (ii) or (iii)
above unless the Property Trustee has obtained an opinion of tax counsel to
the effect that, as a result of such action, the Trust will not fail to be
classified as a grantor trust for United States federal income tax purposes
and each holder of Trust Securities will be treated as owning an undivided
interest in the Junior Subordinated Debt Securities.
In the event the consent of the Property Trustee, as the holder of the
Junior Subordinated Debt Securities, is required under the Junior Subordinated
Indenture with respect to any amendment, modification or termination of the
Junior Subordinated Indenture, the Property Trustee shall request the
direction of the holders of the Trust Securities with respect to such
amendment, modification or termination and shall vote with respect to such
amendment, modification or termination as directed by a majority in
liquidation amount of the Trust Securities voting together as a single class;
provided, however, that where a consent under the Junior Subordinated
Indenture would require the consent of all the holders, the Property Trustee
may only give such consent at the direction of all the holders of the Trust
Securities outstanding. The Property Trustee shall be under no obligation to
take any such action in accordance with the directions of the holders of the
Trust Securities unless the Property Trustee has obtained an opinion of tax
counsel to the effect that for the purposes of United States federal income
tax the Trust will not be classified as other than a grantor trust and each
holder of Trust Securities will be treated as owning an undivided interest in
the Junior Subordinated Debt Securities.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Preferred Securities may be
given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all of the holders of Trust Securities or
pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be
taken, to be mailed to each holder of record of Preferred Securities. Each
such notice will include a statement setting forth the following information:
(i) the date of such meeting or the date by which such action is to be taken;
(ii) a description of any resolution proposed for adoption at such meeting on
which such holders are entitled to vote or of such matter upon which written
consent is sought; and (iii) instructions for the delivery of proxies or
consents. No vote or consent of the holders of Preferred Securities will be
required for the Trust to redeem and cancel Preferred Securities or distribute
Junior Subordinated Debt Securities in accordance with the Declaration.
S-24
<PAGE>
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by the Company or any entity directly
or indirectly controlling or controlled by, or under direct or indirect common
control with, the Company shall not be entitled to vote or consent and shall,
for purposes of such vote or consent, be treated as if such Preferred
Securities were not outstanding.
The procedures by which holders of Preferred Securities may exercise their
voting rights are described below. See "Description of the Preferred
Securities--Book-Entry Only Issuance--The Depository Trust Company".
Holders of the Preferred Securities will have no rights to appoint or remove
the ReliaStar Trustees, who may be appointed, removed or replaced solely by
the Company as the holder of all of the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by a majority of the
Regular Trustees (and in certain circumstances the Property Trustee), provided
that, if any proposed amendment provides for, or the Regular Trustees
otherwise propose to effect, (i) any action that would adversely affect the
powers, preferences or special rights of the Trust Securities, whether by way
of amendment to the Declaration or otherwise or (ii) the dissolution, winding-
up or termination of the Trust other than pursuant to the terms of the
Declaration, then the holders of the Trust Securities voting together as a
single class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of at
least a majority in liquidation amount of the Trust Securities affected
thereby; provided, that a reduction in the principal amount or the
distribution rate, or a change in the payment dates or maturity, of the
Preferred Securities shall not be permitted without the consent of each holder
of Preferred Securities. If any amendment or proposal referred to in clause
(i) above would adversely affect only the Preferred Securities or the Common
Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of a majority in liquidation amount of such class of
Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified for purposes of United States federal income taxation as other
than a grantor trust, (ii) reduce or otherwise adversely affect the powers of
the Property Trustee or (iii) cause the Trust to be deemed an "investment
company" which is required to be registered under the Investment Company Act
of 1940, as amended (the "1940 Act").
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any corporation or other body, except as
described below. The Trust may, with the consent of the Regular Trustees and
without the consent of the holders of the Trust Securities, consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any State; provided, that (i) such successor entity either
(x) expressly assumes all of the obligations of the Trust under the Trust
Securities or (y) substitutes for the Trust Securities other securities having
substantially the same terms as the Trust Securities (the "Successor
Securities"), so long as the Successor Securities rank the same as the Trust
Securities rank with respect to distributions and payments upon redemption,
liquidation and otherwise, (ii) the Company expressly acknowledges a trustee
of such successor entity possessing the same powers and duties as the Property
Trustee as the holder of the Junior Subordinated Debt Securities, (iii) the
Preferred Securities or any Successor Securities are listed, or any Successor
Securities will be listed upon notification of issuance, on any national
securities exchange, the Nasdaq National Market or other organization on which
the Preferred Securities are listed or admitted for trading, (iv) such merger,
consolidation, amalgamation or replacement does not adversely affect the
rights, preferences and privileges of the holders of the Trust Securities
(including any Successor Securities) in any material respect (other than with
respect to any dilution of the holders' interest in the new entity), (v) such
successor entity has a purpose identical to that of the
S-25
<PAGE>
Trust, (vi) prior to such merger, consolidation, amalgamation or replacement,
the Company has received an opinion of a nationally recognized independent
counsel to the Trust experienced in such matters to the effect that (A) such
merger, consolidation, amalgamation or replacement does not adversely affect
the rights, preferences and privileges of the holders of the Trust Securities
(including any Successor Securities) in any material respect (other than with
respect to any dilution of the holders' interest in the new entity), and (B)
following such merger, consolidation, amalgamation or replacement, neither the
Trust nor such successor entity will be required to register as an investment
company under the 1940 Act, and (vii) the Company guarantees the obligations
of such successor entity under the Successor Securities at least to the extent
provided by the Preferred Securities Guarantee. Notwithstanding the foregoing,
the Trust shall not, except with the consent of holders of 100% in liquidation
amount of the Trust Securities, consolidate, amalgamate, merge with or into,
or be replaced by any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it, if such consolidation,
amalgamation, merger or replacement would cause the Trust or the Successor
Entity to be classified as other than a grantor trust for United States
federal income tax purposes or any holder of Trust Securities not to be
treated as owning an undivided interest in the Junior Subordinated Debt
Securities.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary for
the Preferred Securities. The Preferred Securities will be issued only as
fully-registered securities registered in the name of Cede & Co. (DTC's
nominee). One or more fully-registered global Preferred Securities
certificates, representing the total aggregate number of Preferred Securities,
will be issued and will be deposited with DTC.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in the global Preferred Security.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). DTC holds securities
that its participants ("Participants") deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations ("Direct Participants"). DTC is owned by a
number of its Direct Participants and by the NYSE, the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc.
Access to the DTC system is also available to others, such as securities
brokers and dealers, banks and trust companies that clear transactions through
or maintain a direct or indirect custodial relationship with a Direct
Participant either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser
of each Preferred Security ("Beneficial Owner") is in turn to be recorded on
the Direct and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchases, but Beneficial
Owners are expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the
Direct or Indirect Participants through which the Beneficial Owners purchased
Preferred Securities. Transfers of ownership interests in the Preferred
Securities are to be accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in the Preferred
Securities, except in the event that use of the book-entry system for the
Preferred Securities is discontinued.
S-26
<PAGE>
To facilitate subsequent transfers, all the Preferred Securities deposited
by Participants with DTC are registered in the name of DTC's nominee, Cede &
Co. The deposit of Preferred Securities with DTC and their registration in the
name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Preferred Securities. DTC's
records reflect only the identity of the Direct Participants to whose accounts
such Preferred Securities are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements that may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Preferred Securities are being redeemed, DTC will reduce the amount of the
interest of each Direct Participant in such Preferred Securities in accordance
with its procedures.
Although voting with respect to the Preferred Securities is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to Preferred Securities. Under its usual
procedures, DTC would mail an Omnibus Proxy to the Trust as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts the Preferred
Securities are credited on the record date (identified in a listing attached
to the Omnibus Proxy). The Company and the Trust believe that the arrangements
among DTC, Direct and Indirect Participants, and Beneficial Owners will enable
the Beneficial Owners to exercise rights equivalent in substance to the rights
that can be directly exercised by a holder of a beneficial interest in the
Trust.
Distribution payments on the Preferred Securities will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment
date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payments on such
payment date. Payments by Participants to Beneficial Owners will be governed
by standing instructions and customary practices, as is the case with
securities held for the account of customers in bearer form or registered in
"street name", and such payments will be the responsibility of such
Participant and not of DTC, the Trust or the Company, subject to any statutory
or regulatory requirements to the contrary that may be in effect from time to
time. Payment of distributions to DTC is the responsibility of the Trust,
disbursement of such payments to Direct Participants is the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
Except as provided herein, a Beneficial Owner in a global Preferred Security
certificate will not be entitled to receive physical delivery of Preferred
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under the Preferred Securities.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
the Trust. Under such circumstances, in the event that a successor securities
depositary is not obtained, Preferred Securities certificates are required to
be printed and delivered. Additionally, the Regular Trustees (with the consent
of the Company) may decide to discontinue use of the system of book-entry
transfers through DTC (or any successor depositary) with respect to the
Preferred Securities. In that event, certificates for the Preferred Securities
will be printed and delivered.
PAYING AGENT
In the event that the Preferred Securities do not remain in book-entry only
form, the following provisions would apply:
The Property Trustee will act as paying agent and may designate an
additional or substitute paying agent at any time.
S-27
<PAGE>
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but upon payment (with the giving of such
indemnity as the Trust or the Company may require) in respect of any tax or
other government charges that may be imposed in relation to it.
The Trust will not be required to register or cause to be registered the
transfer of Preferred Securities after such Preferred Securities have been
called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to the occurrence of a default with respect to
the Trust Securities and after the curing of any defaults that may have
occurred, undertakes to perform only such duties as are specifically set forth
in the Declaration and, after default, shall exercise the same degree of care
as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to such provisions, the Property Trustee is under no
obligation to exercise any of the powers vested in it by the Declaration at
the request of any holder of Preferred Securities, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which
might be incurred thereby. The holders of Preferred Securities will not be
required to offer such indemnity in the event such holders, by exercising
their voting rights, direct the Property Trustee to take any action it is
empowered to take under the Declaration following a Declaration Event of
Default. The Property Trustee also serves as trustee under the Preferred
Securities Guarantee.
GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to operate the Trust in
such a way so that the Trust will not be required to register as an
"investment company" under the 1940 Act or characterized as other than a
grantor trust for United States federal income tax purposes. The Company is
authorized and directed to conduct its affairs so that the Junior Subordinated
Debt Securities will be treated as indebtedness of the Company for United
States federal income tax purposes. In this connection, the Company and the
Regular Trustees are authorized to take any action, not inconsistent with
applicable law, the Declaration or the certificate of incorporation of the
Company, that each of the Company and the Regular Trustees determines in their
discretion to be necessary or desirable to achieve such end, as long as such
action does not materially and adversely affect the interests of the holders
of the Preferred Securities or vary the terms thereof.
Holders of the Preferred Securities have no preemptive rights.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBT SECURITIES
Set forth below is a description of the specific terms of the Junior
Subordinated Debt Securities in which the Trust will invest the proceeds from
the issuance and sale of the Trust Securities. This description supplements
the description of the general terms and provisions of Junior Subordinated
Debt Securities set forth in the accompanying Prospectus under the caption
"Description of Debt Securities". The following description does not purport
to be complete and is subject to, and is qualified in its entirety by
reference to, the description in the accompanying Prospectus and the Junior
Subordinated Indenture, dated as of March 29, 1996 between the Company and
Wilmington Trust Company, as trustee (the "Indenture Trustee"), as
supplemented by the First Supplemental Indenture, dated as of March 29, 1996
and the Second Supplemental Indenture dated as of June 3, 1997 (as so
supplemented, the "Junior Subordinated Indenture"), the forms of which are
filed as Exhibits to the Registration Statement of which this Prospectus
Supplement and the accompanying Prospectus form a part. Certain capitalized
terms used herein are defined in the Junior Subordinated Indenture.
S-28
<PAGE>
Under certain circumstances involving the dissolution of the Trust following
the occurrence of a Tax Event, Junior Subordinated Debt Securities may be
distributed to the holders of the Trust Securities in Liquidation of the
Trust. See "Description of the Preferred Securities--Tax Event Redemption or
Distribution".
If the Junior Subordinated Debt Securities are distributed to the holders of
the Preferred Securities, the Company will use its best efforts to have the
Junior Subordinated Debt Securities listed on the NYSE or on such other
exchange, the Nasdaq National Market or other organization on which the
Preferred Securities are then listed.
GENERAL
The Junior Subordinated Debt Securities will be issued as unsecured
subordinated debt under the Junior Subordinated Indenture. The Junior
Subordinated Debt Securities will be limited in aggregate principal amount to
approximately $128.9 million, such amount being the sum of the aggregate
stated liquidation amount of the Preferred Securities and the capital
contributed by the Company in exchange for the Common Securities (the "Company
Payment").
The Junior Subordinated Debt Securities are not subject to a sinking fund
provision. The entire principal amount of the Junior Subordinated Debt
Securities will mature and become due and payable, together with any accrued
and unpaid interest thereon including Compound Interest (as defined herein)
and Additional Interest (as defined herein), if any, on June 3, 2027. The
stated maturity date may be extended at any time by the Company to any date
not later than June 3, 2046; provided, that at the time such election is made
and at the time of extension (i) the Company is not in bankruptcy, otherwise
insolvent or in liquidation, (ii) the Company is not in default in the payment
of any interest or principal on the Junior Subordinated Debt Securities, and
(iii) in the case of Junior Subordinated Debt Securities held by the Trust,
the Trust is not in arrears on payments of distributions on the Preferred
Securities and no deferred distributions are accumulated. In the event the
Company elects to extend the stated maturity of the Junior Subordinated Debt
Securities, it shall give notice to the Indenture Trustee, and the Indenture
Trustee shall give notice of such extension to the holders of the Junior
Subordinated Debt Securities not more than 90 and nor less than 30 days prior
to the effectiveness thereof.
If Junior Subordinated Debt Securities are distributed to holders of
Preferred Securities in liquidation of such holders' interests in the Trust,
such Junior Subordinated Debt Securities will initially be issued as a Global
Security. As described herein, under certain limited circumstances, Junior
Subordinated Debt Securities may be issued in certificated form in exchange
for a Global Security. See "Description of the Junior Subordinated Debt
Securities--Book-Entry and Settlement". In the event that Junior Subordinated
Debt Securities are issued in certificated form, such Junior Subordinated Debt
Securities will be in denominations of $25 and integral multiples thereof and
may be transferred or exchanged at the offices described below. Payments on
Junior Subordinated Debt Securities issued as a Global Security will be made
to DTC, a successor depositary or, in the event that no depositary is used, to
a Paying Agent for the Junior Subordinated Debt Securities. In the event
Junior Subordinated Debt Securities are issued in certificated form, principal
and interest will be payable, the transfer of the Junior Subordinated Debt
Securities will be registrable and Junior Subordinated Debt Securities will be
exchangeable for Junior Subordinated Debt Securities of other denominations of
a like aggregate principal amount at the corporate trust office of the
Indenture Trustee in Wilmington, Delaware; provided, that at the option of the
Company payment of interest may be made by check mailed to the address of the
holder entitled thereto or by wire transfer to an account appropriately
designated by the holder entitled thereto. Notwithstanding the foregoing, so
long as the holder of any Junior Subordinated Debt Securities is the Property
Trustee, the payment of principal and interest on the Junior Subordinated Debt
Securities held by the Property Trustee will be made at such place and to such
account as may be designated by the Property Trustee.
The Junior Subordinated Indenture does not contain provisions that afford
the Junior Subordinated Debt Securities protection in the event of a highly
leveraged transaction involving the Company.
SUBORDINATION
The Junior Subordinated Indenture provides that the Junior Subordinated Debt
Securities are subordinate and junior in right of payment to all Senior Debt
of the Company. "Senior Debt" means all Debt of the Company except for Trust
Related Securities. "Trust Related Securities" are obligations evidenced by
debt securities (and guarantees in respect of those debt securities) initially
issued to any trust, or a trustee of a trust, partnership or other entity
affiliated with the Company that is, directly or indirectly, a financing
vehicle of the Company in connection with the issuance by such entity of
preferred securities or other similar securities. The
S-29
<PAGE>
Junior Subordinated Debt Securities will rank pari passu with such Trust
Related Securities, if any. "Debt" has the meaning set forth under the heading
"Description of Debt Securities--Subordination" in the accompanying
Prospectus. In the event that the Company shall default in the payment of any
principal, premium, if any, or interest, if any, on any Senior Debt when the
same becomes due and payable, whether at maturity or at a date fixed for
prepayment or by declaration of acceleration or otherwise, then, unless and
until such default shall have been cured or waived or shall have ceased to
exist, no direct or indirect payment (in cash, property, securities, by set-
off or otherwise) may be made or agreed to be made for principal, premium, if
any, or interest, if any, on the Junior Subordinated Debt Securities, or in
respect of any redemption, repayment, retirement, purchase or other
acquisition of any of the Junior Subordinated Debt Securities. In the event of
(i) any insolvency, bankruptcy, receivership, liquidation, reorganization,
readjustment, composition or other similar proceeding relating to the Company,
its creditors or its property, (ii) any proceeding for the liquidation,
dissolution or other winding up of the Company, voluntary or involuntary,
whether or not involving insolvency or bankruptcy proceedings, (iii) any
assignment by the Company for the benefit of creditors, or (iv) any other
marshalling of the assets of the Company, all Senior Debt (including any
interest thereon accruing after the commencement of any such proceedings) must
first be paid in full before any payment or distribution, whether in cash,
securities or other property, may be made on account of the principal of or
interest on the Junior Subordinated Debt Securities. If any payment or
distribution on account of the principal of or interest on the Junior
Subordinated Debt Securities of any character or any security, whether in
cash, securities or other property (other than securities of the Company or
any other company provided for by a plan of reorganization or readjustment the
payment of which is subordinate, at least to the extent provided in the
subordination provisions with respect to the Junior Subordinated Debt
Securities, to the payment of all Senior Debt at the time outstanding and to
any securities issued in respect thereof under any such plan of reorganization
or readjustment) shall be received by any Holder of the Junior Subordinated
Debt Securities in contravention of any of the terms of the Junior
Subordinated Indenture and before all the Senior Debt has been paid in full,
such payment or distribution or security shall be received in trust for the
benefit of, and shall be paid over or delivered and transferred to, the
holders of the Senior Debt at the time outstanding in accordance with the
priorities then existing among such holders for application to the payment of
all Senior Debt remaining unpaid to the extent necessary to pay all such
Senior Debt in full.
As of March 31, 1997, the Company had approximately $449.1 million of Senior
Debt and $125.0 million of Trust Related Securities outstanding.
OPTIONAL REDEMPTION
The Company shall have the right to redeem the Junior Subordinated Debt
Securities, in whole or in part, from time to time, on or after June 3, 2002,
or at any time in certain circumstances upon the occurrence of a Tax Event as
described under "Description of the Preferred Securities--Tax Event Redemption
or Distribution", upon not less than 30 nor more than 60 days notice, at a
redemption price equal to 100% of the principal amount to be redeemed plus any
accrued and unpaid interest, including Additional Interest (as defined
herein), if any, to the redemption date. If a partial redemption of the
Preferred Securities resulting from a partial redemption of the Junior
Subordinated Debt Securities would result in the delisting of the Preferred
Securities, the Company may only redeem the Junior Subordinated Debt
Securities in whole.
INTEREST
Each Junior Subordinated Debt Security shall bear interest at the rate of
8.10% per annum from the original date of issuance, payable quarterly in
arrears on March 31, June 30, September 30 and December 31 of each year (each
an "Interest Payment Date"), commencing June 30, 1997, to the person in whose
name such Junior Subordinated Debt Security is registered, subject to certain
exceptions, at the close of business on the Business Day next preceding such
Interest Payment Date. In the event the Junior Subordinated Debt Securities
are not represented by one or more Global Securities, the Company shall have
the right to select record dates, which shall be more than one Business Day
prior to the Interest Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period for which interest is computed
will be computed on the basis of the actual number of days elapsed per 30-day
month. In the event that any date on which interest is payable on the Junior
Subordinated Debt Securities is not a Business Day, then payment of the
interest payable on such date will be made on the next succeeding day that is
a Business Day, except that, if such Business Day is in the next succeeding
calendar year, then such payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date.
S-30
<PAGE>
PROPOSED TAX LEGISLATION
On February 6, 1997, the Clinton Administration released its budget proposal
for fiscal year 1998. The proposal contains certain tax law changes that, if
enacted, would prohibit an issuer from deducting interest payments or original
issue discount on an instrument such as the Junior Subordinated Debt
Securities if such instrument has a maximum weighted average maturity of more
than 40 years. Under the proposal, for purposes of determining the term of an
instrument, any right to extend would be treated as exercised. The
Administration's proposal, if enacted, would also treat a corporate issuer
that files annual financial statements with the Commission as having
characterized an instrument such as the Junior Subordinated Debt Securities as
equity for purposes of Section 385(c) of the Code, if the instrument (i) has a
maximum term exceeding 15 years and (ii) is not shown as indebtedness on the
applicable balance sheet of the issuer or, in the case of indebtedness issued
to a related party that issues a related instrument, such related instrument
is not reflected as indebtedness on the applicable consolidated balance sheet.
Under Section 385(c), the characterization by the issuer of an instrument as
equity is binding on the issuer and all holders of the instrument unless a
holder discloses on his tax return that he is treating such instrument in a
manner inconsistent with the issuer's characterization. The Administration's
proposal specifies that the changes would be effective for instruments issued
on or after the date of first Congressional committee action.
There can be no assurance that legislation affecting the Company's ability
to deduct interest paid on the Junior Subordinated Debt Securities or the
characterization of the Junior Subordinated Debt Securities for U.S. federal
income tax purposes, including legislation similar to the proposals described
above, will not be enacted in the future or that any such legislation would
not be effective retroactively. In the event tax law changes are enacted and
apply retroactively to the Junior Subordinated Debt Securities, such changes
could give rise to a Tax Event, which would, in certain circumstances, require
the dissolution of the Trust or permit the Company to redeem the Junior
Subordinated Debt Securities within 90 days of the date thereof. See "Risk
Factors--Proposed Changes to U.S. Tax Laws; Possible Tax Event", "--Tax Event
Redemption or Distribution", "Description of the Preferred Securities--Tax
Event Redemption or Distribution", and "United States Federal Income
Taxation--Proposed Tax Legislation".
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company shall have the right at any time, and from time to time, during
the term of the Junior Subordinated Debt Securities to defer payments of
interest by extending the interest payment period for a period not exceeding
20 consecutive quarters, at the end of which Extension Period the Company
shall pay all interest then accrued and unpaid (including any Additional
Interest) together with interest thereon compounded quarterly at the rate
specified for the Junior Subordinated Debt Securities to the extent permitted
by applicable law ("Compound Interest"); provided, that during any such
Extension Period, (a) the Company shall not declare or pay dividends on, make
any distribution with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to any of its capital stock, and (b) the
Company shall not make any payment of interest, principal or premium, if any,
on or repay, repurchase or redeem any debt securities issued by the Company
that rank pari passu with or junior to the Junior Subordinated Debt
Securities, provided however, the Company may declare and pay a stock dividend
where the dividend is the same stock as that on which the dividend is being
paid. Prior to the termination of any such Extension Period, the Company may
further defer payments of interest by further extending the interest payment
period; provided, however, that, such Extension Period, including all such
previous and further extensions, may not exceed 20 consecutive quarters or
extend beyond the maturity of the Junior Subordinated Debt Securities. Upon
the termination of any Extension Period and the payment of all amounts then
due, the Company may commence a new Extension Period, subject to the terms set
forth in this section. No interest during an Extension Period, except at the
end thereof, shall be due and payable. The Company has no present intention of
exercising its right to defer payments of interest by extending the interest
payment period on the Junior Subordinated Debt Securities. If the Property
Trustee shall be the sole holder of the Junior Subordinated Debt Securities,
the Company shall give the Regular Trustees and the Property Trustee notice of
its selection of such Extension Period one Business Day prior to the earlier
of (i) the date distributions on the Preferred Securities are payable or (ii)
the date the Regular Trustees are required to give notice to the NYSE (or
other applicable self-regulatory organization) or to holders of the Preferred
Securities of the record
S-31
<PAGE>
date or the date such distribution is payable. The Regular Trustees shall give
notice of the Company's selection of such Extension Period to the holders of
the Preferred Securities. If the Property Trustee shall not be the sole holder
of the Junior Subordinated Debt Securities, the Company shall give the holders
of the Junior Subordinated Debt Securities notice of its selection of such
Extension Period ten Business Days prior to the earlier of (i) the Interest
Payment Date or (ii) the date upon which the Company is required to give
notice to the NYSE (or other applicable self-regulatory organization) or to
holders of the Junior Subordinated Debt Securities of the record or payment
date of such related interest payment.
ADDITIONAL INTEREST
If at any time the Trust shall be required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in
any such case, the Company will pay as additional interest ("Additional
Interest") such additional amounts as shall be required so that the net
amounts received and retained by the Trust after paying any such taxes,
duties, assessments or other governmental charges will be not less than the
amounts the Trust would have received had no such taxes, duties, assessments
or other governmental charges been imposed.
INDENTURE EVENTS OF DEFAULT
In addition to the Events of Default described in the Prospectus, an Event
of Default for purposes of the Junior Subordinated Debt Securities shall
include the voluntary or involuntary dissolution or winding up of the business
of the Trust or other termination of the existence of the Trust, other than in
connection with (i) the distribution of the Junior Subordinated Debt
Securities to holders of the Trust Securities in liquidation of their
interests in the Trust, (ii) the redemption of all of the outstanding Trust
Securities, or (iii) certain mergers, consolidations or amalgamations, each as
permitted by the Declaration.
If any Event of Default shall occur and be continuing, the Property Trustee,
as the holder of the Junior Subordinated Debt Securities, will have the right
to declare the principal of and the interest on the Junior Subordinated Debt
Securities (including any Compounded Interest and Additional Interest, if any)
and any other amounts payable under the Junior Subordinated Indenture to be
forthwith due and payable and to enforce its other rights as a creditor with
respect to the Junior Subordinated Debt Securities. See "Description of Debt
Securities--Events of Default" in the accompanying Prospectus for a
description of the Events of Default. An Event of Default also constitutes a
Declaration Event of Default. The holders of Preferred Securities in certain
circumstances have the right to direct the Property Trustee to exercise its
rights as the holder of the Junior Subordinated Debt Securities. See
"Description of the Preferred Securities--Declaration Events of Default" and
"--Voting Rights".
Notwithstanding the foregoing, if the Company has failed to pay interest or
principal on the Junior Subordinated Debt Securities on the date such interest
or principal is otherwise payable, then a holder of Preferred Securities may
directly institute a proceeding for enforcement of payment to such holder
directly of the principal of or interest on the Junior Subordinated Debt
Securities having a principal amount equal to the aggregate liquidation amount
of the Preferred Securities of such holder on or after the respective due date
specified in the Junior Subordinated Debt Securities. The holders of Preferred
Securities will not be able to exercise directly any other remedy available to
the holders of the Junior Subordinated Debt Securities unless the Property
Trustee fails to do so.
ADDITIONAL COVENANTS
The Company has covenanted, with respect to the Junior Subordinated Debt
Securities, that if (i) there has occurred any event that would constitute an
Event of Default, (ii) the Company is in default with respect to its payment
of any obligations under the Preferred Securities Guarantee or Common
Securities Guarantee relating to the Trust, or (iii) the Company has given
notice of its election to defer payments of interest on the Junior
Subordinated Debt Securities by extending the interest payment period as
provided in the Indenture and such period, or any extension thereof, shall be
continuing, then (A) the Company will not declare or pay any dividend on, make
any distributions with respect to, or redeem, purchase or make a liquidation
payment with respect to
S-32
<PAGE>
any of its capital stock, and (B) the Company will not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities issued by the Company which rank pari passu with or junior to
the Junior Subordinated Debt Securities; provided, however, that restriction
(A) above will not apply to any stock dividends paid by the Company where the
dividend stock is the same as that on which the dividend is being paid.
The Company has also covenanted, with respect to the Junior Subordinated
Debt Securities, that for so long as the Preferred Securities and Common
Securities remain outstanding, the Company will (i) maintain 100% direct or
indirect ownership of the Common Securities, provided, however, that any
permitted successor of the Company under the Junior Subordinated Indenture may
succeed to the Company's ownership of the Common Securities, (ii) use its
reasonable efforts to cause the Trust (a) to remain a business trust, except
in connection with a distribution of the Junior Subordinated Debt Securities,
the redemption of all of the Preferred Securities and Common Securities of the
Trust or certain mergers, consolidations or amalgamations, each as permitted
by the Declaration, and (b) to otherwise continue not to be treated as an
association taxable as a corporation or partnership for United States federal
income tax purposes, and (iii) to use its reasonable efforts to cause each
holder of Preferred Securities and Common Securities to be treated as owning
an individual beneficial interest in the Junior Subordinated Debt Securities.
LIMITATION ON WAIVERS AND CONSENTS UNDER THE JUNIOR SUBORDINATED INDENTURE
Notwithstanding anything to the contrary contained in the Junior
Subordinated Indenture, if the Junior Subordinated Debt Securities are held by
the Trust or a ReliaStar Trustee, (i) a waiver of a past default or any
modification to a waiver of a past default under the Junior Subordinated
Indenture will not be effective until the holders of a majority in liquidation
preference of Trust Securities have consented to such waiver or modification;
provided, however, that if the consent of the Holder (as defined in the Junior
Subordinated Indenture) of each Junior Subordinated Debt Security Outstanding
is required in connection with such waiver or modification, such waiver or
modification shall not be effective until each holder of the Trust Securities
shall have consented to such waiver or modification, and (ii) an indenture
supplemental to the Junior Subordinated Indenture will not be effective until
the holders of a majority in liquidation preference of Trust Securities have
consented to such supplemental indenture; provided, however, that if the
consent of the Holder of each Junior Subordinated Debt Security Outstanding is
required in connection with a supplemental indenture, such supplemental
indenture shall not be effective until each holder of the Trust Securities
shall have consented to such supplemental indenture.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Preferred Securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of the Trust
as a result of the occurrence of a Tax Event, the Junior Subordinated Debt
Securities will be issued in the form of one or more global certificates (each
a "Global Security") registered in the name of a depositary (the "depositary")
or its nominee. Except under the limited circumstances described below, Junior
Subordinated Debt Securities represented by the Global Security will not be
exchangeable for, and will not otherwise be issuable as, Junior Subordinated
Debt Securities in definitive form. The Global Securities described above may
not be transferred except by the depositary to a nominee of the depositary or
by a nominee of the depositary to the depositary or another nominee of the
depositary or to a successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a Global Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Junior
Subordinated Debt Securities in definitive form and will not be considered the
Holders thereof for any purpose under the Junior Subordinated Indenture, and
no Global Security representing Junior Subordinated Debt Securities shall be
exchangeable, except for another Global Security of
S-33
<PAGE>
like denomination and tenor to be registered in the name of the depositary or
its nominee or to a successor depositary or its nominee. Accordingly, each
Beneficial Owner must rely on the procedures of the depositary or, if such
person is not a Direct Participant, on the procedures of the Direct
Participant through which such person owns its interest to exercise any rights
of a holder under the Junior Subordinated Indenture.
THE DEPOSITARY
If Junior Subordinated Debt Securities are distributed to holders of
Preferred Securities in liquidation of such holders' interests in the Trust,
DTC will act as securities depositary for the Junior Subordinated Debt
Securities. For a description of DTC and the specific terms of the depositary
arrangements, see "Description of the Preferred Securities--Book-Entry Only
Issuance--The Depository Trust Company". As of the date of this Prospectus
Supplement, the description therein of DTC's book-entry system and DTC's
practices as they relate to purchases, transfers, notices and payments with
respect to the Preferred Securities apply in all material respects to any debt
obligations represented by one or more Global Securities held by DTC. The
Company may appoint a successor to DTC or any successor depositary in the
event DTC or such successor depositary is unable or unwilling to continue as
the depositary for the Global Securities.
None of the Company, the Trust, the Indenture Trustee, any paying agent and
any other agent of the Company or the Indenture Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global
Security for such Junior Subordinated Debt Securities or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
DISCONTINUANCE OF THE DEPOSITARY'S SERVICES
A Global Security shall be exchangeable for Junior Subordinated Debt
Securities registered in the names of persons other than the depositary or its
nominee only if (i) the depositary notifies the Company that it is unwilling
or unable to continue as the depositary for such Global Security and no
successor depositary shall have been appointed, (ii) the depositary, at any
time, ceases to be a clearing agency registered under the Exchange Act at
which time the depositary is required to be so registered to act as such
depositary and no successor depositary shall have been appointed, (iii) the
Company, in its sole discretion, determines that such Global Security shall be
so exchangeable or (iv) there shall have occurred an Event of Default with
respect to such Junior Subordinated Debt Securities. Any Global Security that
is exchangeable pursuant to the preceding sentence shall be exchangeable for
Junior Subordinated Debt Securities registered in such names as the depositary
shall direct. It is expected that such instructions will be based upon
directions received by the depositary from its Participants with respect to
ownership of beneficial interests in such Global Security.
MISCELLANEOUS
The Junior Subordinated Indenture will provide that the Company will pay all
fees and expenses related to (i) the offering of the Trust Securities and the
Junior Subordinated Debt Securities, (ii) the organization, maintenance and
dissolution of the Trust, (iii) the retention of the ReliaStar Trustees and
(iv) the enforcement by the Property Trustee of the rights of the holders of
the Preferred Securities. The payment of such fees and expenses will be fully
and unconditionally guaranteed by the Company.
S-34
<PAGE>
EFFECT OF OBLIGATIONS UNDER THE JUNIOR SUBORDINATED
DEBT SECURITIES AND THE PREFERRED SECURITIES GUARANTEE
As set forth in the Declaration, the sole purpose of the Trust is to issue
the Trust Securities evidencing undivided beneficial interests in the assets
of the Trust, to invest the proceeds from such issuance and sale in the Junior
Subordinated Debt Securities and to engage in only those activities necessary
or incidental thereto.
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debt Securities, such payments will be sufficient to cover
distributions and payments due on the Trust Securities because of the
following factors: (i) the aggregate principal amount of Junior Subordinated
Debt Securities will be equal to the sum of the aggregate stated liquidation
amount of the Trust Securities; (ii) the interest rate and the interest and
other payment dates on the Junior Subordinated Debt Securities will match the
distribution rate and distribution and other payment dates for the Preferred
Securities; (iii) the Company shall pay all, and the Trust shall not be
obligated to pay, directly or indirectly, any, costs and expenses of the
Trust; and (iv) the Declaration further provides that the ReliaStar Trustees
shall not cause or permit the Trust to, among other things, engage in any
activity that is not consistent with the purposes of the Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor
are available) are guaranteed by the Company as and to the extent set forth
under "The Preferred Securities Guarantee" in the accompanying Prospectus. If
the Company does not make interest payments on the Junior Subordinated Debt
Securities purchased by the Trust, it is expected that the Trust will not have
sufficient funds to pay distributions on the Preferred Securities. The
Preferred Securities Guarantee does not apply to any payment of distributions
unless and until the Trust has sufficient funds for the payment of such
distributions. The Preferred Securities Guarantee is a guarantee from the time
of its issuance, but will not apply to the payment of distributions and other
payments on the Preferred Securities when the Trust does not have sufficient
funds to make such distributions or other payments.
If the Company fails to make interest and/or principal payments on the
Junior Subordinated Debt Securities when due (taking account of any Extension
Period) a record holder of Preferred Securities may institute a proceeding
directly against the Company for enforcement of payment to the holder of the
principal of or interest on the Junior Subordinated Debt Securities having a
principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such holder on or after the respective due dates specified in
the Junior Subordinated Debt Securities. In connection with such Direct
Action, the Company will be subrogated to the rights of such holder of
Preferred Securities under the Declaration to the extent of any payment made
by the Company to such holder of Preferred Securities in such Direct Action.
If a Declaration Event of Default occurs and is continuing, the Declaration
provides a mechanism whereby the holders of the Preferred Securities, using
the procedures described in "Description of the Preferred Securities--Voting
Rights", may direct the Property Trustee to enforce its rights under the
Junior Subordinated Debt Securities. If, with respect to other than principal
and interest payments on the Junior Subordinated Debt Securities, the Property
Trustee fails to enforce its rights under the Junior Subordinated Debt
Securities, a holder of Preferred Securities may institute a legal proceeding
directly against any person to enforce such holder's rights under the Junior
Subordinated Debt Securities without first instituting any legal proceeding
against the Property Trustee or any other person or entity.
If the Company fails to make payments to holders of Preferred Securities
under the Preferred Securities Guarantee, any such holder of the Preferred
Securities may institute a legal proceeding directly against the Company to
enforce the Company's obligation to make such payments.
The Company's obligations under the Declaration, the Preferred Securities
Guarantee, the Junior Subordinated Debt Securities and the Junior Subordinated
Indenture, taken together, constitute a full and unconditional guarantee by
the Company of payments due on the Preferred Securities. See "The Preferred
Securities Guarantee" in the accompanying Prospectus.
S-35
<PAGE>
UNITED STATES FEDERAL INCOME TAXATION
GENERAL
The following is a summary of certain of the material United States federal
income tax consequences of the purchase, ownership and disposition of
Preferred Securities. Unless otherwise stated, this summary deals only with
Preferred Securities held as capital assets by holders who purchase the
Preferred Securities upon original issuance ("Initial Holders"). It does not
deal with special classes of holders such as banks, thrifts, real estate
investment trusts, regulated investment companies, insurance companies,
dealers in securities or currencies, tax-exempt investors, or persons that
will hold the Preferred Securities as a position in a "straddle", as part of a
"synthetic security" or "hedge", as part of a "conversion transaction" or
other integrated investment, or as other than a capital asset. This summary
also does not address the tax consequences to persons that have a functional
currency other than the U.S. Dollar or the tax consequences to shareholders,
partners or beneficiaries of a holder of Preferred Securities. Further, it
does not include any description of any alternative minimum tax consequences
or the tax laws of any state or local government or of any foreign government
that may be applicable to the holders of Preferred Securities. This summary is
based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations thereunder and administrative and judicial interpretations
thereof, as of the date hereof, all of which are subject to change, possibly
on a retroactive basis.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBT SECURITIES
In connection with the issuance of the Junior Subordinated Debt Securities,
Faegre & Benson LLP, counsel to the Company and the Trust, will render its
opinion generally to the effect that, although not entirely free from doubt,
under then current law and assuming full compliance with the terms of the
Junior Subordinated Indenture (and certain other documents), and based on
certain facts and assumptions contained in such opinion, the Junior
Subordinated Debt Securities held by the Trust will be classified for United
States federal income tax purposes as indebtedness of the Company.
PROPOSED TAX LEGISLATION
On February 6, 1997, the Clinton Administration released its budget proposal
for fiscal year 1998. The proposal contains certain tax law changes that, if
enacted, would prohibit an issuer from deducting interest payments or original
issue discount on an instrument such as the Junior Subordinated Debt
Securities if such instrument has a maximum weighted average maturity of more
than 40 years. Under the proposal, for purposes of determining the term of an
instrument, any right to extend would be treated as exercised. The
Administration's proposal, if enacted, would also treat a corporate issuer
that files annual financial statements with the Commission as having
characterized an instrument such as the Junior Subordinated Debt Securities as
equity for purposes of Section 385(c) of the Code if the instrument (i) has a
maximum term exceeding 15 years and (ii) is not shown as indebtedness on the
applicable balance sheet of the issuer or, in the case of indebtedness issued
to a related party that issues a related instrument, such related instrument
is not reflected as indebtedness on the applicable consolidated balance sheet.
Under Section 385(c), the characterization by the issuer of an instrument as
equity is binding on the issuer and all holders of the instrument unless a
holder discloses on his tax return that he is treating such instrument in a
manner inconsistent with the issuer's characterization. The Administration's
proposal specifies that the changes would be effective for instruments issued
on or after the date of first Congressional committee action.
There can be no assurance that legislation affecting the Company's ability
to deduct interest paid on the Junior Subordinated Debt Securities or the
characterization of the Junior Subordinated Debt Securities for U.S. federal
income tax purposes, including legislation similar to the proposals described
above, will not be enacted in the future or that any such legislation would
not be effective retroactively. In the event tax law changes are enacted and
apply retroactively to the Junior Subordinated Debt Securities, such changes
could give rise to a Tax Event, which would, in certain circumstances, require
the dissolution of the Trust or permit the Company to redeem the Junior
Subordinated Debt Securities within 90 days of the date thereof. See "Risk
Factors--Proposed Changes to U.S. Tax Laws; Possible Tax Event", "--Tax Event
Redemption or Distribution", "Description of the Preferred Securities--Tax
Event Redemption or Distribution", and "Description of the Junior Subordinated
Debt Securities--Proposed Tax Legislation".
S-36
<PAGE>
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Preferred Securities, Faegre & Benson
LLP will render its opinion generally to the effect that, under then current
law and assuming full compliance with the terms of the Declaration and the
Junior Subordinated Indenture (and certain other documents), and based on
certain facts and assumptions contained in such opinion, the Trust will be
classified for United States federal income tax purposes as a grantor trust
and not as an association taxable as a corporation. Accordingly, for United
States federal income tax purposes, each holder of Preferred Securities
generally will be considered the owner of an undivided beneficial interest in
the Junior Subordinated Debt Securities, and each holder will be required to
include in its gross income any OID accrued with respect to its allocable
share of the Junior Subordinated Debt Securities.
ORIGINAL ISSUE DISCOUNT
Under the Junior Subordinated Indenture, the Company has the option to defer
from time to time the payment of interest on the Junior Subordinated Debt
Securities. The Company's option to extend the interest payment period could
cause the Junior Subordinated Debt Securities to be subject to the OID rules
for federal income tax purposes. The Company, however, believes, and intends
to take the position that, as of the issue date, the terms and conditions of
the Junior Subordinated Debt Securities (in particular the restrictions on the
Company's ability to pay dividends during an Extension Period) make the
likelihood that the Company would elect to defer the payment of interest a
"remote" contingency for these purposes. If so treated, the Junior
Subordinated Debt Securities would not be subject to the OID rules unless the
Company were to extend the interest payment period, and a holder would
generally include stated interest in income as ordinary income when paid to
the Trust or accrued, in accordance with such holder's regular method of
accounting.
If the Company were to exercise its option to defer payments of interest,
the Junior Subordinated Debt Securities would at that time be treated as
issued with OID, and all stated interest on the Junior Subordinated Debt
Securities would thereafter be treated as OID as long as the Junior
Subordinated Debt Securities remained outstanding. In such event, all of a
holder's taxable interest income with respect to the Junior Subordinated Debt
Securities would thereafter be accounted for on an economic accrual basis
regardless of such holder's method of tax accounting, and actual distributions
of stated interest would not be reported as taxable income. Consequently, a
holder of Preferred Securities would be required to include OID in its gross
income daily even though the Company would not make actual cash payments
during an Extension Period.
The IRS could take a position that the likelihood of deferral is not a
remote contingency for these purposes, in which case the Junior Subordinated
Debt Securities would be subject to the OID rules described in the preceding
paragraph even if the Company did not exercise its option to defer payment of
interest.
Because income on the Preferred Securities will constitute interest or OID,
corporate holders of Preferred Securities will not be entitled to a dividends-
received deduction with respect to any income recognized with respect to the
Preferred Securities.
RECEIPT OF JUNIOR SUBORDINATED DEBT SECURITIES OR CASH UPON LIQUIDATION OF THE
TRUST
Under certain circumstances, as described under the caption "Description of
the Preferred Securities--Tax Event Redemption or Distribution", Junior
Subordinated Debt Securities may be distributed to holders in exchange for the
Preferred Securities and in liquidation of the Trust. Under current law, such
a distribution, for United States federal income tax purposes, would be
treated as a non-taxable event to each holder, and each holder would receive
an aggregate tax basis in the Junior Subordinated Debt Securities equal to
such holder's aggregate tax basis in its Preferred Securities. A holder's
holding period in the Junior Subordinated Debt Securities so received in
liquidation of the Trust would include the period during which the Preferred
Securities were held by such holder.
Under certain circumstances described under the caption "Description of the
Preferred Securities-- Mandatory Redemption" and "--Tax Event Redemption or
Distribution", the Junior Subordinated Debt Securities may be redeemed for
cash and the proceeds of such redemption distributed to holders in redemption
S-37
<PAGE>
of their Preferred Securities. Under current law, such a redemption would, for
United States federal income tax purposes, constitute a taxable disposition of
the redeemed Preferred Securities, and a holder could recognize gain or loss
as if it sold such redeemed Preferred Securities for cash. See "Sales of
Preferred Securities" below.
SALES OF PREFERRED SECURITIES
A holder that sells Preferred Securities will recognize gain or loss equal
to the difference between its adjusted tax basis in the Preferred Securities
and the amount realized on the sale of such Preferred Securities. A holder's
adjusted tax basis in the Preferred Securities generally will be its initial
purchase price increased by accrued but unpaid interest or OID previously
includible in such holder's gross income to the date of disposition and
decreased by payments received on the Preferred Securities. Such gain or loss
generally will be a capital gain or loss and generally will be a long-term
capital gain or loss if the Preferred Securities have been held for more than
one year.
The Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the
underlying Junior Subordinated Debt Securities. A holder who disposes of his
Preferred Securities between record dates for payments of distributions
thereon will be required to include accrued but unpaid interest or OID on the
Junior Subordinated Debt Securities through the date of disposition in income
as ordinary income, and to add such amount to his adjusted tax basis in his
pro rata share of the underlying Junior Subordinated Debt Securities deemed
disposed of. To the extent the selling price is less than the holder's
adjusted tax basis (which will include all accrued but unpaid interest or OID)
a holder will recognize a capital loss. Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for United States
federal income tax purposes.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the
United States, a foreign corporation, a non-resident alien individual, a
foreign partnership, or a non-resident fiduciary of a foreign estate or trust.
This discussion assumes that income with respect to the Preferred Securities
is not effectively connected with a trade or business in the United States in
which the United States Alien Holder is engaged.
Under present United States federal income tax law, and subject to the
discussion of backup withholding below: (i) payments by the Trust or any of
its paying agents to any holder of a Preferred Security who or which is a
United States Alien Holder will not be subject to United States federal
withholding tax; provided that, (a) the beneficial owner of the Preferred
Security does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Company entitled to vote,
(b) the beneficial owner of the Preferred Security is not a controlled foreign
corporation that is related to the Company through stock ownership, and (c)
either (A) the beneficial owner of the Preferred Security certifies to the
Trust or its agent, under penalties of perjury, that it is not a United States
holder and provides its name and address or (B) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution"), and holds the Preferred Security in such capacity, certifies to
the Trust or its agent, under penalties of perjury, that such statement has
been received from the beneficial owner by it or by a Financial Institution
between it and the beneficial owner and furnishes the Trust or its agent with
a copy thereof; and (ii) a United States Alien Holder of a Preferred Security
will not be subject to United States federal withholding tax on any gain
realized upon the sale or other disposition of a Preferred Security.
INFORMATION REPORTING TO HOLDERS
Subject to the qualifications discussed below, income on the Preferred
Securities will be reported to holders on Forms 1099, which forms should be
mailed to holders of Preferred Securities by January 31 following each
calendar year.
S-38
<PAGE>
The Trust will be obligated to report annually to Cede & Co., as holder of
record of the Preferred Securities, the interest or OID related to the Junior
Subordinated Debt Securities that accrued during the year. The Trust currently
intends to report such information on Form 1099 prior to January 31 following
each calendar year even though the Trust is not legally required to report to
record holders until April 15 following each calendar year. The Underwriters
have indicated to the Trust that, to the extent that they hold Preferred
Securities as nominees for beneficial holders, they currently expect to report
to such beneficial holders on Forms 1099 by January 31 following each calendar
year. Under current law, holders of Preferred Securities who hold as nominees
for beneficial holders will not have any obligation to report information
regarding the beneficial holders to the Trust. The Trust, moreover, will not
have any obligation to report to beneficial holders who are not also record
holders. Thus, beneficial holders of Preferred Securities who hold their
Preferred Securities through the Underwriters will receive Forms 1099
reflecting the income on their Preferred Securities from such nominee holders
rather than the Trust.
BACKUP WITHHOLDING
Under current United States federal income tax law, a 31% backup withholding
tax applies if a non-corporate person (i) fails to furnish such person's
Taxpayer Identification Number ("TIN") (which, for an individual, would be his
or her Social Security Number) to the payor in the manner required, (ii)
furnishes an incorrect TIN and the payor is so notified by the IRS, (iii) is
notified by the IRS that such person has failed properly to report payments of
interest and dividends or (iv) in certain circumstances, fails to certify,
under penalties or perjury, that such person has not been notified by the IRS
that such person is subject to backup withholding for failure properly to
report interest and dividend payments. Backup withholding does not apply with
respect to payments made to certain exempt recipients, such as corporations
and tax-exempt organizations.
In the case of a United States Alien Holder, backup withholding and
information reporting do not apply to payments with respect to principal and
interest on a Preferred Security with respect to which such Holder has
provided the required certification under penalties of perjury that such
Holder is a United States Alien Holder or has otherwise established an
exemption, provided that certain conditions are satisfied.
Backup withholding tax is not an additional tax. Rather, any amounts
withheld from a payment to a person under the backup withholding rules are
allowed as a refund or a credit against such person's United States federal
income tax, provided that the required information is furnished to the IRS.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES
IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), the Trust has agreed to sell to each of the
Underwriters named herein, and each of the Underwriters, for whom Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Dain Bosworth Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation, The Robinson-Humphrey
Company, Inc. and Smith Barney Inc. (the "Representatives"), has severally
agreed to purchase the number of Preferred Securities set forth opposite its
name below. In the Underwriting Agreement, the several Underwriters have
agreed, subject to the terms and conditions set forth therein, to purchase all
the Preferred Securities offered hereby if any of the
S-39
<PAGE>
Preferred Securities are purchased. In the event of default by an Underwriter,
the Underwriting Agreement provides that, in certain circumstances, the
purchase commitments of the nondefaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
PREFERRED
UNDERWRITER SECURITIES
----------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................................... 890,000
Dain Bosworth Incorporated..................................... 890,000
Donaldson, Lufkin & Jenrette Securities Corporation............ 890,000
The Robinson-Humphrey Company, Inc............................. 890,000
Smith Barney Inc............................................... 890,000
Alex. Brown & Sons Incorporated................................ 50,000
Cowen & Company................................................ 50,000
A.G. Edwards & Sons, Inc....................................... 50,000
EVEREN Securities, Inc......................................... 50,000
Legg Mason Wood Walker, Incorporated........................... 50,000
J.P. Morgan Securities Inc..................................... 50,000
Oppenheimer & Co., Inc......................................... 50,000
Piper Jaffray Inc.............................................. 50,000
Prudential Securities Incorporated............................. 50,000
Tucker Anthony Incorporated.................................... 50,000
Wheat, First Securities, Inc................................... 50,000
---------
Total..................................................... 5,000,000
</TABLE>
The Underwriters have advised the Trust that they propose initially to offer
the Preferred Securities to the public at the public offering price set forth
on the cover page of this Prospectus Supplement, and to certain dealers at
such price less a concession not in excess of $.50 per Preferred Security. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $.35 per Preferred Security to certain other dealers. After the initial
public offering, the public offering price, concession and discount may be
changed.
In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debt Securities of
the Company, the Underwriting Agreement provides that the Company will agree
to pay as compensation ("Underwriters' Compensation") for the Underwriters'
arranging the investment therein of such proceeds, an amount of $.7875 per
Preferred Security (or $3,937,500 in the aggregate) for the accounts of the
several Underwriters.
During a period of 90 days from the date of this Prospectus Supplement,
neither the Trust nor the Company will, without the prior written consent of
the Representatives, directly or indirectly, sell, offer to sell, grant any
option for the sale of, or otherwise dispose of, any Preferred Securities, any
security convertible into or exchangeable into or exercisable for Preferred
Securities or any equity securities substantially similar to the Preferred
Securities (except for the Junior Subordinated Debt Securities and the
Preferred Securities offered hereby).
The Preferred Securities have been approved for listing, subject to notice
of issuance, on the NYSE. Trading of the Preferred Securities on the NYSE is
expected to commence within a 30-day period after the initial delivery of the
Preferred Securities. The Representatives have advised the Trust that they
intend to make a market in the Preferred Securities prior to the commencement
of trading on the NYSE. The Representatives have no obligation to make a
market in the Preferred Securities, however, and may cease market making
activities, if commenced, at any time.
S-40
<PAGE>
Prior to this offering, there has been no public market for the Preferred
Securities. In order to meet one of the requirements for listing the Preferred
Securities on the NYSE, the Underwriters will undertake to sell lots of 100 or
more Preferred Securities to a minimum of 400 beneficial holders.
In connection with this offering and in compliance with applicable law and
industry practice, the Underwriters may overallot or effect transactions which
stabilize, maintain or otherwise affect the market price of the Preferred
Securities at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids. A stabilizing bid means the
placing of any bid, or the effecting of any purchase, for the purpose of
pegging, fixing or maintaining the price of a security.
In general, purchases of a security for the purpose of stabilization could
cause the price of the security to be higher than it might be in the absence
of such purchases.
Neither the Company, the Trust nor any of the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of the Preferred
Securities. In addition, neither the Company, the Trust nor any of the
Underwriters makes any representation that the Underwriters will engage in
such transactions or that such transactions, once commenced, will not be
discontinued without notice.
The Company and the Trust have agreed to indemnify the Underwriters against,
or contribute to payments that the Underwriters may be required to make in
respect of, certain liabilities, including liabilities under the Securities
Act.
Certain of the Underwriters engage in transactions with, and, from time to
time, have performed services for, the Company and its subsidiaries in the
ordinary course of business.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon on behalf of the Trust by Richards, Layton &
Finger, P.A., Wilmington, Delaware, special Delaware counsel to the Trust. The
validity of the Junior Subordinated Debt Securities, the Preferred Securities
Guarantee and certain matters relating thereto, including United States
federal income tax matters, will be passed upon on behalf of the Company and
the Trust by Faegre & Benson LLP, Minneapolis, Minnesota. Certain legal
matters will be passed upon for the Underwriters by Sidley & Austin, Chicago,
Illinois.
S-41
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS,
OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THE PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED HEREIN,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE TRUST OR THE
UNDERWRITERS. NEITHER THE DELIVERY OF THE PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE AS OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS. THE PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANY PERSON IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
---------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors.............................................................. S-4
The Trust................................................................. S-8
ReliaStar Financial Corp.................................................. S-8
Capitalization of the Company............................................. S-17
Accounting Treatment...................................................... S-18
Use of Proceeds........................................................... S-18
Description of the Preferred Securities................................... S-18
Description of the Junior Subordinated Debt Securities.................... S-28
Effect of Obligations under the Junior Subordinated Debt Securities and
the Preferred Securities Guarantee....................................... S-35
United States Federal Income Taxation..................................... S-36
Underwriting.............................................................. S-39
Legal Matters............................................................. S-41
PROSPECTUS
Available Information..................................................... 4
Incorporation of Certain Documents by Reference........................... 4
The Company............................................................... 5
The Financing Trusts...................................................... 6
Use of Proceeds........................................................... 7
Ratios of Earnings to Fixed Charges and to Combined Fixed Charges and
Preferred Stock Dividends................................................ 7
Description of Debt Securities............................................ 7
Particular Terms of Junior Subordinated Debt Securities Issued in
Connection with Preferred Securities..................................... 20
Description of Capital Stock.............................................. 21
Description of Depositary Shares.......................................... 24
Description of Securities Warrants........................................ 27
Description of Preferred Securities of the Financing Trusts............... 30
The Preferred Securities Guarantee........................................ 31
Plan of Distribution...................................................... 33
Validity of Securities.................................................... 34
Experts................................................................... 34
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5,000,000 PREFERRED SECURITIES
RELIASTAR FINANCING II
8.10% TRUST ORIGINATED
PREFERRED SECURITIES ("TOPRSSM")
FULLY AND UNCONDITIONALLY
GUARANTEED BY
RELIASTAR FINANCIAL CORP.
---------------
PROSPECTUS SUPPLEMENT
---------------
MERRILL LYNCH & CO.
DAIN BOSWORTH
INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
THE ROBINSON-HUMPHREY COMPANY, INC.
SMITH BARNEY INC.
MAY 29, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
