AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 2000
REGISTRATION NO. 33-57244
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE
AMENDMENT NO. 11 TO
FORM S-6
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
-----------------
SELECT*LIFE VARIABLE ACCOUNT
(Exact Name of Unit Investment Trust)
RELIASTAR LIFE INSURANCE COMPANY
(Name of Depositor)
Stewart D. Gregg
Counsel
ReliaStar Life Insurance Company
20 Washington Avenue South
Minneapolis, Minnesota 55401
-----------------
Approximate date of Proposal Public Offering: As soon as practicable after the
Registration Statement becomes effective.
It is proposed that this filing will become effective
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 2000 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on (date) pursuant to paragraph (a) of Rule 485
Title of securities being registered: Variable life contracts issued by a
registered separate account.
<PAGE>
SELECT*LIFE VARIABLE ACCOUNT
CROSS REFERENCE SHEET
(RECONCILIATION AND TIE SHEET)
ITEM NUMBER OF
FORM N-8B-2 HEADING IN THE PROSPECTUS
-------------- -------------------------
1 Cover Page
2 Cover Page
3 Not Applicable
4 Distribution of the Policies
5 ReliaStar Life Insurance
Company and the Variable Account
6 The Variable Account
7 Not Applicable
8 Not Applicable
9 Not Applicable
10 Summary; Death Benefit; Payment and Allocation of Premiums;
Death Benefit Guarantee; Accumulation Value; Sales Charge
Refund; Policy Lapse and Reinstatement; Surrender Benefits;
Investments of the Variable Account; Transfers; Policy Loans;
Free Look and Conversion Rights; Voting Rights; General
Provisions; Appendix A; Appendix B
11 Deductions and Charges; Additional Information
on the Investments of the Variable Account
12 Additional Information on the Investments of the
Variable Account
13 Deductions and Charges
14 The Policies; General Provisions; Distribution of
the Policies
15 Payment and Allocation of Premiums; Additional
Information on the Investments of the Variable
Account
16 Payment and Allocation of Premiums; Surrender
Benefits; Additional Information on the
Investments of the Variable Account
17 Surrender Benefits; Policy Loans; Free Look and
Conversion Rights; General Provisions
18 The Variable Account; Additional Information on
the Investments of the Variable Account; Payment
and Allocation of Premiums
19 Voting Rights; General Provisions
20 Not Applicable
21 Policy Loans
i
<PAGE>
ITEM NUMBER OF
FORM N-8B-2 HEADING IN THE PROSPECTUS
-------------- -------------------------
22 Not Applicable
23 Bonding Arrangements
24 Definitions; General Provisions
25 ReliaStar Life Insurance Company
26 Not Applicable
27 ReliaStar Life Insurance Company; Other
Contracts Issued by Us
28 Management
29 ReliaStar Life Insurance Company
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Not Applicable
36 Not Applicable
37 Not Applicable
38 Distribution of the Policies
39 Distribution of the Policies
40 Distribution of the Policies
41 Distribution of the Policies
42 Management
43 Not Applicable
44 Additional Information on the Investments of the
Variable Account; Payment and Allocation of
Premiums; Deductions and Charges
45 Not Applicable
46 Additional Information on the Investments of the
Variable Account; Deductions and Charges
47 Additional Information on the Investments of the
Variable Account
48 ReliaStar Life Insurance Company; State
Regulation
49 Not Applicable
50 The Variable Account
51 Cover Page; The Policies; Death Benefit; Payment
and Allocation of Premiums; Deductions and
Charges; Policy Lapse and Reinstatement;
General Provisions; Free Look and Conversion
Rights
ii
<PAGE>
ITEM NUMBER OF
FORM N-8B-2 HEADING IN THE PROSPECTUS
-------------- -------------------------
52 Additional Information on the Investments of the
Variable Account
53 Federal Tax Matters
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Financial Statements
iii
<PAGE>
[LOGO] RELIASTAR
20 Washington Avenue South
Minneapolis, Minnesota 55401
---------------------------
SELECT*LIFE II
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
ISSUED BY
SELECT*LIFE VARIABLE ACCOUNT
OF
RELIASTAR LIFE INSURANCE COMPANY
ReliaStar Life Insurance Company is offering the flexible premium variable
life insurance policy (Select*Life II) described in this prospectus. ReliaStar
designed the Policy to provide (1) a death benefit payable if the insured person
dies before age 95; and (2) maximum flexibility regarding premium payments and
death benefits. Subject to certain restrictions, Policy owners may:
* vary the frequency and amount of premium payments;
* increase or decrease the level of death benefits payable under the
Policy; and
* allocate premiums to:
-- the Fixed Account, an account that provides a minimum specified
rate of interest; and
-- Sub-Accounts of Select*Life Variable Account, a variable account
allowing you to invest in certain portfolios of the following
Funds:
<TABLE>
<CAPTION>
<S> <C>
AIM Variable Insurance Funds, Inc. Neuberger Berman Advisers Management Trust
The Alger American Fund OCC Accumulation Trust
Fidelity Variable Insurance Products Fund Pilgrim Variable Products Trust
Fidelity Variable Insurance Products Fund II Putnam Variable Trust
Janus Aspen Series
</TABLE>
If you allocate net premiums to Sub-Accounts of Select*Life Variable
Account, the amount of the Policy's death benefit may, and the total value
attributed to a Policy will, vary to reflect the investment performance of the
Sub-Accounts you select.
The Policy's primary purpose is to provide insurance protection for the
beneficiary. ReliaStar does not claim that investing in the Policy is in any way
similar or comparable to a systematic investment plan of a mutual fund.
Generally, the Policy will remain in force as long as the cash surrender
value (that is, the amount that ReliaStar would pay if you surrender the Policy)
is sufficient to pay certain monthly charges. However, under certain
circumstances the Policy provides a death benefit guarantee that allows the
Policy to remain in force without regard to the cash surrender value (See "Death
Benefit Guarantee").
INTERESTS IN THE POLICIES AND SHARES OF THE FUNDS ARE NOT DEPOSITS OR
OBLIGATIONS OF OR GUARANTEED BY A BANK, AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED THESE SECURITIES OR
DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Please read this prospectus carefully and keep it for future reference.
Call 1-800-456-6965 to obtain a current prospectus for any of the Funds. A
current prospectus for each of the Funds must accompany this prospectus and
should be read in conjunction with this prospectus.
THE DATE OF THIS PROSPECTUS IS MAY 1, 2000.
1
<PAGE>
DEFINITIONS................................................................. 5
PART 1. SUMMARY
The Policy.................................................................. 7
Free Look Rights............................................................ 8
Premium Payments............................................................ 8
The Variable Account........................................................ 8
The Fixed Account........................................................... 8
The Funds................................................................... 8
Charges Against the Accumulation Value...................................... 11
Charge Upon Lapse or Total Surrender of the Policy.......................... 12
Surrenders.................................................................. 12
Partial Withdrawals......................................................... 12
Loans....................................................................... 12
Transfers................................................................... 12
Death Benefit Overview...................................................... 13
Adjusting the Death Benefit................................................. 13
Death Benefit Guarantee..................................................... 13
Lapse....................................................................... 13
Taxation of Death Benefit Proceeds.......................................... 13
Taxation of the Policy...................................................... 13
PART 2. DETAILED INFORMATION
ReliaStar Life Insurance Company............................................ 14
The Policies................................................................ 14
Deductions and Charges...................................................... 14
Premium Expense Charge...................................................... 14
Sales Charge............................................................... 14
Premium Tax Charge......................................................... 14
Premium Processing Charge.................................................. 15
Monthly Deduction........................................................... 15
Cost of Insurance.......................................................... 15
Monthly Administrative Charge.............................................. 15
Monthly Mortality and Expense Risk Charge.................................. 15
Optional Insurance Benefit Charges......................................... 15
Surrender Charge............................................................ 16
General.................................................................... 16
Contingent Deferred Administrative Charge.................................. 16
Contingent Deferred Sales Charge........................................... 16
Partial Withdrawal and Transfer Charges..................................... 17
Modification of Charges..................................................... 17
Investment Advisory Fees and Other Fund Expenses............................ 18
Fund Expenses............................................................... 19
Sales Charge Refund......................................................... 20
Initial Face Amount........................................................ 20
Requested Increases in Face Amount......................................... 21
Effect of Sales Charge Refund.............................................. 21
The Variable Account........................................................ 21
Investments of the Variable Account......................................... 22
Performance Information..................................................... 22
Death Benefit............................................................... 22
Death Benefit Options....................................................... 23
Level Amount Option........................................................ 23
Illustration of Level Amount Option........................................ 23
Variable Amount Option..................................................... 24
Illustration of Variable Amount Option..................................... 24
Which Death Benefit Option to Choose........................................ 24
Requested Changes in Face Amount............................................ 24
Increases.................................................................. 24
Decreases.................................................................. 25
Effect of Requested Changes in Face Amount................................. 25
2
<PAGE>
Insurance Protection........................................................ 26
Changing the Death Benefit Option........................................... 26
Accelerated Benefit Rider................................................... 27
Payment and Allocation of Premiums.......................................... 27
Issuing the Policy.......................................................... 27
Coverage................................................................... 27
Minimum Initial Premium.................................................... 28
Allocating Premiums......................................................... 28
Temporary Insurance........................................................ 28
Crediting Net Premiums..................................................... 28
Refunding Premiums......................................................... 28
Amount and Timing of Premiums............................................... 29
Planned Periodic Premiums................................................... 29
Paying Premiums by Mail..................................................... 29
Death Benefit Guarantee..................................................... 30
Requirements for the Death Benefit Guarantee................................ 30
Accumulation Value.......................................................... 31
Illustration of Policy Benefits............................................. 31
Specialized Uses of the Policy.............................................. 32
Policy Lapse and Reinstatement.............................................. 32
Lapse...................................................................... 32
Reinstatement.............................................................. 33
Surrender Benefits.......................................................... 33
Total Surrender............................................................. 33
Partial Withdrawal.......................................................... 33
Effect of Partial Withdrawals.............................................. 33
Transfers................................................................... 34
Telephone/Fax Instructions................................................. 34
Dollar Cost Averaging Service.............................................. 35
Portfolio Rebalancing Service.............................................. 35
Transfer Limits............................................................ 35
Transfer Charges........................................................... 36
Policy Loans................................................................ 36
General.................................................................... 36
Immediate Effect of Policy Loans........................................... 36
Effect on Investment Performance........................................... 37
Effect on Policy Coverage.................................................. 37
Interest................................................................... 37
Repayment of Loan Amount................................................... 37
Tax Considerations......................................................... 37
Free Look and Conversion Rights............................................. 37
Free Look Rights............................................................ 37
Cancellation............................................................... 38
Conversion Rights........................................................... 38
General Option............................................................. 38
Connecticut and New Jersey................................................. 38
Additional Information on the Investments of the Variable Account........... 39
Investment Limits........................................................... 39
Addition, Deletion, or Substitution of Investments.......................... 39
Voting Rights............................................................... 40
Disregarding Voting Instructions........................................... 40
Paid-Up Life Insurance Option............................................... 40
General Provisions.......................................................... 41
Ownership................................................................... 41
Proceeds.................................................................... 41
Beneficiary................................................................. 41
Postponement of Payments.................................................... 41
Settlement Options.......................................................... 42
Interest on Settlement Options............................................. 42
Incontestability............................................................ 42
Misstatement of Age and Sex................................................. 42
Suicide..................................................................... 43
3
<PAGE>
Termination................................................................. 43
Amendment................................................................... 43
Reports..................................................................... 43
Annual Statement........................................................... 43
Projection Report.......................................................... 43
Other Reports.............................................................. 43
Dividends................................................................... 43
Collateral Assignment....................................................... 44
Optional Insurance Benefits................................................. 44
Accelerated Benefit Rider.................................................. 44
Accidental Death Benefit Rider............................................. 44
Additional Insured Rider................................................... 44
Waiver of Monthly Deduction Rider.......................................... 44
Children's Insurance Rider................................................. 44
Cost of Living Increase Rider.............................................. 44
Waiver of Specified Premium Rider.......................................... 44
Federal Tax Matters......................................................... 44
Introduction................................................................ 44
Tax Status of the Policy.................................................... 44
Tax Treatment of Policy Benefits............................................ 45
In General................................................................. 45
Modified Endowment Contracts............................................... 45
Distributions from Modified Endowment Contracts............................ 45
Distributions from Policies that are not Modified Endowment Contracts...... 45
Policy Loans............................................................... 46
Multiple Policies.......................................................... 46
Taxation of ReliaStar Life Insurance Company................................ 46
Possible Changes in Taxation................................................ 46
Other Considerations........................................................ 46
Legal Developments Regarding Employment -- Related Benefit Plans............ 46
Distribution of the Policies................................................ 47
Management.................................................................. 47
Directors and Officers..................................................... 47
State Regulation............................................................ 50
Massachusetts and Montana Residents......................................... 51
Legal Proceedings........................................................... 51
Bonding Arrangements........................................................ 51
Legal Matters............................................................... 51
Experts..................................................................... 51
Registration Statement Contains Further Information......................... 51
Financial Statements........................................................ 52
Appendices..................................................................A-1
THE POLICY MAY NOT BE AVAILABLE IN ALL JURISDICTIONS. THIS PROSPECTUS
CONSTITUTES AN OFFERING OR SOLICITATION ONLY IN THOSE JURISDICTIONS WHERE SUCH
OFFERING OR SOLICITATION MAY LAWFULLY BE MADE.
RELIASTAR HAS NOT AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS REGARDING THE POLICY OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS OR THE ACCOMPANYING FUND PROSPECTUSES. DO NOT RELY UPON ANY SUCH
INFORMATION OR REPRESENTATIONS.
4
<PAGE>
DEFINITIONS
ACCUMULATION VALUE. The total value attributable to a specific Policy, which
equals the sum of the Variable Accumulation Value (the total of the values
in each Sub-Account of the Variable Account) and the Fixed Accumulation
Value (the value in the Fixed Account). See "Accumulation Value" at page 31
and Appendix B.
AGE. The Insured's age at the last birthday determined as of the beginning of
each Policy Year.
CASH SURRENDER VALUE. The Accumulation Value less any Surrender Charge, Loan
Amount and unpaid Monthly Deductions.
CASH VALUE. The Accumulation Value less any Surrender Charge.
CODE. Internal Revenue Code of 1986, as amended.
DEATH BENEFIT. The amount determined under the applicable Death Benefit Option.
We will reduce the proceeds payable to the beneficiary upon the Insured's
death by any Loan Amount and any unpaid Monthly Deductions. See "Death
Benefit" at page 22.
DEATH BENEFIT GUARANTEE. A feature of the Policy guaranteeing that the Policy
will not lapse during the Death Benefit Guarantee Period specified in your
Policy if, on each Monthly Anniversary, the total premiums paid on the
Policy, less any partial withdrawals and any Loan Amount, equals or exceeds
the total required Minimum Monthly Premium payments specified in your
Policy. See "Death Benefit Guarantee" at page 30.
DEATH BENEFIT OPTION. Either of two death benefit options available under the
Policy (the Level Amount Option and the Variable Amount Option). See "Death
Benefit -- Death Benefit Options" at page 23.
FACE AMOUNT. The minimum Death Benefit under the Policy as long as the Policy
remains in force. See "Death Benefit" at page 22.
FIXED ACCOUNT. ReliaStar Life Insurance Company's assets other than those
allocated to the Variable Account or any other separate account. See
Appendix A.
FIXED ACCUMULATION VALUE. The value attributable to a specific Policy based on
amounts in the Fixed Account. Unlike the Variable Accumulation Value, the
Fixed Accumulation Value will not reflect the investment performance of the
Funds. See "Accumulation Value" at page 31 and Appendix B.
FUNDS. Any open-end management investment company (or portfolio thereof) or unit
investment trust (or series thereof) in which a Sub-Account invests. See
"Summary" at page 7 and "Investments of the Variable Account" at page 22.
INSURED. The person upon whose life we issue the Policy.
ISSUE DATE. The date insurance coverage under a Policy begins.
LOAN AMOUNT. The sum of all unpaid Policy loans including unpaid interest due
thereon. See "Policy Loans" at page 36.
MINIMUM MONTHLY PREMIUM. A monthly premium amount that we determine when we
issue the Policy. See "Death Benefit Guarantee" at page 30.
MONTHLY ANNIVERSARY. The same date in each succeeding month as the Policy Date.
If the Monthly Anniversary falls on a date other than a Valuation Date,
then the Monthly Anniversary will be the next Valuation Date. The first
Monthly Anniversary is on the Policy Date.
MONTHLY DEDUCTION. A monthly charge that we deduct from the Accumulation Value
of the Policy. See "Deductions and Charges -- Monthly Deduction" at page
15.
NET PREMIUM. The premium you pay less a Premium Expense Charge.
PLANNED PERIODIC PREMIUM. The scheduled premium you select of a level amount at
a fixed interval. The Policy will show the initial Planned Periodic Premium
you select. See "Payment and Allocation of Premiums -- Planned Periodic
Premiums" at page 29.
POLICY. Select*Life II, the flexible premium variable life insurance policy
described in this Prospectus.
5
<PAGE>
POLICY ANNIVERSARY. The same date in each succeeding year as the Policy Date. If
the Policy Anniversary falls on a date other than a Valuation Date, the
Policy Anniversary will be the next Valuation Date.
POLICY DATE. The date shown on your Policy that ReliaStar uses to determine
Policy Years, Policy Months, Monthly Anniversaries, and Policy
Anniversaries.
POLICY MONTH. A one-month period beginning on a Monthly Anniversary.
POLICY YEAR. A 12-month period beginning on a Policy Anniversary.
PREMIUM EXPENSE CHARGE. An amount (currently 5%) ReliaStar deducts from each
premium payment resulting in the Net Premium. See "Deductions and Charges
-- Premium Expense Charge" at page 14.
RATE CLASS. A group of Insureds we determine based on our expectation that they
will have similar mortality experience.
SALES CHARGE REFUND. An amount we designate as a Sales Charge Refund may exist
during the first two Policy Years or during any 24-month period following a
requested increase in Face Amount. See "Sales Charge Refund" at page 20.
SEC. Securities and Exchange Commission.
SIGNATURE GUARANTEE. A guarantee of your signature by a member firm of the New
York, American, Boston, Midwest, Philadelphia, or Pacific Stock Exchange,
or by a commercial bank which is a member of the Federal Deposit Insurance
Corporation, or, in certain cases, by a member firm of the National
Association of Securities Dealers, Inc. that has entered into an
appropriate agreement with us.
SUB-ACCOUNT. A sub-division of the Variable Account that invests exclusively in
the shares of a specified Fund.
SURRENDER CHARGE. A charge imposed upon total surrender or lapse of the Policy
during the first 15 Policy Years and the first 15 years following any
requested increase in Face Amount. See "Deductions and Charges -- Surrender
Charge" at page 16.
SURRENDER CHARGE GUIDELINE. An amount used in calculating Sales Charge Refunds
(see "Sales Charge Refund" at page 20) and in calculating the sales charge
on requested increases in Face Amount (see "Deductions and Charges --
Surrender Charge -- Contingent Deferred Sales Charge Calculation" at page
16).
UNIT VALUE. The unit measure by which we determine the value of the Policy's
interest in each Sub-Account. See Appendix B.
VALUATION DATE. Each day the New York Stock Exchange is open for business except
for days that a Sub-Account's corresponding Fund does not value its shares.
The New York Stock Exchange is currently closed on week-ends and on the
following holidays: New Year's Day; Rev. Dr. Martin Luther King, Jr. Day;
Presidents' Day; Good Friday; Memorial Day; July Fourth; Labor Day;
Thanksgiving Day; and Christmas Day. See Appendix B.
VALUATION PERIOD. The period beginning at the close of business on a Valuation
Date and ending at the close of business on the next Valuation Date. See
Appendix B.
VARIABLE ACCOUNT. Select*Life Variable Account, a separate investment account we
established to receive and invest Net Premiums paid under the Policy and
other variable life insurance policies we issue. See "The Variable Account"
at page 21.
VARIABLE ACCUMULATION VALUE. The value attributable to a specific Policy based
on amounts in the Variable Account. See "Accumulation Value" at page 31 and
Appendix B.
WE, US, OUR, THE COMPANY, OR RELIASTAR. ReliaStar Life Insurance Company.
YOU, YOUR. The Policy owner as designated in the application for the Policy or
as subsequently changed. If a Policy has been absolutely assigned, the
assignee is the Policy owner. A collateral assignee is not the Policy
owner.
6
<PAGE>
PART 1. SUMMARY
This is a brief summary of the Policy's features. Please read the entire
Prospectus and the Policy for more detailed information.
THE POLICY
Select*Life II is a flexible premium variable life insurance contract with
death benefits, cash values, and other features of traditional life insurance
contracts. The Policies are:
* "FLEXIBLE PREMIUM" because you do not have to pay premiums according
to a fixed schedule; and
* "VARIABLE" because Accumulation Values and, under certain
circumstances, the Death Benefit will increase and decrease based on
the investment performance of the Funds corresponding to the
Sub-Accounts to which you allocate your premium payments.
Under current Federal tax law, as long as the Policy qualifies as life
insurance, Accumulation Value increases will be subject to the same Federal
income tax treatment as traditional life insurance cash values. Therefore, any
increases should accumulate on a tax deferred basis until you request a
distribution. See "Federal Tax Matters -- Tax Status of the Policy." The
following chart outlines the various features, charges, and expenses of the
Policies. Additional, detailed information pertaining to charges and expenses is
contained in this Summary and in "Deductions and Charges."
HOW SELECT*LIFE II WORKS
[FLOW CHART]
PREMIUM PAYMENTS
MINUS
PREMIUM EXPENSE CHARGES
Invested in Variable Sub-Accounts
or Fixed Account
Variable Sub-Accounts Fixed Account
AIM Alger Fidelity(R) Janus
Neuberger Berman OpCap Pilgrim Putnam
PLUS
INVESTMENT RETURN
(Net of Fund Expenses)
MINUS
MONTHLY DEDUCTIONS
* Monthly Administrative Charge * Mortality and Expense Risk Charge
* Cost of Insurance * Optional Benefit Charges
MINUS
PARTIAL WITHDRAWALS
EQUALS
ACCUMULATION VALUE
(Provides Living Benefits
and Death Benefits)
LIVING BENEFITS DEATH BENEFITS
ACCUMULATION VALUE ACCUMULATION VALUE
MINUS PLUS
SURRENDER CHARGE NET AMOUNT AT RISK
EQUALS EQUALS
CASH VALUE DEATH BENEFIT
MINUS MINUS
POLICY LOAN POLICY LOAN
EQUALS EQUALS
CASH SURRENDER VALUE DEATH BENEFIT PROCEEDS
7
<PAGE>
FREE LOOK RIGHTS * If you return the Policy to us by (1) midnight of
the 20th day after you receive it, (2) midnight of
the 20th day after a written Notice of Right of
Withdrawal is mailed or delivered to you, or (3)
midnight of the 45th day after the date of your
application for the Policy is signed, we will send
you a refund of all premiums paid unless otherwise
stipulated by state law. See "Free Look and
Conversion Rights -- Free Look Rights."
* Certain states may allow a longer period of time
for the free look period and refund a different
amount.
PREMIUM PAYMENTS * You choose when to pay and how much to pay.
* We may refuse to accept any premium less than $25.
* You cannot pay additional premiums after Age 95.
* We may refuse any premium that would disqualify
your Policy as life insurance under Section 7022
of the Code.
* You may be required to pay premiums to maintain
the Death Benefit Guarantee in order to keep the
Policy in force during at least the first several
Policy Years. See "Death Benefit Guarantee" and
"Payment and Allocation of Premiums -- Amount and
Timing of Premiums."
* We deduct a Premium Expense Charge (5.00% of each
premium payment) and credit the remaining premium
(the Net Premium) to the Variable Account or the
Fixed Account according to your instructions. See
"Deductions and Charges -- Premium Expense
Charge."
THE VARIABLE ACCOUNT * Select*Life Variable Account is one of our
(Select*Life Variable separate accounts and consists of several
Account) Sub-Accounts. We only invest premiums from our
variable life insurance policies in the Variable
Account.
* We invest any Net Premiums you allocate to each
Sub-Account in shares of the Fund related to that
Sub-Account.
* Variable Accumulation Value will vary with the
investment performance of the Funds and the
charges deducted from the Variable Accumulation
Value. See "Accumulation Value."
THE FIXED ACCOUNT * Consists of all of our assets other than those in
our separate accounts (including the Variable
Account).
* We credit interest of at least 4% per year on any
amounts you allocate to the Fixed Account.
* We may, in our sole discretion, credit interest in
excess of 4%. See Appendix A, "The Fixed Account."
THE FUNDS * You can instruct ReliaStar to place your Net
Premium in or transfer to up to 17 of 34
investment portfolios over the lifetime of your
Policy.
8
<PAGE>
The following chart lists the currently available Funds and outlines
certain of their important characteristics.
INVESTMENT FUNDS
<TABLE>
<CAPTION>
ADVISER/
FUND GROUP FUND SUBADVISER MONEY MARKET FIXED INCOME GROWTH & INCOME
=================== ================== ===================== ============== ============== =================
<S> <C> <C> <C> <C> <C>
AIM AIM V.I. Dent A I M
Variable Demographic Advisors, Inc./
Insurance Funds, Trends Fund H.S. Dent Advisors,
Inc. Inc.
Houston, TX
============================================================================================================
Alger Alger American Fred Alger
American Growth Management, Inc.
New York, N.Y. Portfolio
----------------------------------------------------------------------------------------
Alger American Fred Alger
Leveraged Management, Inc.
All Cap Portfolio
----------------------------------------------------------------------------------------
Alger American Fred Alger
MidCap Management, Inc.
Growth
Portfolio
----------------------------------------------------------------------------------------
Alger American Fred Alger
Small Management, Inc.
Capitalization
Portfolio
============================================================================================================
Fidelity VIP Fidelity Management X
Investments(R) Equity-Income & Research Company
Boston, Mass. Portfolio
----------------------------------------------------------------------------------------
VIP Growth Fidelity Management
Portfolio & Research Company
----------------------------------------------------------------------------------------
VIP Fidelity Management X
High Income & Research Company
Portfolio
----------------------------------------------------------------------------------------
VIP Fidelity Management X
Money Market & Research Company
Portfolio
----------------------------------------------------------------------------------------
VIP II Fidelity Management
Contrafund(R) & Research Company
Portfolio
----------------------------------------------------------------------------------------
VIP II Fidelity Management X
Index 500 & Research Company
Fidelity Portfolio
Investments(R) ----------------------------------------------------------------------------------------
is a registered VIP II Fidelity Management X
trademark of Investment & Research Company
FMR Corp. Grade Bond
Portfolio
============================================================================================================
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
PRIMARY
FUND GROUP INTERNATIONAL BALANCED GROWTH AGGRESSIVE GROWTH OBJECTIVE(S) INVESTMENTS
=================== =============== ========== ======== ================== ========================== ========================
<S> <C> <C> <C> <C> <C> <C>
AIM Long-term growth Securities of companies
Variable X of capital that are likely to
Insurance Funds, benefit
Inc. from changing
Houston, TX demographic, economic
and lifestyle trends
==============================================================================================================================
Alger Long-term capital Equity securities of
American X appreciation large companies
New York, N.Y.
----------------------------------------------------------------------------------------------------------
X Long-term capital Equity securities of
appreciation companies of any size
----------------------------------------------------------------------------------------------------------
X Long-term capital Equity securities
appreciation within the range of
S&P(R) MidCap 400
Index
----------------------------------------------------------------------------------------------------------
X Long-term capital Equity securities
appreciation within the range of
Russell(R) 2000 Growth
or S&P(R) SmallCap 600
Indexes
==============================================================================================================================
Fidelity Reasonable income; Income-producing
Investments(R) also considers potential equity securities and
Boston, Mass. for capital appreciation debt obligations
----------------------------------------------------------------------------------------------------------
X Capital appreciation Common stocks
----------------------------------------------------------------------------------------------------------
High current income Income-producing debt
securities, preferred
stocks and convertible
securities, with an
emphasis on lower-
quality debt securities
----------------------------------------------------------------------------------------------------------
High current income U.S. dollar-denominated
consistent with money market
preservation of securities
capital
----------------------------------------------------------------------------------------------------------
X Capital appreciation Securities of
companies whose
value the adviser
believes is not
fully recognized
by the public
----------------------------------------------------------------------------------------------------------
Total return that Common stocks of
corresponds to that of S&P 500
Fidelity S&P 500 Index
Investments(R) ----------------------------------------------------------------------------------------------------------
is a registered High current income Investment-grade
trademark of consistent with intermediate fixed
FMR Corp. preservation of capital income securities
==============================================================================================================================
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
ADVISER/
FUND GROUP FUND SUBADVISER MONEY MARKET FIXED INCOME GROWTH & INCOME
================= ================== =================== ============== ============== =================
<S> <C> <C> <C> <C> <C>
Janus Aspen Series Janus
Denver, Co. Aggressive Capital
Growth Corporation
Portfolio
--------------------------------------------------------------------------------------
Aspen Series Janus
Growth Capital
Portfolio Corporation
--------------------------------------------------------------------------------------
Aspen Series Janus
International Capital
Growth Corporation
Portfolio
--------------------------------------------------------------------------------------
Aspen Series Janus
Worldwide Capital
Growth Corporation
Portfolio
========================================================================================================
Neuberger Advisers Neuberger Berman X
Berman Management Management Inc./
New York, N.Y. Trust Limited Neuberger Berman,
Maturity Bond LLC
Portfolio
--------------------------------------------------------------------------------------
Advisers Neuberger Berman
Management Management Inc./
Trust Partners Neuberger Berman,
Portfolio LLC
--------------------------------------------------------------------------------------
Advisers Neuberger Berman
Management Management Inc./
Trust Socially Neuberger Berman,
Responsive LLC
Portfolio
========================================================================================================
OCC OCC Accumulation OpCap
New York, N.Y. Trust Equity Advisors
Portfolio
--------------------------------------------------------------------------------------
OCC Accumulation OpCap
Trust Global Advisors
Equity Portfolio
--------------------------------------------------------------------------------------
OCC Accumulation OpCap
Trust Managed Advisors
Portfolio
--------------------------------------------------------------------------------------
OCC Accumulation OpCap
Trust Small Advisors
Cap Portfolio
========================================================================================================
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
PRIMARY
FUND GROUP INTERNATIONAL BALANCED GROWTH AGGRESSIVE GROWTH OBJECTIVE(S) INVESTMENTS
================= =============== ========== ======== ================== ====================== =========================
<S> <C> <C> <C> <C> <C> <C>
Janus X Long-term growth of Nondiversified portfolio
Denver, Co. capital of common stocks
-------------------------------------------------------------------------------------------------------
X Long-term capital Diversified common
growth stocks
-------------------------------------------------------------------------------------------------------
X Long-term capital Foreign issuers of
growth common stocks
-------------------------------------------------------------------------------------------------------
X Long-term capital Foreign and domestic
growth common stocks
=========================================================================================================================
Neuberger Highest available Short to
Berman current income intermediate-term
New York, N.Y. consistent with investment-grade debt
liquidity and low securities
risk to principal;
total return is a
secondary goal
-------------------------------------------------------------------------------------------------------
X Growth of Capital Common stocks of
medium- to large-
capitalization
companies
-------------------------------------------------------------------------------------------------------
X Long-term Common stocks of
capital growth medium to large
capitalization
companies
=========================================================================================================================
OCC X Long-term capital Securities of
New York, N.Y. appreciation undervalued
companies
-------------------------------------------------------------------------------------------------------
X Long-term capital Global investments in
appreciation equity securities
-------------------------------------------------------------------------------------------------------
X Growth of capital Common stocks,
bonds and cash
equivalents
-------------------------------------------------------------------------------------------------------
X Capital appreciation Equity securities of
companies under
$1 billion
=========================================================================================================================
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
ADVISER/
FUND GROUP FUND SUBADVISER MONEY MARKET FIXED INCOME GROWTH & INCOME
==================== ================= ====================== ============== ============== =================
<S> <C> <C> <C> <C> <C>
Pilgrim Pilgrim VP Pilgrim Investments,
Growth Inc.
Phoenix, AZ Opportunities
Portfolio
----------------------------------------------------------------------------------------
Pilgrim VP Pilgrim Investments,
Growth + Value Inc./Navellier Fund
Portfolio Management, Inc.
----------------------------------------------------------------------------------------
Pilgrim VP Pilgrim Investments, X
High Yield Inc.
Portfolio
----------------------------------------------------------------------------------------
Pilgrim VP Pilgrim Investments,
International Inc./Brandes
Value Portfolio Investment
Partners, L.P.
----------------------------------------------------------------------------------------
Pilgrim VP Pilgrim Investments,
MagnaCap Inc.
Portfolio
----------------------------------------------------------------------------------------
Pilgrim VP Pilgrim Investments,
MidCap Inc.
Opportunities
Portfolio
----------------------------------------------------------------------------------------
Pilgrim VP Pilgrim Investments,
Research Inc. /J.P. Morgan
Enhanced Investment
Index Portfolio Management Inc.
----------------------------------------------------------------------------------------
Pilgrim VP Pilgrim Investments,
SmallCap Inc.
Opportunities
Portfolio
=============================================================================================================
Putnam Putnam Putnam Investment X
Investments, Inc. VT Growth and Management, Inc.
Income Fund
Class IA Shares
----------------------------------------------------------------------------------------
Boston, Mass. Putnam Putnam Investment
VT New Management, Inc.
Opportunities
Fund Class IA
Shares
----------------------------------------------------------------------------------------
Putnam Putnam Investment
VT Voyager Fund Management, Inc.
Class IA Shares
=============================================================================================================
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
PRIMARY
FUND GROUP INTERNATIONAL BALANCED GROWTH AGGRESSIVE GROWTH OBJECTIVE(S) INVESTMENTS
==================== =============== ========== ======== ================== ======================== =======================
<S> <C> <C> <C> <C> <C> <C>
Pilgrim X Long-term capital Common stocks of
growth large cap, mid cap or
Phoenix, AZ small cap companies
-------------------------------------------------------------------------------------------------------
X Capital appreciation Equity securities
from investing in a
diversified portfolio
of equity securities
-------------------------------------------------------------------------------------------------------
High current yield and High-yield bonds
capital appreciation
-------------------------------------------------------------------------------------------------------
X Long-term capital International equities
appreciation
-------------------------------------------------------------------------------------------------------
X Capital growth Common stocks
-------------------------------------------------------------------------------------------------------
X Long-term capital Common stocks of
appreciation mid-sized
U.S. companies
-------------------------------------------------------------------------------------------------------
X Long-term capital Common stocks
appreciation
-------------------------------------------------------------------------------------------------------
X Long-term capital Common stocks
appreciation
============================================================================================================================
Putnam Capital growth & Common stocks
Investments, Inc. current income
-------------------------------------------------------------------------------------------------------
Boston, Mass. Long-term capital Common stocks
X appreciation
-------------------------------------------------------------------------------------------------------
X Capital appreciation Common stocks
============================================================================================================================
</TABLE>
For each Fund's expenses, see "Investment Advisory Fees and Other Fund
Expenses".
CHARGES AGAINST THE ACCUMULATION VALUE
The Accumulation Value of the Policy is subject to the Monthly Deduction
charges. We will deduct the Monthly Deduction each month from both the Fixed
Accumulation Value and the Variable Accumulation Value on a proportionate basis
depending on their relative Accumulation Values at that time. See "Deductions
and Charges -- Monthly Deduction".
The Monthly Deduction includes:
* A charge for the cost of insurance -- varies based on the Insured's
sex, Age, Rate Class and Face Amount.
* Monthly Administrative Charge -- currently $8.25 per month and
guaranteed not to exceed $12.00 per month.
* Monthly Mortality and Expense Risk Charge -- currently equal to 1/12
of .90% of the Variable Accumulation Value during the first 10 Policy
Years. Beginning on Policy Year 11 and each year thereafter, this
monthly charge will be 1/12 of .45% guaranteed not to exceed 1/12 of
.90% of the Variable Accumulation Value.
11
<PAGE>
* Any charges for optional insurance benefits -- vary depending upon the
benefit(s) selected.
CHARGE UPON LAPSE OR TOTAL SURRENDER OF THE POLICY
* We assess a Surrender Charge if your Policy lapses or if you surrender
the Policy during the first 15 Policy Years (or during the first 15
years following a Face Amount increase).
* We will determine the maximum Surrender Charge for the initial Face
Amount and any requested increases in Face Amount on the Policy Date
and on the effective date of any such requested increase.
* The Surrender Charge includes both the Contingent Deferred
Administrative Charge and the Contingent Deferred Sales Charge.
* The Contingent Deferred Administrative Charge is a maximum of $5.00
per $1,000 Face Amount during the first five years of the relevant 15
year period and decreases thereafter in equal monthly increments.
* The Contingent Deferred Sales Charge for the initial Face Amount will
depend on the initial Face Amount, the Insured's Age on the Policy
Date, and the Insured's sex.
* You do not pay the Surrender Charge if the Policy remains in force
during the entire relevant 15-year period. See "Deductions and Charges
-- Surrender Charge".
SURRENDERS * In general, you will receive the Cash Surrender
Value if you surrender the Policy.
* To determine the Cash Surrender Value, we reduce
your Accumulation Value by the Surrender Charge,
if any, and any Loan Amount and unpaid Monthly
Deductions. During the first two Policy Years and
the first two Policy Years following an increase
in the Face Amount, you may be entitled to a
refund of a portion of charges made for sales
expenses. See "Surrender Benefits -- Total
Surrender" and "Sales Charge Refund".
PARTIAL WITHDRAWALS * Once each Policy Year after the first Policy Year,
you can withdraw part of your Cash Surrender
Value.
* You will not incur a Surrender Charge, but partial
withdrawals are subject to a processing charge
(currently $10, guaranteed not to exceed $25). See
"Surrender Benefits -- Partial Withdrawal".
LOANS * Depending on your state of residence, you can
borrow up to 75% of your Policy's Cash Value less
any existing Loan Amount.
* Interest is payable in advance for each Policy
Year and accrues daily at an effective annual rate
that will not exceed 8.00%.
* After the 10th Policy Year, we charge interest at
an annual rate of 5.50% on the portion of your
Loan Amount that is not in excess of (1) the
Accumulation Value, less (2) the total of all
premiums paid less all partial withdrawals.
* We reserve the right to limit borrowing during the
first Policy Year. See "Policy Loans".
TRANSFERS * Currently, you can transfer all or part of your
Accumulation Value among the investment options.
* We currently do not limit the number of transfers
per policy year. We reserve the right to limit you
to 12 transfers per policy year.
* There are certain restrictions on transfers from
the Fixed Account.
* We currently assess a $25 charge for transfers
over 24 per policy year. We reserve the right to
assess a maximum charge of $25 for any transfer.
See "Transfers".
12
<PAGE>
DEATH BENEFIT OVERVIEW
You may choose one of two Death Benefit Options:
* Level Amount Option -- whereby the Death Benefit until age 95 is the
greater of the Face Amount or the corridor percentage of Accumulation
Value;
* Variable Amount Option -- whereby the Death Benefit until age 95 is
equal to the greater of the Face Amount plus the Accumulation Value,
or the corridor percentage of Accumulation Value.
The Death Benefit until age 95 under the Level Amount Option and the
Variable Amount Option will never be less than the Face Amount as long as the
Policy is in force and there is no Loan Amount or unpaid Monthly Deductions.
After Age 95, the Death Benefit under both Death Benefit Options will be the
Accumulation Value.
We will reduce the proceeds payable upon the death of the Insured under any
Death Benefit Option by any Loan Amount and any unpaid Monthly Deductions.
Under certain circumstances, you may receive a part of the Death Benefit
when the Insured has been diagnosed as having a terminal illness. See
"Accelerated Benefit Rider".
ADJUSTING THE DEATH BENEFIT
Although we reserve the right to limit Face Amount increases and decreases
during the first two Policy Years, you have flexibility to adjust the Death
Benefit by increasing or decreasing the Face Amount. You cannot decrease the
Face Amount below the Minimum Face Amount shown in the Policy. Any increase in
the Face Amount may require additional evidence of insurability satisfactory to
us and will result in additional charges. See "Death Benefit -- Requested
Changes in Face Amount".
Generally, you may also change the Death Benefit Option at any time after
the second Policy Year. See "Death Benefit -- Changing the Death Benefit
Option".
See "Death Benefit -- Insurance Protection" for a discussion of available
techniques to adjust the amount of insurance protection to satisfy changing
insurance needs.
DEATH BENEFIT GUARANTEE
If you meet the requirements for the Death Benefit Guarantee, we will not
lapse your Policy during the Death Benefit Guarantee Period even if the Cash
Surrender Value is not sufficient to cover the Monthly Deduction that is due.
See "Death Benefit Guarantee".
LAPSE
If the Death Benefit Guarantee is not in effect, the Policy will lapse if
the Cash Surrender Value plus any Sales Charge Refund is less than the Monthly
Deduction due and if you do not make a sufficient payment during the grace
period of 61 days. See "Policy Lapse and Reinstatement".
TAXATION OF DEATH BENEFIT PROCEEDS
Under current Federal tax law, as long as the Policy qualifies as life
insurance, the Death Benefit under the Policy will be subject to the same
Federal income tax treatment as proceeds of traditional life insurance.
Therefore, the Death Benefit should not be taxable income to the beneficiary.
See "Federal Tax Matters -- Tax Status of the Policy".
TAXATION OF THE POLICY
The Company intends for the Policy to satisfy the definition of a life
insurance contract under Section 7702 of the Code. Under certain circumstances,
a Policy could be treated as a "modified endowment contract." The Company will
monitor Policies and will attempt to notify an owner on a timely basis if his or
her Policy is in jeopardy of becoming a modified endowment contract. See
"Federal Tax Matters" for further discussion of the tax status of a Policy and
the tax consequences of being treated as a life insurance contract or a modified
endowment contract.
A Policy lapse, surrender, partial withdrawal or loan may have adverse tax
consequences in certain circumstances. See "Federal Tax Matters."
13
<PAGE>
PART 2. DETAILED INFORMATION
RELIASTAR LIFE INSURANCE COMPANY
ReliaStar Life Insurance Company is a stock life insurance company
organized in 1885 and incorporated under the laws of the State of Minnesota. We
are a direct, wholly-owned subsidiary of ReliaStar Financial Corp. We offer
individual life insurance and annuities, employee benefits and retirement
contracts. Our Home Office is at 20 Washington Avenue South, Minneapolis,
Minnesota 55401 (telephone 612-372-5507).
From time to time, we may publish in advertisements, sales literature, and
reports, the ratings and other information assigned to us by one or more
independent rating organizations such as A.M. Best Company, Standard & Poor's,
Moody's, and Duff & Phelps. The purpose of the ratings is to reflect our
financial strength and/or claims-paying ability and should not be considered as
bearing on the investment performance of assets held in the Variable Account.
Each year the A.M. Best Company reviews the financial status of many insurers,
culminating in the assignment of Best's Ratings. These ratings reflect their
current opinion of the relative financial strength and operating performance of
an insurance company in comparison to the norms of the life/health insurance
industry. We have been assigned a rating of A+ by A.M. Best, which is a rating
assigned to companies demonstrating superior overall performance and a very
strong ability to meet obligations to policyholders over a long period. Such
ratings do not reflect the investment in the Variable Account.
ReliaStar is a charter member of the Insurance Marketplace Standards
Association ("IMSA"). Companies that belong to IMSA subscribe to a rigorous set
of standards that cover the various aspects of sales and service for
individually sold life insurance and annuities. IMSA members have adopted
policies and procedures that demonstrate a commitment to honesty, fairness and
integrity in all customer contacts involving sales and service of individual
life insurance and annuity products.
THE POLICIES
The Policies are flexible premium variable life insurance contracts with
death benefits, cash values, and other features of traditional life insurance
contracts.
DEDUCTIONS AND CHARGES
We deduct certain charges in connection with the Policy to compensate us
for (1) providing the insurance benefits of the Policy (including any riders),
(2) administering the Policy, (3) assuming certain risks in connection with the
Policy, and (4) incurring expenses in distributing the Policy.
We deduct some of these charges from each premium payment. We deduct
certain other charges monthly from both the Fixed Account and the Variable
Account. We also assess a charge for each partial withdrawal and we may assess a
charge for each transfer.
We may realize a profit on one or more of these charges, such as the
mortality and expense risk charge. We may use any such profits for any proper
corporate purpose, including, among other things, payments of sales expenses.
The Surrender Charge usually exceeds the Accumulation Value in the early
Policy Years. This occurs because the Surrender Charge is usually more than the
accumulated Minimum Monthly Premiums less Policy Charges in the early Policy
years.
PREMIUM EXPENSE CHARGE
We deduct a sales charge and a charge for premium taxes from each premium
payment. We may in the future deduct a premium processing charge from each
premium payment although we currently do not make this charge. The total of
these charges is called the Premium Expense Charge. The amount remaining after
we have deducted the Premium Expense Charge is called the Net Premium.
SALES CHARGE. A sales charge of 2.50% of each premium payment will be
deducted to compensate us for expenses relating to the distribution of the
Policy, including agents' commissions, advertising, and the printing of the
prospectuses and sales literature for new and prospective buyers of this policy.
In addition, we may charge a contingent deferred sales charge if you surrender
the Policy or the Policy lapses. See "Deductions and Charges -- Surrender
Charge".
PREMIUM TAX CHARGE. Various states and subdivisions impose a tax on
premiums received by insurance companies. Premium taxes vary from state to
state. A charge of 2.50% of each premium
14
<PAGE>
payment will be deducted by us. The deduction represents an amount we consider
necessary to pay all taxes imposed by the states and any subdivisions.
PREMIUM PROCESSING CHARGE. We may make a charge of up to $2.00 per premium
payment to reimburse us for the cost of collecting and processing premiums,
although we currently make no such charge. If a premium processing charge is
made, it will be deducted from premium payments before the percentage deductions
for sales charge and premium taxes.
MONTHLY DEDUCTION
We deduct the charges described below from the Accumulation Value of the
Policy on a monthly basis. The total of these charges is called the Monthly
Deduction.
We will deduct the Monthly Deduction on each Monthly Anniversary from the
Fixed Account and the Sub-Accounts of the Variable Account on a proportionate
basis depending on their relative Accumulation Values at that time. For purposes
of determining these proportions, the Fixed Accumulation Value is reduced by the
Loan Amount. Because the cost of insurance portion of the Monthly Deduction can
vary from month to month, the Monthly Deduction itself will vary in amount from
month to month.
If the Cash Surrender Value plus any Sales Charge Refund is not sufficient
to cover the Monthly Deduction on a Monthly Anniversary, the Policy may lapse.
See "Death Benefit Guarantee" and "Policy Lapse and Reinstatement".
COST OF INSURANCE. We will determine the monthly cost of insurance by
multiplying the applicable cost of insurance rate or rates by the net amount at
risk under the Policy. The net amount at risk under the Policy for a Policy
Month is (1) the Death Benefit at the beginning of the Policy Month divided by
1.004074 (which reduces the net amount at risk, solely for purposes of computing
the cost of insurance, by taking into account assumed monthly earnings at an
annual rate of 5%), less (2) the Accumulation Value at the beginning of the
Policy Month (reduced by any charges for rider benefits). As a result, the net
amount at risk may be affected by changes in the Accumulation Value or in the
Death Benefit.
The Rate Class of an Insured may affect the cost of insurance. A Rate Class
is a group of Insureds we determine based upon our expectation that they will
have similar mortality experience. We currently place Insureds into standard
Rate Classes or into substandard Rate Classes that involve a higher mortality
risk. In an otherwise identical Policy, an Insured in the standard Rate Class
will have a lower cost of insurance than an Insured in a Rate Class with higher
mortality risks.
If there is an increase in the Face Amount and the Rate Class applicable to
the increase is different from that for the initial Face Amount or any prior
requested increases in Face Amount, the net amount at risk will be calculated
separately for each Rate Class. For purposes of determining the net amount at
risk for each Rate Class, we will first assume the Accumulation Value to be part
of the initial Face Amount. If the Accumulation Value is greater than the
initial Face Amount, it will then be assumed to be part of each increase in
order, starting with the first increase.
We base cost of insurance rates on the sex, Age, Policy Year and Rate
Class(es) of the Insured. The actual monthly cost of insurance rates will
reflect our expectations as to future experience. They will not, however, be
greater than the guaranteed cost of insurance rates shown in the Policy, which
are based on the Commissioner's 1980 Standard Ordinary Mortality Tables for
smokers or nonsmokers, respectively.
MONTHLY ADMINISTRATIVE CHARGE. Each month we deduct an administrative
charge of $8.25 which is guaranteed not to exceed $12.00 each month.
MONTHLY MORTALITY AND EXPENSE RISK CHARGE. Each month during the first 10
Policy Years we will deduct a charge at an annual rate of .90% of the Variable
Accumulation Value of the Policy. Each month thereafter we will deduct a charge
at an annual rate of .45% of the Variable Accumulation Value guaranteed not to
exceed .90% for the duration of the Policy.
The mortality risk assumed is that Insureds may live for a shorter period
of time than we estimated and that, as a result, we would have to pay a greater
amount in Death Benefits than we collect in premium payments. The expense risk
assumed is that expenses incurred in issuing and administering the Policy will
be greater than we estimated.
OPTIONAL INSURANCE BENEFIT CHARGES. Each month we deduct charges for any
optional insurance benefits added to the Policy by rider. See "General
Provisions -- Optional Insurance Benefits".
15
<PAGE>
SURRENDER CHARGE
GENERAL. During the first 15 Policy Years and during the first 15 years
following any requested increase in Face Amount, there is a Surrender Charge if
you surrender the Policy or the Policy lapses. The Surrender Charge has two
parts -- The Contingent Deferred Administrative Charge and the Contingent
Deferred Sales Charge which are determined separately. The Surrender Charge will
not be affected by any decrease in Face Amount or by any change in Face Amount
resulting from a change in the Death Benefit Option. The maximum amount of the
Surrender Charge is $50.60 per thousand for a male Insured at Issue Age 61.
CONTINGENT DEFERRED ADMINISTRATIVE CHARGE. We will determine the maximum
Contingent Deferred Administrative Charge for the initial Face Amount and any
requested increase in Face Amount on the Policy Date or on the effective date of
any requested increase. The maximum charge is $5.00 per $1,000 of Face Amount
during the first five years of the relevant 15 year period, and decreases
thereafter in equal monthly increments until it becomes zero at the end of the
15 year period.
The Contingent Deferred Administrative Charge for the initial Face Amount
or a requested increase in Face Amount is determined by multiplying (1) $5.00 by
(2) the initial Face Amount or the Face Amount of the increase, as applicable,
and by (3) the applicable percentage from the Surrender Charge Percentage Table
below, and then dividing this amount by 1000.
EXAMPLE: The following example illustrates how we determine the Contingent
Deferred Administrative charge. Assume that an Insured buys a Policy with an
initial Face Amount of $100,000. If the Policy is surrendered at any time in the
first five Policy Years, the Contingent Deferred Administrative Charge is
calculated by multiplying (1) $5.00 by (2) $100,000 (the initial Face Amount),
and by (3) 100% (the applicable percentage from the Surrender Charge Percentage
Table), and then dividing by 1000, which results in a Contingent Deferred
Administrative Charge of $500 ($5.00 x 100,000 x 100% / 1000).
The Contingent Deferred Administrative Charge for requested increases in
Face Amount will be calculated in the same manner as illustrated in the example
above, except that the charges are based on the amount of the increase and the
years and months are measured from the effective date of the increase.
CONTINGENT DEFERRED SALES CHARGE. We will determine the maximum Contingent
Deferred Sales Charge for the initial Face Amount or any requested increase in
Face Amount on the Policy Date or on the effective date of any requested
increase. The Contingent Deferred Sales Charge will remain level for the first
five years in the relevant 15 year period, and then reduces in equal monthly
increments until it becomes zero at the end of 15 years. The Contingent Deferred
Sales Charge will vary depending upon the Insured's Age on the Policy Date or on
the effective date of an increase in Face Amount and sex.
If you surrender the Policy during the first two Policy Years or during
the first 24 months following a requested increase in Face Amount, you may be
entitled to a refund of a portion of the Contingent Deferred Sales Charge. See
"Sales Charge Refund."
The Contingent Deferred Sales Charge will be equal to the lesser of:
(1) 47.50% of the premiums attributable to the initial Face Amount of the
Policy and any premiums attributable to an increase in Face Amount; or
(2) The result of the Contingent Deferred Sales Charge calculation
described below.
CONTINGENT DEFERRED SALES CHARGE CALCULATION. For purposes of (2) above, we
will determine the Contingent Deferred Sales Charge for the initial Face Amount
or any requested increase in Face Amount by multiplying (1) the applicable
Charge per $1,000 of Face Amount from Appendix C by (2) the Initial Face Amount
or the Face Amount of the increase, as applicable, and by (3) the applicable
percentage from the Surrender Charge Percentage Table below, and then dividing
this amount by 1000.
EXAMPLE: The following example illustrates how we determine the Contingent
Deferred Sales Charge. Assume that a male, Age 35, buys a policy with an initial
Face Amount of $100,000 and he surrenders the Policy during the third Policy
Year at which time he has paid cumulative premiums of $2,000. Based on these
assumptions the Contingent Deferred Sales Charge will be the lesser of:
(1) 47.50% times the cumulative premiums paid on the Policy, which is $950
(47.50% x $2,000); or
16
<PAGE>
(2) The result of the Contingent Deferred Sales Charge Calculation, which
is determined by multiplying (a) $14.00 (from Appendix C for a male
age 35) by (b) $100,000 (the Initial Face Amount) and by (c) 100% (the
applicable percentage from the Surrender Charge Percentage Table), and
then dividing by 1000, which is $1,400 ($14.00 x 100,000 x 100%/1000).
We will calculate the additional Contingent Deferred Sales Charge for
requested increases in Face Amount in the same manner as illustrated in the
example above. However, for purposes of determining the amount in (1) in the
above example, the cumulative premium paid is replaced by the premiums
attributable to the increase in Face Amount. The premiums attributable to the
increase in Face Amount will consist of a portion of the existing Accumulation
Value and a portion of the premium payments made after the effective date of the
increase. The proportion of existing Accumulation Value and subsequent premium
payments attributable to the increase will equal (1) the Surrender Charge
Guideline for the increase found in Appendix D, divided by (2) the sum of the
Surrender Charge Guideline(s) for the initial Face Amount and each increase in
Face Amount.
MASSACHUSETTS, MONTANA AND PENNSYLVANIA RESIDENTS. Appendix C and Appendix
D and the preceding illustrations of the Contingent Deferred Sales Charge do not
apply to Policies issued in Massachusetts, Montana and Pennsylvania. The
Contingent Deferred Sales Charge applied to Policies issued in Massachusetts and
Montana is not affected by the Insured's sex. Therefore, the Contingent Deferred
Sales Charge made on Policies issued in these two states will differ from the
charge made in other states. In Pennsylvania, the Insured's sex will be a factor
in determining the amount of Contingent Deferred Sales Charge applied to a
Policy, but the charge will differ from the charge described in the above
example.
SURRENDER CHARGE PERCENTAGE TABLE
IF SURRENDER OR LAPSE OCCURS IN THE FOLLOWING PERCENTAGES OF THE
THE LAST MONTH OF POLICY YEAR:* SURRENDER CHARGE WILL BE PAYABLE:**
------------------------------- -----------------------------------
1 through 5 100%
6 90%
7 80%
8 70%
9 60%
10 50%
11 40%
12 30%
13 20%
14 10%
15 and later 0%
*For requested increases, years are measured from the date of the increase.
**The percentages reduce equally for each Policy Month during the years shown.
For example, during the seventh Policy Year, the percentage reduces equally
each month from 90% at the end of the sixth Policy Year to 80% at the end of
the seventh Policy Year.
PARTIAL WITHDRAWAL AND TRANSFER CHARGES
We currently make no charge for the first 24 transfers in a Policy Year and
assess a $25 charge for each subsequent transfer. We currently assess a $10.00
charge for each partial withdrawal. These charges are guaranteed not to exceed
$25.00 per transfer or partial withdrawal for the duration of the Policy. The
transfer charge will not be imposed on transfers that occur as a result of
Policy loans or the exercise of conversion rights.
MODIFICATION OF CHARGES
ReliaStar may modify any of the charges under the Policy, as well as the
minimum Face Amount set forth in this Prospectus, because of special
circumstances that result in lower sales, administrative, or mortality expenses.
For example, special circumstances may exist in connection with group or
sponsored arrangements, sales to our policyholders or those of affiliated
insurance companies, or sales to employees or clients of members of our
affiliated group of insurance companies. The amount of any reductions will
17
<PAGE>
reflect the reduced sales effort and administrative costs resulting from, or the
different mortality experience expected as a result of, the special
circumstances. Reductions will not be unfairly discriminatory against any
person, including the affected Policy owners and owners of all other policies
funded by the Variable Account.
If we approve simplified underwriting, the cost of insurance may increase
as a result of higher than anticipated mortality experience. However, any such
increase will not cause the cost of insurance charge to exceed the guaranteed
rates set forth in the Policy.
INVESTMENT ADVISORY FEES AND OTHER FUND EXPENSES
Because the Variable Account purchases shares of the Funds, the net asset
value of the Variable Account's investments will reflect the investment advisory
fees and other expenses incurred by the Funds. Set forth below is information
provided by each Fund on its total 1999 annual expenses as a percentage of the
Fund's average net assets. See the prospectuses for the Funds for more
information concerning these expenses.
18
<PAGE>
FUND EXPENSES
(BEFORE REIMBURSEMENTS)
<TABLE>
<CAPTION>
TOTAL INVESTMENT
MANAGEMENT OTHER FUND AMOUNT
FUND FEES EXPENSES EXPENSES
- ---- ---------- -------- ----------------
<S> <C> <C> <C>
AIM V.I. Dent Demographic Trends Fund (a) ................... 0.85% 0.55% 1.40%
Alger American Growth Portfolio (a) ......................... 0.75% 0.04% 0.79%
Alger American Leveraged AllCap Portfolio (a) ............... 0.85% 0.08% 0.93%
Alger American MidCap Growth Portfolio (a) .................. 0.80% 0.05% 0.85%
Alger American Small Capitalization Portfolio (a) ........... 0.85% 0.05% 0.90%
Fidelity VIP Equity-Income Portfolio (a) (b) ................ 0.48% 0.09% 0.57%
Fidelity VIP Growth Portfolio (a) (b) ....................... 0.58% 0.08% 0.66%
Fidelity VIP High Income Portfolio (a) ...................... 0.58% 0.11% 0.69%
Fidelity VIP Money Market Portfolio ......................... 0.18% 0.09% 0.27%
Fidelity VIP II Contrafund Portfolio (a) (b) ................ 0.58% 0.09% 0.67%
Fidelity VIP II Index 500 Portfolio (a) (b) ................. 0.24% 0.10% 0.34%
Fidelity VIP II Investment Grade Bond Portfolio (a) ......... 0.43% 0.11% 0.54%
Janus Aspen Aggressive Growth Portfolio (a) (c) ............. 0.65% 0.02% 0.67%
Janus Aspen Growth Portfolio (a) (c) ........................ 0.65% 0.02% 0.67%
Janus Aspen International Growth Portfolio (a) (c) .......... 0.65% 0.11% 0.76%
Janus Aspen Worldwide Growth Portfolio (a) (c) .............. 0.65% 0.05% 0.70%
Neuberger Berman Advisers Management Trust Limited
Maturity Bond Portfolio (a) ................................ 0.65% 0.11% 0.76%
Neuberger Berman Advisers Management Trust Partners
Portfolio (a) .............................................. 0.80% 0.07% 0.87%
Neuberger Berman Advisers Management Trust Socially
Responsive Portfolio (a) (d) ............................... 0.85% 8.19% 9.04%
OCC Accumulation Trust Equity Portfolio (a) (e) ............. 0.80% 0.11% 0.91%
OCC Accumulation Trust Global Equity Portfolio (a) (e) ...... 0.80% 0.30% 1.10%
OCC Accumulation Trust Managed Portfolio (a) (e) ............ 0.77% 0.06% 0.83%
OCC Accumulation Trust Small Cap Portfolio (a) (e) .......... 0.80% 0.09% 0.89%
Pilgrim VP Trust Growth Opportunities Portfolio (f) (g) ..... 0.75% 0.34% 1.09%
Pilgrim VP Trust Growth + Value Portfolio (f) ............... 0.75% 0.22% 0.97%
Pilgrim VP Trust High Yield Bond Portfolio (f) .............. 0.75% 0.36% 1.11%
Pilgrim VP Trust International Value Portfolio (f) .......... 1.00% 0.52% 1.52%
Pilgrim VP Trust MagnaCap Portfolio (f) (g) ................. 0.75% 0.34% 1.09%
Pilgrim VP Trust MidCap Opportunities Portfolio (f) (g) ..... 0.75% 0.34% 1.09%
Pilgrim VP Trust Research Enhanced Index Portfolio (f) ...... 0.75% 0.51% 1.26%
Pilgrim VP Trust SmallCap Opportunities Portfolio (f) ....... 0.75% 0.34% 1.09%
Putnam VT Growth and Income Fund -- Class IA Shares ......... 0.46% 0.04% 0.50%
Putnam VT New Opportunities Fund -- Class IA Shares ......... 0.54% 0.05% 0.59%
Putnam VT Voyager Fund -- Class IA Shares ................... 0.53% 0.04% 0.57%
</TABLE>
(a) The Company or its affiliates may receive compensation from an
affiliate or affiliates of certain of the Funds based upon an annual
percentage of the average net assets held in that Fund by the Company
and by certain of the Company's insurance company affiliates. These
amounts are intended to compensate the Company or the Company's
affiliates for administrative, record keeping, and in some cases
distribution, and other services provided by the Company and its
affiliates to Funds and/or the Funds' affiliates. Payments of such
amounts by an affiliate or affiliates of the Funds do not increase the
fees paid by the Funds or their shareholders. The percentage paid may
vary from one Fund company to another.
(b) A portion of the brokerage commissions that certain portfolios pay was
used to reduce Portfolio expenses. In addition, certain Portfolios
have entered into arrangements with their custodian whereby credits
realized as a result of uninvested cash balances are used to reduce
custodian expenses. Including these reductions, the total operating
expenses presented in the table would have been: 0.56% for Fidelity
VIP Equity-Income Portfolio; 0.65% for Fidelity
19
<PAGE>
VIP Growth Portfolio; 0.28% for Fidelity VIP II Index 500 Portfolio;
and 0.65% for Fidelity VIP II Contrafund Portfolio.
(c) Expenses are based upon expenses for the fiscal year ended December
31, 1999, restated to reflect a reduction in the management fee for
these Portfolios. All expenses are shown without the effect of
expenses offset arrangements.
(d) Neuberger Berman Management Inc. ("NBMI") has undertaken to reimburse
the Socially Responsive Portfolio for certain operating expenses,
including the compensation of Neuberger Berman Advisers Management
Trust and excluding taxes, interest, extraordinary expenses, brokerage
commissions and transaction costs, that exceed in the aggregate, 1.50%
of the average daily net asset value of the Socially Responsive
Portfolio. Expenses were 1.53% for the fiscal period ending December
31, 1999, after reimbursement. There can be no assurance that this
policy will be continued after May 1, 2001. See "Expense Limitation"
in the Socially Responsive Portfolio prospectus for further
information.
(e) Management Fees reflect effective management fees after taking into
effect any waiver. Other Expenses are shown net of expense offsets
afforded the Portfolios. Total Portfolio Expenses for the Equity,
Small Cap and Managed Portfolios are limited by OpCap Advisors so that
their respective annualized operating expenses (net of any expense
offsets) do not exceed 1.00% of average daily net assets. Total
Portfolio Expenses for the Global Equity Portfolio are limited to
1.25% of average daily net assets (net of expense offsets).
(f) The investment adviser to the Pilgrim VP Trust has agreed to reimburse
the Pilgrim VP Growth + Value Portfolio and High Yield Bond Portfolio
for any expenses in excess of 0.80% of each Portfolio's average daily
net assets. It has also agreed to reimburse the SmallCap
Opportunities, MagnaCap, MidCap, and Research Enhanced Index
Portfolios for amounts in excess of 0.90%. It has agreed to reimburse
the International Value Portfolio for amounts in excess of 1.00%.
Expense reimbursements are voluntary. There is no assurance of ongoing
reimbursement.
(g) This portfolio had not commenced operations as of December 31, 1999,
and therefore these expenses are estimated.
SALES CHARGE REFUND
If you surrender the Policy during the first two Policy Years or during the
first 24 Policy Months following the effective date of any requested increase in
Face Amount, we may be required to refund a portion of the Contingent Deferred
Sales Charge. This refund is called the Sales Charge Refund.
Any amount used in the calculation described below will be determined on
the effective date of surrender.
INITIAL FACE AMOUNT. If you surrender the Policy during the first two
Policy Years, we will pay you a Sales Charge Refund which will equal the excess,
if any, of the total sales charge deducted (which consists of the 2.50% sales
charge deducted from each premium payment and the Contingent Deferred Sales
Charge) over (1) 30% of actual premium payments made during the first Policy
Year up to the amount of the Surrender Charge Guideline (see below) for the
initial Face Amount, plus (2) 9% of any actual premium payments made that exceed
(1). The amount of the refund will never decrease as the result of the payment
of a premium. After the second Policy Year, there is no Sales Charge Refund with
respect to the initial Face Amount.
As described above, we calculate the Sales Charge Refund based on
percentages of premium payments. While the total sales charge deducted under the
Policy is not based solely on premium payments, it is possible to translate the
total sales charge into a percentage of premium payments. In general, the total
sales charge deducted (before calculating the Sales Charge Refund) will be 50%
of each premium payment until premium payments reach a certain level. The level
ranges from approximately 35% of a Surrender Charge Guideline for a male age 0,
up to approximately 115% of a Surrender Charge Guideline for a male age 40, and
down to approximately 45% of a Surrender Charge Guideline for a male age 75.
After premium payments reach this level, the total sales charge will equal 2.50%
of each additional premium payment. During the two Policy Years when the Sales
Charge Refund applies, however, the total sales charge will be limited to 30% of
actual first year premium payments up to the amount of a Surrender Charge
Guideline, 9% of actual premium payments until payments reach the
20
<PAGE>
level where the total sales charge drops to 2.50%, and 2.50% of any additional
premium payments beyond that level. If you have any questions regarding the
amount of your Sales Charge Refund, please call us.
Due to the Sales Charge Refund, the total sales charge for the initial Face
Amount will be significantly less if a Policy is surrendered during the first
two Policy Years rather than shortly thereafter.
The Surrender Charge Guideline equals (1) the Face Amount or the amount of
the increase divided by $1,000, (2) multiplied by the applicable factor from
Appendix D.
REQUESTED INCREASES IN FACE AMOUNT. If you cancel a requested increase in
Face Amount during the first 24 Policy Months following the increase (but after
the free look period -- see "Free Look and Conversion Rights -- Free Look
Rights"), and the Policy is surrendered at any time thereafter, we will pay you
a Sales Charge Refund which will equal the excess, if any, of the total sales
charge for the increase (which consists of 2.50% of the premiums attributable to
the increase and the Contingent Deferred Sales Charge for the increase) over (1)
30% of the premiums attributable to the increase in the 12 Policy Months
following the increase up to the amount of the Surrender Charge Guideline for
the increase (see immediately preceding paragraph), plus (2) 9% of any premiums
attributable to the increase that exceed (1). The amount of the refund will
never decrease as the result of the payment of a premium. This refund is only
available if the increase is cancelled within the 24 Policy Months following its
effective date, and the Policy is subsequently surrendered. No refund is
available if the increase is cancelled after the 24-month period.
Calculating total sales charge deducted for an increase as a percentage of
premiums attributable to the increase is, in general, the same as described
above for the initial Face Amount. Thus, due to the Sales Charge Refund, the
total sales charge for a requested increase in Face Amount may be significantly
less if the increase is cancelled during the 24-month period following the
increase rather than shortly thereafter. If you have any questions regarding the
amount of your Sales Charge Refund, please call us.
For the purposes of the preceding paragraph, the premiums attributable to
the increase will be determined as described in the section entitled "Deductions
and Charges -- Surrender Charge -- Calculation of Contingent Deferred Sales
Charge", which means that, in effect, we will deem a proportionate amount of the
existing Accumulation Value on the effective date of the increase to be a
premium payment for the increase, and subsequent premium payments will be
prorated.
EFFECT OF SALES CHARGE REFUND. We will apply the Sales Charge Refund to
maintain the Policy in force when the Cash Surrender Value is insufficient to
cover the Monthly Deduction. If the remaining Sales Charge Refund (not already
applied to keep the Policy in force) is insufficient to cover the Monthly
Deduction, we may apply this remaining Sales Charge Refund for the grace period
under the Policy. See "Policy Lapse and Reinstatement." Any Sales Charge Refund
not so applied will be refunded to you upon the total surrender of the Policy.
THE VARIABLE ACCOUNT
On October 11, 1984, we established the Select*Life Variable Account as
one of our separate accounts pursuant to the laws of the State of Minnesota.
The Variable Account:
* will receive and invest the Net Premiums paid and allocated to it
under this Policy;
* currently receives and invests net premiums for other classes of
flexible premium variable life insurance policies and may do so for
additional classes in the future;
* meets the definition of a "separate account" under the federal
securities laws; and
* is registered with the SEC as a unit investment trust under the
Investment Company Act of 1940. The registration does not involve
supervision by the SEC of the management or investment policies or
practices of the Variable Account, us, or the Funds.
We own the Variable Account's assets. However, Minnesota law provides that
we cannot charge the Variable Account with liabilities arising out of any other
business we may conduct. We are required to maintain assets which are at least
equal to the reserves and other liabilities of the Variable Account. We may
transfer assets which exceed these reserves and liabilities to our general
account (the Fixed Account).
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<PAGE>
For a description of the Fixed Account, see Appendix A to this Prospectus.
INVESTMENTS OF THE VARIABLE ACCOUNT
There are currently 34 investment options (Funds) available under the
Variable Account. However, we only permit you to participate in a maximum of 17
investment options over the lifetime of your Policy. You also should read the
Funds' prospectuses for more detailed information, particularly because several
of the Funds and portfolios may have objectives that are quite similar. THERE IS
NO ASSURANCE THAT ANY FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE(S).
PERFORMANCE INFORMATION
Performance information for the Sub-Accounts of the Variable Account and
the Funds available for investment by the Variable Account may appear in
advertisements, sales literature, or reports to Policy owners or prospective
purchasers. Such performance information for the Sub-Accounts will reflect
deductions of Fund expenses and be adjusted to reflect the Mortality and Expense
Risk Charge, but will not reflect deductions for the cost of insurance or the
Surrender Charge. We will accompany quotations of performance information for
the Funds by performance information for the Sub-Accounts. Performance
information for the Funds will take into account all fees and charges at the
Fund level, but will not reflect any deductions from the Variable Account.
Performance information reflects only the performance of a hypothetical
investment during a particular time period in which the calculations are based.
We may provide performance information showing total returns and average annual
total returns for periods prior to the date a Sub-Account commenced operation.
We will calculate such performance information based on the assumption that the
Sub-Accounts were in existence for the same periods as those indicated for the
Funds, with the level of charges at the Variable Account level that were in
effect at the inception of the Sub-Accounts.
We may also provide individualized hypothetical illustrations of
Accumulation Value, Cash Surrender Value and Death Benefit based on historical
investment returns of the Funds. These illustrations will reflect deductions for
Fund expenses and Policy and Variable Account charges, including the Monthly
Deduction, Premium Expense Charge and the Surrender Charge. We will base these
hypothetical illustrations on the actual historical experience of the Funds as
if the Sub-Accounts had been in existence and a Policy issued for the same
periods as those indicated for the Funds.
We may compare performance of the Sub-Accounts and/or the Funds in
advertisements and sales literature:
* to other variable life insurance issuers in general;
* to the performance of particular types of variable life insurance
policies investing in mutual funds;
* to investment series of mutual funds with investment objectives
similar to each of the Sub-Accounts, whose performance is reported by
Lipper Analytical Services, Inc. and Morningstar, Inc. (independent
services that monitor and rank the performances of variable life
insurance issuers in each of the major categories of investment
objectives on an industry-wide basis) or reported by other series,
companies, individuals or other industry or financial publications of
general interest, such as FORBES, MONEY, THE WALL STREET JOURNAL,
BUSINESS WEEK, BARRON'S, KIPLINGER'S, and FORTUNE; and
* to the Standard & Poor's Index of 500 common stocks and the Dow Jones
Industrials, which are widely used measures of stock market
performance.
We may also compare the performance of each Sub-Account to other widely
recognized indices. Unmanaged indices may assume the reinvestment of dividends,
but typically do not reflect any "deduction" for the expense of operating or
managing an investment portfolio.
DEATH BENEFIT
If the Insured dies while the Policy is in force, we will pay the Death
Benefit (see "Death Benefit Options" below) reduced by any Loan Amount and
unpaid Monthly Deductions. This amount is called the proceeds. All or part of
the proceeds may be paid in cash to your beneficiaries or under one or more of
the settlement options we offer (see "General Provisions -- Settlement
Options").
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<PAGE>
The Policy provides two Death Benefit Options: the Level Amount Option and
the Variable Amount Option. You choose the Death Benefit Option on the
application for the Policy. Subject to certain limitations, you can change the
Death Benefit Option after issuance of the Policy. See "Death Benefit --
Changing the Death Benefit Option."
DEATH BENEFIT OPTIONS
The Policy provides two Death Benefit Options as shown below. You choose
the Death Benefit Option on the application for the Policy. Subject to certain
limitations, you can change the Death Benefit Option after issuance of the
Policy. See "Death Benefit -- Changing the Death Benefit Option."
LEVEL AMOUNT OPTION (OPTION A). The Death Benefit is the greater of the
current Face Amount of the Policy or the corridor percentage of Accumulation
Value on the Valuation Date on or next following the date of the Insured's
death. The corridor percentage is 250% for an Insured Age 40 or below, and the
percentage declines with increasing Ages as shown in the Corridor Percentage
Table below. Accordingly, under the Level Amount Option the Death Benefit will
remain level unless the corridor percentage of Accumulation Value exceeds the
current Face Amount, in which case the amount of the Death Benefit will vary as
the Accumulation Value varies.
ILLUSTRATION OF LEVEL AMOUNT OPTION. For purposes of this illustration,
assume that the Insured is under Age 40, and that there is no Loan Amount. Under
the Level Amount Option, a Policy with a $100,000 Face Amount will generally
have a $100,000 Death Benefit. However, because the Death Benefit must be equal
to or be greater than 250% of the Accumulation Value, any time the Accumulation
Value of the Policy exceeds $40,000, the Death Benefit will exceed the $100,000
Face Amount. Each additional dollar added to the Accumulation Value above
$40,000 will increase the Death Benefit by $2.50. Thus, if the Accumulation
Value exceeds $40,000 and increases by $100 because of investment performance or
premium payments, the Death Benefit will increase by $250. A Policy owner with
an Accumulation Value of $50,000 will be entitled to a Death Benefit of $125,000
($50,000 X 250%); an Accumulation Value of $75,000 will yield a Death Benefit of
$187,500 ($75,000 X 250%); and an Accumulation Value of $100,000 will yield a
Death Benefit of $250,000 ($100,000 X 250%).
The corridor percentage becomes lower as the Insured's Age increases. If
the current Age of the Insured in the illustration above were, for example, 50
(rather than under Age 40), the corridor percentage would be 185%. The Death
Benefit would not exceed the $100,000 Face Amount unless the Accumulation Value
exceeded approximately $54,055 (rather than $40,000), and each $1 then added to
or taken from the Accumulation Value would change the Death Benefit by $1.85
(rather than $2.50).
23
<PAGE>
CORRIDOR PERCENTAGE TABLE
<TABLE>
<CAPTION>
CORRIDOR CORRIDOR CORRIDOR
INSURED'S AGE ON PERCENTAGE OF INSURED'S AGE ON PERCENTAGE OF INSURED'S AGE ON PERCENTAGE OF
PREVIOUS POLICY ACCUMULATION PREVIOUS POLICY ACCUMULATION PREVIOUS POLICY ACCUMULATION
ANNIVERSARY VALUE ANNIVERSARY VALUE ANNIVERSARY VALUE
- ---------------- ------------- ---------------- ------------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
40 or younger 250% 54 157 68 117
41 243 55 150 69 116
42 236 56 146 70 115
43 229 57 142 71 113
44 222 58 138 72 111
45 215 59 134 73 109
46 209 60 130 74 107
47 203 61 128 75-90 105
48 197 62 126 91 104
49 191 63 124 92 103
50 185 64 122 93 102
51 178 65 120 94 101
52 171 66 119 95 or older 100
53 164 67 118
</TABLE>
VARIABLE AMOUNT OPTION (OPTION B). The Death Benefit is equal to the
greater of the current Face Amount plus the Accumulation Value of the Policy, or
the corridor percentage of the Accumulation Value on the Valuation Date on or
next following the date of the Insured's death. The corridor percentage is 250%
for an Insured Age 40 or below, and the percentage declines with increasing Age
as shown in the Corridor Percentage Table above. Accordingly, under the Variable
Amount Option the amount of the Death Benefit will always vary as the
Accumulation Value varies.
ILLUSTRATION OF VARIABLE AMOUNT OPTION. For purposes of this illustration,
assume that the Insured is under Age 40 and that there is no Loan Amount. Under
the Variable Amount Option, a Policy with a Face Amount of $100,000 will
generally pay a Death Benefit of $100,000 plus the Accumulation Value. Thus, for
example, a Policy with an Accumulation Value of $20,000 will have a Death
Benefit of $120,000 ($100,000 + $20,000); an Accumulation Value of $40,000 will
yield a Death Benefit of $140,000 ($100,000 + $40,000). The Death Benefit,
however, must be at least 250% of the Accumulation Value. As a result, if the
Accumulation Value of the Policy exceeds approximately $66,667, the Death
Benefit will be greater than the Face Amount plus the Accumulation Value. Each
additional dollar of the Accumulation Value above $66,667 will increase the
Death Benefit by $2.50. Thus, if the Accumulation Value exceeds $66,667 and
increases by $100 because of investment performance or premium payments, the
Death Benefit will increase by $250. A Policy owner with an Accumulation Value
of $75,000 will be entitled to a Death Benefit of $187,500 ($75,000 X 250%); an
Accumulation Value of $100,000 will yield a Death Benefit of $250,000 ($100,000
X 250%); and an Accumulation Value of $125,000 will yield a Death Benefit of
$312,500 ($125,000 X 250%).
The corridor percentage becomes lower as the Insured's Age increases. If
the current Age of the Insured in the illustration above were, for example, 50
(rather than under 40), the corridor percentage would be 185%. The amount of the
Death Benefit would be the sum of the Accumulation Value plus $100,000 unless
the Accumulation Value exceeded approximately $117,647 (rather than $66,667),
and each $1 then added to or taken from the Accumulation Value would change the
Death Benefit by $1.85 (rather than $2.50).
WHICH DEATH BENEFIT OPTION TO CHOOSE
If you prefer to have premium payments and favorable investment performance
reflected partly in the form of an increasing Death Benefit, you should choose
the Variable Amount Option. If you are satisfied with the amount of your
existing insurance coverage and prefer to have premium payments and favorable
investment performance reflected to the maximum extent in the Accumulation Value
and lower cost of insurance charges, you should choose the Level Amount Option.
REQUESTED CHANGES IN FACE AMOUNT
Subject to certain limitations, you may request an increase or decrease in
the Face Amount. We reserve the right to limit increases and decreases in the
Face Amount during the first two Policy Years.
INCREASES. For an increase in the Face Amount, you must submit a written
request to us. We may also require additional evidence of insurability
satisfactory to us. The effective date of the increase will be the Monthly
Anniversary on or next following our approval of the increase. The increase may
not be less than $5,000. We will currently permit increases up to the Insured's
Age 80, if our requirements are
24
<PAGE>
met. We will deduct any charges associated with the increase (the increases in
the cost of insurance and the Surrender Charge upon lapse or total surrender --
see "Effect of Requested Changes in Face Amount" below) from the Accumulation
Value, whether or not you pay an additional premium in connection with the
increase. You will be entitled to limited free look, conversion, and refund
rights with respect to requested increases in Face Amount. See "Sales Charge
Refund" and "Free Look and Conversion Rights".
DECREASES. For a decrease in the Face Amount, you must submit a written
request to us. Any decrease in the Face Amount will be effective on the Monthly
Anniversary on or next following our receipt of a written request. You cannot
request a decrease in the Face Amount more frequently than once every six
months. The Face Amount remaining in force after any requested decrease may not
be less than the Minimum Face Amount shown in the Policy. Under our current
rules, the Minimum Face Amount is $25,000, but we reserve the right to establish
a different Minimum Face Amount in the future. If, following a decrease in Face
Amount, the Policy would no longer qualify as life insurance under Federal tax
law (see "Federal Tax Matters -- Tax Status of the Policy"), the decrease will
be limited to the extent necessary to meet these requirements.
For purposes of determining the cost of insurance, decreases in the Face
Amount will be applied to reduce the current Face Amount in the following order:
(1) The Face Amount provided by the most recent increase;
(2) The next most recent increases successively; and
(3) The Face Amount when the Policy was issued.
By reducing the current Face Amount in this manner, the Rate Class
applicable to the most recent increase in Face Amount will be eliminated first,
then the Rate Class applicable to the next most recent increase, and so on, for
the purposes of calculating the cost of insurance. This assumption will affect
the cost of insurance under the Policy only if different Rate Classes have been
applied to the current Face Amount. We currently place Insureds into standard
Rate Classes or into substandard Rate Classes that involve a higher mortality
risk (for example, a 200% Rate Class or a 300% Rate Class). In an otherwise
identical Policy, an Insured in the standard Rate Class will have a lower cost
of insurance than an Insured in a substandard Rate Class with higher mortality
risks. See "Deductions and Charges -- Monthly Deduction".
For example, assume that the initial Face Amount was $50,000 with a
standard Rate Class, and that successive increases of $25,000 (at a Rate Class
of 200%) and $50,000 (at a Rate Class of 300%) were added. If a decrease of
$50,000 or less is requested, the amount of insurance at a 300% Rate Class will
be reduced first. If a decrease of more than $50,000 is requested, the amount at
a 300% Rate Class will be eliminated, and the excess over $50,000 will next
reduce the amount of insurance at a 200% Rate Class.
EFFECT OF REQUESTED CHANGES IN FACE AMOUNT. An increase or decrease in Face
Amount will affect the Monthly Deduction because the cost of insurance depends
upon the Face Amount. The charge for certain optional insurance benefits may
also be affected. See "Deductions and Charges -- Monthly Deduction". An increase
in the Face Amount will increase the Surrender Charge, but a decrease in the
Face Amount will not reduce the Surrender Charge. The Surrender Charge is,
however, imposed only upon lapse or total surrender of the Policy and not upon a
requested decrease in Face Amount. See "Deductions and Charges -- Surrender
Charge".
An increase in the Face Amount will increase the Minimum Monthly Premium as
of the effective date of the increase. Therefore, additional premium payments
may be required to maintain the Death Benefit Guarantee. A decrease in the Face
Amount will reduce the Minimum Monthly Premium as of the effective date of the
decrease. See "Death Benefit Guarantee".
The additional Surrender Charge on a requested increase in the Face Amount
will reduce the Cash Surrender Value (which is the Accumulation Value less any
Surrender Charge, Loan Amount and unpaid Monthly Deductions). If the resulting
Cash Surrender Value is not sufficient to cover the Monthly Deduction, the
Policy may lapse unless the Death Benefit Guarantee is in effect. See "Policy
Lapse and Reinstatement -- Lapse" and "Death Benefit Guarantee".
25
<PAGE>
INSURANCE PROTECTION
As your insurance needs change, you may increase or decrease the pure
insurance protection provided by the Policy (that is, the difference between the
Death Benefit and the Accumulation Value) in one of several ways. These ways
include:
* increasing or decreasing the Face Amount of insurance, changing the
level of premium payments, and,
* to a lesser extent, making a partial withdrawal under the Policy.
Although the consequences of each of these methods will depend upon the
individual circumstances, they may be generally summarized as follows:
* A DECREASE IN THE FACE AMOUNT will, subject to the corridor percentage
limitations (see "Death Benefit -- Death Benefit Options"), decrease
the pure insurance protection without reducing the Accumulation Value.
If the Face Amount is decreased, the Policy charges generally will
decrease as well. (Note that the Surrender Charge will not be reduced.
See "Deductions and Charges -- Surrender Charge".)
* AN INCREASE IN THE FACE AMOUNT (which is generally subject to
underwriting approval -- see "Death Benefit -- Requested Changes in
Face Amount") will likely increase the amount of pure insurance
protection, depending on the amount of Accumulation Value and the
resultant corridor percentage limitation. If the insurance protection
is increased, the Policy charges generally will increase as well.
* A CHANGE IN THE LEVEL OF PREMIUM can have a variety of effects, as
follows:
UNDER THE LEVEL AMOUNT OPTION, until the corridor percentage of
Accumulation Value exceeds the Face Amount, (a) an increased level of
premium payments will reduce the amount of pure insurance protection,
and (b) a reduced level of premium payments will increase the amount
of pure insurance protection.
UNDER THE VARIABLE AMOUNT OPTION, until the corridor percentage of
Accumulation Value exceeds the Face Amount plus the Accumulation
Value, the level of premium payments will not affect the amount of
pure insurance protection (however, both the Accumulation Value and
the Death Benefit will be increased if premium payments are increased,
and reduced if premium payments are reduced).
UNDER ANY DEATH BENEFIT OPTION, if the Death Benefit is the corridor
percentage of Accumulation Value, then (a) an increased level of
premium payments will increase the amount of pure insurance protection
(subject to underwriting approval -- see "Payment and Allocation of
Premiums -- Amount and Timing of Premiums"), and (b) a reduced level
of premium payments will reduce the pure insurance protection.
* A PARTIAL WITHDRAWAL will reduce the Death Benefit. See "Surrender
Benefits -- Partial Withdrawal". However, it has a limited effect on
the amount of pure insurance protection and charges under the Policy,
because the decrease in the Death Benefit is usually equal to the
amount of Accumulation Value withdrawn. The primary use of a partial
withdrawal is to withdraw Accumulation Value. Furthermore, it results
in a reduced amount of Accumulation Value and increases the
possibility that the Policy will lapse.
YOU SHOULD CONSIDER THE TECHNIQUES DESCRIBED IN THIS SECTION FOR CHANGING
THE AMOUNT OF PURE INSURANCE PROTECTION UNDER THE POLICY (FOR EXAMPLE, CHANGING
THE FACE AMOUNT, MAKING A PARTIAL WITHDRAWAL, AND CHANGING THE AMOUNT OF PREMIUM
PAYMENTS) TOGETHER WITH THE OTHER RESTRICTIONS AND CONSIDERATIONS DESCRIBED
ELSEWHERE IN THIS PROSPECTUS.
CHANGING THE DEATH BENEFIT OPTION
After the first two Policy Years, you may change the Death Benefit Option.
You must submit a written request to change the Death Benefit Option. A change
in the Death Benefit Option will also change the Face Amount. If the Death
Benefit Option is changed from the Level Amount Option to the Variable Amount
Option, the Face Amount will be decreased by an amount equal to the Accumulation
Value on the effective date of the change. You cannot change from the Level
Amount Option to the Variable Amount Option if the resulting Face Amount would
fall below the Minimum Face Amount (currently $25,000).
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If you request to change the Death Benefit Option from the Variable Amount
Option to the Level Amount Option, we will increase the Face Amount by an amount
equal to the Policy's Accumulation Value on the effective date of the change.
An increase or decrease in Face Amount resulting from a change in the Death
Benefit Option will affect the future Monthly Deductions because the cost of
insurance depends upon the Face Amount. The charge for certain optional
insurance benefits may also be affected. See "Deductions and Charges -- Monthly
Deduction". However, a Face Amount change resulting from a change in Death
Benefit Option will not affect the Surrender Charge.
Changes in the Death Benefit Option do not currently require additional
evidence of insurability.
ACCELERATED BENEFIT RIDER
Under certain circumstances, the Accelerated Benefit Rider allows a Policy
owner to accelerate benefits from the Policy that we would otherwise pay upon
the Insured's death. The benefit may vary state-by-state and your registered
representative should be consulted as to whether and to what extent the rider is
available in a particular state and on any particular Policy. Generally, we will
provide an Accelerated Benefit if the Insured has a terminal illness that will
result in the death of the Insured within 12 months, as certified by a
physician. The Accelerated Benefit will not be more than 50% of the amount that
would be payable at the death of the Insured. The Accelerated Benefit will first
be used to pay off any outstanding Policy loans and interest due. The remainder
of the Accelerated Benefit will be paid in a lump sum to the Policy owner.
Limitations, as described in the Accelerated Benefit Rider, may apply.
We will establish a lien against the Policy for the amount of the
Accelerated Benefit plus the administrative charge, plus interest on the lien.
Any proceeds from the Policy will be first used to repay this lien. We will
reduce your access to the Cash Value by the amount of the lien. We will also
reduce the proceeds payable to the beneficiary by the amount of the lien. We
will assess an administrative charge up to $300 at the time we pay the
Accelerated Benefit. The Accelerated Benefit will not affect the premium payable
on the Policy. Receipt of a benefit under the Accelerated Benefit Rider may give
rise to Federal or State income tax. Consult a competent tax adviser for further
information.
The above information is not a complete summary of the Rider. All of the
terms and provisions of the Accelerated Benefit Rider are set forth in the Rider
and you should refer to the Rider in order to fully ascertain its benefits and
limitations.
PAYMENT AND ALLOCATION OF PREMIUMS
ISSUING THE POLICY
An individual applying for a Policy must complete an application and
personally deliver it to our licensed agent. We will only issue a Policy to an
applicant Age 80 or less who supplies evidence of insurability satisfactory to
us. The minimum Face Amount is currently $25,000, but we reserve the right to
specify a different minimum Face Amount for issuing a new Policy. Acceptance is
subject to our underwriting rules and we reserve the right to reject an
application for any reason permitted by law.
COVERAGE. Coverage under a Policy begins on the later of the Issue Date or
the date we receive at least the minimum initial premium (see immediately
following section). In general, if the applicant pays at least the minimum
initial premium with the application, the Issue Date will be the later of the
date of the application or the date of any medical examination required by our
underwriting procedures. However, if underwriting approval has not occurred
within 45 days after we receive the application or if you authorize premiums to
be paid by bank account monthly deduction, the Issue Date will be the date of
underwriting approval.
If you authorize premiums to be paid by government allotment, the Issue
Date generally will be, subject to our underwriting approval, the first day of
the month in which we receive the first Minimum Monthly Premium through
government allotment, whether or not a Minimum Monthly Premium is collected with
the application. If a Minimum Monthly Premium is collected with the application,
it will be allocated to the Sub-Accounts of the Variable Account and the Fixed
Account on the Valuation Date next following the Issue Date.
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MINIMUM INITIAL PREMIUM. The minimum initial premium is three Minimum
Monthly Premiums (see "Death Benefit Guarantee"). If, however, you authorize
premiums to be paid by bank account monthly deduction or government allotment,
we will accept one Minimum Monthly Premium together with the required
authorization forms. The Minimum Monthly Premium is specified in the Policy and
determines the payments required to maintain the Death Benefit Guarantee.
ALLOCATING PREMIUMS
You choose the initial allocation of your Net Premiums (your gross premiums
less the Premium Expense Charge) to the Fixed Account and the Sub-Accounts of
the Variable Account on the application for the Policy. (The Fixed Account is
not available for Net Premium allocation under policies issued in New Jersey.)
You may change the allocation at any time by notifying us in writing. Changes
will not be effective until the date we receive your request and will only
affect premiums we receive on or after that date. The new premium allocation may
be 100% to any Account or divided in whole percentage points totaling 100%. We
reserve the right to adjust any allocation to eliminate fractional percentages.
Changing the current premium allocation will not affect the allocation of
existing Accumulation Value.
TEMPORARY INSURANCE. At the time the application is taken, you can receive
temporary insurance coverage by paying a premium equal to 10% of annualized
Minimum Monthly Premium. The temporary insurance will be for the Face Amount
specified in the premium receipt and will be effective until the earliest of the
following:
* The date the coverage under the Policy is effective;
* The date you receive an offer for an alternative policy, a notice of
termination of temporary insurance coverage, or notice that we have
rejected the application;
* The date of death of the proposed Insured, any proposed additional
Insured, or any proposed Insured's child; or
* The 180th day after the date of the receipt for the temporary
insurance.
CREDITING NET PREMIUMS. We will credit Net Premiums on the latest of the
following dates:
* The Valuation Date following the date of underwriting approval;
* The Valuation Date on or next following the Policy Date;
* The Valuation Date on or next following the date we receive at least
the required minimum initial premium payment; or
* In the case of Policies issued under government allotment programs,
the Valuation Date next following the Issue Date.
Until the date on which Net Premiums are credited as described above,
premium payments will be held in our General Account. No interest will be earned
on these premium payments during this period of time.
REFUNDING PREMIUMS. We will return all premiums paid without interest if
any of the following occur:
* We send notice to you that the insurance is declined;
* You refuse an offer for an alternative policy;
* You do not supply required medical exams or tests within 30 days of
the date of the application; or
* You return the Policy under the limited free look right. See "Free
Look and Conversion Rights -- Free Look Rights".
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AMOUNT AND TIMING OF PREMIUMS
The amount and frequency of premium payments will affect the Accumulation
Value, the Cash Surrender Value, and how long the Policy will remain in force
(including affecting whether the Death Benefit Guarantee is in effect -- see
"Death Benefit Guarantee"). After the initial premium, you may determine the
amount and timing of subsequent premium payments within the following
restrictions:
* In most cases, we will require that you pay cumulative premiums
sufficient to maintain the Death Benefit Guarantee to keep the policy
in force during at least the first several Policy Years. See "Death
Benefit Guarantee".
* We may choose not to accept any premium less than $25.
* We reserve the right to limit the amount of any premium payment. In
general, during the first Policy Year we will not accept total premium
payments in excess of $250,000 on the life of any Insured, whether
such payments are received on a Policy or on any other insurance
policy issued by us or our affiliates. Also, we will not accept any
premium payment in excess of $50,000 on any Policy after the first
Policy Year. We may waive any of these premium limitations.
* We may require additional evidence of insurability satisfactory to us
if any premium would increase the difference between the Death Benefit
and the Accumulation Value (that is, the net amount at risk). A
premium payment would increase the net amount at risk if at the time
of payment the Death Benefit would be based upon the applicable
corridor percentage of Accumulation Value. See "Death Benefit -- Death
Benefit Options".
* In no event may the total of all premiums paid, both scheduled and
unscheduled, exceed the current maximum premium payments allowed for
life insurance under Section 7702 of the Code. If at any time you pay
a premium that would result in total premiums exceeding the current
maximum premiums allowed, we will only accept that portion of the
premium which would make total premiums equal the maximum. We will
return any part of the premium in excess of that amount, and we will
not accept further premiums until allowed by the current maximum
premium limitations.
* You may pay additional premiums (other than Planned Periodic Premiums)
at any time while the Policy is in force. We may limit the number and
amount of these additional payments.
* If you want to make a large premium payment under this Policy, and you
wish to avoid Modified Endowment Contract classification, you may
contact us in writing before making the payment and we will tell you
the maximum amount which you can pay into the Policy. See "Federal Tax
Matters".
PLANNED PERIODIC PREMIUMS
You may choose a Planned Periodic Premium schedule which indicates a
preference as to future amounts and frequency of payment. You may pay Planned
Periodic Premiums annually, semi-annually, quarterly or, if you choose, you can
pay the Planned Periodic Premiums by bank account monthly deduction or
government allotment.
Your Policy will show the amount and frequency of your initial Planned
Periodic Premium. You may change the Planned Periodic Premium at any time by
written request. We may limit the amount of any increase. Failure to make any
Planned Periodic Premium payment will not, however, necessarily result in lapse
of the Policy. On the other hand, making Planned Periodic Premium payments will
not guarantee that the Policy remains in force. See "Death Benefit Guarantee"
and "Policy Lapse and Reinstatement".
PAYING PREMIUMS BY MAIL
You may pay Planned Periodic Premiums and Unscheduled Additional Premiums
to the Company by mailing the payments to:
ReliaStar Life Insurance Company
P.O. Box 1880
Minneapolis, Minnesota 55480-1880
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DEATH BENEFIT GUARANTEE
If you meet the requirements described below, we guarantee that we will not
lapse the Policy even if the Cash Surrender Value is not sufficient to cover the
Monthly Deduction that is due. This feature of the Policy is called the "Death
Benefit Guarantee". The Death Benefit Guarantee expires at the Insured's Age 65
(or five Policy Years, if longer).
In general, the two most significant benefits from the Death Benefit
Guarantee are as follows:
* First, during the early Policy Years, the Cash Surrender Value (even
when supplemented by the Sales Charge Refund) will generally not be
sufficient to cover the Monthly Deduction, so that the Death Benefit
Guarantee will be necessary to avoid lapse of the Policy. See "Policy
Lapse and Reinstatement". This occurs because the Surrender Charge
usually exceeds the Accumulation Value in these years. In this regard,
you should consider that if you request an increase in Face Amount, an
additional Surrender Charge would apply for the fifteen years
following the increase, which could create a similar possibility of
lapse as exists during the early Policy Years.
* Second, to the extent the Cash Surrender Value declines due to poor
investment performance, or due to an additional Surrender Charge after
a requested increase, the Cash Surrender Value may not be sufficient
even in later Policy Years to cover the Monthly Deduction, so that the
Death Benefit Guarantee may also be necessary in later Policy Years to
avoid lapse of the Policy.
Thus, even though the Policy permits premium payments that are less than
the Minimum Monthly Premiums, you may lose the significant protection provided
by the Death Benefit Guarantee by paying less than the Minimum Monthly Premiums.
REQUIREMENTS FOR THE DEATH BENEFIT GUARANTEE
The Death Benefit Guarantee will be in effect if the sum of all premiums
paid minus any partial withdrawals and any loans are equal to or greater than
the sum of the Minimum Monthly Premiums since the Policy Date. You must satisfy
the requirements for the Death Benefit Guarantee as of each Monthly Anniversary,
even though you do not have to pay premiums monthly.
EXAMPLE: The Policy Date is January 1, 2000. The Minimum Monthly Premium
is $100 per month. No Policy loans or partial withdrawals are taken and no Face
Amount changes have occurred.
Case 1. You pay $100 each month. The Death Benefit Guarantee is
maintained.
Case 2. You pay $1,000 on January 1, 2000. The $1,000 maintains the Death
Benefit Guarantee without your paying any additional premiums for
the next 10 months (through October 31, 2000). However, you must
pay at least $100 by November 1, 2000 to maintain the Death
Benefit Guarantee through November 30, 2000.
We will determine (and the Policy will indicate) the amount of the initial
Minimum Monthly Premium at issuance of the Policy. The initial Minimum Monthly
Premium will depend upon the Insured's sex, Age at issue, Rate Class, optional
insurance benefits added by rider, and the initial Face Amount.
The following Policy changes may change the Minimum Monthly Premium:
* A requested increase or decrease in the Face Amount (see "Death
Benefit -- Requested Changes in Face Amount").
* A change in the Death Benefit Option (see "Death Benefit -- Changing
the Death Benefit Option").
* The addition or termination of a Policy rider (see "General Provisions
-- Optional Insurance Benefits").
We will notify you in writing of any changes in the Minimum Monthly
Premium.
If you have not made sufficient premium payments to maintain the Death
Benefit Guarantee as of any Monthly Anniversary, we will send you notice of the
premium payment required to maintain the Death Benefit Guarantee. If we do not
receive the required premium payment within 61 days from the date of our notice,
the Death Benefit Guarantee will terminate. The Death Benefit Guarantee cannot
be reinstated.
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Even if the Death Benefit Guarantee terminates, the Policy will not
necessarily lapse. For a discussion of the circumstances under which the Policy
may lapse, see "Policy Lapse and Reinstatement".
ACCUMULATION VALUE
The Accumulation Value of the Policy (that is, the total value attributable
to a specific Policy in the Variable Account and the Fixed Account) is equal to
the sum of the Variable Accumulation Value (the amount attributable to the
Variable Account) plus the Fixed Accumulation Value (the amount attributable to
the Fixed Account). You should distinguish the Accumulation Value from the Cash
Surrender Value that would actually be paid to you upon total surrender of the
Policy, which is the Accumulation Value less any Surrender Charge, Loan Amount
and unpaid Monthly Deductions. See "Surrender Benefits -- Total Surrender". You
should also distinguish the Accumulation Value from the Cash Value, which
determines the amount available for Policy loans, and is the Accumulation Value
less any Surrender Charge. See "Policy Loans." (During the first two Policy
Years and the first two years following a requested increase in Face Amount, you
may also be entitled to a Sales Charge Refund. See "Sales Charge Refund".)
The Variable Accumulation Value will generally vary daily and will increase
or decrease to reflect the investment performance of the Funds in which the
Sub-Accounts of the Variable Account have been invested.
We will increase the Variable Accumulation Value by:
* any Net Premiums credited to the Variable Account, and
* any transfers from the Fixed Account.
We will reduce the Variable Accumulation Value by:
* the Monthly Deduction attributable to the Variable Account,
* partial withdrawals from the Variable Account,
* any transfer and partial withdrawal charges attributable to the
Variable Account, and
* any amounts transferred from the Variable Account to the Fixed Account
(including amounts transferred from the Variable Account to the Fixed
Account as security for Policy loans -- see "Policy Loans").
We will increase the Fixed Accumulation Value by:
* any Net Premiums credited to the Fixed Account,
* any interest credited to the Fixed Account (determined at our
discretion, but guaranteed not to be less than 4%), and
* any amounts transferred from the Variable Account to the Fixed Account
(including amounts transferred to the Fixed Account as security for
Policy loans -- see "Policy Loans").
We will reduce the Fixed Accumulation Value by:
* the Monthly Deduction attributable to the Fixed Account,
* partial withdrawals from the Fixed Account,
* any transfer and partial withdrawal charges attributable to the Fixed
Account, and
* any amounts transferred from the Fixed Account to the Variable
Account.
See Appendix B for a detailed discussion of the calculation of Accumulation
Value.
ILLUSTRATION OF POLICY BENEFITS
In order to help you understand how your Policy values would vary over time
under different sets of assumptions, we will provide you with certain
personalized illustrations upon request. These will be based on the age and
insurance risk characteristics of the Insured under your Policy and such factors
as the specified face amount, death benefit option, premium payment amounts and
rates of return (within limits) that you request. You can request such
illustrations at any time.
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We have also filed an example of such an illustration as an exhibit to the
registration statement referred to on page 51 of this Prospectus. This form of
illustration is available to you upon request and is incorporated herein by
reference.
SPECIALIZED USES OF THE POLICY
Because the Policy provides for an accumulation of Cash Surrender Value as
well as a Death Benefit, the Policy can be used for various individual and
business financial planning purposes. Purchasing the Policy in part for such
purposes entails certain risks. For example, if the investment performance of
the Sub-Accounts to which Accumulation Value is allocated is poorer than
expected or if sufficient premiums are not paid, the Policy may lapse or may not
accumulate sufficient Accumulation Value or Cash Surrender Value to fund the
purpose for which the Policy was purchased. Withdrawals and Policy loans may
significantly affect current and future Accumulation Value, Cash Surrender
Value, or Death Benefit proceeds. Depending upon Sub-Account investment
performance and the amount of a Policy loan, the loan may cause a Policy to
lapse. Because the Policy is designed to provide benefits on a long-term basis,
before purchasing a Policy for a specialized purpose a purchaser should consider
whether the long-term nature of the Policy is consistent with the purpose for
which it is being considered. Using a Policy for a specialized purpose may have
tax consequences. See "Federal Tax Matters".
POLICY LAPSE AND REINSTATEMENT
LAPSE. Unlike traditional life insurance policies, the failure to make a
Planned Periodic Payment will not by itself cause the Policy to lapse
(terminate). If the Death Benefit Guarantee is not in effect, the Policy will
lapse only if, as of any Monthly Anniversary, the Cash Surrender Value plus any
Sales Charge Refund is less than the Monthly Deduction due, and a grace period
of 61 days expires without a sufficient payment. If (during the first two Policy
Years or the first 24 Policy Months after a requested increase in Face Amount)
there exists any Sales Charge Refund (see "Sales Charge Refund") sufficient to
supplement the Cash Surrender Value so as to cover the Monthly Deduction, then
the Sales Charge Refund will be applied by us to keep the Policy in force. The
amount of Sales Charge Refund available for such application is reduced on each
Monthly Anniversary as so applied. Any payment made by you after we have kept
the Policy in force in this manner will first be used to reimburse us for the
amount of Sales Charge Refund so applied.
During the early Policy Years, the Cash Surrender Value (even when
supplemented by the Sales Charge Refund) will generally not be sufficient to
cover the Monthly Deduction, so that premium payments sufficient to maintain the
Death Benefit Guarantee will be required to avoid lapse. See "Death Benefit
Guarantee".
The Policy does not lapse, and the insurance coverage continues, until the
expiration of a 61-day grace period which begins on the date we send you written
notice indicating that the Cash Surrender Value plus any Sales Charge Refund is
less than the Monthly Deduction due. Our written notice will indicate the amount
of the payment required to avoid lapse. If you do not make a sufficient payment
within the grace period, then the Policy will lapse without value.
As discussed above, any Sales Charge Refund will be applied to keep the
Policy in force when the Cash Surrender Value is less than the Monthly
Deduction. When a total surrender of the Policy is requested after the start of
a grace period, any remaining Sales Charge Refund (not already applied to keep
the Policy in force) will be so applied for the grace period, and consequently
not refunded, unless the surrender request is received by us within 30 days
after we mail the grace period notice to you. If such a request is timely
received, you will be refunded an amount equal to any unapplied Sales Charge
Refund that existed as of the Monthly Anniversary on which the Cash Surrender
Value deficiency causing the grace period notice occurred, plus any unearned
prepaid loan interest as of such Monthly Anniversary.
If the Insured dies during the grace period, the proceeds payable will
equal the amount of the Death Benefit on the Valuation Date on or next following
the date of the Insured's death, reduced by any Loan Amount and any unpaid
Monthly Deductions.
If the Death Benefit Guarantee is in effect, we will not lapse the Policy.
See "Death Benefit Guarantee".
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REINSTATEMENT. Reinstatement means putting a lapsed Policy back in force.
You may reinstate a lapsed Policy by written request any time within five years
after it has lapsed if it has not been surrendered for its Cash Surrender Value.
To reinstate the Policy and any riders you must submit evidence of
insurability satisfactory to us and you must pay a premium large enough to keep
the Policy in force for at least two months.
The Death Benefit Guarantee cannot be reinstated.
SURRENDER BENEFITS
Subject to certain limitations, you may make a total surrender of the
Policy or a partial withdrawal of the Policy's Cash Surrender Value by sending
us a written request. We will determine the amount available for a total
surrender or partial withdrawal at the end of the Valuation Period when we
receive your written request. Generally, we will pay any amounts from the
Variable Account upon total surrender or partial withdrawal within seven days
after we receive your written request. We may postpone payments, however, in
certain circumstances. See "General Provisions -- Postponement of Payments".
TOTAL SURRENDER
You may surrender the Policy at any time for its Cash Surrender Value plus
any Sales Charge Refund by making a written request. The Cash Surrender Value is
the Accumulation Value of the Policy reduced by any Surrender Charge, Loan
Amount and unpaid Monthly Deductions. If the Cash Surrender Value at the time of
a surrender exceeds $25,000, the written request must include a Signature
Guarantee.
PARTIAL WITHDRAWAL
After the first Policy Year, you may withdraw part of the Cash Surrender
Value by sending us a written request. If the amount being withdrawn exceeds
$25,000, then the written request must include a Signature Guarantee. We
currently allow only one partial withdrawal in any Policy Year. We currently
make a $10 charge for each partial withdrawal. We guarantee that this charge
will not exceed $25 for each partial withdrawal. See "Deductions and Charges --
Partial Withdrawal and Transfer Charges". The amount of any partial withdrawal
must be at least $500 and, during the first 15 Policy Years, may not be more
than 20% of the Cash Surrender Value on the date we receive your written
request.
Unless you specify a different allocation, we make partial withdrawals from
the Fixed Account and the Sub-Accounts of the Variable Account on a
proportionate basis based upon the Accumulation Value. We will determine these
proportions at the end of the Valuation Period during which we receive your
written request. For purposes of determining these proportions, we first
subtract any outstanding Loan Amount from the Fixed Accumulation Value.
EFFECT OF PARTIAL WITHDRAWALS. We will reduce the Accumulation Value by the
amount of any partial withdrawal. We will also reduce the Death Benefit by the
amount of the withdrawal, or, if the Death Benefit is based on the corridor
percentage of Accumulation Value (see "Death Benefit -- Death Benefit Options"),
by an amount equal to the corridor percentage times the amount of the partial
withdrawal.
If the Level Amount Option is in effect, we will reduce the Face Amount by
the amount of the partial withdrawal. When increases in the Face Amount have
occurred previously, we reduce the current Face Amount by the amount of the
partial withdrawal in the following order:
(1) The Face Amount provided by the most recent increase;
(2) The next most recent increases successively; and
(3) The Face Amount when the policy was issued.
This assumption also applies to requested decreases in Face Amount -- see
"Death Benefit -- Requested Changes in Face Amount". Thus, partial withdrawals
may affect the way in which the cost of insurance is calculated and the amount
of pure insurance protection under the Policy. See "Death Benefit -- Requested
Changes in Face Amount", "Deductions and Charges -- Monthly Deduction" and
"Death Benefit -- Insurance Protection".
We do not allow a partial withdrawal if the Face Amount after a partial
withdrawal would be less than the Minimum Face Amount (currently $25,000).
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If the Variable Amount Option is in effect, a partial withdrawal does not
affect the Face Amount.
A partial withdrawal may also cause the termination of the Death Benefit
Guarantee because we deduct the amount of the partial withdrawal from the total
premiums paid in calculating whether you have paid sufficient premiums in order
to maintain the Death Benefit Guarantee.
Like partial withdrawals, Policy loans are a means of withdrawing money
from the Policy. See "Policy Loans". A partial withdrawal or a Policy loan may
have tax consequences depending on the circumstances of such withdrawal or
loan. See "Federal Tax Matters".
TRANSFERS
You may transfer all or part of the Variable Accumulation Value between the
Sub-Accounts or to the Fixed Account subject to any conditions the Funds whose
shares are involved may impose. (Transfers to or from the Fixed Account are not
available for Policies issued in New Jersey.) You must make your transfer
request in writing unless you have completed a telephone transfer authorization
form. You may also direct us to automatically make periodic transfers under the
Dollar Cost Averaging or Portfolio Rebalancing services as described below.
To transfer all or part of the Variable Accumulation Value from a
Sub-Account, we redeem Accumulation Units and reinvest their values in other
Sub-Accounts, or the Fixed Account, as you direct in your request. We will
effect transfers, and determine all values in connection with transfers, at the
end of the Valuation Period during which we receive your request, except as
otherwise specified for the Dollar Cost Averaging or Portfolio Rebalancing
services. With respect to future Net Premium payments, however, your current
premium allocation will remain in effect unless (1) you have requested the
Portfolio Rebalancing service, or (2) you are transferring all of the Variable
Accumulation Value from the Variable Account to the Fixed Account in exercise of
conversion rights. See "Free Look and Conversion Rights -- Conversion Rights".
Transfers from the Fixed Account to the Variable Account are subject to the
following additional restrictions:
* your transfer request must be postmarked no more than 30 days before
or after the Policy Anniversary in any year, and only one transfer is
permitted during this period,
* you may only transfer up to 50% of the Fixed Accumulation Value, less
any Loan Amount, unless the balance, after the transfer, would be less
than $1,000, in which event you may transfer the full Fixed
Accumulation Value, less any Loan Amount, and
* you must transfer at least the lesser of $500 or the total Fixed
Accumulation Value, less any Loan Amount.
See Appendix A. Some of these restrictions may be waived for transfers due
to the Portfolio Rebalancing service.
TELEPHONE/FAX INSTRUCTIONS. You are allowed to enter certain types of
instructions either by telephone or by fax if you complete a telephone/fax
instruction authorization form. If you complete the form, you can enter the
following types of instructions by telephone or fax:
* transfers between Sub-Accounts,
* changes of allocations among fund options.
By completing the telephone/fax form, you agree that we will not be liable
for any loss, liability, cost or expense when we act in accordance with the
telephone/fax transfer instructions that we receive or are recorded on voice
recording equipment. If we later determine that you did not make a telephone/fax
transfer request or the request was made without your authorization, and loss
results from such unauthorized transfer, you bear the risk of this loss. We
consider any requests made via fax as telephone requests and such requests are
bound by the conditions in the telephone/fax transfer authorization form you
sign. Any fax request should include your name, daytime telephone number, Policy
number and, in the case of transfers, the names of the Sub-Accounts from which
and to which money will be transferred and the allocation percentage. ReliaStar
will employ reasonable procedures to confirm that instructions communicated by
telephone/fax are genuine. If we do not employ such procedures, we may be liable
for any losses due to unauthorized or fraudulent instructions. Such procedures
may include, among others,
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requiring forms of personal identification prior to acting upon telephone/fax
instructions, providing written confirmation of such instructions, and/or tape
recording telephone instructions.
DOLLAR COST AVERAGING SERVICE. You may request this service if your Face
Amount is at least $100,000 and your Accumulation Value, less any Loan Amount,
is at least $5,000. If you request this service, you direct us to automatically
make specific periodic transfers of a fixed dollar amount from any of the
Sub-Accounts to one or more of the Sub-Accounts or to the Fixed Account. We do
not permit transfers from the Fixed Account under this service. You may request
that we make transfers of this type on a monthly, quarterly, semi-annual, or
annual basis. This service is intended to allow you to use "Dollar Cost
Averaging", a long term investment method which provides for regular investments
over time. We make no guarantees that Dollar Cost Averaging will result in a
profit or protect against loss. You may discontinue this service at any time by
notifying us in writing.
If you are interested in the Dollar Cost Averaging service you may obtain a
separate application form and full information concerning this service and its
restrictions from us or our registered representative.
We will discontinue the Dollar Cost Averaging service immediately (1) on
receipt of any request to begin a Portfolio Rebalancing service, (2) if the
Policy is in the grace period on any date when Dollar Cost Averaging transfers
are scheduled, or (3) if the specified transfer amount from any Sub-Account is
more than the Accumulation Value in that Sub-Account.
We reserve the right to discontinue, modify, or suspend this service. Any
such modification or discontinuation would not affect any Dollar Cost Averaging
service requests already commenced.
PORTFOLIO REBALANCING SERVICE. You may request this service if your Face
Amount is at least $200,000 and your Accumulation Value, less any Loan Amount,
is at least $10,000. If you request this service, you direct us to automatically
make periodic transfers to maintain your specified percentage allocation of
Accumulation Value, less any Loan Amount, among the Sub-Accounts of the Variable
Account and the Fixed Account. We will also change your allocation of future Net
Premium payments to be equal to this specified percentage allocation. You may
request transfers under this service on a quarterly, semi-annual, or annual
basis. This service is intended to maintain the allocation you have selected
consistent with your personal objectives.
The Accumulation Value in each Sub-Account of the Variable Account and the
Fixed Account will grow or decline at different rates over time. Portfolio
Rebalancing will periodically transfer Accumulation Values from those accounts
that have increased in value to those accounts that have increased at a slower
rate or declined in value. If all accounts decline in value, it will transfer
Accumulation Values from those that have decreased less in value to those that
have decreased more in value. We make no guarantees that Portfolio Rebalancing
will result in a profit or protect against loss. You may discontinue this
service at any time by notifying us in writing.
If you are interested in the Portfolio Rebalancing service you may obtain a
separate application form and full information concerning this service and its
restrictions from us or our registered representative.
We will discontinue this service immediately (1) on receipt of any request
to change the allocation of premiums to the Fixed Account and Sub-Account of the
Variable Account, (2) on receipt of any request to begin a Dollar Cost Averaging
service, (3) upon receipt of any request to transfer Accumulation Value among
the accounts, or (4) if the policy is in the grace period or the Accumulation
Value, less any Loan Amount, is less than $7,500 on any Valuation Date when
Portfolio Rebalancing transfers are scheduled.
We reserve the right to discontinue, modify, or suspend this service. Any
such modification or discontinuation could affect Portfolio Rebalancing services
currently in effect, but only after 30 days notice to affected Policy owners.
TRANSFER LIMITS. We currently do not limit the number of transfers,
although we reserve the right to limit you to no more than four transfers per
year. All transfers that are effective on the same Valuation Date will be
treated as one transfer transaction. Transfers made due to the Dollar Cost
Averaging or Portfolio Rebalancing services do not currently count toward the
limit on number of transfers.
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TRANSFER CHARGES. We currently charge a $25 fee for each transfer in excess
of 24 per Policy Year. We reserve the right to make a charge not to exceed $25
per transfer for any transfer. No charge currently is made for transfers to
implement Dollar Cost Averaging and Portfolio Rebalancing. See "Deductions and
Charges -- Partial Withdrawal and Transfer Charges". In no event, however, will
we impose any charge in connection with the exercise of a conversion right or
transfers occurring as the result of Policy Loans. All transfers are also
subject to any charges and conditions imposed by the Fund whose shares are
involved. We will treat all transfers that are effective on the same Valuation
Date as one transfer transaction for the purpose of assessing any transfer
charge.
POLICY LOANS
GENERAL. As long as the Policy remains in effect, you may borrow money from
us using the Policy as security for the loan. We do reserve the right to limit
loans during the first Policy year (except that persons in Indiana may take
loans during the first Policy year). The maximum amount you may borrow at any
time is equal to the Loan Value of the Policy, which is equal to 75% of the Cash
Value (100% in Texas and 90% in Alabama, Maryland and Virginia) less the
existing Loan Amount. If the Policy is in force as paid-up life insurance, the
Loan Value is equal to the Cash Value on the next Policy Anniversary less any
existing Loan Amount and loan interest to that date. Each Policy loan must be at
least $500 ($200 in Connecticut). After Age 65, we currently allow you to borrow
100% of the Cash Surrender Value.
You may make loan requests in writing or by telephoning us on any Valuation
Date. Any loan request in excess of $25,000 will require a Signature Guarantee.
Telephone loan requests cannot exceed $10,000. We currently do not require any
election form to make telephone loan requests. We will employ reasonable
procedures to confirm that loan requests made by telephone are genuine. In the
event we do not employ such procedures, we may be liable for any losses due to
unauthorized or fraudulent instructions. Such procedures may include, among
others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmations of such instructions
and/or tape recording telephone instructions.
Policy loans have priority over the claims of any assignee or other person.
You may repay a Policy loan in whole or in part at any time on or before the
date the Insured reaches Age 95, while the Insured is living.
We will normally pay the loan proceeds to you within seven days after we
receive your request. We may postpone payment of loan proceeds to you under
certain circumstances. See "General Provisions -- Postponement of Payments".
Payments you make generally will be treated as premium payments, rather
than Policy loan repayments, unless you indicate that we should treat the
payment otherwise or unless we decide, at our discretion, to apply the payment
as a Policy loan repayment. As a result, unless you indicate that a payment is a
loan repayment, all payments you make to the Policy will generally be subject to
the Premium Expense Charge. See "Deductions and Charges -- Premium Expense
Charge".
IMMEDIATE EFFECT OF POLICY LOANS. When we make a Policy loan, we will
segregate an amount equal to the Policy loan (which includes interest payable in
advance) within the Accumulation Value of your Policy and hold it in the Fixed
Account as security for the loan (this includes loans taken on policies issued
in New Jersey). As described below, you will pay interest to us on the Policy
loan, but we will also credit interest to you on the amount held in the Fixed
Account as security for the loan. We will include the amount segregated in the
Fixed Account as security for the Policy loan as part of the Fixed Accumulation
Value under the Policy, but we will credit that amount with interest on a basis
different from other amounts in the Fixed Account.
Unless you specify differently, amounts held as security for the Policy
loan will come proportionately from the Fixed Accumulation Value and the
Variable Accumulation Value (with the proportions being determined as described
below). We will transfer assets equal to the portion of the Policy loan coming
from the Variable Accumulation Value from the Sub-Accounts of the Variable
Account to the Fixed Account, THEREBY REDUCING THE POLICY VALUE HELD IN THE
SUB-ACCOUNTS. We do not treat these transfers as transfers for the purposes of
assessing the transfer charge or calculating the limit on the number of
transfers.
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EFFECT ON INVESTMENT PERFORMANCE. Amounts coming from the Variable Account
as security for Policy loans will no longer participate in the investment
performance of the Variable Account. We will credit all amounts held in the
Fixed Account as security for Policy loans (that is, the Loan Amount) with
interest at an effective annual rate currently equal to 5.50% (guaranteed to be
no less than 4.00%). WE WILL NOT CREDIT ADDITIONAL INTEREST TO THESE AMOUNTS. On
the Policy Anniversary, we will allocate any interest credited on these amounts
to the Fixed Account and the Variable Account according to the premium
allocation then in effect (see "Payment and Allocation of Premiums -- Allocation
of Premiums").
Although you may repay Policy loans in whole or in part at any time before
the Insured's Age 95, Policy loans will permanently affect the Policy's
potential Accumulation Value. As a result, to the extent that the Death Benefit
depends upon the Accumulation Value (see "Death Benefit -- Death Benefit
Options"), Policy loans will also affect the Death Benefit under the Policy.
This effect could be favorable or unfavorable depending on whether the
investment performance of the assets allocated to the Sub-Account(s) is less
than or greater than the interest being credited on the assets transferred to
the Fixed Account while the loan is outstanding. Compared to a Policy under
which no loan is made, values under the Policy will be lower when such interest
credited is less than the investment performance of assets held in the
Sub-Account(s).
EFFECT ON POLICY COVERAGE. We will notify you if, on any Monthly
Anniversary, the Loan Amount is greater than the Accumulation Value, plus any
Sales Charge Refund, less the then applicable Surrender Charge. If we do not
receive sufficient payment within 61 days from the date we send notice to you,
the Policy will lapse and terminate without value. Our written notice to you
will indicate the amount of the payment required to avoid lapse. The Policy may,
however, later be reinstated. See "Policy Lapse and Reinstatement".
A Policy loan may also cause termination of the Death Benefit Guarantee,
because we deduct the Loan Amount from the total premiums paid in calculating
whether you have paid sufficient premiums in order to maintain the Death Benefit
Guarantee. See "Death Benefit Guarantee".
We will reduce proceeds payable upon the death of the Insured by any Loan
Amount.
INTEREST. The interest rate charged on Policy loans will be an annual rate
of 7.40%, payable in advance. After the 10th Policy Year, we currently charge
interest at an annual rate of 5.21%, payable in advance, on that portion of your
Loan Amount that is not in excess of (1) the Accumulation Value, less (2) the
total of all premiums paid less all partial withdrawals. We will charge interest
on any excess of this amount at the annual rate of 7.40%, payable in advance.
Interest is payable in advance (for the rest of the Policy Year) at the
time any Policy loan is made and at the beginning of each Policy Year thereafter
(for that entire Policy Year). If you do not pay interest when due, we will
deduct it from the Cash Surrender Value as an additional Policy loan (see
"Immediate Effect of Policy Loans" above) and we will add it to the existing
Loan Amount.
Because we charge interest in advance, any interest that we have not earned
will be refunded to you upon lapse or surrender of the Policy or repayment of
the Policy Loan.
REPAYMENT OF LOAN AMOUNT. You may repay the Loan Amount any time while the
Insured is living before the Insured reaches Age 95 (see "Paid-Up Life Insurance
Option"). If not repaid, we will deduct the Loan Amount from any amount payable
under the Policy. As described above, unless you provide us with notice to the
contrary, we generally will treat any payments on the Policy as premium
payments, which are subject to the Premium Expense Charge, rather than
repayments on the Loan Amount. Any repayments on the Loan Amount will result in
amounts being reallocated from the Fixed Account and to the Sub-Accounts of the
Variable Account according to your current premium allocation.
TAX CONSIDERATIONS. A Policy loan may have tax consequences depending on
the circumstances of the loan. See "Federal Tax Matters".
FREE LOOK AND CONVERSION RIGHTS
FREE LOOK RIGHTS
The Policy provides for a "free look" period after application for and
issuance of the Policy. The Policy also provides for a "free look" period after
any requested increase in Face Amount.
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CANCELLATION. During the free look period you have a right to return the
Policy for cancellation and receive a refund of premiums paid for the Policy or
the increase. You must return the Policy to us or your agent and ask us to
cancel the Policy or cancel your increase by the latest of:
* Midnight of the 20th day after receiving the Policy or a new Policy
Data Page;
* Midnight of the 20th day after a written Notice of Right of Withdrawal
is mailed or delivered to you; or
* Midnight of the 45th day after the date your application for the
Policy or the request for increase is signed.
Upon requesting cancellation of the increase, you will receive a refund, if
you so request, or otherwise a restoration to the Policy's Accumulation Value
(allocated among the Fixed Account and the Sub-Accounts of the Variable Account
as if it were a Net Premium payment), in an amount equal to all Monthly
Deductions attributable to the increase in Face Amount, including rider costs
arising from the increase.
CONVERSION RIGHTS
During the first two Policy Years and the first two years following a
requested increase in Face Amount, we are required to provide you with an option
to convert the Policy or any requested increase in Face Amount to a life
insurance policy under which the benefits do not vary with the investment
experience of the Variable Account. For policies issued in all states, except
Connecticut and New Jersey, we make this option available by permitting you to
transfer all or a part of your Variable Accumulation Value to the Fixed Account.
For policies issued in Connecticut and New Jersey, you may exchange this Policy
for a different permanent fixed benefit life insurance policy that we offer in
those states. The two conversion right options are discussed below.
GENERAL OPTION. In all states except Connecticut and New Jersey, you may
exercise your conversion right by transferring all or any part of your Variable
Accumulation Value to the Fixed Account. If, at any time during the first two
Policy Years or the first two years following a requested increase in Face
Amount, you request transfer from the Variable Account to the Fixed Account and
indicate that you are making the transfer in exercise of your conversion right,
we will not assess any transfer charge on the transfer and the transfer will not
count against the limit on the number of transfers. At the time of such
transfer, there is no effect on the Policy's Death Benefit. Face Amount, net
amount at risk, Rate Class(es) or Issue Age -- only the method of funding the
Accumulation Value under the Policy will be affected. See "Death Benefit",
"Accumulation Value" and Appendix A, "The Fixed Account".
If you transfer all of the Variable Accumulation Value from the Variable
Account to the Fixed Account and indicate that you are making this transfer in
exercise of your Conversion Right, we will automatically credit all future
premium payments on the policy to the Fixed Account unless you request a
different allocation.
CONNECTICUT AND NEW JERSEY. During the first two policy years and during
the first 24 months following a requested increase in Face Amount, you may
convert the Policy or the Face Amount increase to any fixed benefit whole life
insurance policy we offer. We will not require any evidence of insurability for
the conversion. In order to convert to a new policy, we must receive a written
conversion request. If the entire Policy is being converted, you must surrender
the Policy to us. The conversion must be made while the Policy is in force; and
any outstanding Loan Amount must be repaid.
The new policy will have the same Issue Age and rate class as the Policy.
If you are converting the entire Policy, the effective date of the conversion
will be the date on which we receive both your written conversion request and
the Policy. If you are converting a Face Amount increase, the effective date of
the conversion will be the date on which we receive your written conversion
request.
On the effective date of the conversion, the new policy will have, at your
option, either:
(1) A death benefit which is equal to the Death Benefit of the Policy on
the effective date of the conversion, or in the case of a Face Amount
increase, a death benefit equal to the increase in Face Amount; or
(2) A net amount at risk which equals the Death Benefit of the Policy on
the effective date of the conversion, less the Accumulation Value on
that date, or in the case of a Face Amount
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increase, a net amount at risk which equals the Face Amount increase
on the effective date of conversion less the Accumulation Value on
that date which is considered to be part of the Face Amount increase.
The conversion will be subject to an equitable adjustment in payments and
Policy values to reflect variances, if any, in the payments and Policy values
under the Policy and the new policy. We may require an additional premium
payment. The new Policy's provisions and charges will be the same as those that
would have been in effect had the new Policy been issued on the Policy Date.
ADDITIONAL INFORMATION ON THE INVESTMENTS OF THE VARIABLE ACCOUNT
INVESTMENT LIMITS
Although the Variable Account currently consists of 34 investment options,
we currently only permit you to participate in a maximum of 17 investment
options over the lifetime of your Policy. You do not have to choose your
investment options in advance, but once you participate in the 17th Fund since
your Policy was issued, you would only be able to transfer within those 17 Funds
already used and which are still available.
The Fund shares may be available to fund benefits under both variable
annuity and variable life contracts and policies. This could result in an
irreconcilable conflict between the interests of the holders of the different
types of variable contracts. The Funds have advised us that they will monitor
for such conflicts and will promptly provide us with information regarding any
such conflicts should they arise or become imminent, and we will promptly advise
the Funds if we become aware of any such conflicts. If any such material
irreconcilable conflict arises, we will arrange to eliminate and remedy such
conflict up to and including establishing a new management investment company
and segregating the assets underlying the variable policies and contracts at no
cost to the holders of the policies and contracts.
There also is a possibility that one Fund might become liable for any
misstatement, inaccuracy or incomplete disclosure in another Fund's prospectus.
The Funds distribute dividends and capital gains. However, we automatically
reinvest distributions in additional Fund shares, at net asset value. The
Sub-Account receives the distributions which are then reflected in the Unit
Value of that Sub-Account. See "Accumulation Value".
ReliaStar has entered into service arrangements with the managers or
distributors of certain of the Funds. Under these arrangements, ReliaStar or its
affiliates may receive compensation from affiliates of the Funds. This
compensation is for providing administrative, recordkeeping, distribution and
other services to the Funds or their affiliates. Such compensation is paid based
upon assets invested in the particular Funds, or based on the aggregated net
asset goals. Payments of such amounts by an affiliate or affiliates of the Funds
do not increase the fees paid by the Funds or their shareholders. The percentage
paid may vary from one Fund to another.
ADDITION, DELETION, OR SUBSTITUTION OF INVESTMENTS
We reserve the right, subject to compliance with applicable law, to make
additions to, deletions from, or substitutions for the shares that are held by
the Variable Account or that the Variable Account may purchase.
* We reserve the right to establish additional Sub-Accounts of the
Variable Account, each of which would invest in a new Fund, or in
shares of another investment company, with a specified investment
objective. We may establish new Sub-Accounts when, in our sole
discretion, marketing needs or investment conditions warrant, and we
will make any new Sub-Accounts available to existing Policy owners on
a basis we determine.
* We may eliminate one or more Sub-Accounts, or prohibit additional new
premium or transfers into a Sub-Account, if, in our sole discretion,
marketing, tax, regulatory requirements or investment conditions
warrant.
* We reserve the right to eliminate the shares of any of the Funds and
to substitute shares of another Fund or of another open-end,
registered investment company. We will not substitute any shares
attributable to your interest in a Sub-Account of the Variable Account
without notice and prior approval of the SEC, to the extent required
by the Investment Company Act of 1940 or other applicable law.
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Nothing contained herein shall prevent the Variable Account from:
* Purchasing other securities of other Funds or classes of policies,
* Permitting a conversion between Funds or classes of policies on the
basis of requests made by Policy owners, or
* Substituting the shares of one fund for shares of another fund in the
event of a merger of funds or similar transaction.
In the event of any such substitution, deletion or change, we may make
appropriate changes in this and other policies to reflect such substitution,
deletion or change. If you allocated all or a portion of your investments to any
of the current funds that are being substituted for or deleted, you may transfer
the portion of the Accumulation Value affected without paying a transfer charge.
If we deem it to be in the best interests of persons having voting rights
under the Policies, we may:
* operate the Variable Account as a management company under the 1940
Act,
* deregister the Variable Account under the 1940 Act in the event such
registration is no longer required, or
* combine the Variable Account with our other separate accounts.
VOTING RIGHTS
You have the right to instruct us how to vote the Fund shares attributable
to the Policy at regular meetings and special meetings of the Funds. We will
vote the Fund shares held in Sub-Accounts according to the instructions
received, as long as:
* The Variable Account is registered as a unit investment trust under
the Investment Company Act of 1940; and
* The Variable Account's assets are invested in Fund shares.
If we determine that, because of applicable law or regulation, we do not
have to vote according to the voting instructions received, we will vote the
Fund shares at our discretion.
All persons entitled to voting rights and the number of votes they may cast
are determined as of a record date, selected by us, not more than 90 days before
the meeting of the Fund. All Fund proxy materials and appropriate forms used to
give voting instructions will be sent to persons having voting interests.
We will vote any Fund shares held in the Variable Account for which we do
not receive timely voting instructions, or which are not attributable to Policy
owners, in proportion to the instructions received from all Policy owners having
a voting interest in the Fund. Any Fund shares held by us or any of our
affiliates in general accounts will, for voting purposes, be allocated to all
separate accounts having voting interests in the Fund in proportion to each
account's voting interest in the respective Fund, and will be voted in the same
manner as are the respective account's votes.
Owning the Policy does not give you the right to vote at meetings of our
stockholders.
DISREGARDING VOTING INSTRUCTIONS. We may, when required by state insurance
regulatory authorities, disregard voting instructions if the instructions
require that the shares be voted so as to cause a change in the
subclassification or investment objective of any Fund or to approve or
disapprove an investment advisory contract for any Fund. In addition, we may
disregard voting instructions in favor of changes initiated by a Policy owner in
the investment policy or the investment adviser of any Fund if we reasonably
disapprove of such changes. We would disapprove a change only if the proposed
change is contrary to state law or prohibited by state regulatory authorities,
or we determine that the change would have an adverse effect on the Variable
Account in that the proposed investment policy for a Fund may result in
speculative or unsound investments. In the event we do disregard voting
instructions, we will include a summary of that action and the reasons for such
action in the next annual report to owners.
PAID-UP LIFE INSURANCE OPTION
Before Age 95, if the Insured is living and the Policy is in force, you may
make a written request to direct us to apply the Cash Surrender Value of the
Policy to purchase paid-up life insurance. If the
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insured is living at Age 95 and the Policy is in force, the Cash Surrender Value
of the Policy will automatically be applied to purchase paid-up life insurance
unless the Insured notifies us in writing before Age 95 that the Cash Surrender
Value should be paid in cash. The amount by which any paid-up insurance will
exceed its cash value cannot be greater than the amount by which the Policy's
Death Benefit exceeds the Policy's Accumulation Value. We will pay you in cash
any Cash Surrender Value not used to purchase paid-up life insurance. Any cash
paid out or Policy loans forgiven may be considered a taxable event.
GENERAL PROVISIONS
OWNERSHIP
While the Insured is alive, subject to the Policy's provisions you may:
* Change the amount and frequency of premium payments.
* Change the allocation of premiums.
* Change the Death Benefit Option.
* Change the Face Amount.
* Make transfers between accounts.
* Surrender the Policy for cash.
* Make a partial withdrawal for cash.
* Receive a cash loan.
* Assign the Policy as collateral.
* Change the beneficiary.
* Transfer ownership of the Policy.
* Enjoy any other rights the Policy allows.
PROCEEDS
At the Insured's death, the proceeds payable include the Death Benefit then
in force:
* Plus any additional amounts provided by rider on the life of the
Insured;
* Plus any Policy loan interest that we have collected but not earned;
* Minus any Loan Amount; and
* Minus any unpaid Monthly Deductions.
BENEFICIARY
You may name one or more beneficiaries on the application when you apply
for the Policy. You may later change beneficiaries by written request. You may
also name a beneficiary whom you cannot change without his or her consent
(irrevocable beneficiary). If no beneficiary is surviving when the Insured dies,
we will pay the Death Benefit to you, if surviving, or otherwise to your estate.
POSTPONEMENT OF PAYMENTS
We generally make payments from the Variable Account for Death Benefits,
cash surrender, partial withdrawal, or loans within seven days after we receive
all the documents required for the payments.
We may, however, delay making a payment when we are not able to determine
the Variable Accumulation Value because (1) the New York Stock Exchange is
closed, other than customary weekend or holiday closings, or the SEC restricts
trading on the New York Stock Exchange, (2) the SEC by order permits
postponement for the protection of Policyholders, or (3) an emergency exists,
which makes disposing of securities not reasonably practicable or which makes it
not reasonably practicable to determine the value of the Variable Account's net
assets. We may also postpone transfers and allocation to and from any
Sub-Account of the Variable Account under these circumstances.
We may delay any of the payments that we make from the Fixed Account for up
to six months from the date we receive the documents required. We will pay
interest at an effective annual rate of 4.00% if
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we delay payment more than 30 days. We will not credit any additional interest
to any delayed payments. The time a payment from the Fixed Account may be
delayed and the rate of interest paid on such amounts may vary among states.
SETTLEMENT OPTIONS
Settlement Options are ways you can choose to have the Policy's proceeds
paid. These options apply to proceeds paid:
* At the Insured's death.
* On total surrender of the Policy.
We pay the proceeds to one or more payees. We may pay the proceeds in a
lump sum or we may apply the proceeds to one of the following Settlement
Options. You may request that we use a combination of options. You must apply at
least $2,500 to any Option for each payee under that Option. Under an
installment Option, each payment must be at least $25. We may adjust the
interval to make each payment at least $25.
Proceeds applied to any Option no longer earn interest at the rate applied
to the Fixed Account or participate in the investment performance of the Funds.
Option 1 -- Proceeds are left with us to earn interest. Withdrawals and
any changes are subject to our approval.
Option 2 -- Proceeds and interest are paid in equal installments of a
specified amount until the proceeds and interest are all paid.
Option 3 -- Proceeds and interest are paid in equal installments for a
specified period until the proceeds and interest are all paid.
Option 4 -- The proceeds provide an annuity payment with a specified
number of months "certain". The payments are continued for the
life of the primary payee. If the primary payee dies before
the certain period is over, the remaining payments are paid to
a contingent payee.
Option 5 -- The proceeds provide a life income for two payees. When one
payee dies, the surviving payee receives two-thirds of the
amount of the joint monthly payment for life.
Option 6 -- The proceeds are used to provide an annuity based on the rates
in effect when the proceeds are applied. We do not apply this
Option if a similar Option would be more favorable to the
payee at that time.
INTEREST ON SETTLEMENT OPTIONS. We base the interest rate for proceeds
applied under Options 1 and 2 on the interest rate we declare on funds that we
consider to be in the same classification based on the Option, restrictions on
withdrawal, and other factors. The interest rate will never be less than an
effective annual rate of 3.50%.
In determining amounts to be paid under Options 3 and 4, we assume interest
at an effective annual rate of 3.50%. Also, for Option 3 and "certain" periods
under Option 4, we credit any excess interest we may declare on funds that we
consider to be in the same classification based on the Option, restrictions on
withdrawal, and other factors.
INCONTESTABILITY
After the Policy has been in force during the Insured's lifetime for two
years from the Policy's Issue Date, we cannot claim the Policy is void or refuse
to pay any proceeds unless the Policy has lapsed.
If you make a Face Amount increase or a premium payment which requires
proof of insurability, the corresponding Death Benefit increase has its own
two-year contestable period measured from the effective date of the increase.
If the Policy is reinstated, we measure the contestable period from the
date of reinstatement with respect to statements made on the application for
reinstatement.
MISSTATEMENT OF AGE AND SEX
If the Insured's Age or sex or both are misstated (except where unisex
rates apply), the Death Benefit will be the amount that the most recent cost of
insurance would purchase using the current cost of insurance rate for the
correct Age and sex.
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SUICIDE
If the Insured commits suicide, whether sane or insane, within two years of
the Policy's Issue Date (one year in Colorado and North Dakota), we do not pay
the Death Benefit. Instead, we refund all premiums paid for the Policy and any
attached riders, minus any Loan Amounts and partial withdrawals.
If you make a Face Amount increase or a premium payment which requires
proof of insurability, the corresponding Death Benefit increase has its own
two-year suicide limitation for the proceeds associated with that increase. If
the Insured commits suicide, whether sane or insane, within two years of the
effective date of the increase, we pay the Death Benefit prior to the increase
and refund the cost of insurance for that increase.
TERMINATION
The Policy terminates when any of the following occurs:
* The Policy lapses. See "Policy Lapse and Reinstatement".
* The Insured dies.
* You surrender the Policy for its Cash Surrender Value.
* We amend the Policy according to the amendment provision described
below and you do not accept the amendment.
* The Policy matures. See "Paid-Up Life Insurance Option".
AMENDMENT
We reserve the right to amend the Policy in order to include any future
changes relating to the following:
* Any SEC rulings and regulations.
* The Policy's qualification for treatment as a life insurance policy
under the following:
-- The Code, as amended.
-- Internal Revenue Service rulings and regulations.
-- Any requirements imposed by the Internal Revenue Service.
REPORTS
ANNUAL STATEMENT. We will send you an Annual Statement once each year,
showing the Face Amount, Death Benefit, Accumulation Value, Cash Surrender
Value, Loan Amount, premiums paid, Planned Periodic Premiums, interest credits,
partial withdrawals, transfers, and charges since the last statement.
Additional statements are available upon request. We may make a charge not
to exceed $50.00 for each additional Annual Statement you request.
PROJECTION REPORT. Upon request, we will provide you a report projecting
future results based on the Death Benefit Option you specify, the Planned
Periodic Premiums you specify, and the Accumulation Value of your Policy at the
end of the prior Policy Year. We may make a charge not to exceed $50 for each
Projection Report you request after the first report and after the first report
in a Policy Year.
OTHER REPORTS. The Company will mail to you at your last known address of
record at least annually a report containing such information as may be required
by any applicable law.
To reduce expenses, only one copy of most financial reports and
prospectuses, including reports and prospectuses for the Funds, will be mailed
to your household, even if you or other persons in your household have more than
one contract issued by ReliaStar Life or an affiliate. Call 1-800-456-6965 if
you need additional copies of financial reports, prospectuses, or annual and
semi-annual reports, or if you would like to receive one copy for each contract
in all future mailings.
DIVIDENDS
The Policy does not entitle you to participate in our surplus. We do not
pay you dividends under the Policy.
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The Sub-Account receives any dividends paid by the related Fund. Any such
dividend is credited to you through the calculation of the Sub-Account's daily
Unit Value.
COLLATERAL ASSIGNMENT
You may assign the benefits of the Policy as collateral for a debt. This
limits your rights to the Cash Surrender Value and the beneficiary's rights to
the proceeds. An assignment is not binding on us until we receive written
notice.
OPTIONAL INSURANCE BENEFITS
The Policy can include additional benefits, in the form of riders to the
Policy, if our requirements for issuing such benefits are met. We currently
offer the following benefit riders, although some riders may not be available in
some states:
ACCELERATED BENEFIT RIDER. Under certain circumstances we pay a part of
the Death Benefit to you when the Insured has been diagnosed as having a
terminal illness. See "Accelerated Benefit Rider".
ACCIDENTAL DEATH BENEFIT RIDER. Provides an additional benefit if the
Insured dies from an accidental injury.
ADDITIONAL INSURED RIDER. Provides a 10 year, guaranteed level premium and
level term coverage for the Insured, the Insured's spouse, or a child of the
Insured.
WAIVER OF MONTHLY DEDUCTION RIDER. The Monthly Deduction for the Policy is
waived while the Insured is totally disabled under the terms of the rider.
CHILDREN'S INSURANCE RIDER. Provides up to $10,000 of term life insurance
on the life of each of the Insured's children.
COST OF LIVING INCREASE RIDER. Provides optional increases in Face Amount
on the life of the Insured every two years based on the cost of living without
evidence of insurability.
WAIVER OF SPECIFIED PREMIUM RIDER. Contributes a specified amount of
premium to the Policy each month while the Insured is totally disabled under the
terms of the rider.
FEDERAL TAX MATTERS
INTRODUCTION
The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all tax situations. This discussion is not intended as tax
advice. Counsel or other competent tax advisors should be consulted for more
complete information. This discussion is based upon the Company's understanding
of the present Federal income tax laws. No representation is made as to the
likelihood of continuation of the present Federal income tax laws or as to how
they may be interpreted by the Internal Revenue Service (the "IRS").
Any qualified plan contemplating the purchase of a life policy should
consult a tax advisor.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited. Nevertheless, the Company believes
that a Policy issued on the basis of a standard risk class should satisfy the
applicable requirements. There is less guidance with respect to Policies issued
on a substandard basis (i.e., a premium class involving higher than standard
mortality risk), and it is not clear whether such a Policy would satisfy the
applicable requirements, particularly if the owner pays the full amount of
premiums permitted under the Policy. If it is subsequently determined that a
Policy does not satisfy the applicable requirements, the Company may take
appropriate steps to bring the Policy into compliance with such requirements and
reserves the right to restrict Policy transactions in order to do so.
In certain circumstances, owners of variable life insurance contracts have
been considered for Federal income tax purposes to be the owners of the assets
of the variable account supporting their policies due to their ability to
exercise investment control over these assets. Where this is the case, the
44
<PAGE>
policy owners have been currently taxed on income and gains attributable to the
variable account assets. There is little guidance in this area, and some
features of the Policies, such as the flexibility of an owner to allocate
premium payments and Policy Accumulation Values, have not been explicitly
addressed in published rulings. While the Company believes that the Policies do
not give owners investment control over Variable Account assets, the Company
reserves the right to modify the Policies as necessary to prevent an owner from
being treated as the owner of the Variable Account assets supporting the Policy.
In addition, the Code requires that the investments of the Variable Account
be "adequately diversified" in order for the Policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Variable Account, through the Funds, will satisfy these diversification
requirements.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS
IN GENERAL. The Company believes that the Death Benefit under a Policy
should be excludible from the gross income of the Beneficiary. Federal, state
and local transfer, and other tax consequences of ownership or receipt of Policy
proceeds depend on the circumstances of each owner or beneficiary. A tax advisor
should be consulted on these consequences.
Generally, the owner will not be deemed to be in constructive receipt of
the Policy Accumulation Value until there is a distribution. When distributions
from a Policy occur, including payments arising from any maturity benefits, or
when loans are taken out from or secured by (e.g., by assignment), a Policy, the
tax consequences depend on whether the Policy is classified as a "Modified
Endowment Contract."
MODIFIED ENDOWMENT CONTRACTS. Under the Code, certain life insurance
contracts are classified as "Modified Endowment Contracts," with less favorable
tax treatment than other life insurance contracts. Due to the flexibility of the
Policies as to premiums and benefits, the individual circumstances of each
Policy will determine whether it is classified as a Modified Endowment Contract.
The rules are too complex to be summarized here, but generally depend on the
amount of premiums paid during the first seven Policy Years. Certain changes in
a Policy after it is issued could also cause it to be classified as a Modified
Endowment Contract. A current or prospective owner should consult with a
competent advisor to determine whether a Policy transaction will cause the
Policy to be classified as a Modified Endowment Contract. The Company will
monitor the Policies, however, and will attempt to notify an owner on a timely
basis if it believes that such owner's Policy is in jeopardy of becoming a
Modified Endowment Contract.
DISTRIBUTIONS FROM MODIFIED ENDOWMENT CONTRACTS. Policies classified as
Modified Endowment Contracts are subject to the following tax rules:
(1) All distributions, including distributions upon surrender and
withdrawals, will be treated as ordinary income subject to tax up to
an amount equal to the excess (if any) of the unloaned Policy
Accumulation Value (Cash Surrender Value for surrenders) immediately
before the distribution plus prior distributions over the owner's
total investment in the Policy at that time. "Total investment in the
Policy" means the aggregate amount of any premiums or other
considerations paid for a Policy, plus any previously taxed
distributions, minus any credited dividends.
(2) Loans taken from or secured by (e.g., by assignment) such a Policy are
treated as distributions and taxed accordingly.
(3) A 10 percent additional income tax is imposed on the amount included
in income except where distribution or loan is made when the owner has
attained age 591/2 or is disabled, or where the distribution is part
of a series of substantially equal periodic payments for the life (or
life expectancy) of the owner or the joint lives (or joint life
expectancies) of the owner and the owner's beneficiary or designated
beneficiary.
DISTRIBUTIONS FROM POLICIES THAT ARE NOT MODIFIED ENDOWMENT CONTRACTS.
Distributions from a Policy that is not a Modified Endowment Contract are
generally treated first as a recovery of an owner's investment in the Policy and
only after the recovery of all investment in the Policy as taxable income.
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<PAGE>
However, certain distributions which must be made in order to enable the Policy
to continue to qualify as a life insurance contract for Federal income tax
purposes if Policy benefits are reduced during the first 15 Policy Years may be
treated in whole or in part as ordinary income subject to tax.
Loans from or secured by a Policy that is not a Modified Endowment Contract
are not treated as distributions.
Finally, neither distributions from nor loans from or secured by a Policy
that is not a Modified Endowment Contract are subject to the 10 percent
additional tax.
POLICY LOANS. In general, interest on a loan from a Policy will not be
deductible. Before taking out a Policy loan, you should consult a tax advisor
as to the tax consequences.
MULTIPLE POLICIES. All Modified Endowment Contracts that we (or our
affiliates) issue to the same owner during any calendar year are treated as one
Modified Endowment Contract for purposes of determining the amount includible in
the owner's income when a taxable distribution occurs.
TAXATION OF RELIASTAR LIFE INSURANCE COMPANY
We do not initially expect to incur any income tax burden upon the earnings
or the realized capital gains attributable to the Variable Account. Based on
this expectation, we currently make no charge to the Variable Account for
Federal income taxes which may be attributable to the Account. If, however, we
determine that we may incur such tax burden, we may assess a charge for such
burden from the Variable Account.
We may also incur state and local taxes, in addition to premium taxes, in
several states. At present these taxes are not significant. If there is a
material change in state or local tax laws, we may make charges for such taxes,
if any, attributable to the Variable Account.
POSSIBLE CHANGES IN TAXATION
Although the likelihood of legislative changes is uncertain, there is
always the possibility that the tax treatment of the Policy could change by
legislation or other means. Moreover, it is also possible that any change could
be retroactive (that is, effective prior to the date of the change). You should
consult a tax advisor with respect to legislative developments and their effect
on the Policy.
OTHER CONSIDERATIONS
The foregoing discussion is general and is not intended as tax advice. Any
person concerned about these tax implications should consult a competent tax
advisor. This discussion is based on our understanding of the present Federal
income tax laws as they are currently interpreted by the IRS. We make no
representation as to the likelihood of continuation of these current laws and
interpretations. In addition, the foregoing discussion is not exhaustive and
special rules not described in this Prospectus may be applicable in certain
situations. Moreover, we have made no attempt to consider any applicable state
or other tax laws.
LEGAL DEVELOPMENTS REGARDING EMPLOYMENT -- RELATED BENEFIT PLANS
The Policy is based on actuarial tables which distinguish between men and
women and therefore provide different benefits to men and women of the same Age.
Employers and employee organizations should consider, in consultation with legal
counsel, the impact of the Supreme Court decision of July 6, 1983 in ARIZONA
GOVERNING COMMITTEE V. NORRIS. That decision stated that optional annuity
benefits provided under an employee's deferred compensation plan could not,
under Title VII of the Civil Rights Act of 1964, vary between men and women on
the basis of sex. Employers and employee organizations should also consider, in
consultation with legal counsel, the impact of Title VII generally, and
comparable state laws that may be applicable, on any employment-related
insurance or benefit plan for which a Policy may be purchased.
Because of the NORRIS decision, the charges under the Policy that vary
depending on sex may in some cases not vary on the basis of the Insured's sex.
Unisex rates to be provided by us will apply, if requested on the application,
for tax-qualified plans and those plans where an employer believes that the
NORRIS decision applies. In this case, references made to the mortality tables
applicable to this Policy are to be disregarded and substituted with an 80% male
20% female blend of the 1980 Commissioner's Standard Ordinary Smoker and
Non-Smoker Mortality Tables, Age Last Birthday.
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DISTRIBUTION OF THE POLICIES
We intend to sell the Policies in all jurisdictions where we are licensed.
The Policies will be distributed by the general distributor, Washington
Square Securities, Inc., (WSSI), a Minnesota corporation, which is an affiliate
of ours. WSSI is a securities broker-dealer registered with the SEC and is a
member of the National Association of Securities Dealers, Inc. It is primarily a
mutual funds dealer and has dealer agreements under which it markets shares of
many mutual funds. It also markets limited partnerships and other tax-sheltered
or tax-deferred investments, and acts as general distributor (principal
underwriter) for variable annuity products issued by us. The Policies may also
be sold through other broker-dealers authorized by WSSI and applicable law to do
so. Registered representatives of such broker-dealers may be paid on a different
basis than described below.
The Policies will be sold by licensed insurance agents who are also
registered representatives of broker-dealers registered with the SEC under the
Securities Exchange Act of 1934 who are members of the National Association of
Securities Dealers, Inc. Registered representatives who sell the Policies will
receive commissions based on a commission schedule. In the first Policy Year,
commissions generally will be no more than 50% of the premiums paid up to the
annualized Minimum Monthly Premium, plus 2% of additional premiums. In any
subsequent Policy Year, commissions generally will be 2% of premiums paid in
that year. Corresponding commissions will be paid upon a requested increase in
Face Amount. In addition, a commission of .25% of the average monthly
Accumulation Value excluding any Loan Amount during each Policy Year may be
paid. Further, registered representatives may be eligible to receive certain
overrides and other benefits based on the amount of earned commissions.
For all Policies which use the Select*Life Variable Account, the aggregrate
amount paid to WSSI under the Distribution Agreement was $51,164,472 in 1999,
$46,485,880 in 1998, and $34,572,698 in 1997.
MANAGEMENT
The following is a list of the current directors and executive officers of
the Company, their principal occupation and business experience.
PRINCIPAL OCCUPATION
DIRECTORS AND OFFICERS AND BUSINESS EXPERIENCE
- ---------------------- -----------------------
Richard R. Crowl(2) Senior Vice President, General Counsel and Secretary
of ReliaStar Financial Corp. since 1996; Senior Vice
President and General Counsel of
Security-Connecticut Life Insurance Company since
1997; Senior Vice President and General Counsel of
ReliaStar Life Insurance Company, Northern Life
Insurance Company, and ReliaStar Life Insurance
Company of New York since 1996; Senior Vice
President and General Counsel of ReliaStar United
Services Life Insurance Company from 1996 to 1998 at
which time this company merged into ReliaStar Life
Insurance Company; Senior Vice President and General
Counsel of ReliaStar Investment Research, Inc.
(formerly known as Washington Square Advisers, Inc.)
since 1986; Vice President and Associate General
Counsel of ReliaStar Financial Corp. from 1989 to
1996; Vice President and Associate General Counsel
of ReliaStar Life Insurance Company from 1985 to
1996; Director and Senior Vice President of various
subsidiaries of ReliaStar Financial Corp.
Michael J. Dubes(2) President and Chief Executive Officer of Northern
Life Insurance Company since 1994; Senior Vice
President of ReliaStar Life Insurance Company since
1987; Senior Vice President of Security-Connecticut
Life Insurance Company since 1999; Chairman of
Washington Square Securities, Inc. from 1987 to
1994; Senior Vice President of ReliaStar Financial
Corp. since 1997; Director and Officer of various
subsidiaries of ReliaStar Financial Corp.
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PRINCIPAL OCCUPATION
DIRECTORS AND OFFICERS AND BUSINESS EXPERIENCE
- ---------------------- -----------------------
Wayne R. Huneke(2) Senior Executive Vice President of ReliaStar
Financial Corp. and ReliaStar Life Insurance Company
since 1999; Senior Vice President of ReliaStar
Financial Corp. and ReliaStar Life Insurance Company
from 1994 to 1999; Chief Financial Officer and
Treasurer of ReliaStar Financial Corp. and ReliaStar
Life Insurance Company from 1994 to 1997; Director
and Officer of various subsidiaries of ReliaStar
Financial Corp.
Dewette Ingham, Jr.(1) Senior Vice President of ReliaStar Financial Corp.
since 1998; Corporate Vice President of R.R.
Donnelley & Sons Company from 1993 to 1998; Director
of ReliaStar Life Insurance Company.
Mark S. Jordahl(2) President and Chief Executive Officer of ReliaStar
Investment Research, Inc. since 1998; Senior Vice
President and Chief Investment Officer of ReliaStar
Life Insurance Company and ReliaStar Financial Corp.
since 1998; Senior Vice President of
Security-Connecticut Life Insurance Company since
1998; Vice President of ReliaStar Life Insurance
Company and ReliaStar Financial Corp. from 1987 to
1998; Director and Officer of various subsidiaries
of ReliaStar Financial Corp.
Kenneth U. Kuk(2) Executive Vice President of ReliaStar Financial
Corp. and ReliaStar Life Insurance Company since
1999; Senior Vice President of ReliaStar Financial
Corp. and ReliaStar Life Insurance Company from 1996
to 1999; Vice President of ReliaStar Life Insurance
Company from 1996 to 1998; Vice President of
ReliaStar Financial Corp. from 1991 to 1998;
President of Washington Square Advisers, Inc. from
1995 to 1998; Chairman of ReliaStar Mortgage
Corporation from 1988 to 1998; Director and Officer
of various subsidiaries of ReliaStar Financial Corp.
Susan W. A. Mead(2) Vice President of ReliaStar Financial Corp. and
ReliaStar Life Insurance Company since 1996;
President, ReliaStar Document Management Center
(formerly known as ReliaStar Printing and
Fulfillment Services) of ReliaStar Financial Corp.
since 1996; Second Vice President of ReliaStar
Financial Corp. and ReliaStar Life Insurance Company
from 1992 to 1996; Director and Officer of various
subsidiaries of ReliaStar Financial Corp.
William R. Merriam(2) Executive Vice President of ReliaStar Life Insurance
Company since 1999; Senior Vice President of
ReliaStar Life Insurance Company from 1991 to 1999.
James R. Miller(2) Senior Vice President, Chief Financial Officer and
Treasurer of ReliaStar Financial Corp. and ReliaStar
Life Insurance Company since 1997; Executive Vice
President and Chief Operating Officer of Northern
Life Insurance Company from 1992 to 1997; Vice
President of ReliaStar Financial Corp. from 1985 to
1992; Director and Officer of various subsidiaries
of ReliaStar Financial Corp.
Robert C. Salipante(2) Chairman of Security-Connecticut Life Insurance
Company since 2000; President and Chief Operating
Officer of ReliaStar Financial Corp. and ReliaStar
Life Insurance Company since 1999; Senior Vice
President of ReliaStar Financial Corp. and ReliaStar
Life Insurance Company from 1996 to 1999; Vice
Chairman of ReliaStar Life Insurance Company of New
York since 1999; President and Chief Executive
Officer of ReliaStar Life Insurance Company of New
York from 1998 to 1999; Senior Vice President of
ReliaStar Financial Corp. from 1994 to 1996; Senior
Vice President and Chief Financial Officer of
ReliaStar Financial Corp. from 1992 to 1994;
Director and Officer of various subsidiaries of
ReliaStar Financial Corp.
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PRINCIPAL OCCUPATION
DIRECTORS AND OFFICERS AND BUSINESS EXPERIENCE
- ---------------------- -----------------------
John G. Turner(2) Chairman and Chief Executive Officer of ReliaStar
Financial Corp. and ReliaStar Life Insurance Company
since 1993; Chairman of ReliaStar United Services
Life Insurance Company from 1995 until its merger
with ReliaStar Life Insurance Company in 1998;
Chairman of ReliaStar Life Insurance Company of New
York since 1995; Chairman of Northern Life Insurance
Company since 1992; Director and Officer of various
subsidiaries of ReliaStar Financial Corp.
James R. Gelder(3) President and Chief Executive Officer of ReliaStar
Life Insurance Company of New York since 1999;
Senior Vice President of ReliaStar Life Insurance
Company since 1999; Executive Vice President of
ReliaStar Life Insurance Company of New York from
1998 to 1999; President and Chief Executive Officer
of Security-Connecticut Life Insurance Company since
1998; Executive Vice President and Chief Operating
Officer of Security-Connecticut Life Insurance
Company from 1997 to 1998; Vice President of
ReliaStar Life Insurance Company from 1994 to 1999;
Director and Officer of various subsidiaries of
ReliaStar Financial Corp.
Paul H. Gulstrand(3) Senior Vice President of ReliaStar Life Insurance
Company since 1999; Vice President of ReliaStar Life
Insurance Company from 1996 to 1999; Second Vice
President of ReliaStar Life Insurance Company from
1995 to 1996; Regional Vice President of ReliaStar
Life Insurance Company from 1994 to 1995.
Blake W. Mohr(3) Senior Vice President of ReliaStar Life Insurance
Company since 1999; Vice President of ReliaStar Life
Insurance Company from 1997 to 1999; Second Vice
President of ReliaStar Life Insurance Company from
1993 to 1997.
Roger A. Weber(3) Senior Vice President of ReliaStar Life Insurance
Company since 1999; Vice President of ReliaStar Life
Insurance Company from 1996 to 1999; Vice President
and Chief Auditor of ReliaStar Financial Corp. and
ReliaStar Life Insurance Company in 1996; Second
Vice President and Auditor of ReliaStar Financial
Corp. and ReliaStar Life Insurance Company from 1989
to 1996.
Theresa A. Wurst(3) Senior Vice President of ReliaStar Life Insurance
Company since 1999; Vice President of ReliaStar Life
Insurance Company from 1993 to 1999.
- ------------------
(1) Director of ReliaStar Life Insurance Company
(2) Director and Officer of ReliaStar Life Insurance Company
(3) Officer of ReliaStar Life Insurance Company
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The Executive Committee of our Board of Directors consists of Directors
Salipante, Crowl and Turner.
The following is a list of the current directors and executive officers of
the principal underwriter and their business addresses.
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES
- ---------------- ---------------------
Wayne R. Huneke* Director
Robert C. Salipante* Director
Jeffrey A. Montgomery* President and Chief Executive Officer, Director
Kenneth S. Cameranesi* Executive Vice President and Chief Operations Officer
Gene Grayson* Vice President, National Sales and Marketing
Keith Loveland* Vice President and Chief Compliance Officer
Daniel S. Kuntz* Assistant Vice President and Treasurer
David A. Sheridan
20 Security Drive
Avon, Connecticut 06001 Vice President
Susan M. Bergen* Secretary
Margaret B. Wall* Vice President
Loralee A. Renelt* Assistant Secretary
Allen Kidd
222 North Arch Road
Richmond, Virginia 23236 Assistant Secretary
- ------------------
* 20 Washington Avenue South
Minneapolis, Minnesota 55401
STATE REGULATION
We are subject to the laws of the State of Minnesota governing insurance
companies and to regulation and supervision by the Insurance Division of the
State of Minnesota. We file an annual statement in a prescribed form with the
Insurance Division each year, and in each state we do business, covering our
operations for the preceding year and our financial condition as of the end of
that year. Our books and accounts are subject to review by the Insurance
Division and a full examination of our operations is conducted periodically
(usually every three years) by the National Association of Insurance
Commissioners. This regulation does not, however, involve supervision or
management of our investment practices or policies.
In addition, we are subject to regulation under the insurance laws of other
jurisdictions in which we operate.
We are also subject to supervision and verification by the State of
Minnesota regarding participating business allocated to the Participation Fund
Account, which was established in connection with the reorganization and
demutualization of the Company in 1989. The Participation Fund Account was
established for the purpose of maintaining the dividend practices relative to
certain policies previously issued by the Company's former Mutual Department.
The Participation Fund Account is not a separate account as described under
Minnesota Statutes Chapter 61A. An annual examination of the Participation Fund
Account is made by independent consulting actuaries representing the Insurance
Division of the State of Minnesota.
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MASSACHUSETTS AND MONTANA RESIDENTS
If you are a resident of Massachusetts or Montana, you should disregard all
Policy provisions described in the prospectus that are based on the sex of the
Insured. We will issue this Policy on a unisex basis. You should also disregard
references made to the mortality tables applicable to this Policy and substitute
these references with an 80% male 20% female blend of the 1980 Commissioner's
Standard Ordinary Smoker and Non-Smoker Mortality Tables, Age Last Birthday.
LEGAL PROCEEDINGS
The Variable Account is not a party to any pending legal proceedings.
The Company is a defendant in various lawsuits in connection with the
normal conduct of its insurance operations. Some of the claims seek to be
granted class action status and many of the claims seek both compensatory and
punitive damages. In the opinion of management, the ultimate resolution of such
litigation will not have a material adverse impact to the financial position of
the Company. It should be noted, however, that a number of financial services
companies have been subjected to significant awards in connection with punitive
damages claims and the Company can make no assurances that it will not be
subjected to such an award. The defense of the putative class actions pending
against the Company may require the commitment of substantial internal resources
and the retention of legal counsel and expert advisors.
The Company is a defendant in litigation in New York State court regarding
an alleged reinsurance contract. The plaintiff alleges damages in excess of $100
million. The Company believes that no contract exists and the suit is without
merit. The Company filed a motion for summary judgment on February 18, 2000. If
the court does not grant the Company's motion, the case may go to trial later
this year.
BONDING ARRANGEMENTS
The Company maintains a blanket bond providing $25,000,000 coverage for our
officers and employees and those of Washington Square Securities, Inc. (WSSI),
subject to a $500,000 deductible.
LEGAL MATTERS
Legal matters in connection with the Variable Account and the Policy
described in this Prospectus have been passed upon by Stewart D. Gregg, Esquire,
Attorney for the Company.
EXPERTS
The financial statements of ReliaStar's Select*Life Variable Account as of
December 31, 1999 and for each of the three years then ended and the annual
consolidated financial statements of ReliaStar Life Insurance Company and
subsidiaries as of December 31, 1999 and for the two years then ended included
in this Prospectus have been audited by Deloitte & Touche, LLP, independent
auditors, as stated in their reports which are included herein, and have been so
included in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing.
Actuarial matters included in this Prospectus have been examined by Craig
A. Krogstad, F.S.A., M.A.A.A., as stated in the opinion filed as an exhibit to
the Registration Statement.
REGISTRATION STATEMENT CONTAINS FURTHER INFORMATION
A Registration Statement has been filed with the SEC under the Securities
Act of 1933 with respect to the Policies. This Prospectus does not contain all
information included in the Registration Statement, its amendments and exhibits.
For further information concerning the Variable Account, the Funds, the Policies
and us, please refer to the Registration Statement.
Statements in this Prospectus concerning provisions of the Policy and other
legal documents are summaries. Please refer to the documents as filed with the
SEC for a complete statement of the provisions of those documents.
Information may be obtained from the SEC's principal office in Washington,
D.C., for a fee it prescribes, or examined there without charge.
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FINANCIAL STATEMENTS
The financial statements for the Variable Account reflect the operations of
the Variable Account and its Sub-Accounts as of December 31, 1999 and for each
of the three years in the period then ended. The financial statements are
audited. The periods covered are not necessarily indicative of the longer term
performance of the assets held in the Variable Account.
The financial statements of ReliaStar Life Insurance Company and
subsidiaries which are included in this Prospectus should be distinguished from
the financial statements of the Variable Account and should be considered only
as bearing upon the ability of ReliaStar Life Insurance Company to meet its
obligations under the Policies. They should not be considered as bearing on the
investment performance of the assets held in the Variable Account.
These financial statements are as of December 31, 1999 and for each of the
two years in the period ended December 31, 1999. The financial statements are
audited. The periods covered are not necessarily indicative of the longer term
performance of the Company.
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INDEPENDENT AUDITORS' REPORT
Board of Directors
ReliaStar Life Insurance Company
We have audited the accompanying combined statement of assets and liabilities of
ReliaStar Select*Life Variable Account as of December 31, 1999 and the related
combined statements of operations and changes in policy owners' equity
(including the sub-accounts which comprise the account) for each of the years
ended December 31, 1999, 1998 and 1997. These financial statements are the
responsibility of the management of ReliaStar Life Insurance Company. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We have conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures include
confirmation of the securities owned as of December 31, 1999, by correspondence
with the account custodians. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
sub-accounts constituting the Select*Life Variable Account as of December 31,
1999 and the results of its operations and changes in its policy owners' equity
for the years ended December 31, 1999, 1998 and 1997, in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
February 11, 2000
53
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54
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RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
SHARES COST MARKET VALUE
ASSETS: ------------ ---------- ------------
<S> <C> <C> <C>
Investments in mutual funds at market value:
The Alger American Fund:
Alger American Growth Portfolio .......................... 568,379 $ 31,001 $ 36,592
Alger American MidCap Growth Portfolio ................... 154,465 4,154 4,978
Alger American Small Capitalization Portfolio ............ 117,446 5,196 6,477
Fidelity's Variable Insurance Products Fund (VIP):
VIP Equity-Income Portfolio -- IC Shares ................. 3,874,559 78,509 99,615
VIP Growth Portfolio -- IC Shares ........................ 3,765,747 122,689 206,852
VIP High Income Portfolio -- IC Shares ................... 1,781,115 20,894 20,144
VIP Money Market Portfolio -- IC Shares .................. 33,296,505 33,297 33,297
VIP Overseas Portfolio -- IC Shares ...................... 1,081,911 20,259 29,688
Fidelity's Variable Insurance Products Fund (VIP II):
VIP II Asset Manager Portfolio -- IC Shares .............. 1,839,674 29,099 34,347
VIP II Contrafund Portfolio -- IC Shares . ............... 2,591,694 52,826 75,548
VIP II Index 500 Portfolio -- IC Shares .................. 505,363 64,538 84,603
VIP II Investment Grade Bond Portfolio -- IC Shares ...... 525,728 6,473 6,393
Janus Aspen Series:
Aggressive Growth Portfolio .............................. 437,294 16,666 26,102
Growth Portfolio ......................................... 555,135 15,075 18,680
International Growth Portfolio ........................... 307,127 8,020 11,877
Worldwide Growth Portfolio ............................... 1,150,408 37,676 54,932
Neuberger Berman Advisers Management Trust:
AMT Limited Maturity Bond Portfolio ...................... 252,056 3,378 3,337
AMT Partners Portfolio ................................... 450,351 8,460 8,845
AMT Socially Responsive Portfolio ........................ 4,049 44 47
Northstar Galaxy Trust:
Northstar Emerging Growth Portfolio ...................... 353,924 7,096 10,349
Northstar Growth + Value Portfolio ....................... 225,243 5,847 6,766
Northstar International Value Portfolio .................. 259,782 3,460 3,837
Northstar Research Enhanced Index Portfolio .............. 390,993 1,901 1,951
Northstar High Yield Bond Portfolio ...................... 177,331 834 762
OCC Accumulation Trust:
Equity Portfolio ......................................... 47,977 1,802 1,802
Global Equity Portfolio .................................. 72,584 1,252 1,202
Managed Portfolio ........................................ 123,385 5,279 5,386
Small Cap Portfolio ...................................... 183,212 4,215 4,126
Putnam Variable Trust:
Putnam VT Asia Pacific Growth Fund -- Class IA Shares..... 265,928 2,500 4,598
Putnam VT Diversified Income Fund -- Class IA Shares ..... 177,824 1,904 1,766
Putnam VT Growth and Income Fund -- Class IA Shares....... 1,411,324 36,717 37,823
Putnam VT New Opportunities Fund -- Class IA Shares ...... 1,361,731 28,126 59,290
Putnam VT Utilities Growth and Income Fund --
Class IA Shares ......................................... 179,068 2,882 3,039
Putnam VT Voyager Fund -- Class IA Shares ................ 2,127,569 78,817 140,951
----------
Total Assets ........................................... $1,046,002
==========
LIABILITIES AND POLICY OWNERS' EQUITY:
Due from ReliaStar Life Insurance Company
for contract charges ..................................... $ 64
Policy Owners' Equity ..................................... 1,045,938
----------
Total Liabilities and Policy Owners' Equity .............. $1,046,002
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
55
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY
For the years ended December 31, 1999, 1998 and 1997
(In Thousands, Except Value Per Unit)
<TABLE>
<CAPTION>
Total All Funds
-----------------------------------------------------
1999 1998 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 9,107 $ 7,644 $ 5,580
Reinvested capital gains ......................... 41,674 34,463 14,480
Administrative expenses .......................... (7,060) (4,152) (2,742)
--------------- --------------- ---------------
Net investment income (loss) and
capital gains ................................. 43,721 37,955 17,318
--------------- --------------- ---------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 39,243 12,939 6,393
Increase (decrease) in unrealized appreciation
of investments .................................. 152,399 55,885 46,873
--------------- --------------- ---------------
Net realized and unrealized gains (losses) ..... 191,642 68,824 53,266
--------------- --------------- ---------------
Additions (reductions) from operations ......... 235,363 106,779 70,584
--------------- --------------- ---------------
Policy Owners' transactions:
Net premium payments ............................. 220,865 184,473 141,159
Transfers between funds and/or fixed account ..... (627) (251) 74
Policy loans ..................................... (12,966) (5,343) (4,385)
Loan collateral interest crediting ............... 692 462 292
Surrenders ....................................... (23,743) (16,659) (8,917)
Death benefits ................................... (1,708) (1,646) (588)
Costs of insurance charges ....................... (43,115) (34,996) (26,634)
Death benefit guarantee charges .................. (1,938) (630) (439)
Monthly expense charges .......................... (6,873) (5,413) (4,207)
--------------- --------------- ---------------
Additions (reductions) for policy
owners' transactions .......................... 130,587 119,997 96,355
--------------- --------------- ---------------
Net additions (reductions) for the year ........ 365,950 226,776 166,939
Policy Owners' Equity, beginning of the year ...... 679,988 453,212 286,273
--------------- --------------- ---------------
Policy Owners' Equity, end of the year ............ $ 1,045,938 $ 679,988 $ 453,212
=============== =============== ===============
Units Outstanding, beginning of the year .......... 29,584,452.030 21,952,826.717 15,861,312.070
Units Outstanding, end of the year ................ 36,956,472.845 29,584,452.030 21,952,826.717
Net Asset Value per Unit:
Select*Life I .................................. -- -- --
Select*Life Series 2000 ........................ -- -- --
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Alger American
Growth Portfolio
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 22 $ 3 $ --
Reinvested capital gains ......................... 1,535 182 --
Administrative expenses .......................... (183) (16) --
-------------- -------------- --------------
Net investment income (loss) and
capital gains ................................. 1,374 169 --
-------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 441 37 --
Increase (decrease) in unrealized appreciation
of investments .................................. 4,801 789 1
-------------- -------------- --------------
Net realized and unrealized gains (losses) ..... 5,242 826 1
-------------- -------------- --------------
Additions (reductions) from operations ......... 6,616 995 1
-------------- -------------- --------------
Policy Owners' transactions:
Net premium payments ............................. 10,595 2,300 175
Transfers between funds and/or fixed account ..... 15,621 2,512 175
Policy loans ..................................... (234) (40) (1)
Loan collateral interest crediting ............... 13 -- --
Surrenders ....................................... (270) (19) --
Death benefits ................................... (18) -- --
Costs of insurance charges ....................... (1,284) (194) (6)
Death benefit guarantee charges .................. (35) (4) --
Monthly expense charges .......................... (275) (28) (1)
-------------- -------------- --------------
Additions (reductions) for policy
owners' transactions .......................... 24,113 4,527 342
-------------- -------------- --------------
Net additions (reductions) for the year ........ 30,729 5,522 343
Policy Owners' Equity, beginning of the year ...... 5,865 343 --
-------------- -------------- --------------
Policy Owners' Equity, end of the year ............ $ 36,594 $ 5,865 $ 343
============== ============== ==============
Units Outstanding, beginning of the year .......... 402,669.328 34,697.106 --
Units Outstanding, end of the year ................ 1,879,018.360 402,669.328 34,697.106
Net Asset Value per Unit:
Select*Life I .................................. $ 19.144387 $ 14.429571 $ 9.823427
Select*Life Series 2000 ........................ $ 19.516075 $ 14.592177 $ 9.854808
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Alger American
MidCap Growth Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ -- $ -- $ --
Reinvested capital gains ......................... 415 61 --
Administrative expenses .......................... (27) (8) (1)
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 388 53 (1)
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 59 (30) --
Increase (decrease) in unrealized appreciation
of investments .................................. 622 218 (16)
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 681 188 (16)
------------ ------------ ------------
Additions (reductions) from operations ......... 1,069 241 (17)
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 1,336 1,205 132
Transfers between funds and/or fixed account ..... 725 512 263
Policy loans ..................................... (21) -- (2)
Loan collateral interest crediting ............... 1 -- --
Surrenders ....................................... (67) (9) --
Death benefits ................................... (1) (11) --
Costs of insurance charges ....................... (223) (82) (5)
Death benefit guarantee charges .................. (7) (4) --
Monthly expense charges .......................... (45) (12) (1)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... 1,698 1,599 387
------------ ------------ ------------
Net additions (reductions) for the year ........ 2,767 1,840 370
Policy Owners' Equity, beginning of the year ...... 2,210 370 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 4,977 $ 2,210 $ 370
============ ============ ============
Units Outstanding, beginning of the year .......... 172,814.592 37,772.926 --
Units Outstanding, end of the year ................ 295,715.008 172,814.592 37,772.926
Net Asset Value per Unit:
Select*Life I .................................. $ 16.557934 $ 12.659555 $ 9.793978
Select*Life Series 2000 ........................ $ 16.879516 $ 12.802277 $ 9.825275
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Alger American
Small Capitalization Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ -- $ -- $ --
Reinvested capital gains ......................... 402 155 --
Administrative expenses .......................... (32) (8) (1)
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 370 147 (1)
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 109 6 (5)
Increase (decrease) in unrealized appreciation
of investments .................................. 1,171 133 (23)
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 1,280 139 (28)
------------ ------------ ------------
Additions (reductions) from operations ......... 1,650 286 (29)
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 1,603 1,373 235
Transfers between funds and/or fixed account ..... 911 555 452
Policy loans ..................................... (20) (19) --
Loan collateral interest crediting ............... 2 -- --
Surrenders ....................................... (42) (8) (2)
Death benefits ................................... (5) -- --
Costs of insurance charges ....................... (236) (124) (14)
Death benefit guarantee charges .................. (10) (6) --
Monthly expense charges .......................... (50) (18) (2)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... 2,153 1,753 669
------------ ------------ ------------
Net additions (reductions) for the year ........ 3,803 2,039 640
Policy Owners' Equity, beginning of the year ...... 2,679 640 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 6,482 $ 2,679 $ 640
============ ============ ============
Units Outstanding, beginning of the year .......... 230,199.995 63,628.672 --
Units Outstanding, end of the year ................ 388,991.269 230,199.995 63,628.672
Net Asset Value per Unit:
Select*Life I .................................. $ 16.369247 $ 11.505655 $ 10.039295
Select*Life Series 2000 ........................ $ 16.687171 $ 11.635433 $ 10.071361
</TABLE>
The accompanying notes are an integral part of the financial statements.
56
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, Continued
For the years ended December 31, 1999, 1998 and 1997
(In Thousands, Except Value Per Unit)
<TABLE>
<CAPTION>
Fidelity's VIP
Equity-Income Portfolio
IC Shares
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income .......................... $ 1,476 $ 1,175 $ 1,013
Reinvested capital gains ............................ 3,264 4,180 5,096
Administrative expenses ............................. (864) (705) (551)
-------------- -------------- --------------
Net investment income (loss) and
capital gains .................................... 3,876 4,650 5,558
-------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemption of fund
shares ............................................. 6,688 2,533 1,778
Increase (decrease) in unrealized appreciation of
investments ........................................ (5,132) 2,086 9,445
-------------- -------------- --------------
Net realized and unrealized gains (losses) ........ 1,556 4,619 11,223
-------------- -------------- --------------
Additions (reductions) from operations ............ 5,432 9,269 16,781
-------------- -------------- --------------
Policy Owners' transactions:
Net premium payments ................................ 15,156 18,161 17,102
Transfers between funds and/or fixed account ........ (8,382) (2,096) (1,313)
Policy loans ........................................ (2,073) (1,121) (1,209)
Loan collateral interest crediting .................. 146 113 76
Surrenders .......................................... (3,298) (3,152) (1,627)
Death benefits ...................................... (420) (264) (160)
Cost of insurance charges ........................... (4,541) (4,711) (4,240)
Death benefit guarantee charges ..................... (139) (114) (111)
Monthly expense charges ............................. (625) (659) (596)
-------------- -------------- --------------
Additions (reductions) for policy
owners' transactions ............................. (4,176) 6,157 7,922
-------------- -------------- --------------
Net additions (reductions) for the year ........... 1,256 15,426 24,703
Policy Owners' Equity, beginning of the year ......... 98,336 82,910 58,207
-------------- -------------- --------------
Policy Owners' Equity, end of the year ............... $ 99,592 $ 98,336 $ 82,910
============== ============== ==============
Units Outstanding, beginning of the year ............. 3,348,679.958 3,053,047.193 2,622,030.390
Units Outstanding, end of the year ................... 3,274,491.085 3,348,679.958 3,053,047.193
Net Asset Value per Unit:
Select*Life I ..................................... $ 40.949711 $ 38.822462 $ 35.058961
Select*Life Series 2000 ........................... $ 25.020668 $ 23.531218 $ 21.080180
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Fidelity's VIP
Growth Portfolio
IC Shares
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income .......................... $ 271 $ 537 $ 526
Reinvested capital gains ............................ 17,026 14,057 2,357
Administrative expenses ............................. (1,452) (971) (722)
-------------- -------------- --------------
Net investment income (loss) and
capital gains .................................... 15,845 13,623 2,161
-------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemption of fund
shares ............................................. 10,864 4,873 2,098
Increase (decrease) in unrealized appreciation of
investments ........................................ 28,390 22,732 14,061
-------------- -------------- --------------
Net realized and unrealized gains (losses) ........ 39,254 27,605 16,159
-------------- -------------- --------------
Additions (reductions) from operations ............ 55,099 41,228 18,320
-------------- -------------- --------------
Policy Owners' transactions:
Net premium payments ................................ 22,365 21,080 21,483
Transfers between funds and/or fixed account ........ (3,110) (1,512) (1,822)
Policy loans ........................................ (3,915) (1,618) (1,280)
Loan collateral interest crediting .................. 196 138 92
Surrenders .......................................... (6,338) (4,327) (2,498)
Death benefits ...................................... (409) (370) (160)
Cost of insurance charges ........................... (7,181) (6,378) (5,741)
Death benefit guarantee charges ..................... (270) (168) (163)
Monthly expense charges ............................. (1,047) (956) (876)
-------------- -------------- --------------
Additions (reductions) for policy
owners' transactions ............................. 291 5,889 9,035
-------------- -------------- --------------
Net additions (reductions) for the year ........... 55,390 47,117 27,355
Policy Owners' Equity, beginning of the year ......... 151,390 104,273 76,918
-------------- -------------- --------------
Policy Owners' Equity, end of the year ............... $ 206,780 $ 151,390 $ 104,273
============== ============== ==============
Units Outstanding, beginning of the year ............. 4,282,470.411 3,971,201.581 3,452,718.980
Units Outstanding, end of the year ................... 4,401,398.280 4,282,470.411 3,971,201.581
Net Asset Value per Unit:
Select*Life I ..................................... $ 68.164143 $ 49.996221 $ 36.130923
Select*Life Series 2000 ........................... $ 36.733274 $ 26.727479 $ 19.160956
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Fidelity's VIP
High Income Portfolio
IC Shares
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income .......................... $ 1,861 $ 1,415 $ 1,063
Reinvested capital gains ............................ 70 899 131
Administrative expenses ............................. (173) (160) (132)
-------------- -------------- --------------
Net investment income (loss) and
capital gains .................................... 1,758 2,154 1,062
-------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemption of fund
shares ............................................. (177) 210 301
Increase (decrease) in unrealized appreciation of
investments ........................................ (69) (3,436) 1,318
-------------- -------------- --------------
Net realized and unrealized gains (losses) ........ (246) (3,226) 1,619
-------------- -------------- --------------
Additions (reductions) from operations ............ 1,512 (1,072) 2,681
-------------- -------------- --------------
Policy Owners' transactions:
Net premium payments ................................ 4,236 5,161 5,072
Transfers between funds and/or fixed account ........ (4,013) (469) (1,001)
Policy loans ........................................ (325) (268) (282)
Loan collateral interest crediting .................. 29 21 15
Surrenders .......................................... (557) (740) (397)
Death benefits ...................................... (13) (88) (39)
Cost of insurance charges ........................... (1,068) (1,230) (1,198)
Death benefit guarantee charges ..................... (51) (31) (29)
Monthly expense charges ............................. (126) (144) (140)
-------------- -------------- --------------
Additions (reductions) for policy
owners' transactions ............................. (1,888) 2,212 2,001
-------------- -------------- --------------
Net additions (reductions) for the year ........... (376) 1,140 4,682
Policy Owners' Equity, beginning of the year ......... 20,517 19,377 14,695
-------------- -------------- --------------
Policy Owners' Equity, end of the year ............... $ 20,141 $ 20,517 $ 19,377
============== ============== ==============
Units Outstanding, beginning of the year ............. 1,053,934.152 916,625.159 773,942.356
Units Outstanding, end of the year ................... 982,653.237 1,053,934.152 916,625.159
Net Asset Value per Unit:
Select*Life I ..................................... $ 30.499630 $ 28.427207 $ 29.952917
Select*Life Series 2000 ........................... $ 16.349223 $ 15.116470 $ 15.800365
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Fidelity's VIP
Money Market Portfolio
IC Shares
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income .......................... $ 1,087 $ 669 $ 556
Reinvested capital gains ............................ -- -- --
Administrative expenses ............................. (181) (92) (67)
-------------- -------------- --------------
Net investment income (loss) and
capital gains .................................... 906 577 489
-------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemption of fund
shares ............................................. -- -- --
Increase (decrease) in unrealized appreciation of
investments ........................................ -- -- --
-------------- -------------- --------------
Net realized and unrealized gains (losses) ........ -- -- --
-------------- -------------- --------------
Additions (reductions) from operations ............ 906 577 489
-------------- -------------- --------------
Policy Owners' transactions:
Net premium payments ................................ 36,690 10,376 10,226
Transfers between funds and/or fixed account ........ (14,511) (7,227) (5,733)
Policy loans ........................................ (977) (31) (147)
Loan collateral interest crediting .................. 100 18 13
Surrenders .......................................... (768) (285) (802)
Death benefits ...................................... (113) (7) (43)
Cost of insurance charges ........................... (1,337) (817) (755)
Death benefit guarantee charges ..................... (534) (55) (8)
Monthly expense charges ............................. (156) (74) (73)
-------------- -------------- --------------
Additions (reductions) for policy
owners' transactions ............................. 18,394 1,898 2,678
-------------- -------------- --------------
Net additions (reductions) for the year ........... 19,300 2,475 3,167
Policy Owners' Equity, beginning of the year ......... 13,968 11,493 8,326
-------------- -------------- --------------
Policy Owners' Equity, end of the year ............... $ 33,268 $ 13,968 $ 11,493
============== ============== ==============
Units Outstanding, beginning of the year ............. 1,021,422.904 875,038.346 654,425.374
Units Outstanding, end of the year ................... 2,329,160.577 1,021,422.904 875,038.346
Net Asset Value per Unit:
Select*Life I ..................................... $ 18.153875 $ 17.399235 $ 16.628903
Select*Life Series 2000 ........................... $ 13.611549 $ 12.941412 $ 12.269546
</TABLE>
The accompanying notes are an integral part of the financial statements.
57
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, Continued
For the years ended December 31, 1999, 1998 and 1997
(In Thousands, Except Value Per Unit)
<TABLE>
<CAPTION>
Fidelity's VIP
Overseas Portfolio
IC Shares
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 489 $ 551 $ 411
Reinvested capital gains ......................... 789 1,626 1,630
Administrative expenses .......................... (236) (247) (220)
-------------- -------------- --------------
Net investment income (loss) and
capital gains ................................. 1,042 1,930 1,821
-------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 2,572 1,235 724
Increase (decrease) in unrealized appreciation
of investments .................................. 5,914 187 5
-------------- -------------- --------------
Net realized and unrealized gains (losses) ..... 8,486 1,422 729
-------------- -------------- --------------
Additions (reductions) from operations ......... 9,528 3,352 2,550
-------------- -------------- --------------
Policy Owners' transactions:
Net premium payments ............................. 1,521 5,928 7,156
Transfers between funds and/or fixed account ..... (9,986) (2,715) (1,515)
Policy loans ..................................... (508) (396) (379)
Loan collateral interest crediting ............... 18 44 28
Surrenders ....................................... (1,003) (889) (690)
Death benefits ................................... (33) (60) (18)
Cost of insurance charges ........................ (1,183) (1,589) (1,667)
Death benefit guarantee charges .................. (27) (37) (43)
Monthly expense charges .......................... (172) (241) (253)
-------------- -------------- --------------
Additions (reductions) for policy
owners' transactions .......................... (11,373) 45 2,619
-------------- -------------- --------------
Net additions (reductions) for the year ........ (1,845) 3,397 5,169
Policy Owners' Equity, beginning of the year ...... 31,514 28,117 22,948
-------------- -------------- --------------
Policy Owners' Equity, end of the year ............ $ 29,669 $ 31,514 $ 28,117
============== ============== ==============
Units Outstanding, beginning of the year .......... 1,752,679.671 1,733,459.426 1,536,316.506
Units Outstanding, end of the year ................ 1,162,674.433 1,752,679.671 1,733,459.426
Net Asset Value per Unit:
Select*Life I .................................. $ 31.755579 $ 22.444163 $ 20.066499
Select*Life Series 2000 ........................ $ 22.456788 $ 15.745282 $ 13.964753
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Fidelity's VIP II
Asset Manager Portfolio
IC Shares
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ................... $ 1,409 $ 1,161 $ 1,010
Reinvested capital gains ..................... 1,785 3,484 2,533
Administrative expenses ...................... (316) (323) (270)
-------------- -------------- --------------
Net investment income (loss) and
capital gains ............................. 2,878 4,322 3,273
-------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ................................. 2,289 274 346
Increase (decrease) in unrealized appreciation
of investments .............................. (1,681) 660 2,222
-------------- -------------- --------------
Net realized and unrealized gains (losses) . 608 934 2,568
-------------- -------------- --------------
Additions (reductions) from operations ..... 3,486 5,256 5,841
-------------- -------------- --------------
Policy Owners' transactions:
Net premium payments ......................... 1,752 5,834 6,096
Transfers between funds and/or fixed account . (9,250) (717) (651)
Policy loans ................................. (626) (482) (371)
Loan collateral interest crediting ........... 16 51 38
Surrenders ................................... (1,691) (1,458) (694)
Death benefits ............................... (78) (60) (68)
Cost of insurance charges .................... (1,686) (2,041) (2,034)
Death benefit guarantee charges .............. (43) (52) (56)
Monthly expense charges ...................... (201) (255) (264)
-------------- -------------- --------------
Additions (reductions) for policy
owners' transactions ...................... (11,807) 820 1,996
-------------- -------------- --------------
Net additions (reductions) for the year .... (8,321) 6,076 7,837
Policy Owners' Equity, beginning of the year .. 42,656 36,580 28,743
-------------- -------------- --------------
Policy Owners' Equity, end of the year ........ $ 34,335 $ 42,656 $ 36,580
============== ============== ==============
Units Outstanding, beginning of the year ...... 2,091,427.861 2,034,040.832 1,892,481.312
Units Outstanding, end of the year ............ 1,510,293.812 2,091,427.861 2,034,040.832
Net Asset Value per Unit:
Select*Life I .............................. $ 26.757824 $ 24.280390 $ 21.274161
Select*Life Series 2000 .................... $ 19.272715 $ 17.348504 $ 15.079031
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Fidelity's VIP II
Contrafund Portfolio
IC Shares
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 235 $ 180 $ 94
Reinvested capital gains ......................... 1,722 1,324 247
Administrative expenses .......................... (526) (229) (104)
-------------- -------------- --------------
Net investment income (loss) and
capital gains ................................. 1,431 1,275 237
-------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 569 651 61
Increase (decrease) in unrealized appreciation
of investments .................................. 11,058 7,367 3,113
-------------- -------------- --------------
Net realized and unrealized gains (losses) ..... 11,627 8,018 3,174
-------------- -------------- --------------
Additions (reductions) from operations ......... 13,058 9,293 3,411
-------------- -------------- --------------
Policy Owners' transactions:
Net premium payments ............................. 18,650 16,875 12,617
Transfers between funds and/or fixed account ..... 3,457 605 767
Policy loans ..................................... (563) (197) (66)
Loan collateral interest crediting ............... 14 6 1
Surrenders ....................................... (1,275) (882) (307)
Death benefits ................................... (48) (130) (10)
Cost of insurance charges ........................ (3,655) (2,823) (1,815)
Death benefit guarantee charges .................. (127) (15) --
Monthly expense charges .......................... (610) (512) (344)
-------------- -------------- --------------
Additions (reductions) for policy
owners' transactions .......................... 15,843 12,927 10,843
-------------- -------------- --------------
Net additions (reductions) for the year ........ 28,901 22,220 14,254
Policy Owners' Equity, beginning of the year ...... 46,647 24,427 10,173
-------------- -------------- --------------
Policy Owners' Equity, end of the year ............ $ 75,548 $ 46,647 $ 24,427
============== ============== ==============
Units Outstanding, beginning of the year .......... 1,974,535.451 1,334,244.465 686,514.792
Units Outstanding, end of the year ................ 2,609,699.831 1,974,535.451 1,334,244.465
Net Asset Value per Unit:
Select*Life I .................................. $ 16.376549 $ 13.286083 $ 10.304064
Select*Life Series 2000 ........................ $ 29.708780 $ 23.909755 $ 18.395120
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Fidelity's VIP II
Index 500 Portfolio
IC Shares
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 491 $ 278 $ 95
Reinvested capital gains ......................... 333 644 193
Administrative expenses .......................... (592) (229) (91)
-------------- -------------- --------------
Net investment income (loss) and
capital gains ................................. 232 693 197
-------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 2,738 1,033 427
Increase (decrease) in unrealized appreciation
of investments .................................. 9,397 6,585 2,896
-------------- -------------- --------------
Net realized and unrealized gains (losses) ..... 12,135 7,618 3,323
-------------- -------------- --------------
Additions (reductions) from operations ......... 12,367 8,311 3,520
-------------- -------------- --------------
Policy Owners' transactions:
Net premium payments ............................. 23,262 16,991 9,635
Transfers between funds and/or fixed account ..... 9,341 3,742 3,272
Policy loans ..................................... (837) (264) (104)
Loan collateral interest crediting ............... 33 14 4
Surrenders ....................................... (1,561) (670) (188)
Death benefits ................................... (151) (59) (3)
Cost of insurance charges ........................ (4,256) (2,579) (1,225)
Death benefit guarantee charges .................. (250) (30) (7)
Monthly expense charges .......................... (643) (434) (226)
-------------- -------------- --------------
Additions (reductions) for policy
owners' transactions .......................... 24,938 16,711 11,158
-------------- -------------- --------------
Net additions (reductions) for the year ........ 37,305 25,022 14,678
Policy Owners' Equity, beginning of the year ...... 47,283 22,261 7,583
-------------- -------------- --------------
Policy Owners' Equity, end of the year ............ $ 84,588 $ 47,283 $ 22,261
============== ============== ==============
Units Outstanding, beginning of the year .......... 1,628,829.448 981,434.839 441,948.368
Units Outstanding, end of the year ................ 2,420,819.714 1,628,829.448 981,434.839
Net Asset Value per Unit:
Select*Life I .................................. $ 35.507758 $ 29.701980 $ 23.332252
Select*Life Series 2000 ........................ $ 34.868839 $ 28.934443 $ 22.547720
</TABLE>
The accompanying notes are an integral part of the financial statements.
58
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, Continued
For the years ended December 31, 1999, 1998 and 1997
(In Thousands, Except Value Per Unit)
<TABLE>
<CAPTION>
Fidelity's VIP II
Investment Grade Bond Portfolio
IC Shares
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 208 $ 206 $ 194
Reinvested capital gains ......................... 65 25 --
Administrative expenses .......................... (50) (36) (27)
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 223 195 167
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 52 128 16
Increase (decrease) in unrealized appreciation
of investments .................................. (383) 47 94
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... (331) 175 110
------------ ------------ ------------
Additions (reductions) from operations ......... (108) 370 277
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 1,615 2,363 907
Transfers between funds and/or fixed account ..... 548 (1,154) (169)
Policy loans ..................................... (96) (50) (37)
Loan collateral interest crediting ............... 7 4 2
Surrenders ....................................... (175) (106) (69)
Death benefits ................................... (6) (7) (2)
Cost of insurance charges ........................ (316) (280) (225)
Death benefit guarantee charges .................. (19) (7) (5)
Monthly expense charges .......................... (35) (30) (28)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... 1,523 733 374
------------ ------------ ------------
Net additions (reductions) for the year ........ 1,415 1,103 651
Policy Owners' Equity, beginning of the year ...... 4,975 3,872 3,221
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 6,390 $ 4,975 $ 3,872
============ ============ ============
Units Outstanding, beginning of the year .......... 333,810.100 276,930.635 247,189.999
Units Outstanding, end of the year ................ 444,440.696 333,810.100 276,930.635
Net Asset Value per Unit:
Select*Life I .................................. $ 16.785852 $ 17.100659 $ 15.837535
Select*Life Series 2000 ........................ $ 13.662210 $ 13.807112 $ 12.685026
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Janus Aspen Series
Aggressive Growth Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 98 $ -- $ --
Reinvested capital gains ......................... 168 -- --
Administrative expenses .......................... (76) (7) --
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 190 (7) --
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 870 95 (1)
Increase (decrease) in unrealized appreciation
of investments .................................. 9,113 317 6
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 9,983 412 5
------------ ------------ ------------
Additions (reductions) from operations ......... 10,173 405 5
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 4,198 884 109
Transfers between funds and/or fixed account ..... 11,069 194 156
Policy loans ..................................... (153) (4) 1
Loan collateral interest crediting ............... 13 2 --
Surrenders ....................................... (111) (15) --
Death benefits ................................... (16) -- --
Cost of insurance charges ........................ (491) (88) (6)
Death benefit guarantee charges .................. (22) (4) --
Monthly expense charges .......................... (144) (13) (1)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... 14,343 956 259
------------ ------------ ------------
Net additions (reductions) for the year ........ 24,516 1,361 264
Policy Owners' Equity, beginning of the year ...... 1,625 264 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 26,141 $ 1,625 $ 264
============ ============ ============
Units Outstanding, beginning of the year .......... 110,510.717 24,053.408 --
Units Outstanding, end of the year ................ 790,834.555 110,510.717 24,053.408
Net Asset Value per Unit:
Select*Life I .................................. $ 32.536277 $ 14.550679 $ 10.925142
Select*Life Series 2000 ........................ $ 33.167484 $ 14.714669 $ 10.960002
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Janus Aspen Series
Growth Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 27 $ 41 $ 1
Reinvested capital gains ......................... 50 32 --
Administrative expenses .......................... (92) (10) --
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. (15) 63 1
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 1,286 (16) --
Increase (decrease) in unrealized appreciation
of investments .................................. 3,062 541 2
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 4,348 525 2
------------ ------------ ------------
Additions (reductions) from operations ......... 4,333 588 3
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 4,929 1,477 157
Transfers between funds and/or fixed account ..... 6,660 2,294 136
Policy loans ..................................... (44) 2 (3)
Loan collateral interest crediting ............... 3 -- 1
Surrenders ....................................... (772) (74) --
Death benefits ................................... (13) (8) --
Cost of insurance charges ........................ (669) (132) (7)
Death benefit guarantee charges .................. (19) (2) --
Monthly expense charges .......................... (147) (22) (1)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... 9,928 3,535 283
------------ ------------ ------------
Net additions (reductions) for the year ........ 14,261 4,123 286
Policy Owners' Equity, beginning of the year ...... 4,409 286 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 18,670 $ 4,409 $ 286
============ ============ ============
Units Outstanding, beginning of the year .......... 319,301.091 28,040.816 --
Units Outstanding, end of the year ................ 940,075.013 319,301.091 28,040.816
Net Asset Value per Unit:
Select*Life I .................................. $ 19.519150 $ 13.665622 $ 10.154694
Select*Life Series 2000 ........................ $ 19.898078 $ 13.819668 $ 10.187114
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Janus Aspen Series
International Growth Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 16 $ 35 $ 1
Reinvested capital gains ......................... -- 5 --
Administrative expenses .......................... (55) (16) (1)
------------ ------------ ------------
Net investment income (loss) and
capital gains .................................... (39) 24 --
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ...................................... 1,568 52 (1)
Increase (decrease) in unrealized appreciation
of investments ................................... 3,678 190 (11)
------------ ------------ ------------
Net realized and unrealized gains (losses) ....... 5,246 242 (12)
------------ ------------ ------------
Additions (reductions) from operations ........... 5,207 266 (12)
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 2,432 1,711 250
Transfers between funds and/or fixed account ..... 1,499 745 623
Policy loans ..................................... (39) (11) (2)
Loan collateral interest crediting ............... 3 1 --
Surrenders ....................................... (81) (18) --
Death benefits ................................... (3) -- --
Cost of insurance charges ........................ (359) (167) (13)
Death benefit guarantee charges .................. (15) (5) --
Monthly expense charges .......................... (66) (26) (2)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions ............................. 3,371 2,230 856
------------ ------------ ------------
Net additions (reductions) for the year .......... 8,578 2,496 844
Policy Owners' Equity, beginning of the year ...... 3,340 844 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 11,918 $ 3,340 $ 844
============ ============ ============
Units Outstanding, beginning of the year .......... 296,248.488 87,549.532 --
Units Outstanding, end of the year ................ 580,535.174 296,248.488 87,549.532
Net Asset Value per Unit:
Select*Life I .................................... $ 20.176465 $ 11.158415 $ 9.594712
Select*Life Series 2000 .......................... $ 20.567965 $ 11.284244 $ 9.625377
</TABLE>
The accompanying notes are an integral part of the financial statements.
59
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, Continued
For the years ended December 31, 1999, 1998 and 1997
(In Thousands, Except Value Per Unit)
<TABLE>
<CAPTION>
Janus Aspen Series
Worldwide Growth Portfolio
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net Investment income:
Reinvested dividend income ....................... $ 56 $ 210 $ 5
Reinvested capital gains ......................... -- 81 --
Administrative expenses .......................... (270) (57) (3)
-------------- -------------- --------------
Net investment income (loss) and
capital gains ................................. (214) 234 2
-------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 3,533 99 --
Increase (decrease) in unrealized appreciation
of investments .................................. 15,797 1,475 (16)
-------------- -------------- --------------
Net realized and unrealized gains (losses) ..... 19,330 1,574 (16)
-------------- -------------- --------------
Additions (reductions) from operations ......... 19,116 1,808 (14)
-------------- -------------- --------------
Policy Owners' transactions:
Net premium payments ............................. 12,515 7,344 906
Transfers between funds and/or fixed account ..... 11,478 4,415 1,582
Policy loans ..................................... (256) (13) (4)
Loan collateral interest crediting ............... 11 1 --
Surrenders ....................................... (426) (90) (1)
Death benefits ................................... (148) (53) --
Cost of insurance charges ........................ (1,904) (755) (49)
Death benefit guarantee charges .................. (43) (12) --
Monthly expense charges .......................... (348) (106) (7)
-------------- -------------- --------------
Additions (reductions) for policy
owners' transactions .......................... 20,879 10,731 2,427
-------------- -------------- --------------
Net additions (reductions) for the year ........ 39,995 12,539 2,413
Policy Owners' Equity, beginning of the year ...... 14,952 2,413 --
-------------- -------------- --------------
Policy Owners' Equity, end of the year ............ $ 54,947 $ 14,952 $ 2,413
============== ============== ==============
Units Outstanding, beginning of the year .......... 1,180,179.061 245,314.904 --
Units Outstanding, end of the year ................ 2,640,454.020 1,180,179.061 245,314.904
Net Asset Value per Unit:
Select*Life I .................................. $ 20.456930 $ 12.539787 $ 9.804994
Select*Life Series 2000 ........................ $ 20.853866 $ 12.681124 $ 9.836310
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Neuberger Berman
Advisers Management Trust
Limited Maturity Bond Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net Investment income:
Reinvested dividend income ....................... $ 115 $ 79 $ --
Reinvested capital gains ......................... -- -- --
Administrative expenses .......................... (23) (9) --
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 92 70 --
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... (27) (21) --
Increase (decrease) in unrealized appreciation
of investments .................................. (49) 1 7
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... (76) (20) 7
------------ ------------ ------------
Additions (reductions) from operations ......... 16 50 7
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 1,521 1,242 209
Transfers between funds and/or fixed account ..... 133 (296) 896
Policy loans ..................................... (61) (2) (2)
Loan collateral interest crediting ............... -- -- --
Surrenders ....................................... (29) (2) --
Death benefits ................................... (14) (5) --
Cost of insurance charges ........................ (170) (94) (6)
Death benefit guarantee charges .................. (6) (2) --
Monthly expense charges .......................... (36) (11) (1)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... 1,338 830 1,096
------------ ------------ ------------
Net additions (reductions) for the year ........ 1,354 880 1,103
Policy Owners' Equity, beginning of the year ...... 1,983 1,103 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 3,337 $ 1,983 $ 1,103
============ ============ ============
Units Outstanding, beginning of the year .......... 185,303.929 107,550.694 --
Units Outstanding, end of the year ................ 307,256.114 185,303.929 107,550.694
Net Asset Value per Unit:
Select*Life I .................................. $ 10.655507 $ 10.584999 $ 10.221530
Select*Life Series 2000 ........................ $ 10.862584 $ 10.704404 $ 10.254171
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Neuberger Berman
Advisers Management Trust
Partners Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net Investment income:
Reinvested dividend income ....................... $ 120 $ 11 $ --
Reinvested capital gains ......................... 208 342 --
Administrative expenses .......................... (83) (45) (2)
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 245 308 (2)
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... (153) (137) 3
Increase (decrease) in unrealized appreciation
of investments .................................. 529 (164) 20
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 376 (301) 23
------------ ------------ ------------
Additions (reductions) from operations ......... 621 7 21
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 3,534 5,576 484
Transfers between funds and/or fixed account ..... (4,159) 3,196 1,288
Policy loans ..................................... (66) (55) (2)
Loan collateral interest crediting ............... 2 2 1
Surrenders ....................................... (146) (58) (2)
Death benefits ................................... (15) -- --
Cost of insurance charges ........................ (653) (518) (26)
Death benefit guarantee charges .................. (18) (11) --
Monthly expense charges .......................... (93) (64) (3)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... (1,614) 8,068 1,740
------------ ------------ ------------
Net additions (reductions) for the year ........ (993) 8,075 1,761
Policy Owners' Equity, beginning of the year ...... 9,836 1,761 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 8,843 $ 9,836 $ 1,761
============ ============ ============
Units Outstanding, beginning of the year .......... 914,725.581 170,599.212 --
Units Outstanding, end of the year ................ 766,507.228 914,725.581 170,599.212
Net Asset Value per Unit:
Select*Life I .................................. $ 11.333244 $ 10.640408 $ 10.292965
Select*Life Series 2000 ........................ $ 11.553436 $ 10.760407 $ 10.325813
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Neuberger Berman
Advisers Management Trust
Socially Responsive Portfolio
-------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net Investment income:
Reinvested dividend income ....................... $ -- $ -- $ --
Reinvested capital gains ......................... -- -- --
Administrative expenses .......................... -- -- --
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. -- -- --
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... -- -- --
Increase (decrease) in unrealized appreciation
of investments .................................. 3 -- --
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 3 -- --
------------ ------------ ------------
Additions (reductions) from operations ......... 3 -- --
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 23 -- --
Transfers between funds and/or fixed account ..... 26 -- --
Policy loans ..................................... -- -- --
Loan collateral interest crediting ............... -- -- --
Surrenders ....................................... -- -- --
Death benefits ................................... -- -- --
Cost of insurance charges ........................ (3) -- --
Death benefit guarantee charges .................. (1) -- --
Monthly expense charges .......................... -- -- --
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... 45 -- --
------------ ------------ ------------
Net additions (reductions) for the year ........ 48 -- --
Policy Owners' Equity, beginning of the year ...... -- -- --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 48 $ -- $ --
============ ============ ============
Units Outstanding, beginning of the year .......... -- -- --
Units Outstanding, end of the year ................ 4,350.420 -- --
Net Asset Value per Unit:
Select*Life I .................................. $ -- $ -- $ --
Select*Life Series 2000 ........................ $ 10.754901 $ -- $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
60
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, Continued
For the years ended December 31, 1999, 1998 and 1997
(In Thousands, Except Value Per Unit)
<TABLE>
<CAPTION>
Northstar Galaxy Trust
Emerging Growth Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ -- $ 58 $ 36
Reinvested capital gains ......................... 1,382 107 9
Administrative expenses .......................... (40) (11) (5)
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 1,342 154 40
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 473 10 3
Increase (decrease) in unrealized appreciation
of investments .................................. 2,990 181 83
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 3,463 191 86
------------ ------------ ------------
Additions (reductions) from operations ......... 4,805 345 126
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 1,278 990 826
Transfers between funds and/or fixed account ..... 2,248 (2) 47
Policy loans ..................................... (95) (13) (11)
Loan collateral interest crediting ............... 1 -- --
Surrenders ....................................... (64) (27) (21)
Death benefits ................................... (5) -- (1)
Cost of insurance charges ........................ (255) (179) (96)
Death benefit guarantee charges .................. (17) (1) --
Monthly expense charges .......................... (40) (30) (19)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... 3,051 738 725
------------ ------------ ------------
Net additions (reductions) for the year ........ 7,856 1,083 851
Policy Owners' Equity, beginning of the year ...... 2,524 1,441 590
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 10,380 $ 2,524 $ 1,441
============ ============ ============
Units Outstanding, beginning of the year .......... 134,480.431 90,105.753 42,551.251
Units Outstanding, end of the year ................ 237,818.778 134,480.431 90,105.753
Net Asset Value per Unit:
Select*Life I .................................. $ 28.891610 $ 12.082938 $ 10.383806
Select*Life Series 2000 ........................ $ 45.340005 $ 18.810805 $ 16.036372
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Northstar Galaxy Trust
Growth + Value Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ -- $ -- $ 1
Reinvested capital gains ......................... 1,025 14 7
Administrative expenses .......................... (25) (8) (1)
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 1,000 6 7
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 586 -- 1
Increase (decrease) in unrealized appreciation
of investments .................................. 655 277 (13)
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 1,241 277 (12)
------------ ------------ ------------
Additions (reductions) from operations ......... 2,241 283 (5)
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 1,278 1,061 187
Transfers between funds and/or fixed account ..... 1,675 59 497
Policy loans ..................................... (20) 4 (2)
Loan collateral interest crediting ............... 1 -- --
Surrenders ....................................... (23) (4) (1)
Death benefits ................................... -- (94) --
Cost of insurance charges ........................ (178) (115) (10)
Death benefit guarantee charges .................. (9) (3) --
Monthly expense charges .......................... (34) (11) (1)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... 2,690 897 670
------------ ------------ ------------
Net additions (reductions) for the year ........ 4,931 1,180 665
Policy Owners' Equity, beginning of the year ...... 1,845 665 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 6,776 $ 1,845 $ 665
============ ============ ============
Units Outstanding, beginning of the year .......... 151,938.013 65,399.595 --
Units Outstanding, end of the year ................ 286,240.204 151,938.013 65,399.595
Net Asset Value per Unit:
Select*Life I .................................. $ 23.255009 $ 12.022926 $ 10.156905
Select*Life Series 2000 ........................ $ 23.706151 $ 12.158465 $ 10.189337
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Northstar Galaxy Trust
International Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 45 $ 21 $ 1
Reinvested capital gains ......................... 352 68 --
Administrative expenses .......................... (22) (7) --
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 375 82 1
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 497 47 --
Increase (decrease) in unrealized appreciation
of investments .................................. 344 33 --
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 841 80 --
------------ ------------ ------------
Additions (reductions) from operations ......... 1,216 162 1
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 1,001 975 144
Transfers between funds and/or fixed account ..... 229 218 258
Policy loans ..................................... (16) (4) --
Loan collateral interest crediting ............... 3 2 --
Surrenders ....................................... (23) (9) (2)
Death benefits ................................... (13) -- --
Cost of insurance charges ........................ (153) (96) (8)
Death benefit guarantee charges .................. (6) (3) --
Monthly expense charges .......................... (27) (11) (1)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... 995 1,072 391
------------ ------------ ------------
Net additions (reductions) for the year ........ 2,211 1,234 392
Policy Owners' Equity, beginning of the year ...... 1,626 392 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 3,837 $ 1,626 $ 392
============ ============ ============
Units Outstanding, beginning of the year .......... 137,264.427 38,707.007 --
Units Outstanding, end of the year ................ 216,064.849 137,264.427 38,707.007
Net Asset Value per Unit:
Select*Life I .................................. $ 17.448357 $ 11.712172 $ 10.097293
Select*Life Series 2000 ........................ $ 17.787065 $ 11.844211 $ 10.129526
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Northstar Galaxy Trust
Research Enhanced Index Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 36 $ 77 $ 34
Reinvested capital gains ......................... -- -- 3
Administrative expenses .......................... (15) (7) (3)
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 21 70 34
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... (25) (16) 2
Increase (decrease) in unrealized appreciation
of investments .................................. 115 (56) (12)
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 90 (72) (10)
------------ ------------ ------------
Additions (reductions) from operations ......... 111 (2) 24
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 633 866 296
Transfers between funds and/or fixed account ..... (9) 58 42
Policy loans ..................................... (18) (5) (8)
Loan collateral interest crediting ............... 1 -- --
Surrenders ....................................... (17) (13) (13)
Death benefits ................................... (4) -- (1)
Cost of insurance charges ........................ (115) (86) (41)
Death benefit guarantee charges .................. (10) (3) --
Monthly expense charges .......................... (14) (12) (5)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... 447 805 270
------------ ------------ ------------
Net additions (reductions) for the year ........ 558 803 294
Policy Owners' Equity, beginning of the year ...... 1,392 589 295
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 1,950 $ 1,392 $ 589
============ ============ ============
Units Outstanding, beginning of the year .......... 96,571.672 41,273.079 22,576.638
Units Outstanding, end of the year ................ 128,528.216 96,571.672 41,273.079
Net Asset Value per Unit:
Select*Life I .................................. $ 10.808243 $ 10.296187 $ 10.240441
Select*Life Series 2000 ........................ $ 15.298625 $ 14.457253 $ 14.264010
</TABLE>
The accompanying notes are an integral part of the financial statements.
61
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, Continued
For the years ended December 31, 1999, 1998 and 1997
(In Thousands, Except Value Per Unit)
<TABLE>
<CAPTION>
Northstar Galaxy Trust
High Yield Bond Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 61 $ 24 $ 1
Reinvested capital gains ......................... -- 1 --
Administrative expenses .......................... (6) (2) --
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 55 23 1
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... (4) (43) --
Increase (decrease) in unrealized appreciation
of investments .................................. (82) 11 (1)
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... (86) (32) (1)
------------ ------------ ------------
Additions (reductions) from operations ......... (31) (9) --
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 325 482 52
Transfers between funds and/or fixed account ..... 7 35 9
Policy loans ..................................... (3) 2 (2)
Loan collateral interest crediting ............... -- -- --
Surrenders ....................................... (2) (1) --
Death benefits ................................... -- (5) --
Cost of insurance charges ........................ (52) (28) (2)
Death benefit guarantee charges .................. (2) (1) --
Monthly expense charges .......................... (8) (3) --
------------ ------------ ------------
Additions (reductions) for policy owners'
transactions .................................. 265 481 57
------------ ------------ ------------
Net additions (reductions) for the year .......... 234 472 57
Policy Owners' Equity, beginning of the year ...... 529 57 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 763 $ 529 $ 57
============ ============ ============
Units Outstanding, beginning of the year .......... 50,566.068 5,488.146 --
Units Outstanding, end of the year ................ 75,420.881 50,566.068 5,488.146
Net Asset Value per Unit:
Select*Life I .................................. $ 9.937790 $ 10.351379 $ 10.373728
Select*Life Series 2000 ........................ $ 10.130924 $ 10.468149 $ 10.406855
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
OCC Accumulation Trust
Equity Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 13 $ 3 $ --
Reinvested capital gains ......................... 59 12 --
Administrative expenses .......................... (14) (5) --
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 58 10 --
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 19 6 1
Increase (decrease) in unrealized appreciation
of investments .................................. (54) 46 8
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... (35) 52 9
------------ ------------ ------------
Additions (reductions) from operations ......... 23 62 9
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 747 822 52
Transfers between funds and/or fixed account ..... (131) 297 151
Policy loans ..................................... (4) 1 (2)
Loan collateral interest crediting ............... -- -- --
Surrenders ....................................... (12) (10) --
Death benefits ................................... (3) -- --
Cost of insurance charges ........................ (112) (59) (2)
Death benefit guarantee charges .................. (5) (1) --
Monthly expense charges .......................... (20) (9) --
------------ ------------ ------------
Additions (reductions) for policy owners'
transactions .................................. 460 1,041 199
------------ ------------ ------------
Net additions (reductions) for the year .......... 483 1,103 208
Policy Owners' Equity, beginning of the year ...... 1,311 208 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 1,794 $ 1,311 $ 208
============ ============ ============
Units Outstanding, beginning of the year .......... 109,118.612 19,312.138 --
Units Outstanding, end of the year ................ 146,392.070 109,118.612 19,312.138
Net Asset Value per Unit:
Select*Life I .................................. $ 12.099718 $ 11.895001 $ 10.719660
Select*Life Series 2000 ........................ $ 12.334780 $ 12.029100 $ 10.753858
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
OCC Accumulation Trust
Global Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 16 $ 8 $ 1
Reinvested capital gains ......................... 166 28 14
Administrative expenses .......................... (9) (4) (1)
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 173 32 14
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 108 (5) (1)
Increase (decrease) in unrealized appreciation
of investments .................................. (43) 22 (29)
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 65 17 (30)
------------ ------------ ------------
Additions (reductions) from operations ......... 238 49 (16)
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 296 348 51
Transfers between funds and/or fixed account ..... 43 86 272
Policy loans ..................................... (10) (2) 1
Loan collateral interest crediting ............... -- -- --
Surrenders ....................................... (15) (7) --
Death benefits ................................... (15) -- --
Cost of insurance charges ........................ (55) (39) (5)
Death benefit guarantee charges .................. (2) (1) --
Monthly expense charges .......................... (10) (5) (1)
------------ ------------ ------------
Additions (reductions) for policy owners'
transactions .................................. 232 380 318
------------ ------------ ------------
Net additions (reductions) for the year .......... 470 429 302
Policy Owners' Equity, beginning of the year ...... 731 302 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 1,201 $ 731 $ 302
============ ============ ============
Units Outstanding, beginning of the year .......... 67,997.586 31,784.854 --
Units Outstanding, end of the year ................ 88,327.523 67,997.586 31,784.854
Net Asset Value per Unit:
Select*Life I .................................. $ 13.383356 $ 10.662721 $ 9.487891
Select*Life Series 2000 ........................ $ 13.643299 $ 10.782965 $ 9.518205
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
OCC Accumulation Trust
Managed Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 84 $ 17 $ --
Reinvested capital gains ......................... 188 56 --
Administrative expenses .......................... (48) (24) (1)
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 224 49 (1)
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... (23) 2 --
Increase (decrease) in unrealized appreciation
of investments .................................. 26 74 7
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 3 76 7
------------ ------------ ------------
Additions (reductions) from operations ......... 227 125 6
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 2,406 3,191 357
Transfers between funds and/or fixed account ..... (2,222) 1,487 804
Policy loans ..................................... (15) (1) (1)
Loan collateral interest crediting ............... 2 -- --
Surrenders ....................................... (84) (17) --
Death benefits ................................... (13) (76) --
Cost of insurance charges ........................ (375) (294) (16)
Death benefit guarantee charges .................. (8) (4) --
Monthly expense charges .......................... (58) (32) (1)
------------ ------------ ------------
Additions (reductions) for policy owners'
transactions .................................. (367) 4,254 1,143
------------ ------------ ------------
Net additions (reductions) for the year .......... (140) 4,379 1,149
Policy Owners' Equity, beginning of the year ...... 5,528 1,149 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 5,388 $ 5,528 $ 1,149
============ ============ ============
Units Outstanding, beginning of the year .......... 507,204.969 112,854.997 --
Units Outstanding, end of the year ................ 471,347.494 507,204.969 112,854.997
Net Asset Value per Unit:
Select*Life I .................................. $ 11.226640 $ 10.778607 $ 10.143089
Select*Life Series 2000 ........................ $ 11.444770 $ 10.900163 $ 10.175476
</TABLE>
The accompanying notes are an integral part of the financial statements.
62
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, Continued
For the years ended December 31, 1999, 1998 and 1997
(In Thousands, Except Value Per Unit)
<TABLE>
<CAPTION>
OCC Accumulation Trust
Small Cap Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 15 $ 3 $ --
Reinvested capital gains ......................... -- 33 --
Administrative expenses .......................... (25) (10) (1)
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. (10) 26 (1)
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... (62) (13) --
(Increase) decrease in unrealized appreciation
of investments .................................. 66 (151) (4)
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 4 (164) (4)
------------ ------------ ------------
Additions (reductions) from operations ......... (6) (138) (5)
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 1,581 1,525 254
Transfers between funds and/or fixed account ..... 658 340 420
Policy loans ..................................... (23) (4) --
Loan collateral interest crediting ............... 1 -- --
Surrenders ....................................... (32) (6) --
Death benefits ................................... (1) -- --
Cost of insurance charges ........................ (221) (140) (10)
Death benefit guarantee charges .................. (8) (3) --
Monthly expense charges .......................... (38) (18) (1)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... 1,917 1,694 663
------------ ------------ ------------
Net additions (reductions) for the year ........ 1,911 1,556 658
Policy Owners' Equity, beginning of the year ...... 2,214 658 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 4,125 $ 2,214 $ 658
============ ============ ============
Units Outstanding, beginning of the year .......... 237,553.351 64,284.089 --
Units Outstanding, end of the year ................ 450,944.640 237,553.351 64,284.089
Net Asset Value per Unit:
Select*Life I .................................. $ 8.981750 $ 9.223192 $ 10.220080
Select*Life Series 2000 ........................ $ 9.156366 $ 9.327299 $ 10.252721
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Putnam VT
Asia Pacific Growth Fund
Class IA Shares
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ -- $ 105 $ 39
Reinvested capital gains ......................... -- -- --
Administrative expenses .......................... (29) (18) (15)
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. (29) 87 24
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 30 (4) 4
(Increase) decrease in unrealized appreciation
of investments .................................. 2,591 (145) (410)
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 2,621 (149) (406)
------------ ------------ ------------
Additions (reductions) from operations ......... 2,592 (62) (382)
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 303 1,150 1,417
Transfers between funds and/or fixed account ..... (810) (206) (122)
Policy loans ..................................... (40) (14) (9)
Loan collateral interest crediting ............... -- 1 --
Surrenders ....................................... (106) (51) (24)
Death benefits ................................... -- (1) (2)
Cost of insurance charges ........................ (166) (183) (194)
Death benefit guarantee charges .................. (3) (1) --
Monthly expense charges .......................... (27) (32) (34)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... (849) 663 1,032
------------ ------------ ------------
Net additions (reductions) for the year ........ 1,743 601 650
Policy Owners' Equity, beginning of the year ...... 2,859 2,258 1,608
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 4,602 $ 2,859 $ 2,258
============ ============ ============
Units Outstanding, beginning of the year .......... 317,373.587 236,947.013 144,086.091
Units Outstanding, end of the year ................ 246,200.626 317,373.587 236,947.013
Net Asset Value per Unit:
Select*Life I .................................. $ -- $ -- $ --
Select*Life Series 2000 ........................ 18.686981 $ 9.003039 $ 9.525464
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Putnam VT
Diversified Income Fund
Class IA Shares
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 163 $ 88 $ 86
Reinvested capital gains ......................... -- 37 14
Administrative expenses .......................... (18) (18) (13)
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 145 107 87
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... (78) 18 16
(Increase) decrease in unrealized appreciation
of investments .................................. (49) (182) 6
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... (127) (164) 22
------------ ------------ ------------
Additions (reductions) from operations ......... 18 (57) 109
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 254 895 785
Transfers between funds and/or fixed account ..... (800) (71) (100)
Policy loans ..................................... (10) (10) (10)
Loan collateral interest crediting ............... -- 1 --
Surrenders ....................................... (58) (53) (27)
Death benefits ................................... (9) (1) (3)
Cost of insurance charges ........................ (122) (166) (130)
Death benefit guarantee charges .................. (3) (1) --
Monthly expense charges .......................... (16) (24) (21)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... (764) 570 494
------------ ------------ ------------
Net additions (reductions) for the year ........ (746) 513 603
Policy Owners' Equity, beginning of the year ...... 2,511 1,998 1,395
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 1,765 $ 2,511 $ 1,998
============ ============ ============
Units Outstanding, beginning of the year .......... 191,652.487 150,285.794 112,611.941
Units Outstanding, end of the year ................ 132,402.534 191,652.487 150,285.794
Net Asset Value per Unit:
Select*Life I .................................. $ 13.253124 $ 13.128436 $ 13.418177
Select*Life Series 2000 ........................ $ 13.339586 $ 13.108403 $ 13.290543
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Putnam VT
Growth and Income Fund
Class IA Shares
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 492 $ 458 $ 283
Reinvested capital gains ......................... 2,457 2,991 690
Administrative expenses .......................... (331) (201) (120)
-------------- -------------- --------------
Net investment income (loss) and
capital gains ................................. 2,618 3,248 853
-------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 685 435 123
(Increase) decrease in unrealized appreciation
of investments .................................. (3,184) 243 2,475
-------------- -------------- --------------
Net realized and unrealized gains (losses) ..... (2,499) 678 2,598
-------------- -------------- --------------
Additions (reductions) from operations ......... 119 3,926 3,451
-------------- -------------- --------------
Policy Owners' transactions:
Net premium payments ............................. 9,574 10,650 10,331
Transfers between funds and/or fixed account ..... (1,854) (1,739) 1,033
Policy loans ..................................... (375) (145) (71)
Loan collateral interest crediting ............... 16 10 3
Surrenders ....................................... (812) (753) (288)
Death benefits ................................... (25) (129) (27)
Cost of insurance charges ........................ (2,089) (2,010) (1,524)
Death benefit guarantee charges .................. (58) (14) (4)
Monthly expense charges .......................... (340) (333) (252)
-------------- -------------- --------------
Additions (reductions) for policy
owners' transactions .......................... 4,037 5,537 9,201
-------------- -------------- --------------
Net additions (reductions) for the year ........ 4,156 9,463 12,652
Policy Owners' Equity, beginning of the year ...... 33,662 24,199 11,547
-------------- -------------- --------------
Policy Owners' Equity, end of the year ............ $ 37,818 $ 33,662 $ 24,199
============== ============== ==============
Units Outstanding, beginning of the year .......... 1,409,556.585 1,169,049.817 691,973.875
Units Outstanding, end of the year ................ 1,559,790.647 1,409,556.585 1,169,049.817
Net Asset Value per Unit:
Select*Life I .................................. $ 23.687497 $ 23.505531 $ 20.529605
Select*Life Series 2000 ........................ $ 24.291674 $ 23.912286 $ 20.717931
</TABLE>
The accompanying notes are an integral part of the financial statements.
63
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, Continued
For the years ended December 31, 1999, 1998 and 1997
(In Thousands, Except Value Per Unit)
<TABLE>
<CAPTION>
Putnam VT
New Opportunities Fund
Class IA Shares
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ -- $ -- $ --
Reinvested capital gains ......................... 490 353 --
Administrative expenses .......................... (352) (175) (92)
-------------- -------------- --------------
Net investment income (loss) and
capital gains ................................. 138 178 (92)
-------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 1,400 416 239
Increase (decrease) in unrealized appreciation
of investments .................................. 22,263 5,506 3,361
-------------- -------------- --------------
Net realized and unrealized gains (losses) ..... 23,663 5,922 3,600
-------------- -------------- --------------
Additions (reductions) from operations ......... 23,801 6,100 3,508
-------------- -------------- --------------
Policy Owners' transactions:
Net premium payments ............................. 10,067 11,786 11,656
Transfers between funds and/or fixed account ..... (4,660) (1,903) (862)
Policy loans ..................................... (408) (121) (100)
Loan collateral interest crediting ............... 12 4 1
Surrenders ....................................... (1,076) (683) (271)
Death benefits ................................... (34) (44) (8)
Cost of insurance charges ........................ (2,385) (2,195) (1,770)
Death benefit guarantee charges .................. (40) (5) --
Monthly expense charges .......................... (442) (412) (343)
-------------- -------------- --------------
Additions (reductions) for policy
owners' transactions .......................... 1,034 6,427 8,303
-------------- -------------- --------------
Net additions (reductions) for the year ........ 24,835 12,527 11,811
Policy Owners' Equity, beginning of the year ...... 34,451 21,924 10,113
-------------- -------------- --------------
Policy Owners' Equity, end of the year ............ $ 59,286 $ 34,451 $ 21,924
============== ============== ==============
Units Outstanding, beginning of the year .......... 1,513,397.971 1,197,940.702 681,263.859
Units Outstanding, end of the year ................ 1,537,759.325 1,513,397.971 1,197,940.702
Net Asset Value per Unit:
Select*Life I .................................. $ -- $ -- $ --
Select*Life Series 2000 ........................ $ 38.550963 $ 22.763799 $ 18.301715
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Putnam VT
Utilities Growth and Income Fund
Class IA Shares
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 106 $ 87 $ 61
Reinvested capital gains ......................... 112 149 84
Administrative expenses .......................... (32) (24) (14)
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 186 212 131
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 279 149 40
Increase (decrease) in unrealized appreciation
of investments .................................. (518) 100 338
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... (239) 249 378
------------ ------------ ------------
Additions (reductions) from operations ......... (53) 461 509
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 429 1,035 903
Transfers between funds and/or fixed account ..... (869) 108 50
Policy loans ..................................... (43) (34) (17)
Loan collateral interest crediting ............... 1 2 1
Surrenders ....................................... (130) (96) (24)
Death benefits ................................... (10) (4) (3)
Cost of insurance charges ........................ (214) (237) (168)
Death benefit guarantee charges .................. (7) (3) (1)
Monthly expense charges .......................... (33) (37) (26)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... (876) 734 715
------------ ------------ ------------
Net additions (reductions) for the year ........ (929) 1,195 1,224
Policy Owners' Equity, beginning of the year ...... 3,966 2,771 1,547
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 3,037 $ 3,966 $ 2,771
============ ============ ============
Units Outstanding, beginning of the year .......... 190,123.952 152,514.030 107,970.108
Units Outstanding, end of the year ................ 146,646.122 190,123.952 152,514.030
Net Asset Value per Unit:
Select*Life I .................................. $ 20.642919 $ 20.947449 $ 18.375382
Select*Life Series 2000 ........................ $ 20.723572 $ 20.861089 $ 18.153329
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Putnam VT
Voyager Fund
Class IA Shares
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 95 $ 144 $ 68
Reinvested capital gains ......................... 7,611 3,517 1,472
Administrative expenses .......................... (863) (470) (284)
-------------- -------------- --------------
Net investment income (loss) and
capital gains ................................. 6,843 3,191 1,256
-------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 2,077 915 218
Increase (decrease) in unrealized appreciation
of investments .................................. 41,058 10,198 7,940
-------------- -------------- --------------
Net realized and unrealized gains (losses) ..... 43,135 11,113 8,158
-------------- -------------- --------------
Additions (reductions) from operations ......... 49,978 14,304 9,414
-------------- -------------- --------------
Policy Owners' transactions:
Net premium payments ............................. 22,760 22,816 20,897
Transfers between funds and/or fixed account ..... (2,189) (1,602) 169
Policy loans ..................................... (1,072) (428) (263)
Loan collateral interest crediting ............... 47 27 16
Surrenders ....................................... (2,679) (2,127) (969)
Death benefits ................................... (72) (170) (40)
Cost of insurance charges ........................ (5,408) (4,567) (3,626)
Death benefit guarantee charges .................. (124) (27) (12)
Monthly expense charges .......................... (947) (839) (683)
-------------- -------------- --------------
Additions (reductions) for policy
owners' transactions .......................... 10,316 13,083 15,489
-------------- -------------- --------------
Net additions (reductions) for the year ........ 60,294 27,387 24,903
Policy Owners' Equity, beginning of the year ...... 80,654 53,267 28,364
-------------- -------------- --------------
Policy Owners' Equity, end of the year ............ $ 140,948 $ 80,654 $ 53,267
============== ============== ==============
Units Outstanding, beginning of the year .......... 3,169,909.581 2,601,649.957 1,750,710.230
Units Outstanding, end of the year ................ 3,503,220.110 3,169,909.581 2,601,649.957
Net Asset Value per Unit:
Select*Life I .................................. $ 39.904396 $ 25.423734 $ 20.608071
Select*Life Series 2000 ........................ $ 40.259562 $ 25.445248 $ 20.460670
</TABLE>
The accompanying notes are an integral part of the financial statements.
64
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION:
ReliaStar Select*Life Variable Account (the "Account") is a separate account
of ReliaStar Life Insurance Company ("ReliaStar Life"), a wholly owned
subsidiary of ReliaStar Financial Corp. The Account is registered as a unit
investment trust under the Investment Company Act of 1940.
Payments received under the policies are allocated to sub-accounts of the
Account, each of which is invested in one of the following funds during the
year:
<TABLE>
<CAPTION>
The Alger American Fund Fidelity's VIP Fidelity's VIP II
- ----------------------------------- ------------------------------------- -------------------------------------
<S> <C> <C>
Growth Portfolio Equity-Income Portfolio -- Asset Manager Portfolio -- IC Shares
MidCap Growth Portfolio IC Shares Contrafund Portfolio -- IC Shares
Small Capitalization Portfolio Growth Portfolio -- IC Shares Index 500 Portfolio -- IC Shares
High Income Portfolio -- IC Shares Investment Grade Bond Portfolio --
Money Market Portfolio -- IC Shares IC Shares
Overseas Portfolio -- IC Shares
</TABLE>
<TABLE>
<CAPTION>
Janus Aspen Series Putnam Variable Trust
- ----------------------------------- --------------------------------------------------------------
<S> <C>
Aggressive Growth Portfolio Putnam VT Asia Pacific Growth Fund -- Class IA Shares
Growth Portfolio Putnam VT Diversified Income Fund -- Class IA Shares
International Growth Portfolio Putnam VT Growth and Income Fund -- Class IA Shares
Worldwide Growth Portfolio Putnam VT New Opportunities Fund -- Class IA Shares
Putnam VT Utilities Growth and Income Fund -- Class IA Shares
Putnam VT Voyager Fund -- Class IA Shares
</TABLE>
<TABLE>
<CAPTION>
Northstar Galaxy Trust OCC Accumulation Trust Neuberger Berman Advisers Management Trust
- ---------------------------------- ------------------------- ------------------------------------------
<S> <C> <C>
Emerging Growth Portfolio Equity Portfolio AMT Limited Maturity Bond Portfolio
Growth + Value Fund Portfolio Global Equity Portfolio AMT Partners Portfolio
International Value Portfolio Managed Portfolio AMT Socially Responsive Portfolio
Research Enhanced Index Small Capitalization
Portfolio Portfolio
High Yield Bond Portfolio
</TABLE>
Fred Alger Management, Inc. is the investment adviser for the three
portfolios of The Alger American Fund and is paid fees for its services by
The Alger American Fund Portfolios. Fidelity Management & Research Company is
the investment adviser for Fidelity Variable Insurance Products Fund (VIP)
and Variable Insurance Products Fund II (VIP II) and is paid for its services
by the VIP and VIP II Portfolios. Janus Capital Corporation is the investment
adviser for the four portfolios of Janus Aspen Series and is paid fees for
its services by the Janus Aspen Series Portfolios. Neuberger Berman
Management, Inc. is the investment manager for the three portfolios of the
Neuberger Berman Advisers Management Trust and is paid fees for its services
by the Neuberger Berman Advisers Management Trust Portfolios. Pilgrim
Advisors, Inc., an affiliate of ReliaStar Life, is the investment adviser for
the five Northstar Galaxy Trust Portfolios and is paid fees for its services
by the Portfolios. OpCap Advisors is the investment adviser for the four
Portfolios of the OCC Accumulation Trust and is paid fees for its services by
the OCC Accumulation Trust Funds. Putnam Investment Management, Inc. is the
investment adviser for Putnam Variable Trust and is paid fees for its
services by Putnam Variable Trust. Further information is contained in the
related funds' prospectuses.
Fidelity VIP II Contrafund Portfolio is a registered trademark of FMMR
Corporation.
On August 8, 1997, sub-accounts investing in Northstar Galaxy Trust Growth +
Value Portfolio, Northstar Galaxy Trust High Yield Bond Portfolio, Northstar
Galaxy Trust International Value Portfolio, The Alger American Fund, Janus
Aspen Series, OCC Accumulation Trust, and Neuberger Berman Advisers
Management Trust were made available to Select*Life policies.
65
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. ORGANIZATION, CONTINUED:
On July 29, 1998, Northstar Variable Trust Portfolio changed its name to
Northstar Galaxy Trust Portfolio (GT). Also on July 29, 1998, the Northstar
Variable Trust Growth Portfolio changed its name to Northstar Galaxy Trust
Growth + Value Portfolio.
On November 9, 1998, Northstar Galaxy Trust Income and Growth Portfolio
changed its name to Northstar Galaxy Trust Emerging Growth Portfolio.
On April 8, 1999, shareholders of the Northstar Galaxy Trust Multi-Sector
Bond Portfolio approved a proposal to modify the investment objective of the
Portfolio from the objective of seeking to maximize income consistent with
the preservation of capital to the objective of seeking capital appreciation.
Also on April 8, 1999, the name of the Portfolio was changed to Northstar
Galaxy Trust Research Enhanced Index Portfolio to better reflect the
Portfolio's investment objective.
On April 30, 1999, sub-accounts investing in Neuberger Berman Advisers
Management Trust Socially Responsive Portfolio were made available to
Select*Life policies.
On April 30, 1999, Fidelity VIP Overseas Portfolio, Fidelity VIP II Asset
Manager Portfolio, Putnam VT Asia Pacific Growth Fund, Putnam VT Diversified
Income Fund and Putnam VT Utilities Growth and Income Fund were closed to new
premium and transfers.
On November 1, 1999, Northstar Investment Management Corporation changed its
name to Pilgrim Advisors, Inc. Substantially the same personnel are
performing the investment advisory services on behalf of Pilgrim Advisors,
Inc.
2. SIGNIFICANT ACCOUNTING POLICIES:
SECURITIES VALUATION TRANSACTIONS AND RELATED INVESTMENT INCOME:
The market value of investments in the sub-accounts is based on the closing
net asset values of the fund shares held at the end of the year. Investment
transactions are accounted for on the trade date (date the order to purchase
or redeem is executed) and dividend income and capital gain distributions are
recorded on the ex-dividend date. Net realized gains and losses on
redemptions of shares of the funds are determined on the basis of specific
identification of fund share costs.
3. FEDERAL INCOME TAXES:
Under current tax law, the income, gains, and losses from the separate
account investments are not taxable to either the Account or ReliaStar Life.
4. POLICY CHARGES:
ReliaStar Life makes certain charges to Policy Owners' Variable Accumulation
Values in the Account in accordance with the terms of the policies. These
charges are set forth in the policies and may include: cost of insurance;
monthly expense charge; death benefit guarantee charge; optional insurance
benefit charges; and surrender charges and sales charge refunds.
66
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5. INVESTMENTS:
For the year ended December 31, 1999, investment activity in the funds was as
follows (in thousands):
<TABLE>
<CAPTION>
COST OF PROCEEDS
INVESTING FUND PURCHASES FROM SALES
-------------- ----------- -----------
<S> <C> <C>
The Alger American Fund:
Alger American Growth Portfolio ............................... $ 28,569 $ 3,075
Alger American MidCap Growth Portfolio ........................ 9,951 7,863
Alger American Small Capitalization Portfolio ................. 15,351 12,828
Fidelity's VIP:
VIP Equity-Income Portfolio -- IC Shares ...................... 19,740 20,037
VIP Growth Portfolio -- IC Shares ............................. 37,372 21,222
VIP High Income Portfolio -- IC Shares ........................ 23,375 23,508
VIP Money Market Portfolio -- IC Shares ....................... 177,526 158,196
VIP Overseas Portfolio -- IC Shares ........................... 6,357 16,691
Fidelity's VIP II:
VIP II Asset Manager Portfolio -- IC Shares ................... 4,113 13,044
VIP II Contrafund Portfolio -- IC Shares . .................... 19,043 1,766
VIP II Index 500 Portfolio -- IC Shares ....................... 37,056 11,859
VIP II Investment Grade Bond Portfolio -- IC Shares ........... 3,639 1,891
Janus Aspen Series:
Aggressive Growth Portfolio ................................... 22,586 8,081
Growth Portfolio .............................................. 17,332 7,362
International Growth Portfolio ................................ 42,313 39,019
Worldwide Growth Portfolio .................................... 42,215 21,553
Neuberger Berman Advisers Management Trust:
AMT Limited Maturity Bond Portfolio ........................... 2,001 571
AMT Partners Portfolio ........................................ 3,146 4,507
AMT Socially Responsive Portfolio ............................. 49 5
Northstar Galaxy Trust:
Northstar Emerging Growth Portfolio ........................... 8,949 4,588
Northstar Growth + Value Portfolio ............................ 6,517 2,840
Northstar International Value Portfolio ....................... 21,183 19,806
Northstar Research Enhanced Index Portfolio ................... 2,153 1,685
Northstar High Yield Bond Portfolio ........................... 578 258
OCC Accumulation Trust:
Equity Portfolio .............................................. 912 386
Global Equity Portfolio ....................................... 7,373 6,968
Managed Portfolio ............................................. 2,443 2,583
Small Cap Portfolio ........................................... 7,022 5,105
Putnam Variable Trust:
Putnam VT Asia Pacific Growth Fund -- Class IA Shares ......... 5,701 6,581
Putnam VT Diversified Income Fund -- Class IA Shares .......... 311 930
Putnam VT Growth and Income Fund -- Class IA Shares ........... 10,258 3,599
Putnam VT New Opportunities Fund -- Class IA Shares ........... 12,277 11,092
Putnam VT Utilities Growth and Income Fund -- Class IA
Shares ....................................................... 1,221 1,911
Putnam VT Voyager Fund -- Class IA Shares ..................... 27,999 10,843
-------- --------
Total ......................................................... $626,631 $452,253
======== ========
</TABLE>
67
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholder
ReliaStar Life Insurance Company
(A Wholly Owned Subsidiary of ReliaStar Financial Corp.)
Minneapolis, Minnesota
We have audited the accompanying consolidated balance sheets of ReliaStar Life
Insurance Company and Subsidiaries (the Company) as of December 31, 1999 and
1998, and the related statements of income, shareholder's equity and
comprehensive income, and cash flows for each of the two years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ReliaStar Life
Insurance Company and Subsidiaries as of December 31, 1999 and 1998 and the
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1999 in conformity with generally accepted
accounting principles.
Minneapolis, Minnesota
February 1, 2000
68
<PAGE>
CONSOLIDATED BALANCE SHEETS
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
<TABLE>
<CAPTION>
DECEMBER 31 (IN MILLIONS) 1999 1998
- ------------------------------------------------------------- ----------- -----------
<S> <C> <C>
ASSETS
Fixed Maturity Securities (Amortized Cost: 1999, $11,223.6;
1998, $11,106.5) .......................................... $ 11,009.3 $ 11,609.9
Equity Securities (Cost: 1999, $42.7; 1998, $48.1) ......... 42.7 49.1
Mortgage Loans on Real Estate .............................. 2,309.7 2,154.8
Real Estate and Leases ..................................... 20.6 53.3
Policy Loans ............................................... 739.9 702.3
Other Invested Assets ...................................... 88.1 113.5
Short-Term Investments ..................................... 136.0 116.0
- ------------------------------------------------------------- ----------- -----------
TOTAL INVESTMENTS .......................................... 14,346.3 14,798.9
Cash ....................................................... 33.2 --
Accounts and Notes Receivable .............................. 260.8 245.1
Reinsurance Receivable ..................................... 605.4 417.7
Deferred Policy Acquisition Costs .......................... 1,479.0 1,215.5
Present Value of Future Profits ............................ 434.6 422.5
Property and Equipment, Net ................................ 118.8 110.0
Accrued Investment Income .................................. 197.0 195.8
Other Assets ............................................... 282.0 272.0
Participation Fund Account Assets .......................... 310.9 311.6
Assets Held in Separate Accounts ........................... 6,196.7 4,310.6
- ------------------------------------------------------------- ----------- -----------
TOTAL ASSETS ............................................... $ 24,264.7 $ 22,299.7
============================================================= =========== ===========
LIABILITIES
Future Policy and Contract Benefits ........................ $ 13,671.4 $ 13,519.8
Pending Policy Claims ...................................... 584.2 431.8
Other Policyholder Funds ................................... 354.3 304.6
Notes and Mortgages Payable -- Unaffiliated ................ 8.0 8.2
Note Payable -- Parent ..................................... 100.0 100.0
Income Taxes ............................................... 117.3 225.4
Other Liabilities .......................................... 548.8 529.8
Participation Fund Account Liabilities ..................... 310.9 311.6
Liabilities Related to Separate Accounts ................... 6,191.2 4,305.1
- ------------------------------------------------------------- ----------- -----------
TOTAL LIABILITIES .......................................... 21,886.1 19,736.3
- ------------------------------------------------------------- ----------- -----------
SHAREHOLDER'S EQUITY
Common Stock (Shares Issued: 2.0) .......................... 2.5 2.5
Additional Paid-In Capital ................................. 1,057.4 1,057.4
Retained Earnings .......................................... 1,427.6 1,242.7
Accumulated Other Comprehensive Income (Loss) .............. (108.9) 260.8
- ------------------------------------------------------------- ----------- -----------
TOTAL SHAREHOLDER'S EQUITY ................................. 2,378.6 2,563.4
- ------------------------------------------------------------- ----------- -----------
TOTAL LIABILITES AND SHAREHOLDER'S EQUITY .................. $ 24,264.7 $ 22,299.7
============================================================= =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
69
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1999 1998
- ---------------------------------------------------------------- ---------- ----------
<S> <C> <C>
REVENUES
Premiums ...................................................... $ 1,186.6 $ 1,007.9
Net Investment Income ......................................... 1,102.4 1,109.8
Realized Investment Gains (Losses), Net ....................... (7.8) 17.3
Policy and Contract Charges ................................... 454.5 427.6
Other Income .................................................. 43.7 73.7
- ---------------------------------------------------------------- ---------- ----------
TOTAL ......................................................... 2,779.4 2,636.3
- ---------------------------------------------------------------- ---------- ----------
BENEFITS AND EXPENSES
Benefits to Policyholders ..................................... 1,712.7 1,549.4
Sales and Operating Expenses .................................. 434.3 473.9
Amortization of Deferred Policy Acquisition Costs and
Present Value of Future Profits .............................. 185.5 192.4
Interest Expense .............................................. 6.7 6.9
Dividends and Experience Refunds to Policyholders ............. 28.1 29.4
- ---------------------------------------------------------------- ---------- ----------
TOTAL ......................................................... 2,367.3 2,252.0
- ---------------------------------------------------------------- ---------- ----------
Income from Continuing Operations Before Income Taxes ......... 412.1 384.3
Income Tax Expense ............................................ 145.2 136.4
- ---------------------------------------------------------------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS ............................. 266.9 247.9
Loss from Discontinued Operations, Net of Tax ................. -- (7.2)
- ---------------------------------------------------------------- ---------- ----------
NET INCOME .................................................... $ 266.9 $ 240.7
================================================================ ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
70
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY AND
COMPREHENSIVE INCOME
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
<TABLE>
<CAPTION>
Shareholder's Equity Comprehensive Income
------------------------- ------------------------
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1999 1998 1999 1998
- -------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
COMMON STOCK
Beginning and End of Year ............ $ 2.5 $ 2.5
- --------------------------------------- --------- ---------
ADDITIONAL PAID-IN CAPITAL
Beginning and End of Year ............ 1,057.4 1,057.4
- --------------------------------------- --------- ---------
RETAINED EARNINGS
Beginning of Year .................... 1,242.7 1,090.0
Net Income ........................... 266.9 240.7 $ 266.9 $ 240.7
Dividends to Shareholder ............. (82.0) (88.0)
- --------------------------------------- --------- ---------
End of Year ......................... 1,427.6 1,242.7
- --------------------------------------- --------- ---------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Beginning of Year .................... 260.8 226.1
Change for the Year .................. (369.7) 34.7 (369.7) 34.7
- --------------------------------------- --------- ---------
End of Year ......................... (108.9) 260.8
- --------------------------------------- --------- ---------
COMPREHENSIVE INCOME (LOSS) .......... $ (102.8) $ 275.4
======================================= ======== ========
TOTAL SHAREHOLDER'S EQUITY ........... $ 2,378.6 $ 2,563.4
======================================= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
71
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1999 1998
- --------------------------------------------------------------------------- ---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income ............................................................... $ 266.9 $ 240.7
Adjustments to Reconcile Net Income to Net
Cash Provided by (Used in) Operating Activities
Interest Credited to Insurance Contracts .............................. 564.1 586.8
Future Policy Benefits ................................................ (699.0) (685.6)
Capitalization of Policy Acquisition Costs ............................ (290.9) (258.7)
Amortization of Deferred Policy Acquisition Costs and
Present Value of Future Profits ...................................... 185.5 192.4
Deferred Income Taxes ................................................. 48.1 15.5
Net Change in Receivables and Payables ................................ 62.0 14.0
Other Assets .......................................................... (11.2) 295.4
Realized Investment (Gains) Losses, Net ............................... 7.8 (17.3)
Other ................................................................. (24.4) (20.9)
- --------------------------------------------------------------------------- ---------- ----------
Net Cash Provided by Operating Activities ............................... 108.9 362.3
- --------------------------------------------------------------------------- ---------- ----------
INVESTING ACTIVITIES
Proceeds from Sales of Fixed Maturity Securities ......................... 951.3 535.8
Proceeds from Maturities or Repayment of Fixed Maturity Securities ....... 1,374.6 1,096.6
Cost of Fixed Maturity Securities Acquired ............................... (2,438.5) (2,062.9)
Sales (Purchases) of Equity Securities, Net .............................. 5.5 (27.4)
Proceeds of Mortgage Loans Sold, Matured or Repaid ....................... 340.7 654.4
Cost of Mortgage Loans Acquired .......................................... (497.5) (539.9)
Sales of Real Estate and Leases, Net ..................................... 41.4 23.7
Policy Loans Issued, Net ................................................. (37.6) (39.0)
Sales (Purchases) of Other Invested Assets, Net .......................... (8.3) 7.1
Sales (Purchases) of Short-Term Investments, Net ......................... (20.0) 14.3
- --------------------------------------------------------------------------- ---------- ----------
Net Cash Used in Investing Activities ................................... (288.4) (337.3)
- --------------------------------------------------------------------------- ---------- ----------
FINANCING ACTIVITIES
Deposits to Insurance Contracts .......................................... 1,678.0 1,634.9
Maturities and Withdrawals from Insurance Contracts ...................... (1,383.1) (1,350.9)
Increase in Notes and Mortgages Payable .................................. -- 24.0
Repayment of Notes and Mortgages Payable ................................. (.2) (268.5)
Dividends to Shareholder ................................................. (82.0) (88.0)
- --------------------------------------------------------------------------- ---------- ----------
Net Cash Provided by (Used in) Financing Activities ..................... 212.7 (48.5)
- --------------------------------------------------------------------------- ---------- ----------
Increase (Decrease) in Cash .............................................. 33.2 (23.5)
Cash at Beginning of Year ................................................ -- 23.5
- --------------------------------------------------------------------------- ---------- ----------
Cash at End of Year ...................................................... $ 33.2 $ --
=========================================================================== ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
72
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTE 1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
ReliaStar Life Insurance Company (ReliaStar Life or the Company) is principally
engaged in the business of providing life insurance and related financial
services products. The Company provides and distributes individual life
insurance and annuities; employee benefit products and services; retirement
plans and life and health reinsurance. The Company operates primarily in the
United States and, through its subsidiaries, is authorized to conduct business
in all 50 states.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries and exclude the effects of all material intercompany
transactions.
ReliaStar Life is a wholly owned subsidiary of ReliaStar Financial Corp.
(ReliaStar). ReliaStar Life's principal subsidiaries are Northern Life Insurance
Company (Northern), Security-Connecticut Life Insurance Company
(Security-Connecticut), ReliaStar Life Insurance Company of New York (RLNY) and
ReliaStar Reinsurance Group (UK), Ltd. Effective December 31, 1998, ReliaStar
United Services Life Insurance Company, an affiliate, merged with and into
ReliaStar Life.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVESTMENTS
Fixed maturity securities (bonds and redeemable preferred stocks) are classified
as available-for-sale and are carried at fair value.
Equity securities (common stocks and nonredeemable preferred stocks) are carried
at fair value.
Mortgage loans on real estate are carried at amortized cost less an impairment
allowance for estimated uncollectible amounts.
Investment real estate owned directly by the Company is carried at cost less
accumulated depreciation and allowances for estimated losses. Investments in
real estate joint ventures are accounted for using the equity method. Real
estate acquired through foreclosure is carried at the lower of fair value less
estimated costs to sell or cost.
Short-term investments are carried at amortized cost, which approximates fair
value.
Unrealized investment gains and losses on equity securities and fixed maturity
securities, net of related deferred policy acquisition costs (DAC), present
value of future profits (PVFP) and tax effects, are accounted for as a direct
increase or decrease to the accumulated other comprehensive income (loss)
component of shareholder's equity.
Realized investment gains and losses enter into the determination of net income.
Realized investment gains and losses on sales of securities are determined on
the specific identification method. Write-offs of investments that decline in
value below cost on other than a temporary basis and the change in the allowance
for mortgage loans and wholly owned real estate are included with realized
investment gains and losses in the Consolidated Statements of Income.
The Company records write-offs or allowances for its investments based upon an
evaluation of specific problem investments. The Company periodically reviews all
invested assets (including marketable bonds, private placements, mortgage loans
and real estate investments) to identify investments where the Company has
credit concerns. Investments with credit concerns include those the Company has
identified as problem investments, which are issues delinquent in a required
payment of principal or interest, issues in bankruptcy or foreclosure and
restructured or foreclosed assets. The Company also
73
<PAGE>
identifies investments as potential problem investments, which are investments
where the Company has serious doubts as to the ability of the borrowers to
comply with the present loan repayment terms.
INTEREST RATE SWAP AGREEMENTS
Interest rate swap agreements are used as hedges for asset/liability management
of adjustable rate and short-term invested assets. The Company does not enter
into any interest rate swap agreements for trading purposes. The interest rate
swap transactions involve the exchange of fixed and floating rate interest
payments without the exchange of underlying principal amounts and do not contain
other optional provisions. The Company utilizes the settlement method of
accounting for its interest rate swap agreements whereby the difference between
amounts paid and amounts received or accrued on interest rate swap agreements is
reflected in net investment income.
The characteristics (notional amount, maturity and payment dates) of the
interest rate swap agreements are similar to the characteristics of the
designated hedged assets. Interest rate swaps are carried at fair value, and
changes in fair value are recorded as a direct increase or decrease in the
accumulated other comprehensive income component of shareholder's equity. In the
event an interest rate swap agreement would cease to qualify for hedge
accounting, changes in fair value of the affected swap would be recorded as
income or expense. There were no terminations of interest rate swap agreements
during 1999 and 1998.
EQUITY INDEX CALL OPTIONS
Equity index call options are tied to the performance of the S&P 500 Index and
are used for asset/liability management of equity indexed annuity products. The
Company does not purchase options for trading purposes. The notional amounts and
other characteristics of the options correspond to the characteristics of
obligations to policyholders for deposits received on equity indexed annuities.
The change in the fair value of the call options approximates the change in the
corresponding equity indexed annuity account value. The call options are carried
at fair value, and changes in fair value are recorded as income or expense,
consistent with the equity indexed annuity products.
POLICY ACQUISITION COSTS
Those costs of acquiring new business, which vary with and are primarily related
to the production of new business, have been deferred to the extent that such
costs are deemed recoverable. Such costs include commissions, certain costs of
policy issuance and underwriting and certain variable agency expenses.
Costs deferred related to traditional life insurance products are amortized over
the premium paying period of the related policies, in proportion to the ratio of
annual premium revenues to total anticipated premium revenues. Such anticipated
premium revenues are estimated using the same assumptions used for computing
liabilities for future policy benefits.
Costs deferred related to universal life-type policies and investment contracts
are amortized over the lives of the policies, in relation to the present value
of estimated gross profits from mortality, investment, surrender and expense
margins.
PRESENT VALUE OF FUTURE PROFITS
The present value of future profits reflects the estimated fair value of
acquired insurance business in force and represents the portion of the
acquisition cost that was allocated to the value of future cash flows from
insurance contracts existing at the date of acquisition. Such value is the
present value of the actuarially determined projected net cash flows from the
acquired insurance contracts. PVFP is amortized over the lives of the acquired
insurance business in force in a manner consistent with amortization of policy
acquisition costs.
74
<PAGE>
An analysis of the PVFP asset account is presented below:
<TABLE>
<CAPTION>
(IN MILLIONS) 1999 1998
- ------------------------------------------------------ -------- --------
<S> <C> <C>
Balance, Beginning of Year .......................... $ 422.5 $ 480.0
Acquisition ......................................... -- (7.3)
Imputed Interest .................................... 26.9 31.0
Amortization ........................................ (77.5) (90.1)
Impact of Net Unrealized Investment Losses .......... 62.7 8.9
- ------------------------------------------------------ -------- --------
BALANCE, END OF YEAR ................................ $ 434.6 $ 422.5
====================================================== ======== ========
</TABLE>
Based on current conditions and assumptions as to future events on acquired
policies in force, the Company expects that the net amortization of the December
31, 1999, PVFP balance will be between 6% and 9% in each of the years 2000
through 2004. The interest rates used to determine the amount of imputed
interest on the unamortized PVFP balance ranged from 5% to 8%.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost, net of accumulated depreciation of
$104.6 million and $100.5 million at December 31, 1999 and 1998, respectively.
The Company provides for depreciation of property and equipment using
straight-line and accelerated methods over the estimated useful lives of the
assets. Buildings are generally depreciated over 35 to 50 years. Depreciation
expense for the years ending December 31, 1999 and 1998, totaled $4.7 million
and $6.0 million, respectively.
GOODWILL
Goodwill is the excess of the amount paid to acquire a company over the fair
value of the net assets acquired and is amortized on a straight-line basis over
40 years. The carrying value of goodwill is monitored for indicators of
impairment of value. No events or circumstances were identified which warrant
consideration of impairment or a revised estimate of useful lives.
PARTICIPATION FUND ACCOUNT
On January 3, 1989, the Commissioner of Commerce of the State of Minnesota
approved a Plan of Conversion and Reorganization (the Plan) which provided,
among other things, for the conversion of ReliaStar Life from a combined stock
and mutual life insurance company to a stock life insurance company.
The Plan provided for the establishment of a Participation Fund Account (PFA)
for the benefit of certain participating individual life insurance policies and
annuities issued by ReliaStar Life prior to the effective date of the Plan.
Under the terms of the PFA, the insurance liabilities and assets with respect to
such policies are segregated in the accounting records of ReliaStar Life to
assure the continuation of policyholder dividend practices. Assets and
liabilities of the PFA are presented in accordance with statutory accounting
practices. Earnings derived from the operation of the PFA inure solely to the
benefit of the policies covered by the PFA and no benefit will inure to the
Company. Accordingly, results of operations for the PFA are excluded from the
Company's Consolidated Statements of Income. In the event that the assets of the
PFA are insufficient to provide the contractual benefits guaranteed by the
affected policies, ReliaStar Life must provide such contractual benefits from
its general assets.
SEPARATE ACCOUNTS
The Company operates separate accounts. The assets and liabilities of the
separate accounts are primarily related to variable annuity, variable life and
401(k) contracts and represent policyholder-directed funds that are separately
administered. The assets (primarily investments) and liabilities (primarily to
contractholders) of each account are clearly identifiable and distinguishable
from other assets and liabilities of the Company. Assets are carried at fair
value. Revenues from these separate account contracts consist primarily of
charges for mortality risk and expenses, cost of insurance, contract
administration and surrender charges. Revenue for these products is recognized
when due.
FUTURE POLICY AND CONTRACT BENEFITS
Liabilities for future policy benefits for traditional life contracts are
calculated using the net level premium method and assumptions as to investment
yields, mortality, withdrawals and dividends. The assumptions are based on
projections of past experience and include provisions for possible unfavorable
deviation. These assumptions are made at the time the contract is issued or, for
purchased contracts, at the date of acquisition.
75
<PAGE>
Liabilities for future policy and contract benefits on universal life-type and
investment contracts are based on the policy account balance.
The liabilities for future policy and contract benefits for group disabled life
reserves and long-term disability reserves are based upon interest rate
assumptions and morbidity and termination rates from published tables, modified
for Company experience.
INCOME TAXES
The provision for income taxes includes amounts currently payable and deferred
income taxes resulting from the cumulative temporary differences in the assets
and liabilities determined on a tax return and financial statement basis.
The Company files a consolidated tax return with certain of its affiliates. The
method by which the total consolidated federal income tax for each entity is
allocated to each of the companies is subject to a written agreement approved by
the Company's Board of Directors. Allocation is based upon a separate return
calculation such that each company in the consolidated return pays the same tax
or receives the same refunds it would have paid or received had it consistently
filed separate federal income tax returns. Intercompany tax balances are settled
within a reasonable time after filing of the consolidated federal income tax
returns with the Internal Revenue Service.
PREMIUM REVENUE AND BENEFITS TO POLICYHOLDERS
RECOGNITION OF TRADITIONAL LIFE, GROUP AND ANNUITY PREMIUM REVENUE AND BENEFITS
TO POLICYHOLDERS -- Traditional life insurance products include those products
with fixed and guaranteed premiums and benefits and consist principally of term
and whole life insurance policies and certain annuities with life contingencies
(immediate annuities). Life insurance premiums and immediate annuity premiums
are recognized as premium revenue when due. Group insurance premiums are
recognized as premium revenue over the time period to which the premiums relate.
Benefits and expenses are associated with earned premiums so as to result in
recognition of profits over the life of the contracts. This association is
accomplished by means of the provision for liabilities for future policy
benefits and the amortization of DAC and PVFP.
RECOGNITION OF UNIVERSAL LIFE-TYPE CONTRACT REVENUE AND BENEFITS TO
POLICYHOLDERS -- Universal life-type policies are insurance contracts with terms
that are not fixed and guaranteed. The terms that may be changed could include
one or more of the amounts assessed the policyholder, premiums paid by the
policyholder or interest accrued to policyholder balances. Amounts received as
deposits to such contracts are not reported as premium revenues.
Revenues for universal life-type policies consist of charges assessed against
policy account values for deferred policy loading and the cost of insurance and
policy administration. Policy benefits and claims that are charged to expense
include interest credited to contracts and benefit claims incurred in the period
in excess of related policy account balances.
RECOGNITION OF INVESTMENT CONTRACT REVENUE AND BENEFITS TO POLICYHOLDERS --
Contracts that do not subject the Company to risks arising from policyholder
mortality or morbidity are referred to as investment contracts. Retirement plan
contracts, Guaranteed Investment Contracts (GICs) and certain deferred annuities
are considered investment contracts. Amounts received as deposits for such
contracts are not reported as premium revenues.
Revenues for investment products consist of investment income and charges
assessed against contract account values for policy administration. Contract
benefits that are charged to expense include benefit claims incurred in the
period in excess of related contract balances, and interest credited to contract
balances.
CHANGES IN ACCOUNTING PRINCIPLES
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS
OF LIABILITIES Effective for transactions occurring on or after January 1, 1998,
the Company adopted those provisions of Statement of Financial Accounting
Standards (SFAS) No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities," which were deferred by SFAS No. 127,
"Deferral of the Effective Date of Certain Provisions of FASB Statement No.
125." SFAS No. 125 requires a company to recognize the financial and servicing
assets it controls and the liabilities it has
76
<PAGE>
incurred and to derecognize financial assets when control has been surrendered
in accordance with the criteria provided in SFAS No. 125. The adoption of this
standard had no effect on the financial results of the Company.
REPORTING COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards for the reporting and
display of comprehensive income and its components in a company's full set of
financial statements. Comprehensive income encompasses all changes in
shareholder's equity from transactions and other events and circumstances from
nonowner sources. Adoption of this standard had no effect on the financial
results of the Company.
EMPLOYERS' DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS
Effective December 31, 1998, the Company adopted SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits." SFAS No. 132
requires new disclosures relating to a company's pension and other
postretirement benefit plans. Adoption of this standard had no effect on the
financial results of the Company.
ACCOUNTING FOR THE COST OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL
USE
Effective January 1, 1998, the Company adopted Statement of Position (SOP) No.
98-1, "Accounting for the Cost of Computer Software Developed or Obtained for
Internal Use." SOP No. 98-1 provides guidance on accounting for costs associated
with computer software developed or obtained for internal use. Adoption of this
standard did not have a significant effect on the financial results of the
Company.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to current year
presentation.
NOTE 2. INVESTMENTS
FIXED MATURITY SECURITIES
The amortized cost and fair value of investments in fixed maturity securities by
type of investment were as follows:
<TABLE>
<CAPTION>
Gross Unrealized
------------------------
Amortized Fair
DECEMBER 31, 1999 (IN MILLIONS) Cost Gains (Losses) Value
- -------------------------------------------- ------------- --------- ------------ -----------
<S> <C> <C> <C> <C>
United States Government and Government
Agencies and Authorities .................. $ 85.2 $ 1.6 $ (.4) $ 86.4
States, Municipalities and Political
Subdivisions .............................. 30.8 1.0 (1.2) 30.6
Foreign Governments ........................ 69.2 .5 (1.1) 68.6
Public Utilities ........................... 599.6 12.0 (8.4) 603.2
Corporate Securities ....................... 7,109.4 65.0 (198.6) 6,975.8
Mortgage-Backed/Structured Finance ......... 3,316.9 22.5 (105.9) 3,233.5
Redeemable Preferred Stock ................. 12.5 .2 (1.5) 11.2
- --------------------------------------------- ---------- ------- -------- ----------
TOTAL ...................................... $ 11,223.6 $ 102.8 $ (317.1) $ 11,009.3
============================================= ========== ======= ======== ==========
</TABLE>
<TABLE>
<CAPTION>
Gross Unrealized
-----------------------
Amortized Fair
DECEMBER 31, 1998 (IN MILLIONS) Cost Gains (Losses) Value
- -------------------------------------------- ------------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
United States Government and Government
Agencies and Authorities .................. $ 103.6 $ 11.5 -- $ 115.1
States, Municipalities and Political
Subdivisions .............................. 49.9 4.1 -- 54.0
Foreign Governments ........................ 88.5 8.9 -- 97.4
Public Utilities ........................... 643.0 56.6 $ (.2) 699.4
Corporate Securities ....................... 7,416.0 378.3 (47.6) 7,746.7
Mortgage-Backed/Structured Finance ......... 2,793.0 99.9 (7.7) 2,885.2
Redeemable Preferred Stock ................. 12.5 .3 (.7) 12.1
- --------------------------------------------- ---------- ------- ------- ----------
TOTAL ...................................... $ 11,106.5 $ 559.6 $ (56.2) $ 11,609.9
============================================= ========== ======= ======= ==========
</TABLE>
77
<PAGE>
The amortized cost and fair value of fixed maturity securities by contractual
maturity are shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Fair
DECEMBER 31, 1999 (IN MILLIONS) Cost Value
- -------------------------------------------------- ---------- ----------
<S> <C> <C>
Maturing in:
One Year or Less ............................... $ 416.1 $ 415.6
One to Five Years .............................. 3,456.8 3,444.6
Five to Ten Years .............................. 2,850.3 2,773.5
Ten Years or Later ............................. 1,183.5 1,142.1
Mortgage-Backed/Structured Finance .............. 3,316.9 3,233.5
- -------------------------------------------------- ---------- ----------
TOTAL ........................................... $ 11,223.6 $ 11,009.3
================================================== ========== ==========
</TABLE>
The fair values for the actively traded marketable bonds are determined based
upon the quoted market prices. The fair values for marketable bonds without an
active market are obtained through several commercial pricing services which
provide the estimated fair values. Fair values of privately placed bonds which
are not considered problems are determined using a matrix-based pricing model.
The model considers the current level of risk-free interest rates, current
corporate spreads, the credit quality of the issuer and cash flow
characteristics of the security. Using this data, the model generates estimated
market values which the Company considers reflective of the fair value of each
privately placed bond. Fair values for privately placed bonds which are
considered problems are determined through consideration of factors such as the
net worth of the borrower, the value of collateral, the capital structure of the
borrower, the presence of guarantees and the Company's evaluation of the
borrower's ability to compete in their relevant market.
At December 31, 1999, the largest industry concentration in the private
placement portfolio was mortgage-backed/structured finance, where 16.9% of the
portfolio was invested, and the largest industry concentration in the marketable
bond portfolio was mortgage-backed/structured finance, where 34.5% of the
portfolio was invested.
EQUITY SECURITIES
The cost and fair value of investments in equity securities were as follows:
<TABLE>
<CAPTION>
DECEMBER 31 (IN MILLIONS) 1999 1998
- -------------------------------------------------------- ------- -------
<S> <C> <C>
Cost .................................................. $ 42.7 $ 48.1
Gross Unrealized Gains ................................ 2.8 2.2
Gross Unrealized Losses ............................... (2.8) (1.2)
- -------------------------------------------------------- ------- -------
FAIR VALUE ............................................ $ 42.7 $ 49.1
======================================================== ======= =======
</TABLE>
MORTGAGE LOANS ON REAL ESTATE
Investments in mortgage loans on real estate were as follows:
<TABLE>
<CAPTION>
DECEMBER 31 (IN MILLIONS) 1999 1998
- ------------------------------------------------------------------------ ---------- ----------
<S> <C> <C>
Mortgage Loans, Non-Impaired .......................................... $ 2,305.8 $ 2,152.3
Mortgage Loans, Impaired .............................................. 13.7 13.0
- ------------------------------------------------------------------------ ---------- ----------
2,319.5 2,165.3
---------- ----------
Allowance for Credit Losses, Beginning of Year ........................ (10.5) (10.5)
Increases ............................................................ -- --
Decreases ............................................................ .7 --
- ------------------------------------------------------------------------ ---------- ----------
Allowances for Credit Losses, End of Year ............................. (9.8) (10.5)
- ------------------------------------------------------------------------ ---------- ----------
TOTAL ................................................................. $ 2,309.7 $ 2,154.8
======================================================================== ========== ==========
Average Investment in Impaired Mortgage Loans on Real Estate .......... $ 2.0 $ 1.6
======================================================================== ========== ==========
</TABLE>
The Company does not accrue interest income on impaired mortgage loans when the
likelihood of collection is doubtful, rather income is recognized for these
loans as payments are received. Interest
78
<PAGE>
income recognized on impaired mortgage loans during the years ended December 31,
1999 and 1998, was $1.1 and $.9 million, respectively.
At December 31, 1999, the largest geographic concentration of commercial
mortgage loans was in the Midwest region of the United States, where
approximately 36.0% of the commercial mortgage loan portfolio was invested.
INVESTMENT INCOME
Investment income summarized by type of investment was as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1999 1998
- ----------------------------------------------------- --------- ---------
<S> <C> <C>
Fixed Maturity Securities .......................... $ 871.3 $ 866.7
Equity Securities .................................. 3.6 2.1
Mortgage Loans on Real Estate ...................... 181.2 181.6
Real Estate and Leases ............................. 9.2 21.6
Policy Loans ....................................... 42.5 41.8
Other Invested Assets .............................. 9.0 12.8
Short-Term Investments ............................. 8.7 10.9
- ----------------------------------------------------- --------- ---------
Gross Investment Income ........................... 1,125.5 1,137.5
Investment Expenses ................................ 23.1 27.7
- ----------------------------------------------------- --------- ---------
NET INVESTMENT INCOME .............................. $ 1,102.4 $ 1,109.8
===================================================== ========= =========
</TABLE>
REALIZED INVESTMENT GAINS AND LOSSES
Net pretax realized investment gains (losses) were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1999 1998
- ------------------------------------------------------- ------- -------
<S> <C> <C>
Net Gains (Losses) on Sales
Fixed Maturity Securities
Gross Gains ....................................... $ 17.8 $ 26.3
Gross Losses ...................................... (15.2) (13.2)
Equity Securities
Gross Gains ....................................... .7 1.9
Gross Losses ...................................... (.5) (2.5)
Mortgage Loans on Real Estate ....................... .4 (0.2)
Real Estate and Leases .............................. 8.2 4.9
Other ............................................... 7.9 15.3
- ------------------------------------------------------- ------- -------
19.3 32.5
- ------------------------------------------------------- ------- -------
Provisions for Losses
Fixed Maturity Securities ........................... (13.6) (8.4)
Equity Securities ................................... -- --
Mortgage Loans on Real Estate ....................... (.1) --
Real Estate and Leases .............................. (.9) (2.4)
Other ............................................... (12.5) (4.4)
- ------------------------------------------------------- ------- -------
(27.1) (15.2)
- ------------------------------------------------------- ------- -------
PRETAX REALIZED INVESTMENT GAINS (LOSSES) ............ $ (7.8) $ 17.3
======================================================= ======= =======
</TABLE>
OTHER INVESTMENT INFORMATION
Invested assets which were nonincome producing (no income received for the 12
months preceding the balance sheet date) were as follows:
<TABLE>
<CAPTION>
DECEMBER 31 (IN MILLIONS) 1999 1998
- --------------------------------------------------------- ------ ------
<S> <C> <C>
Fixed Maturity Securities .............................. $ 4.5 $ 3.9
Mortgage Loans on Real Estate .......................... .2 1.5
Real Estate and Leases ................................. 2.9 7.1
Other Invested Assets .................................. 29.1 11.8
- --------------------------------------------------------- ------ ------
TOTAL .................................................. $ 36.7 $ 24.3
========================================================= ====== ======
</TABLE>
79
<PAGE>
Allowances for losses on investments are reflected on the Consolidated Balance
Sheets as a reduction of the related assets and were as follows:
<TABLE>
<CAPTION>
DECEMBER 31 (IN MILLIONS) 1999 1998
- ------------------------------------------------------------------------- ------ -------
<S> <C> <C>
Mortgage Loans on Real Estate .......................................... $ 9.8 $ 10.5
Real Estate and Leases ................................................. 4.7 9.0
Other Invested Assets .................................................. 8.5 6.0
- ------------------------------------------------------------------------- ------ -------
</TABLE>
Real estate assets acquired through foreclosure during the year ended December
31, 1999, totaled $1.3 million. There were none in 1998.
The components of net unrealized investment gains (losses) included in the
accumulated other comprehensive income (loss) component of shareholder's equity
are shown below:
<TABLE>
<CAPTION>
DECEMBER 31 (IN MILLIONS) 1999 1998
- ---------------------------------------------------------------------- -------- --------
<S> <C> <C>
Unrealized Investment Gains (Losses) ................................ $ (218.1) $ 529.8
DAC/PVFP Adjustment ................................................. 50.7 (128.6)
Deferred Income Taxes ............................................... 58.5 (140.4)
- ---------------------------------------------------------------------- -------- --------
TOTAL ............................................................... $ (108.9) $ 260.8
====================================================================== ======== ========
</TABLE>
The change in net unrealized investment gains and losses included in the change
in accumulated other comprehensive income (loss) consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1999 1998
- ----------------------------------------------------------------------- -------- -------
<S> <C> <C>
Unrealized Investment Gains (Losses) Arising During The Period(1) .... $ (484.0) $ 36.7
Reclassification Adjustments(2) ...................................... (1.8) (8.7)
Change in DAC/PVFP Adjustment(3) ..................................... 116.1 6.7
- ----------------------------------------------------------------------- -------- -------
TOTAL ................................................................ $ (369.7) $ 34.7
======================================================================= ======== =======
</TABLE>
(1) Net of income taxes totaling $(261.2) million and $17.0 million for 1999 and
1998, respectively.
(2) Net of income taxes totaling $(1.0) million and $(4.1) million for 1999 and
1998, respectively.
(3) Net of income taxes totaling $63.3 million and $3.5 million for 1999 and
1998, respectively.
NOTE 3. NOTES AND MORTGAGES PAYABLE
A summary of notes and mortgages payable is as follows:
<TABLE>
<CAPTION>
DECEMBER 31 (IN MILLIONS) 1999 1998
- --------------------------------------------------------------------------- ------- -------
<S> <C> <C>
Unaffiliated:
Current Portion ......................................................... $ 5.8 $ .2
Noncurrent Portion ...................................................... 2.2 8.0
- --------------------------------------------------------------------------- ------- -------
TOTAL UNAFFILIATED ....................................................... $ 8.0 $ 8.2
- --------------------------------------------------------------------------- ------- -------
NOTE PAYABLE TO PARENT ................................................... $ 100.0 $ 100.0
=========================================================================== ======= =======
</TABLE>
At December 31, 1999 and 1998, unaffiliated debt consisted primarily of mortgage
notes assumed in connection with certain real estate investments with interest
rates ranging from 6.2% to 9.6%.
Principal payments required in each of the next five years and thereafter are as
follows:
(IN MILLIONS)
- ---------------------------------------------------------------------------
2000 - $ 5.8 2003 - $ .1
2001 - $ 2.0 2004 - $ --
2002 - $ .1 2005 and thereafter - $ --
- ---------------------------------------------------------------------------
ReliaStar has loaned $100.0 million to ReliaStar Life under a surplus note. The
original note, dated April 1, 1989, was issued in connection with ReliaStar
Life's demutualization and was used to offset the surplus reduction related to
the cash distribution to the mutual policyholders in the demutualization. This
original note was replaced by a successor surplus note (the 1994 Note) dated
November 1, 1994. The 1994 Note provides, subject to the regulatory constraints
discussed below, that (i) it is a surplus note which will mature on September
15, 2003 with principal due at maturity, but payable without penalty, in whole
or in part before maturity; (ii) interest is at 65/8% payable semi-annually; and
(iii) in the event that
80
<PAGE>
ReliaStar Life is in default in the payment of any required interest or
principal, ReliaStar Life cannot pay cash dividends on its capital stock (all of
which is owned directly by ReliaStar). The 1994 Note further provides that there
may be no payment of interest or principal without the express approval of the
Minnesota Department of Commerce.
Interest paid on unaffiliated debt was $.4 million during both 1999 and 1998.
NOTE 4. INCOME TAXES
The income tax liability reported on the Consolidated Balance Sheets consisted
of the following:
<TABLE>
<CAPTION>
DECEMBER 31 (IN MILLIONS) 1999 1998
- ------------------------------------------------------- ------- -------
<S> <C> <C>
Current Income Taxes ................................. $ 59.4 $ 18.4
Deferred Income Taxes ................................ 57.9 207.0
- ------------------------------------------------------- ------- -------
TOTAL ................................................ $ 117.3 $ 225.4
======================================================= ======= =======
</TABLE>
Deferred income taxes reflect the impact for financial statement reporting
purposes of "temporary differences" between the financial statement carrying
amounts and tax bases of assets and liabilities. The "temporary differences"
that give rise to the net deferred tax liability relate to the following:
<TABLE>
<CAPTION>
DECEMBER 31 (IN MILLIONS) 1999 1998
- --------------------------------------------------- -------- --------
<S> <C> <C>
Future Policy and Contract Benefits .............. $ (381.2) $ (368.8)
Net Unrealized Investment Losses ................. (77.6) --
Investment Write-Offs and Allowances ............. (24.5) (34.4)
Pension and Postretirement Benefit Plans ......... (8.1) (7.8)
Employee Benefits ................................ (12.4) (12.9)
Other ............................................ (25.2) (53.2)
- --------------------------------------------------- -------- --------
Gross Deferred Tax Asset ........................ (529.0) (477.1)
- --------------------------------------------------- -------- --------
Deferred Policy Acquisition Costs ................ 370.2 326.6
Present Value of Future Profits .................. 141.2 157.3
Net Unrealized Investment Gains .................. -- 119.3
Property and Equipment ........................... 25.4 24.4
Real Estate Joint Ventures ....................... 10.0 15.5
Other ............................................ 40.1 41.0
- --------------------------------------------------- -------- --------
Gross Deferred Tax Liability .................... 586.9 684.1
- --------------------------------------------------- -------- --------
NET DEFERRED TAX LIABILITY ....................... $ 57.9 $ 207.0
=================================================== ======== ========
</TABLE>
The provision for income taxes reported on the Consolidated Statements of Income
consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1999 1998
- ------------------------------------------------------ ------- --------
<S> <C> <C>
Currently Payable ................................... $ 97.1 $ 120.9
Deferred ............................................ 48.1 15.5
- ------------------------------------------------------ ------- --------
TOTAL ............................................... $ 145.2 $ 136.4
====================================================== ======= ========
</TABLE>
The difference between the U.S. federal income tax rate and the consolidated
tax provision rate is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1999 1998
- ------------------------------------------------------- ---- ----
<S> <C> <C>
Statutory Tax Rate ................................... 35.0% 35.0%
Other ................................................ .2 .5
- ------------------------------------------------------- ---- ----
EFFECTIVE TAX RATE ................................... 35.2% 35.5%
======================================================= ==== ====
</TABLE>
Federal income tax regulations allowed certain special deductions for 1983 and
prior years which are accumulated in a memorandum tax account designated as
"policyholders' surplus." Generally, this policyholders' surplus account will
become subject to tax at the then current rates only if the accumulated balance
exceeds certain maximum limitations or if certain cash distributions are deemed
to be paid out of the account. At December 31, 1999, ReliaStar Life and its life
insurance subsidiaries have
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<PAGE>
accumulated approximately $51.0 million in their separate policyholders' surplus
accounts. Deferred taxes have not been provided on this temporary difference.
There have been no deferred taxes recorded for the unremitted equity in
subsidiaries as the earnings are considered to be permanently invested or will
be remitted only when tax effective to do so.
The Internal Revenue Service has completed its review of the Company's tax
return for all years through 1995.
Cash paid for federal income taxes was $52.2 million and $123.3 million for the
years ended December 31, 1999 and 1998, respectively.
NOTE 5. EMPLOYEE BENEFIT PLANS
SUCCESS SHARING PLAN AND ESOP
The Success Sharing Plan and ESOP (Success Sharing Plan) was designed to
increase employee ownership and reward employees when certain ReliaStar
performance objectives are met. Essentially all employees are eligible to
participate in the Success Sharing Plan. The Success Sharing Plan has both
qualified and nonqualified components. The nonqualified component is equal to
25% of the annual award and is paid in cash to employees. The qualified
component is equal to 75% of the annual award which is contributed to the ESOP
portion of the Success Sharing Plan.
In addition, the Success Sharing Plan has a 401(k) feature whereby participants
may elect to contribute a percentage of their eligible earnings to the plan.
Beginning in 1999, the Company matched participants' 401(k) contributions up to
6% of eligible earnings.
Costs charged to expense for the Success Sharing Plan were $7.2 million and $6.6
million for the years ended December 31, 1999 and 1998, respectively.
PENSION AND OTHER POSTRETIREMENT BENEFITS
The Company has funded and unfunded noncontributory defined benefit retirement
plans which provide benefits to employees upon retirement (Pension Plans).
Effective December 31, 1998, the Company's qualified defined benefit retirement
plan was amended to suspend the accrual of additional benefits for future
services. Eligible employees retain all of their accrued benefits as of December
31, 1998, which will be paid monthly at retirement according to the provisions
of the plan. Employees meeting certain age and service requirements will receive
certain transition benefits until retirement. A curtailment gain was recorded in
1998 to reflect the impact of this plan amendment and the impact of employee
reductions resulting from the transfer of certain accident and health
administrative operations to a third party.
The Company provides certain health care and life insurance benefits to retired
employees and their eligible dependents (Other Plans). The postretirement health
care plan is contributory, with retiree contribution levels adjusted annually;
the life insurance plan provides a flat amount of noncontributory coverage and
optional contributory coverage.
Net periodic expense or benefit for ReliaStar and its subsidiaries for pension
and other plans included the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1999 1998
- ------------------------------------------------------- ------- -------
PENSION PLANS
<S> <C> <C>
Service Cost ......................................... $ .3 $ 3.2
Interest Cost ........................................ 16.6 16.7
Expected Return on Plan Assets ....................... (22.0) (20.9)
Amortization of Prior Service Cost ................... .3 .8
Amortization of Transition Asset ..................... -- (.1)
Curtailment Gain ..................................... -- ( 3.7)
Settlement Loss ...................................... .3 --
Actuarial Loss ....................................... 1.5 1.6
- ------------------------------------------------------- ------- -------
NET BENEFIT .......................................... $ (3.0) $ (2.4)
======================================================= ======= =======
</TABLE>
82
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1999 1998
- ----------------------------------------------------------- ------ ------
<S> <C> <C>
OTHER PLANS
Service Cost ............................................. $ .6 $ .5
Interest Cost ............................................ .9 .7
Amortization of Prior Service Cost ....................... (1.4) (1.5)
Curtailment Gain ......................................... -- (1.7)
Actuarial Gain ........................................... -- (.1)
- ----------------------------------------------------------- ------ ------
NET EXPENSE (BENEFIT) .................................... $ .1 $ (2.1)
=========================================================== ====== ======
</TABLE>
The funded status of the plans and net amounts recognized in ReliaStar's
Consolidated Balance Sheets were as follows:
<TABLE>
<CAPTION>
Pension Plans Other Plans
----------------------- --------------------
(IN MILLIONS) 1999 1998 1999 1998
- ---------------------------------------------------- -------- -------- ------- -------
<S> <C> <C> <C> <C>
Benefit Obligations at Beginning of Year .......... $ 238.7 $ 237.1 $ 10.8 $ 10.9
Service Cost ...................................... .3 3.2 .6 .5
Interest Cost ..................................... 16.6 16.7 .9 .7
Actuarial (Gain) Loss ............................. (6.6) 14.9 1.8 (.2)
Benefits Paid ..................................... (15.1) (15.4) (.8) (.4)
Plan Amendments ................................... .1 2.0 -- --
Transfers ......................................... .7 -- -- --
Termination Cost .................................. -- 1.0 -- --
Settlement ........................................ (2.2) -- -- --
Curtailment ....................................... -- (20.8) -- (.7)
- ---------------------------------------------------- -------- -------- ------- -------
Benefit Obligations at End of Year ............... 232.5 238.7 13.3 10.8
- ---------------------------------------------------- -------- -------- ------- -------
Fair Value of Plan Assets
at Beginning of Year ............................. 251.7 229.1 -- --
Actual Return on Plan Assets ...................... 109.8 36.6 -- --
Employer Contributions ............................ 3.4 1.4 .8 .4
Participant Contributions ......................... -- -- .5 .5
Settlement ........................................ (2.2) -- -- --
Benefits Paid ..................................... (15.1) (15.4) (1.3) (.9)
- ---------------------------------------------------- -------- -------- ------- -------
Fair Value of Plan Assets at End of Year ......... 347.6 251.7 -- --
- ---------------------------------------------------- -------- -------- ------- -------
Funded Status ..................................... 115.1 13.0 (13.3) (10.8)
Unrecognized Net Gain ............................. (98.2) (2.2) -- (1.8)
Unrecognized Prior Service Cost ................... 3.3 3.6 (3.3) (4.7)
- ---------------------------------------------------- -------- -------- ------- -------
NET ASSET (LIABILITY) RECOGNIZED $ 20.2 $ 14.4 $ (16.6) $ (17.3)
==================================================== ======== ======== ======= =======
</TABLE>
The components of the amounts recognized in ReliaStar's Consolidated Balance
Sheets were as follows:
<TABLE>
<CAPTION>
Pension Plans Other Plans
--------------------- ---------------------
DECEMBER 31 (IN MILLIONS) 1999 1998 1999 1998
- ------------------------------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
Prepaid Benefit Cost .............. $ 33.8 $ 28.2 -- --
Accrued Benefit Liability ......... (20.1) (19.1) $ (16.6) $ (17.3)
Intangible Asset .................. 6.5 5.3 -- --
- ------------------------------------ ------- ------- ------- -------
NET ASSET (LIABILITY) RECOGNIZED $ 20.2 $ 14.4 $ (16.6) $ (17.3)
==================================== ======= ======= ======= =======
</TABLE>
The aggregate projected benefit obligation and aggregate accumulated benefit
obligation for the unfunded pension plans were $20.1 million and $20.1 million,
respectively, as of December 31, 1999; and $19.4 million and $19.1 million,
respectively, as of December 31, 1998. As of December 31, 1999 and 1998, pension
plan assets included 1,232,982 shares of ReliaStar common stock with a fair
value of $48.3 million and $56.9 million, respectively. The benefit obligations
for the pension and other postretirement plans were determined using assumed
discount rates of 7.5% and 7.0% as of January 1, 2000 and 1999, respectively. A
weighted-average long-term rate of compensation increase of 4.5% was used for
the pension benefit obligation. The assumed long-term rate of return on pension
plan assets was 10.5% in 1999 and 1998. The assumed health care cost trend rate
for 2000 and thereafter used in measuring the
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<PAGE>
postretirement health care benefit obligation was 5.0%. The assumed health care
cost trend rate has an effect on the amounts reported. For example, a
one-percentage-point increase in the rate would increase the 1999 total service
and interest cost by $.1 million and the post retirement health care benefit
obligation by $.5 million. A one-percentage-point decrease in the rate would
decrease the 1999 total service and interest cost by $.1 million and the post
retirement health care benefit obligation by $.5 million.
The above amounts are for ReliaStar and its subsidiaries as the Company's
portion is not determinable.
STOCK INCENTIVE PLAN
Officers and key employees of the Company participate in the stock incentive
plans of ReliaStar. ReliaStar applies Accounting Principles Board Opinion No. 25
and related interpretations in accounting for its plans. Accordingly, the
Company has recorded no compensation expense for its stock-based compensation
plans other than for restricted stock and performance-based awards. Had
compensation cost for ReliaStar's stock option plans been determined based upon
the fair value at the grant date for awards under these plans, consistent with
the optional accounting methodology prescribed under SFAS No. 123, ReliaStar's
net income would have been reduced by approximately $11.1 million and $8.1
million for the years ended December 31, 1999 and 1998, respectively. The
weighted average fair value per option granted during 1999 and 1998 was $10.54
and $11.74, respectively, on the date of grant using the Black-Scholes
option-pricing model with the following assumptions: annual dividend yield
ranging from 1.6% to 1.8%, volatility factors ranging from .1881 to .2693,
risk-free interest rates ranging from 5.2% to 6.2% and an expected life of 5.0
to 5.8 years.
NOTE 6. UNPAID ACCIDENT AND HEALTH CLAIMS
The change in the liability for unpaid accident and health claims and claim
adjustment expenses is summarized as follows:
<TABLE>
<CAPTION>
(IN MILLIONS) 1999 1998
- ------------------------------------------------------ -------- --------
<S> <C> <C>
Balance at January 1 ................................ $ 480.3 $ 387.0
Less Reinsurance Recoverables ....................... 180.9 120.2
- ------------------------------------------------------ -------- --------
Net Balance at January 1 ............................ 299.4 266.8
Incurred Related to:
Current Year ....................................... 286.0 204.4
Prior Years ........................................ 20.8 8.2
- ------------------------------------------------------ -------- --------
Total Incurred ...................................... 306.8 212.6
Paid Related to:
Current Year ....................................... 113.2 84.2
Prior Years ........................................ 130.9 95.8
- ------------------------------------------------------ -------- --------
Total Paid .......................................... 244.1 180.0
Net Balance at December 31 .......................... 362.1 299.4
Plus Reinsurance Recoverables ....................... 293.4 180.9
- ------------------------------------------------------ -------- --------
BALANCE AT DECEMBER 31 .............................. $ 655.5 $ 480.3
====================================================== ======== ========
</TABLE>
The liability for unpaid accident and health claims and claim adjustment
expenses is included in Future Policy and Contract Benefits on the Consolidated
Balance Sheets.
NOTE 7. SHAREHOLDER'S EQUITY
SHARE DATA
The authorized capital stock of the Company consists of 25,000,000 common shares
and 5,000,000 preferred shares, all with a par value of $1.25 per share.
2,000,000 common shares are issued and outstanding as of December 31, 1999 and
1998.
DIVIDEND RESTRICTIONS
ReliaStar Life's ability to pay cash dividends to ReliaStar is restricted by law
or subject to approval of the insurance regulatory authorities of Minnesota.
These authorities recognize only statutory accounting practices for determining
the ability of an insurer to pay dividends to its shareholders.
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<PAGE>
Under Minnesota insurance law regulating the payment of dividends by ReliaStar
Life, any such payment must be an amount deemed prudent by ReliaStar Life's
Board of Directors and, unless otherwise approved by the Commissioner of the
Minnesota Department of Commerce (the Commissioner), must be paid solely from
the adjusted earned surplus of ReliaStar Life. Adjusted earned surplus means the
earned surplus as determined in accordance with statutory accounting practices
(unassigned funds) less 25% of the amount of such earned surplus which is
attributable to unrealized capital gains. Further, without approval of the
Commissioner, ReliaStar Life may not pay in any calendar year any dividend
which, when combined with other dividends paid within the preceding 12 months,
exceeds the greater of (i) 10% of ReliaStar Life's statutory surplus at the
prior year-end or (ii) 100% of ReliaStar Life's statutory net gain from
operations (not including realized capital gains) for the prior calendar year.
For 2000, the amount of dividends which can be paid by ReliaStar Life without
Commissioner approval is $208.4 million.
STATUTORY SURPLUS AND NET INCOME
Net income of ReliaStar Life and its subsidiaries, as determined in accordance
with statutory accounting practices, was $191.9 million and $153.3 million for
1999 and 1998, respectively. ReliaStar Life's statutory capital and surplus was
$1,153.7 million and $1,063.4 million at December 31, 1999 and 1998,
respectively.
NOTE 8. REINSURANCE
The Company is a member of reinsurance associations established for the purpose
of ceding the excess of life insurance over retention limits. The Reinsurance
Division of ReliaStar Life assumes and cedes reinsurance on certain life and
health risks as its primary business.
Reinsurance contracts do no relieve the Company from its obligations to
policyholders. Failure of reinsurers to honor their obligations could result in
losses to the Company; consequently, allowances are established for amounts
deemed uncollectible. The amount of the allowance for uncollectible reinsurance
receivables was immaterial at December 31, 1999 and 1998. The Company evaluates
the financial condition of its reinsurers and monitors concentrations of credit
risk to minimize its exposure to significant losses from reinsurer insolvencies.
ReliaStar Life's retention limit is $1,000,000 per insurable life for individual
coverage, with lower retention limits at ReliaStar Life's subsidiaries. For
group coverage and reinsurance assumed, the retention is $500,000 per life with
per occurrence limitations, subject to certain maximums.
As of December 31, 1999, $47.9 billion of life insurance in force was ceded to
other companies. The Company had assumed $55.7 billion of life insurance in
force as of December 31, 1999. Included in these amounts are $50.9 billion of
reinsurance assumed pertaining to Federal Employees' Group Life Insurance and
Servicemans' Group Life Insurance. Also included in the above amounts are $4.8
billion of reinsurance assumed and $.9 billion of reinsurance ceded by the
Reinsurance Division of ReliaStar Life.
Premium amounts received for prospective reinsurance that meet conditions for
reinsurance accounting are recorded as unearned premium revenue and amortized
into earned premium ratably over the remaining reinsurance contract period.
The effect of reinsurance on premiums and recoveries was as follows:
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1999 1998
- ------------------------------------------------------ --------- ---------
Direct Premiums ..................................... $ 838.0 $ 780.0
Reinsurance Assumed ................................. 744.1 498.8
Reinsurance Ceded ................................... (395.5) (270.9)
- ------------------------------------------------------ --------- ---------
NET PREMIUMS ........................................ $ 1,186.6 $ 1,007.9
====================================================== ========= =========
REINSURANCE RECOVERIES .............................. $ 355.2 $ 218.7
====================================================== ========= =========
NOTE 9. RELATED PARTY TRANSACTIONS
The Company and ReliaStar have entered into agreements whereby ReliaStar and the
Company provide certain management, administrative, legal, and other services
for each other. The net amounts billed resulted in the Company making payments
of $33.3 million and $30.7 million to ReliaStar in 1999 and
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<PAGE>
1998, respectively. The net costs allocated to the Company under these
agreements may not be indicative of costs the Company might incur if these
services were not provided by ReliaStar. During 1999 and 1998, the Company paid
cash dividends of $82.0 million and $88.0 million, respectively, to ReliaStar.
NOTE 10. DISCONTINUED OPERATIONS AND OTHER
In December 1998, the Company completed the sale of its mortgage banking
subsidiary, ReliaStar Mortgage Corporation (RMC), for approximately $19 million
in cash. The results of RMC are presented as discontinued operations in the
Consolidated Statements of Income.
Revenues, income from operations and loss on disposal related to the former
mortgage banking subsidiary were as follows:
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1999 1998
- ------------------------------------------------------------ ------ -------
Revenues ................................................... -- $ 18.9
Income from Operations ..................................... -- .1
Loss on Disposal(1) ........................................ -- (7.3)
============================================================= ====== =======
(1) Includes a $2.8 million pretax loss from operations during the phase-out
period and is net of a tax benefit of $4.3 million.
During 1998, the Company approved a plan to consolidate its five individual life
insurance and annuity service center operations into one new center. This
consolidation is expected to be substantially complete by the end of the year
2000 and affects approximately 700 positions at five separate service center
operations. Estimated costs of $24.8 million (pre-tax) were recorded primarily
for employee-related termination and non-cancelable lease contracts costs
associated with vacated facilities. The remaining liability as of December 31,
1999, was $22.4 million and reflects payments of $2.4 million made during 1999.
The 1999 transition of annuity operations to the new center was completed as
originally scheduled.
NOTE 11. COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company is a defendant in a number of lawsuits arising out of the normal
course of its business. Some of the claims seek to be granted class action
status and many of the claims seek both compensatory and punitive damages. In
the opinion of management, the ultimate resolution of such litigation will not
have a material adverse impact to the financial position of the Company. It
should be noted, however, that a number of financial services companies have
been subjected to significant awards in connection with punitive damages claims
and the Company can make no assurances that it will not be subjected to such an
award.
The Company is a defendant in litigation in New York State court regarding an
alleged reinsurance contract. The plaintiff alleges damages in excess of $100
million. The Company believes that no contract exists and the suit is without
merit.
JOINT GROUP LIFE AND ANNUITY CONTRACTS
ReliaStar Life has issued certain participating group annuity and group life
insurance contracts jointly with another insurance company. ReliaStar Life has
entered into an arrangement with this insurer whereby ReliaStar Life will
gradually transfer its liabilities (approximately $144 million at December 31,
1999) to the other insurer over a ten-year period which commenced in 1993. The
terms of the arrangement specify the interest rate on the liabilities and
provide for a transfer of assets and liabilities scheduled in a manner
consistent with the expected cash flows of the assets allocated to support the
liabilities. A contingent liability exists with respect to the joint obligor's
portion of the contractual liabilities attributable to contributions received
prior to July 1, 1993 (approximately $653 million at December 31, 1999) in the
event the joint obligor is unable to meet its obligations.
FINANCIAL INSTRUMENTS
The Company is a party to financial instruments with on and off-balance-sheet
risk in the normal course of business to reduce its exposure to fluctuations in
interest rates and equity prices. These financial instruments include
commitments to extend credit, financial guarantees, futures contracts, interest
rate
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<PAGE>
swaps, interest rate caps and equity indexed call options. Those instruments
involve, to varying degrees, elements of credit, interest rate, equity price, or
liquidity risk in excess of the amount recognized in the Consolidated Balance
Sheets.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
financial guarantees written is represented by the contractual amount of those
instruments. The Company uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments. For
interest rate swap and interest rate cap transactions, the contract or notional
amounts do not represent exposure to credit loss. For swaps, caps and equity
indexed call options, the Company's exposure to credit loss is limited to those
financial instruments where the Company has an unrealized gain.
Unless otherwise noted, the Company does not require collateral or other
security to support financial instruments with credit risk.
DECEMBER 31 (IN MILLIONS) 1999 1998
- ------------------------------------------------------- ------- --------
CONTRACT OR NOTIONAL AMOUNT
Financial Instruments Whose Contract
Amounts Represent Credit Risk
Commitments to Extend Credit ........................ $ 42.6 $ 101.0
Financial Guarantees ................................ 28.5 28.8
Financial Instruments Whose Notional
or Contract Amounts Exceed the Amount
of Credit Risk
Interest Rate Swap Agreements ....................... 790.5 897.5
Interest Rate Cap Agreements ........................ 510.0 510.0
Equity Indexed Call Options ......................... 55.6 28.7
- ------------------------------------------------------- ------- --------
COMMITMENTS TO EXTEND CREDIT -- Commitments to extend credit are legally binding
agreements to lend to a customer. Commitments generally have fixed expiration
dates or other termination clauses and may require payment of a fee. They
generally may be terminated by the Company in the event of deterioration in the
financial condition of the borrower. Since some of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future liquidity requirements. The Company evaluates each
customer's creditworthiness on a case-by-case basis.
FINANCIAL GUARANTEES -- Financial guarantees are conditional commitments issued
by the Company guaranteeing the performance of the borrower to a third party.
Those guarantees are primarily issued to support public and private commercial
mortgage borrowing arrangements. The credit risk involved is essentially the
same as that involved in issuing commercial mortgage loans.
ReliaStar Life is a partner in six real estate joint ventures where it has
guaranteed the repayment of loans of the partnership. As of December 31, 1999,
ReliaStar Life had guaranteed repayment of $28.5 million of such loans including
the portion allocable to the PFA. If any payment were made under these
guarantees, ReliaStar Life would be allowed to make a claim for repayment from
the joint venture, foreclose on the assets of the joint venture, including its
real estate investment and, in certain instances, make a claim against the joint
venture's general partner.
For certain of these partnerships, ReliaStar Life has made capital contributions
from time to time to provide the partnerships with sufficient cash to meet its
obligations, including operating expenses, tenant improvements and debt service.
Capital contributions during 1999 and 1998 were insignificant. Further capital
contributions may be required in future periods for certain of the joint
ventures. The Company cannot predict the amount of such future contributions.
INTEREST RATE SWAP AGREEMENTS -- The Company enters into interest rate swap
agreements to manage interest rate exposure. The primary reason for the interest
rate swap agreements is to extend the duration of adjustable rate investments.
Interest rate swap transactions generally involve the exchange of fixed and
floating rate interest payment obligations without the exchange of the
underlying principal amounts. Changes in market interest rates impact income
from adjustable rate investments and have an opposite (and approximately
offsetting) effect on the reported income from the swap portfolio. The risks
under interest rate swap agreements are generally similar to those of futures
contracts. Notional
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<PAGE>
principal amounts are often used to express the volume of these transactions but
do not represent the much smaller amounts potentially subject to credit risk.
The amount subject to credit risk is approximately equal to the unrealized gain
on the agreements. At December 31, 1999, there was no unrealized gain on the
agreements.
INTEREST RATE CAP AGREEMENTS -- The Company has entered into interest rate cap
agreements as a hedge against the effects of rising interest rates on the
invested assets supporting a portfolio of single premium deferred annuity
contracts. Notional principal amounts are often used to express the volume of
these transactions but do not represent the much smaller amounts potentially
subject to credit risk. The amount subject to credit risk is approximately equal
to the unrealized gain on the agreements which was approximately $.1 million at
December 31, 1999.
EQUITY INDEXED CALL OPTIONS -- The Company holds certain call options indexed to
the performance of the S&P 500 Index as part of its asset/liability management
strategy for its equity indexed annuity products. The Company held 50 call
options with a notional amount of $55.6 million and an estimated fair value of
$19.6 million as of December 31, 1999.
FUTURES CONTRACTS -- Futures contracts are contracts for delayed delivery of
securities or money market instruments in which the seller agrees to make
delivery at a specified future date of a specified instrument, at a specified
price or yield. These contracts are entered into to manage interest rate risk as
part of the Company's asset and liability management. Risks arise from the
movements in securities values and interest rates.
During 1997, the Company closed out of all of its futures contracts and
immediately entered into zero coupon interest rate swaps. The Company has not
entered into any new future contracts since 1997. As of December 31, 1999, the
remaining deferred gain on the closed futures contracts was approximately $17
million, which is being amortized into income over the life of the liabilities
whose cash flows they supported.
LEASES
The Company has operating leases for office space and certain computer
processing and other equipment. Rental expense for these items was $18.2 million
and $15.3 million for 1999 and 1998, respectively.
Future minimum aggregate rental commitments at December 31, 1999 for operating
leases were as follows:
(IN MILLIONS)
- --------------------------------------------------------------------------------
2000 - $ 12.0 2003 - $ 7.5
2001 - $ 11.3 2004 - $ 7.5
2002 - $ 8.8 2005 and thereafter - $ 27.1
- --------------------------------------------------------------------------------
NOTE 12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures are made in accordance with the requirements of SFAS
No. 107, "Disclosures about Fair Value of Financial Instruments." SFAS No. 107
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate that value. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. In that regard, the
derived fair value estimates, in many cases, could not be realized in immediate
settlement of the instrument.
SFAS No. 107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. Accordingly, the aggregate fair
value amounts presented do not represent the underlying value of the Company.
The fair value estimates presented herein are based on pertinent information
available to Management as of December 31, 1999 and 1998, respectively. Although
Management is not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since those dates;
therefore, current estimates of fair value may differ significantly from the
amounts presented herein.
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<PAGE>
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
FIXED MATURITY SECURITIES -- The estimated fair value disclosures for fixed
maturity securities satisfy the fair value disclosure requirements of SFAS No.
107 (see Note 2).
EQUITY SECURITIES -- Fair value equals carrying value as these securities are
carried at quoted market value.
MORTGAGE LOANS ON REAL ESTATE -- The fair values for mortgage loans on real
estate are estimated using discounted cash flow analyses and rates currently
being offered in the marketplace for similar loans to borrowers with similar
credit ratings. Loans with similar characteristics are aggregated for purposes
of the calculations.
CASH, SHORT-TERM INVESTMENTS AND POLICY LOANS -- The carrying amounts for these
assets approximate the assets' fair values.
OTHER FINANCIAL INSTRUMENTS REPORTED AS ASSETS -- The carrying amounts for these
financial instruments (primarily premiums and other accounts receivable and
accrued investment income) approximate those assets' fair values.
INVESTMENT CONTRACT LIABILITIES -- The fair value for deferred annuities was
estimated to be the amount payable on demand at the reporting date, as those
investment contracts have no defined maturity and are similar to a deposit
liability. The amount payable at the reporting date was calculated as the
account balance less applicable surrender charges.
The fair value for GICs was estimated using discounted cash flow analyses. The
discount rate used was based upon current industry offering rates on GICs of
similar durations.
The fair values for supplementary contracts without life contingencies and
immediate annuities were estimated using discounted cash flow analyses. The
discount rate was based upon treasury rates plus a pricing margin.
The carrying amounts reported for other investment contracts, which includes
participating pension contracts and retirement plan deposits, approximate those
liabilities' fair value.
CLAIM AND OTHER DEPOSIT FUNDS -- The carrying amounts for claim and other
deposit funds approximate the liabilities' fair value.
NOTES AND MORTGAGES PAYABLE -- For debt obligations, discounted cash flow
analyses were used. The discount rate was based upon the Company's estimated
current incremental borrowing rates.
OTHER FINANCIAL INSTRUMENTS REPORTED AS LIABILITIES -- The carrying amounts for
other financial instruments (primarily normal payables of a short-term nature)
approximate those liabilities' fair values.
FINANCIAL GUARANTEES -- The fair values for financial guarantees were estimated
using discounted cash flow analyses based upon the expected future net amounts
to be expended. The estimated net amounts to be expended were determined based
on projected cash flows and a valuation of the underlying collateral.
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<PAGE>
The carrying amounts and estimated fair values of the Company's financial
instruments were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------------- -------------------------------
Carrying Fair Carrying Fair
DECEMBER 31 (IN MILLIONS) Amount Value Amount Value
- ------------------------------------------ -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
FINANCIAL INSTRUMENTS RECORDED AS ASSETS
Fixed Maturity Securities ............... $ 11,009.3 $ 11,009.3 $ 11,609.9 $ 11,609.9
Equity Securities ....................... 42.7 42.7 49.1 49.1
Mortgage Loans on Real Estate ...........
Commercial ............................ 1,868.5 1,854.7 1,726.8 1,841.8
Residential and Other ................. 441.2 439.7 428.0 436.7
Policy Loans ............................ 739.9 739.9 702.3 702.3
Cash and Short-Term Investments ......... 169.2 169.2 113.5 113.5
Other Financial Instruments Recorded
as Assets .............................. 493.7 493.7 460.4 460.4
FINANCIAL INSTRUMENTS RECORDED
AS LIABILITIES
Investment Contracts
Deferred Annuities .................... (7,849.0) (7,460.8) (7,784.5) (7,366.3)
GICs .................................. (79.1) (96.8) (70.3) (98.2)
Supplementary Contracts and Immediate
Annuities ............................ (395.9) (394.3) (414.8) (416.5)
Other Investment Contracts ............ (311.6) (311.6) (396.4) (396.4)
Claim and Other Deposit Funds ........... (127.1) (127.1) (154.4) (154.4)
Notes and Mortgages Payable ............. (8.0) (8.4) (7.6) (8.1)
Other Financial Instruments Recorded
as Liabilities ......................... (407.7) (407.7) (411.8) (411.8)
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
Financial Guarantees .................... -- (2.1) -- (2.1)
- ------------------------------------------- ----------- ----------- ----------- -----------
</TABLE>
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from offering
for sale at one time the Company's holdings of a particular financial
instrument. Because no market exists for a significant portion of the Company's
financial instruments, fair value estimates are based on judgments regarding
future expected loss experience, current economic conditions, risk
characteristics of various financial instruments and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on and off-balance sheet financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a significant effect on
fair value estimates and have not been considered in the estimates.
90
<PAGE>
APPENDIX A
THE FIXED ACCOUNT
The Fixed Account consists of all of our assets other than those in our
separate accounts. We have complete ownership and control of all of the assets
of the Fixed Account.
Because of exemptions and exclusions contained in the Securities Act of
1933 and the Investment Company Act of 1940, the Fixed Account has not been
registered under these acts. Neither the Fixed Account nor any interest in it is
subject to the provisions of these acts and as a result the SEC has not reviewed
the disclosures in this Prospectus relating to the Fixed Account. However,
disclosures relating to the Fixed Account are subject to generally applicable
provisions of the federal securities laws relating to the accuracy and
completeness of statements made in prospectuses.
We guarantee both principal and interest on amounts credited to the Fixed
Account. We credit interest at an effective annual rate of at least 4%,
independent of the investment experience of the Fixed Account. From time to
time, we may guarantee interest at a rate higher than 4%.
ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE FIXED ACCOUNT IN EXCESS
OF 4% PER YEAR WILL BE DETERMINED AT OUR SOLE DISCRETION. YOU ASSUME THE RISK
THAT INTEREST CREDITED TO THE FIXED ACCOUNT MAY NOT EXCEED THE MINIMUM GUARANTEE
OF 4% FOR A GIVEN YEAR.
We do not use a specific formula for determining excess interest credits.
However, we consider the following:
* General economic trends,
* Rates of return currently available on our investments,
* Rates of return anticipated in our investments, regulatory and tax
factors, and
* Competitive factors.
We are not aware of any statutory limitations to the maximum amount of
interest we may credit and our Board of Directors has not set any limitations.
The Fixed Accumulation Value of the Policy is the sum of the Net Premiums
credited to the Fixed Account. It is increased by transfers and Loan Amounts
from the Variable Account, and interest credits. It is decreased by Monthly
Deductions and partial withdrawals taken from the Fixed Account and transfers to
the Variable Account. The Fixed Accumulation Value will be calculated at least
monthly on the monthly anniversary date.
You may transfer all or part of your Fixed Accumulation Value to the
Sub-Accounts of the Variable Account, subject to the following transfer
limitations:
* The request to transfer must be postmarked no more than 30 days before
the Policy Anniversary and no later than 30 days after the Policy
Anniversary. Only one transfer is allowed during this period.
* The Fixed Accumulation Value after the transfer must be at least equal
to the Loan Amount.
* No more than 50% of the Fixed Accumulation Value (minus any Loan
Amount) may be transferred unless the balance, after the transfer,
would be less than $1,000. If the balance would be less than $1,000,
the full Fixed Accumulation Value (minus any Loan Amount) may be
transferred.
* You must transfer at least:
-- $500, or
-- the total Fixed Accumulation Value (minus any Loan Amount) if
less than $500.
We make the Monthly Deduction from your Fixed Accumulation Value in
proportion to the total Accumulation Value of the Policy.
The Surrender Charge described in the Prospectus applies to the total
Accumulation Value, which includes the Fixed Accumulation Value. If the Owner
surrenders the Policy for its Cash Surrender Value, the Fixed Accumulation Value
will be reduced by any applicable Surrender Charge, any Loan Amount and unpaid
Monthly Deductions applicable to the Fixed Account.
A-1
<PAGE>
APPENDIX B
CALCULATION OF ACCUMULATION VALUE
The Accumulation Value of the Policy is equal to the sum of the Variable
Accumulation Value plus the Fixed Accumulation Value.
VARIABLE ACCUMULATION VALUE
The Variable Accumulation Value is the total of your values in each
Sub-Account. The value for each Sub-Account is equal to:
1 multiplied by 2, where:
1
Is your current number of Accumulation Units (described below).
2
Is the current Unit Value (described below).
The Variable Accumulation Value will vary from Valuation Date to Valuation
Date (described below) reflecting changes in 1 and 2 above.
ACCUMULATION UNITS. When transactions are made which affect the Variable
Accumulation Value, dollar amounts are converted to Accumulation Units. The
number of Accumulation Units for a transaction is found by dividing the dollar
amount of the transaction by the current Unit Value.
The number of Accumulation Units for a Sub-Account increases when:
* Net Premiums are credited to that Sub-Account; or
* Transfers from the Fixed Account or other Sub-Accounts are credited to
that Sub-Account.
The number of Accumulation Units for a Sub-Account decreases when:
* You take out a Policy loan from that Sub-Account;
* You take a partial withdrawal from that Sub-Account;
* We take a portion of the Monthly Deduction from that Sub-Account; or
* Transfers are made from that Sub-Account to the Fixed Account or other
Sub-Accounts.
UNIT VALUE. The Unit Value for a Sub-Account on any Valuation Date is equal
to the previous Unit Value times the Net Investment Factor for that Sub-Account
(described below) for the Valuation Period (described below) ending on that
Valuation Date. The Unit Value was initially set at $10 when the Sub-Account
first purchased Fund shares.
NET INVESTMENT FACTOR. The Net Investment Factor is a number that reflects
charges to the Policy and the investment performance during a Valuation Period
of the Fund in which a Sub-Account is invested. If the Net Investment Factor is
greater than one, the Unit Value is increased. If the Net Investment Factor is
less than one, the Unit Value is decreased. The Net Investment Factor for a
Sub-Account is determined by dividing 1 by 2.
(1 \ 2), where:
1
Is the result of:
* The net asset value per share of the Fund shares in which the
Sub-Account invests, determined at the end of the current Valuation
Period;
* Plus the per share amount of any dividend or capital gain
distributions made on the Fund shares in which the Sub-Account invests
during the current Valuation Period;
* Plus or minus a per share charge or credit for any taxes reserved
which we determine has resulted from the investment operations of the
Sub-Account and to be applicable to the Policy.
B-1
<PAGE>
2
Is the result of:
* The net asset value per share of the Fund shares held in the
Sub-Account, determined at the end of the last prior Valuation Period;
* Plus or minus a per share charge or credit for any taxes reserved for
during the last prior Valuation Period which we determine resulted
from the investment operations of the Sub-Account and was applicable
to the Policy.
VALUATION DATE; VALUATION PERIOD. A Valuation Date is each day the New York
Stock Exchange is open for trading. A Valuation Period is the period between two
successive Valuation Dates, commencing at the close of business of a Valuation
Date and ending at the close of business on the next Valuation Date.
FIXED ACCUMULATION VALUE
The Fixed Accumulation Value on the Policy Date is your Net Premium
credited to the Fixed Account on that date minus the Monthly Deduction
applicable to the Fixed Accumulation Value for the first Policy Month.
After the Policy Date, the Fixed Accumulation Value is calculated as:
1 + 2 + 3 + 4 - 5 - 6, where:
1
Is the Fixed Accumulation Value on the preceding Monthly Anniversary, plus
interest from the Monthly Anniversary to the date of the calculation.
2
Is the total of your Net Premiums credited to the Fixed Account since the
preceding Monthly Anniversary, plus interest from the date premiums are credited
to the date of the calculation.
3
Is the total of your transfers from the Variable Account to the Fixed Account
since the preceding Monthly Anniversary, plus interest from the date of transfer
to the date of the calculation.
4
Is the total of your Loan Amounts transferred from the Variable Account since
the preceding Monthly Anniversary.
5
Is the total of your transfers to the Variable Account from the Fixed Account
since the preceding Monthly Anniversary, plus interest from the date of transfer
to the date of the calculation.
6
Is the total of your partial withdrawals from the Fixed Account since the
preceding Monthly Anniversary, plus interest from the date of withdrawal to the
date of the calculation.
If the date of the calculation is a Monthly Anniversary, we also reduce the
Fixed Accumulation Value by the applicable Monthly Deduction for the Policy
Month following the Monthly Anniversary.
The minimum interest rate applied in the calculation of the Fixed
Accumulation Value is an effective annual rate of 4%. Interest in excess of the
minimum rate may be applied in the calculation of your Fixed Accumulation Value
in a manner which our Board of Directors determines.
B-2
<PAGE>
APPENDIX C
MAXIMUM CONTINGENT DEFERRED SALES CHARGES
PER $1,000 OF FACE AMOUNT
<TABLE>
<CAPTION>
CHARGE PER $1,000 CHARGE PER $1,000 OF FACE
OF FACE AMOUNT (INITIAL FACE
AMOUNT (INITIAL FACE AMOUNT OR
AMOUNT OR AMOUNT OF AMOUNT OF REQUESTED
INSURED'S AGE AT POLICY INCREASE) REQUESTED INSURED'S AGE AT POLICY INCREASE)
DATE OR EFFECTIVE DATE OF ----------------------- DATE OR EFFECTIVE DATE OF -------------------------
INCREASE, AS APPROPRIATE MALE FEMALE INCREASE, AS APPROPRIATE MALE FEMALE
- --------------------------- ---------- ---------- -------------------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
0 $ 1.00 $ 1.00 41 $ 19.60 $ 16.10
1 1.10 1.00 42 20.40 17.20
2 1.20 1.00 43 21.30 18.00
3 1.30 1.00 44 22.10 18.90
4 1.40 1.00 45 23.00 19.50
5 1.50 1.00 46 23.90 20.60
6 1.60 1.00 47 24.90 21.70
7 1.80 1.00 48 25.90 22.50
8 2.00 1.00 49 27.00 23.30
9 2.20 1.20 50 28.20 24.20
10 2.50 1.40 51 29.40 25.20
11 2.80 1.60 52 30.70 26.20
12 3.00 1.80 53 32.10 27.20
13 3.20 2.00 54 33.50 28.00
14 3.50 2.20 55 35.00 29.50
15 3.80 2.40 56 36.70 30.70
16 4.00 2.60 57 38.40 32.00
17 4.20 2.80 58 40.20 33.40
18 4.50 3.00 59 42.20 34.80
19 4.80 3.20 60 44.30 36.40
20 5.00 3.50 61 45.60 38.10
21 5.30 3.90 62 45.40 40.00
22 5.90 4.20 63 45.30 41.90
23 6.30 4.50 64 44.90 43.90
24 6.90 5.00 65 44.60 45.50
25 7.50 5.50 66 44.30 45.00
26 7.80 6.10 67 43.90 44.60
27 8.40 6.70 68 43.60 44.10
28 8.80 7.30 69 43.30 43.70
29 9.40 7.70 70 43.10 43.30
30 10.00 8.00 71 42.80 42.90
31 10.80 8.60 72 42.60 42.50
32 11.50 9.20 73 42.40 42.10
33 12.30 9.80 74 42.20 41.70
34 13.10 10.40 75 41.90 41.20
35 14.00 11.00 76 41.60 40.80
36 14.90 11.60 77 41.30 40.40
37 15.70 12.20 78 41.00 39.90
38 16.80 12.80 79 40.70 39.50
39 17.90 13.90 80 40.50 39.10
40 19.00 15.00
</TABLE>
C-1
<PAGE>
APPENDIX D
SURRENDER CHARGE GUIDELINE PER $1,000 OF FACE AMOUNT
The following table provides the Surrender Charge Guideline factors that
are used in determining the Sales Charge Refund during the first two Policy
Years or the first two years following a requested increase in Face Amount (see
section entitled "Sales Charge Refund" in Prospectus). The Surrender Charge
Guideline factors are based upon the provisions of Rule 6e-3(T) adopted by the
Securities and Exchange Commission.
<TABLE>
<CAPTION>
CHARGE PER $1,000 CHARGE PER $1,000 OF FACE
OF FACE AMOUNT (INITIAL FACE
AMOUNT (INITIAL FACE AMOUNT OR
AMOUNT OR AMOUNT OF AMOUNT OF REQUESTED
INSURED'S AGE AT POLICY INCREASE) REQUESTED INSURED'S AGE AT POLICY INCREASE)
DATE OR EFFECTIVE DATE OF ----------------------- DATE OR EFFECTIVE DATE OF -------------------------
INCREASE, AS APPROPRIATE MALE FEMALE INCREASE, AS APPROPRIATE MALE FEMALE
- --------------------------- ---------- ---------- -------------------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
0 $ 5.97 $ 4.46 41 $ 37.23 $ 27.91
1 6.14 4.58 42 39.06 29.27
2 6.39 4.77 43 40.97 30.69
3 6.67 4.97 44 42.98 32.19
4 6.95 5.18 45 45.09 33.76
5 7.26 5.40 46 47.30 35.40
6 7.58 5.64 47 49.62 37.14
7 7.92 5.89 48 52.07 38.96
8 8.28 6.15 49 54.64 40.89
9 8.66 6.42 50 57.34 42.91
10 9.06 6.71 51 60.18 45.04
11 9.48 7.02 52 63.16 47.28
12 9.92 7.34 53 66.29 49.64
13 10.38 7.67 54 69.58 52.13
14 10.85 8.03 55 73.03 54.76
15 11.34 8.39 56 76.66 57.53
16 11.85 8.77 57 80.47 60.47
17 12.37 9.17 58 84.48 63.57
18 12.91 9.59 59 88.70 66.87
19 13.47 10.03 60 93.15 70.38
20 14.07 10.49 61 97.82 74.10
21 14.69 10.98 62 102.75 78.05
22 15.34 11.48 63 107.93 82.23
23 16.03 12.02 64 113.38 86.67
24 16.76 12.58 65 119.11 91.37
25 17.53 13.17 66 125.14 96.36
26 18.35 13.79 67 131.50 101.66
27 19.21 14.44 68 138.21 107.32
28 20.11 15.12 69 145.30 113.37
29 21.07 15.84 70 152.79 119.85
30 22.08 16.60 71 160.71 126.78
31 23.14 17.39 72 169.07 134.21
32 24.26 18.22 73 177.88 142.15
33 25.43 19.10 74 187.17 150.62
34 26.66 20.03 75 196.97 159.67
35 27.96 21.00 76 201.77 167.86
36 29.32 22.02 77 212.73 178.12
37 30.76 23.09 78 224.41 189.17
38 32.26 24.21 79 236.91 201.12
39 33.84 25.39 80 250.35 214.09
40 35.49 26.62
</TABLE>
D-1
<PAGE>
UNDERTAKINGS TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities and
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
"REASONABLENESS" REPRESENTATION PURSUANT TO 26(e)(2)(A)
OF THE INVESTMENT COMPANY ACT OF 1940
Depositor represents that the fees and charges deducted under the flexible
premium variable life insurance policy, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by ReliaStar Life Insurance Company.
II-1
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company Act of
1940, Registrant certifies that it meets all of the requirements of
effectiveness of this Amendment to the Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has caused this Amendment to the
Registration Statement to be signed on its behalf, in the City of Minneapolis
and State of Minnesota, on this 31st day of March, 2000.
SELECT*LIFE VARIABLE ACCOUNT
(Registrant)
By: RELIASTAR LIFE INSURANCE COMPANY
(Depositor)
By /S/ JOHN G. TURNER
-------------------------------------
John G. Turner, Chairman
and Chief Executive Officer
As required by the Securities Act of 1933, Depositor has caused this
Post-Effective Amendment No. 10 to Registration Statement to be signed on its
behalf, in the City of Minneapolis and State of Minnesota, on this 31st day of
March, 2000.
RELIASTAR LIFE INSURANCE COMPANY
(Depositor)
By /S/ JOHN G. TURNER
-------------------------------------
John G. Turner, Chairman
and Chief Executive Officer
As required by the Securities Act of 1933, this Amendment to the Registration
Statement has been signed on this 31st day of March, 2000 by the following
directors and officers of Depositor in the capacities indicated:
SIGNATURE TITLE
--------- -----
/S/ JOHN G. TURNER Chairman and Chief Executive Officer
-------------------------------
John G. Turner
/S/ JAMES R. MILLER Senior Vice President, Chief Financial Officer
------------------------------- and Treasurer
James R. Miller
*Richard R. Crowl *Mark S. Jordahl *James R. Miller
*Michael J. Dubes *Kenneth U. Kuk *Robert C. Salipante
*Wayne R. Huneke *Susan W.A. Mead *John G. Turner
*Dewette Ingham, Jr. *William R. Merriam
*A majority of the Board of Directors
Stewart D. Gregg, by signing his name hereto, does hereby sign this document on
behalf of each of the above-named directors of ReliaStar Life Insurance Company
pursuant to powers of attorney duly executed by such persons.
/S/ STEWART D. GREGG
-----------------------------------
Stewart D. Gregg, Attorney-In-Fact
II-2
<PAGE>
PART II
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment No. 10 to the Registration Statement comprises
the following papers and documents:
The Facing Sheet.
The general form of Prospectus, consisting of 96 pages.
Undertakings to file reports.* (Filed in Pre-Effective Amendment No. 1)
Rule 484 Undertaking.
Representation pursuant to Section 26(e)(2)(A).
The signatures.
Written consents of the following persons:
1. Stewart D. Gregg, Esquire -- Filed as part of EX-99.2.
2. Craig A. Krogstad, FSA, MAAA -- Filed as part of EX-99.C6.
3. (Auditor's Consent) -- Filed as part of EX-99.C1.
The following exhibits:
1. The following exhibits correspond to those required by Paragraph A of
the instructions as to exhibits in Form N-8B-2:
A. (1) Resolutions of Board of Directors of Northwestern National Life
Insurance Company ("NWNL") establishing the Select*Life Variable
Account.* (Filed as an Exhibit in S-6EL24 on December 23, 1996,
Accession Number 0000897899-96-000017, CIK 0000897899 and
incorporated herein by reference.)
(2) Not applicable.
(3) (a) General Distributor Agreement between Washington Square
Securities, Inc. and ReliaStar Life.* (Filed as part of
Select*Life Variable Account S-6EL24 on 12-23-96, Accession
Number 0000897899-96-000017, CIK 0000897899 and incorporated
herein by reference.)
(3) (b) Specimens of Selling Agreements.* (Filed as part of
Select*Life Variable Account S-6EL24 on 12-23-96, Accession
Number 0000897899-96-000017, CIK 0000897899 and incorporated
herein by reference.)
(4) Not applicable.
(5) (a) Form of Policy available (together with available Policy
riders) (Filed in Post-Effective No. 9).
(5) (b) Accelerated Benefit Rider (Filed in Post-Effective Amendment
No. 4)
(5) (c) Connecticut Modification Rider (Filed in Post-Effective
Amendment No. 4)
(5) (d) Policy Illustration
(6) (a) Amended Articles of Incorporation of ReliaStar Life.* (Filed
as part of Select*Life Variable Account S-6EL24 on 12-23-96,
Accession Number 0000897899-96-000017, CIK 0000897899 and
incorporated herein by reference.)
(6) (b) Amended By-Laws of ReliaStar Life.* (Filed as part of
Select*Life Variable Account S-6EL24 on 12-23-96, Accession
Number 0000897899-96-000017, CIK 0000897899 and incorporated
herein by reference.)
(7) Not applicable.
(8) (a) Participation Agreement with Fidelity's Variable Insurance
Products Fund and Fidelity Distributors Corporation and
Amendments Nos. 1-8. (Filed as part of
II-3
<PAGE>
Select*Life Variable Account S-6EL24 on 12-23-96, Accession
Number 0000897899-96-000017, CIK 0000897899 and incorporated
herein by reference.)
(8) (b) Form of Amendment No. 10 to Participation Agreement with
Fidelity's Variable Insurance Products Fund and Fidelity
Distributors Corporation. (Filed in Pre-effective Amendment
No. 1, File No. 333-69431 on April 5, 1999 and incorporated
herein by reference.)
(8) (c) Participation Agreement with Fidelity's Variable Insurance
Products Fund II and Fidelity Distributors Corporation and
Amendments Nos. 1-7. (Filed as part of Select*Life Variable
Account S-6EL24 on 12-23-96, Accession Number
0000897899-96-000017, CIK 0000897899 and incorporated herein
by reference.)
(8) (d) Form of Amendment No. 9 to Participation Agreement with
Fidelity's Variable Insurance Products Fund II and Fidelity
Distributors Corporation. (Filed in Pre-effective Amendment
No. 1, File 333-69431 on April 5, 1999 and incorporated
herein by reference.)
(8) (e) Form of Service Agreement and Contract between ReliaStar
Life Insurance Company, WSSI, and Fidelity Investments
Institutional Operations Company and Distributors
Corporation dated January 1, 1997.* (Filed in S-6EL24/A on
March 31, 1997, File No. 333-18517, and incorporated herein
by reference.)
(8) (f) Participation Agreement with Putnam Capital Manager Trust
and Putnam Mutual Funds Corp. and Amendments Nos. 1-2.*
(Filed in S-6EL24 on December 23, 1996, File No. 333-18517,
and incorporated herein by reference.)
(8) (g) Form of Service Agreement by and between ReliaStar Life
Insurance Company and Janus Capital Corporation.* (Filed in
485BPOS on August 4, 1997, File No. 2-95392 and incorporated
herein and by reference.)
(8) (h) Form of Service Agreement by and between ReliaStar Life
Insurance Company and Fred Alger Management, Inc.* (Filed in
485BPOS on August 4, 1997, File No. 2-95392 and incorporated
herein and by reference.)
(8) (i) Form of Service Agreement by and between ReliaStar Life
Insurance Company and OpCap Advisors.* (Filed in 485BPOS on
August 4, 1997, File No. 2-95392 and incorporated herein and
by reference.)
(8) (j) Form of Service Agreement by and between ReliaStar Life
Insurance Company and Neuberger Berman Management
Incorporated ("NBMI").* (Filed in 485BPOS on August 4, 1997,
File No. 2-95392 and incorporated herein and by reference.)
(8) (k) Form of Participation Agreement by and among ReliaStar Life
Insurance Company, Neuberger Berman Advisers Management
Trust, Advisers Managers Trust and Neuberger Berman
Management Inc.* (Filed in 485BPOS on August 4, 1997, File
No. 2-95392 and incorporated herein and by reference.) Form
of Amendment No. 1 to Participation Agreement by and among
ReliaStar Life Insurance Company, Neuberger Berman Advisors
Management Trust, Advisers Trust and Neuberger Berman
Management Inc. (Filed in Pre-effective Amendment No. 1,
File No. 333-69431 on April 5, 1999 and incorporated herein
and by reference.)
(8) (l) Form of Participation Agreement by and between ReliaStar
Life Insurance Company and Janus Aspen Series.* (Filed in
485BPOS on August 4, 1997, File No. 2-95392 and incorporated
herein and by reference.)
(8) (m) Form of Participation Agreement by and between ReliaStar
Life Insurance Company and Fred Alger Management, Inc.,*
(Filed in 485BPOS on August 4, 1997, File No. 2-95392 and
incorporated herein and by reference.)
Amended Exhibit to Participation Agreement.
II-4
<PAGE>
(8) (n) Form of Participation Agreement by and between ReliaStar
Life Insurance Company and OpCap Advisors.* (Filed in
485BPOS on August 4, 1997, File No. 2-95392 and incorporated
herein and by reference.)
(8) (o) Form of Participation Agreement by and between ReliaStar
Life Insurance Company and A I M Advisors, Inc.
(8) (p) Form of Administrative Services Agreement by and between
ReliaStar Life Insurance Company and A I M Advisors, Inc.
(9) Not applicable.
(10) (a) Policy Application Form. (Filed in Pre-effective Amendment
No. 1, File No. 333-69431 on April 5, 1999 and incorporated
herein by reference.)
(b) Supplement to Policy Application Form (Filed in
Pre-effective Amendment No. 1, File No. 333-69431 on April
5, 1999 and incorporated herein by reference.)
2. Opinion and consent of Stewart D. Gregg, Esquire, as to the legality
of the Securities being registered. See EX-99.2.
3. Not applicable.
4. Not applicable.
EX-99.C1. Independent Auditors' Consent.
EX-99.C2. Not applicable.
EX-99.C3. Not applicable.
EX-99.C4. See EX-99.2.
EX-99.C5. Not applicable.
EX-99.C6. Actuarial Opinion and Consent.
EX-99.D1. Memorandum describing Northwestern National's issuance,
transfer and redemption procedures for the Policies and
Northwestern National's procedure for conversion to a fixed
benefit policy. (Filed in Post-Effective Amendment No. 4)
EX-24. Powers of Attorney. (Filed on Form N-4 for Select Variable
Account File No. 811-3341 on February 17, 2000, and
incorporated herein by reference.)
Powers of Attorney.
Richard R. Crowl
Michael J. Dubes
Wayne R. Huneke
Dewette Ingham, Jr.
Mark S. Jordahl
Kenneth U. Kuk
Susan W. A. Mead
William R. Merriam
James R. Miller
Robert C. Salipante
John G. Turner
- ------------------
* Previously Filed
II-5
EXHIBIT 1.A(5)(d)
POLICY ILLUSTRATION
VARIABLE ACCOUNT
THE PURPOSE OF THIS ILLUSTRATION IS TO SHOW HOW THE PERFORMANCE OF THE
UNDERLYING SUB-ACCOUNTS COULD AFFECT THE POLICY CASH VALUE AND DEATH BENEFIT
ASSUMING THE CURRENT POLICY COSTS CONTINUE. THIS ILLUSTRATION IS HYPOTHETICAL
AND MAY NOT BE USED TO PROJECT OR PREDICT INVESTMENT RESULTS
PREMIUMS ARE PAID AT THE BEGINNING OF THE YEAR. THE CASH VALUE AND DEATH
BENEFIT ARE SHOWN AS OF THE END OF EACH POLICY YEAR.
PREPARED FOR:
Male 40 Nonsmoker
Initial Total Face Amount: $100,000
Initial Death Benefit Option: A (Level)
Annual Premium: $1,200.00
<TABLE>
<CAPTION>
CURRENT POLICY COSTS
--------------------------------------------------------------------------------------
0.00% GROSS HYPOTHETICAL RETURN 12.00% GROSS HYPOTHETICAL RETURN
(-1.69% NET YRS 1-10, -1.24% YRS 11+) (10.31% NET YRS 1-10, 10.76% YRS 11+)
---------------------------------------- -------------------------------------------
END END CASH CASH
OF OF YEAR PREMIUM ACCUMULATION SURRENDER DEATH ACCUMULATION SURRENDER DEATH
YEAR AGE OUTLAY VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- --------- -------------- ----------- --------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 41 1,200 809 0 100,000 924 0 100,000
2 42 1,200 1,590 0 100,000 1,929 289 100,000
3 43 1,200 2,344 134 100,000 3,022 812 100,000
4 44 1,200 3,068 668 100,000 4,209 1,809 100,000
5 45 1,200 3,761 1,361 100,000 5,498 3,098 100,000
-----
6,000
6 46 1,200 4,421 2,261 100,000 6,901 4,741 100,000
7 47 1,200 5,049 3,129 100,000 8,427 6,507 100,000
8 48 1,200 5,643 3,963 100,000 10,088 8,408 100,000
9 49 1,200 6,200 4,760 100,000 11,897 10,457 100,000
10 50 1,200 6,719 5,519 100,000 13,868 12,668 100,000
-----
12,000
11 51 1,200 7,230 6,270 100,000 16,090 15,130 100,000
12 52 1,200 7,699 6,979 100,000 18,524 17,804 100,000
13 53 1,200 8,120 7,640 100,000 21,192 20,712 100,000
14 54 1,200 8,485 8,245 100,000 24,114 23,874 100,000
15 55 1,200 8,791 8,791 100,000 27,321 27,321 100,000
------
18,000
20 60 1,200 9,225 9,225 100,000 48,913 48,913 100,000
25 65 1,200 8,407 8,407 100,000 85,922 85,922 104,824
30 70 1,200 3,542 3,542 100,000 147,439 147,439 171,028
35 75 1,200 0 0 0 247,947 247,947 265,303
40 80 1,200 0 0 0 413,939 413,939 434,636
45 85 1,200 0 0 0 680,714 680,714 714,749
50 90 1,200 0 0 0 1,102,304 1,102,304 1,157,419
55 95 1,200 0 0 0 1,794,567 1,794,567 1,812,512
</TABLE>
- ------------------
*Year 32, Month 12
Based on current costs and 0% hypothetical rate of return illustrated, the
policy would lapse and cannot be illustrated. Additional premiums would be
required to continue the coverage.
A-1
<PAGE>
POLICY ILLUSTRATION
VARIABLE ACCOUNT
THE PURPOSE OF THIS ILLUSTRATION IS TO SHOW HOW THE PERFORMANCE OF THE
UNDERLYING SUB-ACCOUNTS COULD AFFECT THE POLICY CASH VALUE AND DEATH BENEFIT
ASSUMING THE MAXIMUM POLICY COSTS WERE CHARGED. THIS ILLUSTRATION IS
HYPOTHETICAL AND MAY NOT BE USED TO PROJECT OR PREDICT INVESTMENT RESULTS.
PREMIUMS ARE PAID AT THE BEGINNING OF THE YEAR. THE CASH VALUE AND DEATH
BENEFIT ARE SHOWN AS OF THE END OF EACH POLICY YEAR.
PREPARED FOR:
Male 40 Nonsmoker
Initial Total Face Amount: $100,000
Initial Death Benefit Option: A (Level)
Annual Premium: $1,200.00
<TABLE>
<CAPTION>
MAXIMUM GUARANTEED POLICY COSTS
--------------------------------------------------------------------------------------
0.00% GROSS HYPOTHETICAL RETURN 12.00% GROSS HYPOTHETICAL RETURN
(-1.69% NET RETURN) (10.31% NET RETURN)
---------------------------------------- -------------------------------------------
END END CASH CASH
OF OF YEAR PREMIUM ACCUMULATION SURRENDER DEATH ACCUMULATION SURRENDER DEATH
YEAR AGE OUTLAY VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- --------- -------------- ----------- --------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 41 1,200 743 0 100,000 855 0 100,000
2 42 1,200 1,458 0 100,000 1,780 140 100,000
3 43 1,200 2,145 0 100,000 2,783 573 100,000
4 44 1,200 2,801 401 100,000 3,871 1,471 100,000
5 45 1,200 3,427 1,027 100,000 5,050 2,650 100,000
-----
6,000
6 46 1,200 4,019 1,859 100,000 6,328 4,168 100,000
7 47 1,200 4,577 2,657 100,000 7,714 5,794 100,000
8 48 1,200 5,100 3,420 100,000 9,218 7,538 100,000
9 49 1,200 5,585 4,145 100,000 10,852 9,412 100,000
10 50 1,200 6,030 4,830 100,000 12,627 11,427 100,000
-----
12,000
11 51 1,200 6,432 5,472 100,000 14,555 13,595 100,000
12 52 1,200 6,786 6,066 100,000 16,650 15,930 100,000
13 53 1,200 7,086 6,606 100,000 18,924 18,444 100,000
14 54 1,200 7,327 7,087 100,000 21,395 21,155 100,000
15 55 1,200 7,501 7,501 100,000 24,080 24,080 100,000
------
18,000
20 60 1,200 7,171 7,171 100,000 41,626 41,626 100,000
25 65 1,200 3,856 3,856 100,000 69,748 69,748 100,000
30 70 1,200 0 0 0 116,883 116,883 135,584
35 75 1,200 0 0 0 192,293 192,293 205,753
40 80 1,200 0 0 0 313,808 313,808 329,497
45 85 1,200 0 0 0 502,266 502,266 527,379
50 90 1,200 0 0 0 785,959 785,959 825,256
55 95 1,200 0 0 0 1,237,751 1,237,751 1,250,128
</TABLE>
- ------------------
*Year 28, Month 10
Based on the maximum guaranteed costs and 0% hypothetical rate of return
illustrated, the policy would lapse and cannot be illustrated. Additional
premiums would be required to continue the coverage.
A-2
<PAGE>
VALUABLE INFORMATION ABOUT YOUR ILLUSTRATION
This is an illustration, not a contract, and must be preceded or
accompanied by a current Prospectus.
This illustration does not recognize that, because of inflation, a dollar
in the future has less value than a dollar today.
The values illustrated comply with the Internal Revenue Code definition of
life insurance.
GROSS HYPOTHETICAL RETURNS. The gross hypothetical returns shown are
illustrative only and should not be deemed a representation of past or future
rates of return. No representation may be made by your agent or ReliaStar Life
Insurance Company that these hypothetical rates of return can be achieved or
sustained over any period of time. The death benefits and cash surrender values
for a policy may be different from those shown, even if the actual rates of
return averaged the hypothetical rate of return illustrated over a period of
years but fluctuated above or below that average at any time during the period.
NET ANNUAL RETURN. The net rate illustrated reflects a reduction from the
gross rate to cover ReliaStar's mortality and expense risk charge and portfolio
operating expenses. For current costs, the mortality and expense risk charge on
an annual basis is equal to 0.90% of the Variable Account assets for years one
through ten, and 0.45% thereafter. For maximum guaranteed costs, the mortality
and risk charge on an annual basis is equal to 0.90%. An average portfolio
operating expense of 0.79% is deducted from the gross return. The actual
portfolio expense deducted would vary based on the premium allocation specified.
SUB-ACCOUNT ALLOCATION. This illustration assumes that the net premiums
(after expense deductions) have been allocated to the Variable Account.
Select*Life II offers the policy owner the opportunity to select those
sub-accounts that most clearly reflect their own tolerance for risk.
Sub-accounts and their allocations are selected initially and can be changed or
transferred between the sub-accounts of the policy without creating a taxable
event. Transfers between sub-accounts can be made up to 24 times per year
without charge. We reserve the right to limit transfers to four per year and
charge up to $25.00 per transfer.
SALES CHARGE REFUND. Cash surrender value does not include the sales charge
refund. Based on current charges, the sales charge refund would be $94.44 at the
end of policy year 1 and $732 at the end of policy year 2. Based on guaranteed
charges, the sales charge refund would be $24.63 at the end of policy year 1,
$732 at the end of policy year 2. A sales charge refund may also apply for 24
months following any increase in face amount.
FIXED ACCOUNT. A portion of premiums and accumulation values may also be
allocated to the Fixed Account. The Fixed Account is an interest paying account
that offers a guarantee of both principal and interest at a minimum annual rate
of 4% on amounts credited to the account. ReliaStar has complete ownership and
control of all of the assets of the Fixed Account. For current interest
crediting rates on the Fixed Account, ask your Registered Representative.
MINIMUM MONTHLY PREMIUM. A minimum monthly premium of $85.33 is required to
issue the policy and is guaranteed to maintain the base policy death benefit
guarantee. This minimum premium will change if increases or decreases are made
in any of the policy benefits.
DEATH BENEFIT GUARANTEE. The death benefit guarantee is in effect until the
Insured reaches age 65 (or for 5 policy years, if longer) provided minimum
premiums (net of policy loans and withdrawals) are paid. The death benefit
guarantee prevents the policy from lapsing even if the cash surrender value is
not sufficient to cover the monthly deduction due. The death benefit guarantee,
while in effect, provides for payment of the policy death benefit regardless of
portfolio performance. Please see the Prospectus for a full explanation of this
provision.
DEDUCTIONS AND CHARGES. A premium expense charge is deducted from each
premium paid. The accumulation value of the policy is subject to several
charges: a monthly administration charge, a mortality and expense risk charge,
and the cost of insurance for the base policy and any riders. Surrender charges
are applicable for the first 15 years and the first 15 years following any
requested increase in the face amount.
A-3
<PAGE>
TAXATION. Tax laws are complex and change frequently. Changes in premium
payments from those illustrated or other changes made to the illustrated policy
after issue may result in classification as a Modified Endowment Contract (MEC).
Distributions from a Modified Endowment Contract, including loans, are taxable
as income in the year received to the extent that the accumulation value of the
policy prior to the distribution exceeds the total premiums paid. In addition,
distributions may be subject to an additional 10% income tax penalty if taken
before age 591/2. For complete information on how distributions from this policy
may affect your personal tax situation, always consult your professional tax
advisor.
ISSUER. Select*Life II is a product of ReliaStar Life Insurance Company
located at 20 Washington Avenue South, Minneapolis, MN 55401. The general
distributor is Washington Square Securities, Inc., an affiliated company,
member NASD/SIPC, located at 20 Washington Avenue South, Minneapolis, MN 55401
(612-372-5507). Form #85-662 (may vary by state).
PREMIUM LIMITS SUMMARY.
Minimum First Year Annual Premium: $ 1,023.96
Initial Guideline Level Premium: $ 1,687.72
Initial Guideline Single Premium: $ 19,153.40
Initial MEC 7-pay Premium: $ 4,440.40
A-4
<PAGE>
ILLUSTRATION SUMMARY AND DISCLOSURE
VARIABLE ACCOUNT
THIS PAGE SUMMARIZES INFORMATION FROM THE PREVIOUS LEDGER PAGES AND OUTLINES
SOME IMPORTANT POLICY PROVISIONS. REVIEW THE INFORMATION PRESENTED BELOW. IF
ACCEPTABLE, SIGN, DATE, AND RETURN THIS ILLUSTRATION, ALONG WITH THE
APPLICATION FOR INSURANCE, TO RELIASTAR LIFE INSURANCE COMPANY.
PREPARED FOR:
Male 40 Nonsmoker
Initial Total Face Amount: $100,000
Initial Death Benefit Option: A (Level)
Annual Premium: $1,200.00
This summary is based on the premium outlay in the policy illustration. The cash
value and death benefit are shown as of the end of the year.
<TABLE>
<CAPTION>
GUARANTEED COSTS CURRENT COSTS
--------------------------- ---------------------------------------------------------
0.00% GROSS ANNUAL RETURN 12.00% GROSS ANNUAL RETURN
0.00% GROSS ANNUAL RETURN (-1.69% NET YRS 1-10, (10.31% NET YRS 1-10,
(-1.69% NET RETURN) -1.24% YRS 11+) 10.76% YRS 11+)
--------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
Year 10, Age 50
Cash Surrender Value: 4,830 5,519 12,668
Death Benefit: 100,000 100,000 100,000
Year 20, Age 60
Cash Surrender Value: 7,171 9,225 48,913
Death Benefit: 100,000 100,000 100,000
Projected age when
Death Benefit Ends: 67 71 95
</TABLE>
- ------------------
You may adjust your payment amounts, within limits, to extend or increase the
cash value and death benefit.
I UNDERSTAND THAT:
PURCHASE OF LIFE INSURANCE. I am buying a flexible premium cash value
variable life insurance policy issued by ReliaStar Life Insurance Company.
RECEIPT OF PROSPECTUS. I received the current Prospectus describing the
terms and operation of the policy and the underlying sub-accounts. I'm keeping
the Prospectus for further reference. I understand the policy has some features
comparable to and others different from a traditional life insurance policy. I
realize this Disclosure Statement highlights some, but not all, of the important
aspects of the policy and that I should examine the Prospectus prior to
purchasing a policy.
INSURANCE PROTECTION. The policy provides insurance protection until age
95, if the cash surrender value, as explained in the Prospectus, is sufficient
to pay the monthly charges. The policy remains in force during the death benefit
guarantee period, without regard to the cash surrender value, if on each monthly
anniversary as described in the policy the total premiums paid, less any partial
withdrawals or policy loans, equals or exceeds the total required premium
payments specified in the policy.
SUB-ACCOUNT ALLOCATION. I may allocate a net premium (amount remaining
after expense deductions) among one or more sub-accounts, each of which invests
in one of the available portfolios. Each portfolio has a different investment
objective, as described in the current Prospectus. In allocating net premiums to
a sub-account, the investment performance of the underlying portfolios I select
will impact the policy accumulation value and may impact the death benefit.
Thus, the investment risk for those amounts is mine, and no minimum accumulation
value in any sub-account(s) is guaranteed. I may also allocate net premiums to a
Fixed Account, which the Company guarantees both as to principal and interest at
a minimum annual rate of 4.0% (the Fixed Account is not available in New
Jersey).
SELECTED PORTFOLIO. The sub-accounts I select have varying portfolio
operating expenses. Changes to the selected sub-accounts and the allocation
percentages will have an impact on the policy cash values. This illustration
assumes the average portfolio expense of all underlying portfolios is deducted.
A-5
<PAGE>
ILLUSTRATIONS. The illustrations in the Prospectus present hypothetical
investment results and those presented by the Company's representative will
utilize hypothetical and/or historical investment results. Neither hypothetical
nor historical investment returns are guaranteed. The values set forth are
illustrative only and are not intended to predict actual performance. They are
intended to help explain how the policy operates and are not deemed to represent
future investment results. Actual investment results may be more or less and
depend on a number of factors, as explained in the Prospectus.
CHARGES AND DEDUCTIONS. As described in the Prospectus, there are (a)
charges made against each premium payment and (b) monthly deductions against the
accumulation value for the cost of insurance, administrative charges and
mortality and expense risks assumed by the Company. If I surrender the policy or
allow it to lapse during the first 15 years after issue or an increase, a
surrender charge will be imposed.
LOANS AND WITHDRAWALS. Policy loans and partial cash withdrawals are
available, subject to certain limits and charges as explained in the Prospectus.
If, at any time, the amount of the policy loan exceeds the cash surrender value,
the grace period goes into effect and we may lapse the policy. Policy loans and
partial withdrawals may cause the death benefit guarantee to terminate.
TAX MATTERS. The Company does not provide legal or tax advice in reference
to this life insurance policy. I acknowledge that the section in the Prospectus
"Federal Tax Matters", is not intended to be a complete description of the tax
status of the policy.
- -------------------------------------------- -------------------------
APPLICANT OR POLICY OWNER DATE
- ------------------ ----------------------
DATE OF PROSPECTUS PROSPECTUS FORM NUMBER
- -------------------------------------------- -------------------------
JOHN R. PEMBLE DATE
A-6
MARCH 28, 2000 AMENDMENT TO
PARTICIPATION AGREEMENT
AMONG
THE ALGER AMERICAN FUND,
FRED ALGER MANAGEMENT, INC., and
RELIASTAR LIFE INSURANCE COMPANY
This amendment to the August 8, 1997 Participation Agreement, among The
Alger American Fund, Fred Alger Management, Inc., and ReliaStar Life Insurance
Company is made for the purpose of modifying Schedules A and B thereto by
incorporating all of the following asset accounts to Schedule A therein:
ReliaStar Select*Life Variable Account: Select*Life II
Select*Life III
SVUL
Variable Estate Design
ReliaStar Select Variable Account: Select*Annuity III
Bonus Variable Annuity
And by including all portfolios of The Alger American Fund in Schedule B,
thereby making all of them available to all asset accounts listed in Schedule A,
as amended, to-wit:
The Alger American Fund
-Alger American Balanced Portfolio
-Alger American Income & Growth Portfolio
-Alger American Small Capitalization Portfolio
-Alger American Growth Portfolio
-Alger American MidCap Growth Portfolio
-Alger American Leveraged AllCap Portfolio
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
<PAGE>
to be executed in its name and on its behalf by its duly authorized
representative as of this date, March 28, 2000.
THE ALGER AMERICAN FUND
By: _________________________
Gregory S. Duch
Treasurer
FRED ALGER MANAGEMENT, INC.
By: _________________________
Gregory S. Duch
Executive Vice President
RELIASTAR LIFE INSURANCE COMPANY
By: _________________________
Name: ______________________
Title: _______________________
RELIASTAR LIFE INSURANCE COMPANY
By: _________________________
Name: ______________________
Title: _______________________
EXHIBIT 1.A.(8)(o)
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.
RELIASTAR LIFE INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
WASHINGTON SQUARE SECURITIES, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
DESCRIPTION PAGE
- ----------- ----
<S> <C> <C>
Section 1. Available Funds.......................................................................................2
- ---------------------------
1.1 Availability....................................................................................2
------------
1.2 Addition, Deletion or Modification of Funds.....................................................2
-------------------------------------------
1.3 No Sales to the General Public..................................................................2
------------------------------
Section 2. Processing Transactions...............................................................................3
- -----------------------------------
2.1 Timely Pricing and Orders.......................................................................3
-------------------------
2.2 Timely Payments.................................................................................3
---------------
2.3 Applicable Price................................................................................4
----------------
2.4 Dividends and Distributions.....................................................................4
---------------------------
2.5 Book Entry......................................................................................4
----------
Section 3. Costs and Expenses....................................................................................4
- ------------------------------
3.1 General.........................................................................................4
-------
3.2 Parties To Cooperate............................................................................5
--------------------
Section 4. Legal Compliance......................................................................................5
- ----------------------------
4.1 Tax Laws........................................................................................5
--------
4.2 Insurance and Certain Other Laws................................................................7
--------------------------------
4.3 Securities Laws.................................................................................8
---------------
4.4 Notice of Certain Proceedings and Other Circumstances...........................................9
-----------------------------------------------------
4.5 LIFE COMPANY To Provide Documents; Information About AVIF......................................10
---------------------------------------------------------
4.6 AVIF To Provide Documents; Information About LIFE COMPANY......................................11
---------------------------------------------------------
Section 5. Mixed and Shared Funding.............................................................................12
- ------------------------------------
5.1 General........................................................................................12
-------
5.2 Disinterested Directors........................................................................12
-----------------------
5.3 Monitoring for Material Irreconcilable Conflicts...............................................13
------------------------------------------------
5.4 Conflict Remedies..............................................................................14
-----------------
5.5 Notice to LIFE COMPANY.........................................................................15
----------------------
5.6 Information Requested by Board of Directors....................................................15
-------------------------------------------
5.7 Compliance with SEC Rules......................................................................15
-------------------------
5.8 Other Requirements.............................................................................15
------------------
Section 6. Termination..........................................................................................16
- -----------------------
6.1 Events of Termination..........................................................................16
---------------------
6.2 Notice Requirement for Termination.............................................................17
----------------------------------
6.3 Funds To Remain Available......................................................................17
-------------------------
6.4 Survival of Warranties and Indemnifications....................................................18
-------------------------------------------
6.5 Continuance of Agreement for Certain Purposes..................................................18
---------------------------------------------
i
<PAGE>
Section 7. Parties To Cooperate Respecting Termination..........................................................18
- -------------------------------------------------------
Section 8. Assignment...........................................................................................18
- ----------------------
Section 9. Notices..............................................................................................18
- -------------------
Section 10. Voting Procedures...................................................................................19
- ------------------------------
Section 11. Foreign Tax Credits.................................................................................20
- --------------------------------
Section 12. Indemnification.....................................................................................20
- ----------------------------
12.1 Of AVIF and AIM by LIFE COMPANY and UNDERWRITER................................................20
-----------------------------------------------
12.2 Of LIFE COMPANY and UNDERWRITER by AVIF and AIM................................................22
-----------------------------------------------
12.3 Effect of Notice...............................................................................25
----------------
12.4 Successors.....................................................................................25
----------
Section 13. Applicable Law......................................................................................25
- ---------------------------
Section 14. Execution in Counterparts...........................................................................25
- --------------------------------------
Section 15. Severability........................................................................................25
- -------------------------
Section 16. Rights Cumulative...................................................................................25
- ------------------------------
Section 17. Headings............................................................................................25
- ---------------------
Section 18. Confidentiality.....................................................................................26
- ----------------------------
Section 19. Trademarks and Fund Names...........................................................................26
- --------------------------------------
Section 20. Parties to Cooperate................................................................................27
- ---------------------------------
</TABLE>
ii
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the ____ day of _________,
2000 ("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation ("AVIF"), A I M Distributors, Inc., a Delaware corporation ("AIM"),
ReliaStar Life Insurance Company, a Minnesota life insurance company ("LIFE
COMPANY"), on behalf of itself and each of its segregated asset accounts listed
in Schedule A hereto, as the parties hereto may amend from time to time (each,
an "Account," and collectively, the "Accounts"); and Washington Square
Securities, Inc., an affiliate of LIFE COMPANY and the principal underwriter of
the Contracts ("UNDERWRITER") (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, AVIF currently consists of seventeen separate series
("Series"), shares ("Shares") each of which are registered under the Securities
Act of 1933, as amended (the "1933 Act") and are currently sold to one or more
separate accounts of life insurance companies to fund benefits under variable
annuity contracts and variable life insurance contracts; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A
hereto as the Parties hereto may amend from time to time (each a "Fund";
reference herein to "AVIF" includes reference to each Fund, to the extent the
context requires) available for purchase by the Accounts; and
WHEREAS, LIFE COMPANY will be the issuer of certain variable annuity
contracts and variable life insurance contracts ("Contracts") as set forth on
Schedule A hereto, as the Parties hereto may amend from time to time, which
Contracts (hereinafter collectively, the "Contracts"), if required by applicable
law, will be registered under the 1933 Act; and
WHEREAS, LIFE COMPANY will fund the Contracts through the Accounts,
each of which may be divided into two or more subaccounts ("Subaccounts";
reference herein to an "Account" includes reference to each Subaccount thereof
to the extent the context requires); and
WHEREAS, LIFE COMPANY will serve as the depositor of the Accounts, each
of which is registered as a unit investment trust investment company under the
1940 Act (or exempt therefrom), and the security interests deemed to be issued
by the Accounts under the Contracts will be registered as securities under the
1933 Act (or exempt therefrom); and
1
<PAGE>
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase Shares in one or more of the Funds
on behalf of the Accounts to fund the Contracts; and
WHEREAS, UNDERWRITER is a broker-dealer registered with the SEC under
the Securities Exchange Act of 1934 ("1934 Act") and a member in good standing
of the National Association of Securities Dealers, Inc. ("NASD");
WHEREAS, AIM is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD");
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
SECTION 1. AVAILABLE FUNDS
1.1 AVAILABILITY.
AVIF will make Shares of each Fund available to LIFE COMPANY for
purchase and redemption at net asset value and with no sales charges, subject to
the terms and conditions of this Agreement. The Board of Directors of AVIF may
refuse to sell Shares of any Fund to any person, or suspend or terminate the
offering of Shares of any Fund if such action is required by law or by
regulatory authorities having jurisdiction or if, in the sole discretion of the
Directors acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, such action is deemed in the best
interests of the shareholders of such Fund.
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS.
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Contracts, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall
include a reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part hereof.
1.3 NO SALES TO THE GENERAL PUBLIC.
AVIF represents and warrants that no Shares of any Fund have been or
will be sold to the general public.
2
<PAGE>
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
(a) AVIF or its designated agent will use its best efforts to provide
LIFE COMPANY with the net asset value per Share for each Fund by 6:00 p.m.
Central Time on each Business Day. As used herein, "Business Day" shall mean any
day on which (i) the New York Stock Exchange is open for regular trading, (ii)
AVIF calculates the Fund's net asset value, and (iii) LIFE COMPANY is open for
business.
(b) LIFE COMPANY will use the data provided by AVIF each Business Day
pursuant to paragraph (a) immediately above to calculate Account unit values and
to process transactions that receive that same Business Day's Account unit
values. LIFE COMPANY will perform such Account processing in a timely manner and
will place corresponding orders to purchase or redeem Shares with AVIF by 9:00
a.m. Central Time the following Business Day; PROVIDED, however, that AVIF shall
provide additional time to LIFE COMPANY in the event that AVIF is unable to meet
the 6:00 p.m. time stated in paragraph (a) immediately above. Such additional
time shall be equal to the additional time that AVIF takes to make the net asset
values available to LIFE COMPANY.
(c) With respect to payment of the purchase price by LIFE COMPANY and
of redemption proceeds by AVIF, LIFE COMPANY and AVIF shall net purchase and
redemption orders with respect to each Fund and shall transmit one net payment
in accordance with Section 2.2, below.
(d) If AVIF provides materially incorrect Share net asset value
information (as determined under SEC guidelines), LIFE COMPANY shall be entitled
to an adjustment to the number of Shares purchased or redeemed to reflect the
correct net asset value per Share. Any material error in the calculation or
reporting of net asset value per Share, dividend or capital gain information
shall be reported promptly upon discovery to LIFE COMPANY. Materiality and
reprocessing cost reimbursement shall be determined in accordance with standards
established by the Parties as provided in Schedule B, attached hereto and
incorporated herein.
2.2 TIMELY PAYMENTS.
LIFE COMPANY will wire payment for net purchases to a custodial account
designated by AVIF by 1:00 p.m. Central Time on the same day as the order for
Shares is placed, to the extent practicable. AVIF will wire payment for net
redemptions to an account designated by LIFE COMPANY by 1:00 p.m. Central Time
on the same day as the Order is placed, to the extent practicable, but in any
event within five (5) calendar days after the date the order is placed in order
to enable LIFE COMPANY to pay redemption proceeds within the time specified in
Section 22(e) of the 1940 Act or such shorter period of time as may be required
by law.
3
<PAGE>
2.3 APPLICABLE PRICE.
(a) Share purchase payments and redemption orders that result from
purchase payments, premium payments, surrenders and other transactions under
Contracts (collectively, "Contract transactions) and that LIFE COMPANY receives
prior to the close of regular trading on the New York Stock Exchange on a
Business Day will be executed at the net asset values of the appropriate Funds
next computed after receipt by AVIF or its designated agent of the orders. For
purposes of this Section 2.3(a), LIFE COMPANY shall be the designated agent of
AVIF for receipt of orders relating to Contract transactions on each Business
Day and receipt by such designated agent shall constitute receipt by AVIF;
PROVIDED that AVIF receives notice of such orders by 9:00 a.m. Central Time on
the next following Business Day or such later time as computed in accordance
with Section 2.1(b) hereof.
(b) All other Share purchases and redemptions by LIFE COMPANY will
be effected at the net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the order therefor, and such orders
will be irrevocable.
2.4 DIVIDENDS AND DISTRIBUTIONS.
AVIF will furnish notice by wire or telephone (followed by written
confirmation) on or prior to the payment date to LIFE COMPANY of any income
dividends or capital gain distributions payable on the Shares of any Fund. LIFE
COMPANY hereby elects to reinvest all dividends and capital gains distributions
in additional Shares of the corresponding Fund at the ex-dividend date net asset
values until LIFE COMPANY otherwise notifies AVIF in writing, it being agreed by
the Parties that the ex-dividend date and the payment date with respect to any
dividend or distribution will be the same Business Day. LIFE COMPANY reserves
the right to revoke this election and to receive all such income dividends and
capital gain distributions in cash.
2.5 BOOK ENTRY.
Issuance and transfer of AVIF Shares will be by book entry only. Stock
certificates will not be issued to LIFE COMPANY. Shares ordered from AVIF will
be recorded in an appropriate title for LIFE COMPANY, on behalf of its Account.
SECTION 3. COSTS AND EXPENSES
3.1 GENERAL.
Except as otherwise specifically provided in Schedule C, attached
hereto and made a part hereof, each Party will bear, or arrange for others to
bear, all expenses incident to its performance under this Agreement.
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3.2 PARTIES TO COOPERATE.
Each Party agrees to cooperate with the others, as applicable, in
arranging to print, mail and/or deliver, in a timely manner, combined or
coordinated prospectuses or other materials of AVIF and the Accounts.
SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS.
(a) AVIF represents and warrants that each Fund is currently qualified
as a regulated investment company ("RIC") under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and represents that it will use
its best efforts to qualify and to maintain qualification of each Fund as a RIC.
AVIF will notify LIFE COMPANY immediately upon having a reasonable basis for
believing that a Fund has ceased to so qualify or that it might not so qualify
in the future.
(b) AVIF represents that it will use its best efforts to comply and to
maintain each Fund's compliance with the diversification requirements set forth
in Section 817(h) of the Code and Section 1.817-5(b) of the regulations under
the Code. AVIF will notify LIFE COMPANY immediately upon having a reasonable
basis for believing that a Fund has ceased to so comply or that a Fund might not
so comply in the future. In the event of a breach of this Section 4.1(b) by
AVIF, it will take all reasonable steps to adequately diversify the Fund so as
to achieve compliance within the grace period afforded by Section 1.817-5 of the
regulations under the Code.
(c) Notwithstanding any other provision of this Agreement, LIFE COMPANY
agrees that if the Internal Revenue Service ("IRS") asserts in writing in
connection with any governmental audit or review of LIFE COMPANY or, to LIFE
COMPANY's knowledge, of any Contract owners, annuitants, insureds or
participants (as appropriate) under the Contracts (collectively,
"Participants"), that any Fund has failed to comply with the diversification
requirements of Section 817(h) of the Code or LIFE COMPANY otherwise becomes
aware of any facts that could give rise to any claim against AVIF or its
affiliates as a result of such a failure or alleged failure:
(i) LIFE COMPANY shall promptly notify AVIF of such
assertion or potential claim (subject to the
Confidentiality provisions of Section 18 as to any
Participant);
(ii) LIFE COMPANY shall consult with AVIF as to how to
minimize any liability that may arise as a result of
such failure or alleged failure;
(iii) LIFE COMPANY shall use its best efforts to minimize
any liability of AVIF or its affiliates resulting
from such failure, including, without limitation,
demonstrating, pursuant to Treasury Regulations
Section 1.817-5(a)(2), to the Commissioner of the IRS
that such failure was inadvertent;
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(iv) LIFE COMPANY shall permit AVIF, its affiliates and
their legal and accounting advisors to participate in
any conferences, settlement discussions or other
administrative or judicial proceeding or contests
(including judicial appeals thereof) with the IRS,
any Participant or any other claimant regarding any
claims that could give rise to liability to AVIF or
its affiliates as a result of such a failure or
alleged failure; PROVIDED, however, that LIFE COMPANY
will retain control of the conduct of such
conferences discussions, proceedings, contests or
appeals;
(v) any written materials to be submitted by LIFE COMPANY
to the IRS, any Participant or any other claimant in
connection with any of the foregoing proceedings or
contests (including, without limitation, any such
materials to be submitted to the IRS pursuant to
Treasury Regulations Section 1.817-5(a)(2)), (a)
shall be provided by LIFE COMPANY to AVIF (together
with any supporting information or analysis); subject
to the confidentiality provisions of Section 18, at
least ten (10) business days or such shorter period
to which the Parties hereto agree prior to the day on
which such proposed materials are to be submitted,
and (b) shall not be submitted by LIFE COMPANY to any
such person without the express written consent of
AVIF which shall not be unreasonably withheld;
(vi) LIFE COMPANY shall provide AVIF or its affiliates and
their accounting and legal advisors with such
cooperation as AVIF shall reasonably request
(including, without limitation, by permitting AVIF
and its accounting and legal advisors to review the
relevant books and records of LIFE COMPANY) in order
to facilitate review by AVIF or its advisors of any
written submissions provided to it pursuant to the
preceding clause or its assessment of the validity or
amount of any claim against its arising from such a
failure or alleged failure;
(vii) LIFE COMPANY shall not with respect to any claim of
the IRS or any Participant that would give rise to a
claim against AVIF or its affiliates (a) compromise
or settle any claim, (b) accept any adjustment on
audit, or (c) forego any allowable administrative or
judicial appeals, without the express written consent
of AVIF or its affiliates, which shall not be
unreasonably withheld, PROVIDED that LIFE COMPANY
shall not be required, after exhausting all
administrative remedies, to appeal any adverse
judicial decision unless AVIF or its affiliates shall
have provided an opinion of independent counsel to
the effect that a reasonable basis exists for taking
such appeal; and PROVIDED FURTHER that the costs of
any such appeal shall be borne equally by the Parties
hereto; and
(viii) If LIFE COMPANY fails to comply with any of the
foregoing clauses (i) through (vii), and such failure
can be shown to have materially contributed
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to the liability of AVIF or its affiliates, then AVIF
and its affiliates shall have no liability pursuant
to Section 12 hereof as a result of a Fund's failure
or alleged failure to comply with the diversification
requirements of Section 817(h) of the Code. AVIF and
its affiliates shall have no liability as a result of
such failure or alleged failure if LIFE COMPANY fails
to comply with any of the foregoing clauses (i)
through (vii), and such failure could be shown to
have materially contributed to the liability.
Should AVIF or any of its affiliates refuse to give its written consent
to any compromise or settlement of any claim or liability hereunder, LIFE
COMPANY may, in its discretion, authorize AVIF or its affiliates to act in the
name of LIFE COMPANY in, and to control the conduct of, such conferences,
discussions, proceedings, contests or appeals and all administrative or judicial
appeals thereof, and in that event AVIF or its affiliates shall bear the fees
and expenses associated with the conduct of the proceedings that it is so
authorized to control; PROVIDED, that in no event shall LIFE COMPANY have any
liability resulting from AVIF's refusal to accept the proposed settlement or
compromise with respect to any failure caused by AVIF. As used in this
Agreement, the term "affiliates" shall have the same meaning as "affiliated
person" as defined in Section 2(a)(3) of the 1940 Act.
(d) LIFE COMPANY represents and warrants that the Contracts currently
are and will be treated as annuity contracts or life insurance contracts under
applicable provisions of the Code and that it will use its best efforts to
maintain such treatment; LIFE COMPANY will notify AVIF immediately upon having a
reasonable basis for believing that any of the Contracts have ceased to be so
treated or that they might not be so treated in the future.
(e) LIFE COMPANY represents and warrants that each Account is a
"segregated asset account" and that interests in each Account are offered
exclusively through the purchase of or transfer into a "variable contract,"
within the meaning of such terms under Section 817 of the Code and the
regulations thereunder. LIFE COMPANY will use its best efforts to continue to
meet such definitional requirements, and it will notify AVIF immediately upon
having a reasonable basis for believing that such requirements have ceased to be
met or that they might not be met in the future.
4.2 INSURANCE AND CERTAIN OTHER LAWS.
(a) AVIF will use its best efforts to comply with any applicable state
insurance laws or regulations, to the extent specifically requested in writing
by LIFE COMPANY, including, the furnishing of information not otherwise
available to LIFE COMPANY which is required by state insurance law to enable
LIFE COMPANY to obtain the authority needed to issue the Contracts in any
applicable state.
(b) LIFE COMPANY represents and warrants that (i) it is an insurance
company duly organized, validly existing and in good standing under the laws of
the State of Minnesota and has full corporate power, authority and legal right
to execute, deliver and perform its duties and comply with its obligations under
this Agreement, (ii) it has legally and validly established and maintains
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each Account as a segregated asset account under Minnesota Insurance Law and the
regulations thereunder, and (iii) the Contracts comply in all material respects
with all other applicable federal and state laws and regulations.
(c) AVIF represents and warrants that it is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Maryland and has full power, authority, and legal right to execute, deliver, and
perform its duties and comply with its obligations under this Agreement.
4.3 SECURITIES LAWS.
(a) LIFE COMPANY represents and warrants that (i) interests in each
Account pursuant to the Contracts will be registered under the 1933 Act to the
extent required by the 1933 Act, (ii) the Contracts will be duly authorized for
issuance and sold in compliance with all applicable federal and state laws,
including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and the
law(s) of LIFE COMPANY's state(s) of organization and domicile, (iii) each
Account is and will remain registered under the 1940 Act, to the extent required
by the 1940 Act, (iv) each Account does and will comply in all material respects
with the requirements of the 1940 Act and the rules thereunder, to the extent
required, (v) each Account's 1933 Act registration statement relating to the
Contracts, together with any amendments thereto, will at all times comply in all
material respects with the requirements of the 1933 Act and the rules
thereunder, (vi) LIFE COMPANY will amend the registration statement for its
Contracts under the 1933 Act and for its Accounts under the 1940 Act from time
to time as required in order to effect the continuous offering of its Contracts
or as may otherwise be required by applicable law, and (vii) each Account
Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
(b) AVIF represents and warrants that (i) Shares sold pursuant to this
Agreement will be registered under the 1933 Act to the extent required by the
1933 Act and duly authorized for issuance and sold in compliance with Maryland
law, (ii) AVIF is and will remain registered under the 1940 Act to the extent
required by the 1940 Act, (iii) AVIF will amend the registration statement for
its Shares under the 1933 Act and itself under the 1940 Act from time to time as
required in order to effect the continuous offering of its Shares, (iv) AVIF
does and will comply in all material respects with the requirements of the 1940
Act and the rules thereunder, (v) AVIF's 1933 Act registration statement,
together with any amendments thereto, will at all times comply in all material
respects with the requirements of the 1933 Act and rules thereunder, and (vi)
AVIF's Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
(c) AVIF will at its expense register and qualify its Shares for sale
in accordance with the laws of any state or other jurisdiction if and to the
extent reasonably deemed advisable by AVIF.
(d) AVIF currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it reserves the right to make such payments in the future. To the
extent that it decides to finance distribution expenses
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(e) pursuant to Rule 12b-1, AVIF undertakes to have its Board of
Directors, a majority of whom are not "interested persons of the Fund, formulate
and approve any plan under Rule 12b-1 to finance distribution expenses.
(f) AVIF represents and warrants that all of its trustees, officers,
employees, investment advisers, and other individuals/entities having access to
the funds and/or securities of the Fund are and continue to be at all times
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund in an amount not less than the minimal coverage as required currently by
Rule 17g-(1) of the 1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond includes coverage for larceny and embezzlement
and is issued by a reputable bonding company.
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
(a) AVIF or AIM will immediately notify LIFE COMPANY of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to AVIF's registration statement
under the 1933 Act or AVIF Prospectus, (ii) any request by the SEC for any
amendment to such registration statement or AVIF Prospectus that may affect the
offering of Shares of AVIF, (iii) the initiation of any proceedings for that
purpose or for any other purpose relating to the registration or offering of
AVIF's Shares, or (iv) any other action or circumstances that may prevent the
lawful offer or sale of Shares of any Fund in any state or jurisdiction,
including, without limitation, any circumstances in which (a) such Shares are
not registered and, in all material respects, issued and sold in accordance with
applicable state and federal law, or (b) such law precludes the use of such
Shares as an underlying investment medium of the Contracts issued or to be
issued by LIFE COMPANY. AVIF and AIM will make every reasonable effort to
prevent the issuance, with respect to any Fund, of any such stop order, cease
and desist order or similar order and, if any such order is issued, to obtain
the lifting thereof at the earliest possible time.
(b) LIFE COMPANY or UNDERWRITER will immediately notify AVIF of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to each Account's registration
statement under the 1933 Act relating to the Contracts or each Account
Prospectus, (ii) any request by the SEC for any amendment to such registration
statement or Account Prospectus that may affect the offering of Shares of AVIF,
(iii) the initiation of any proceedings for that purpose or for any other
purpose relating to the registration or offering of each Account's interests
pursuant to the Contracts, or (iv) any other action or circumstances that may
prevent the lawful offer or sale of said interests in any state or jurisdiction,
including, without limitation, any circumstances in which said interests are not
registered and, in all material respects, issued and sold in accordance with
applicable state and federal law. LIFE COMPANY and UNDERWRITER will make every
reasonable effort to prevent the issuance of any such stop order, cease and
desist order or similar order and, if any such order is issued, to obtain the
lifting thereof at the earliest possible time.
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4.5 LIFE COMPANY TO PROVIDE DOCUMENTS; INFORMATION ABOUT AVIF.
(a) LIFE COMPANY will provide to AVIF or its designated agent at least
one (1) complete copy of all SEC registration statements, Account Prospectuses,
reports, any preliminary and final voting instruction solicitation material,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to each Account or the Contracts,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
(b) LIFE COMPANY will provide to AVIF or its designated agent at least
one (1) complete copy of each piece of sales literature or other promotional
material in which AVIF or any of its affiliates is named, at least five (5)
Business Days prior to its use or such shorter period as the Parties hereto may,
from time to time, agree upon. No such material shall be used if AVIF or its
designated agent objects to such use within five (5) Business Days after receipt
of such material or such shorter period as the Parties hereto may, from time to
time, agree upon. AVIF hereby designates AIM as the entity to receive such sales
literature, until such time as AVIF appoints another designated agent by giving
notice to LIFE COMPANY in the manner required by Section 9 hereof.
(c) Neither LIFE COMPANY nor any of its affiliates, will give any
information or make any representations or statements on behalf of or concerning
AVIF or its affiliates in connection with the sale of the Contracts other than
(i) the information or representations contained in the registration statement,
including the AVIF Prospectus contained therein, relating to Shares, as such
registration statement and AVIF Prospectus may be amended from time to time; or
(ii) in reports or proxy materials for AVIF; or (iii) in published reports for
AVIF that are in the public domain and approved by AVIF for distribution; or
(iv) in sales literature or other promotional material approved by AVIF, except
with the express written permission of AVIF.
(d) LIFE COMPANY shall adopt and implement procedures reasonably
designed to ensure that information concerning AVIF and its affiliates that is
intended for use only by brokers or agents selling the Contracts (i.e.,
information that is not intended for distribution to Participants) ("broker only
materials") is so used, and neither AVIF nor any of its affiliates shall be
liable for any losses, damages or expenses relating to the improper use of such
broker only materials.
(e) For the purposes of this Section 4.5, the phrase "sales literature
or other promotional material includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media, (e.g.,
on-line networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees,
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registration statements, prospectuses, statements of additional information,
shareholder reports, and proxy materials and any other material constituting
sales literature or advertising under the NASD rules, the 1933 Act or the 1940
Act.
4.6 AVIF TO PROVIDE DOCUMENTS; INFORMATION ABOUT LIFE COMPANY.
(a) AVIF will provide to LIFE COMPANY at least one (1) complete copy of
all SEC registration statements, AVIF Prospectuses, reports, any preliminary and
final proxy material, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to AVIF or the
Shares of a Fund, contemporaneously with the filing of such document with the
SEC or other regulatory authorities.
(b) AVIF will provide to LIFE COMPANY a camera ready or electronic copy
of all AVIF prospectuses and printed copies, in an amount specified by LIFE
COMPANY, of AVIF statements of additional information, proxy materials, periodic
reports to shareholders and other materials required by law to be sent to
Participants who have allocated any Contract value to a Fund. AVIF will provide
such copies to LIFE COMPANY in a timely manner so as to enable LIFE COMPANY, as
the case may be, to print and distribute such materials within the time required
by law to be furnished to Participants.
(c) AVIF will provide to LIFE COMPANY or its designated agent at least
one (1) complete copy of each piece of sales literature or other promotional
material in which LIFE COMPANY, or any of its respective affiliates is named, or
that refers to the Contracts, at least five (5) Business Days prior to its use
or such shorter period as the Parties hereto may, from time to time, agree upon.
No such material shall be used if LIFE COMPANY or its designated agent objects
to such use within five (5) Business Days after receipt of such material or such
shorter period as the Parties hereto may, from time to time, agree upon. LIFE
COMPANY shall receive all such sales literature until such time as it appoints a
designated agent by giving notice to AVIF in the manner required by Section 9
hereof.
(d) Neither AVIF nor any of its affiliates will give any information or
make any representations or statements on behalf of or concerning LIFE COMPANY,
each Account, or the Contracts other than (i) the information or representations
contained in the registration statement, including each Account Prospectus
contained therein, relating to the Contracts, as such registration statement and
Account Prospectus may be amended from time to time; or (ii) in published
reports for the Account or the Contracts that are in the public domain and
approved by LIFE COMPANY for distribution; or (iii) in sales literature or other
promotional material approved by LIFE COMPANY or its affiliates, except with the
express written permission of LIFE COMPANY.
(e) AVIF shall cause its principal underwriter to adopt and implement
procedures reasonably designed to ensure that information concerning LIFE
COMPANY, and its respective affiliates that is intended for use only by brokers
or agents selling the Contracts (i.e., information that is not intended for
distribution to Participants) ("broker only materials") is so used, and neither
LIFE COMPANY, nor any of its respective affiliates shall be liable for any
losses, damages or expenses relating to the improper use of such broker only
materials.
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(f) For purposes of this Section 4.6, the phrase "sales literature or
other promotional material includes, but is not limited to, advertisements (such
as material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media, (e.g., on-line
networks such as the Internet or other electronic messages), sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, registration statements, prospectuses,
statements of additional information, shareholder reports, and proxy materials
and any other material constituting sales literature or advertising under the
NASD rules, the 1933 Act or the 1940 Act.
SECTION 5. MIXED AND SHARED FUNDING
5.1 GENERAL.
The SEC has granted an order to AVIF exempting it from certain
provisions of the 1940 Act and rules thereunder so that AVIF may be available
for investment by certain other entities, including, without limitation,
separate accounts funding variable annuity contracts or variable life insurance
contracts, separate accounts of insurance companies unaffiliated with LIFE
COMPANY, and trustees of qualified pension and retirement plans (collectively,
"Mixed and Shared Funding"). The Parties recognize that the SEC has imposed
terms and conditions for such orders that are substantially identical to many of
the provisions of this Section 5. Sections 5.2 through 5.8 below shall apply
pursuant to such an exemptive order granted to AVIF. AVIF hereby notifies LIFE
COMPANY that, in the event that AVIF implements Mixed and Shared Funding, it may
be appropriate to include in the prospectus pursuant to which a Contract is
offered disclosure regarding the potential risks of Mixed and Shared Funding.
5.2 DISINTERESTED DIRECTORS.
AVIF agrees that its Board of Directors shall at all times consist of
directors a majority of whom (the "Disinterested Directors") are not interested
persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the
rules thereunder and as modified by any applicable orders of the SEC, except
that if this condition is not met by reason of the death, disqualification, or
bona fide resignation of any director, then the operation of this condition
shall be suspended (a) for a period of forty-five (45) days if the vacancy or
vacancies may be filled by the Board;(b) for a period of sixty (60) days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
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5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
AVIF agrees that its Board of Directors will monitor for the existence
of any material irreconcilable conflict between the interests of the
Participants in all separate accounts of life insurance companies utilizing AVIF
("Participating Insurance Companies"), including each Account, and participants
in all qualified retirement and pension plans investing in AVIF ("Participating
Plans"). LIFE COMPANY agrees to inform the Board of Directors of AVIF of the
existence of or any potential for any such material irreconcilable conflict of
which it is aware. The concept of a "material irreconcilable conflict" is not
defined by the 1940 Act or the rules thereunder, but the Parties recognize that
such a conflict may arise for a variety of reasons, including, without
limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or
securities laws or regulations, or a public ruling, private letter ruling,
no-action or interpretative letter, or any similar action by insurance, tax or
securities regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life insurance contract Participants or by Participants of
different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the
voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting
instructions of Plan participants.
Consistent with the SEC's requirements in connection with exemptive
orders of the type referred to in Section 5.1 hereof, LIFE COMPANY will assist
the Board of Directors in carrying out its responsibilities by providing the
Board of Directors with all information reasonably necessary for the Board of
Directors to consider any issue raised, including information as to a decision
by LIFE COMPANY to disregard voting instructions of Participants. LIFE COMPANY's
responsibilities in connection with the foregoing shall be carried out with a
view only to the interests of Participants.
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5.4 CONFLICT REMEDIES.
(a) It is agreed that if it is determined by a majority of the members
of the Board of Directors or a majority of the Disinterested Directors that a
material irreconcilable conflict exists, LIFE COMPANY will, if it is a
Participating Insurance Company for which a material irreconcilable conflict is
relevant, at its own expense and to the extent reasonably practicable (as
determined by a majority of the Disinterested Directors), take whatever steps
are necessary to remedy or eliminate the material irreconcilable conflict, which
steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all of
the Accounts from AVIF or any Fund and reinvesting
such assets in a different investment medium,
including another Fund of AVIF, or submitting the
question whether such segregation should be
implemented to a vote of all affected Participants
and, as appropriate, segregating the assets of any
particular group (e.g., annuity Participants, life
insurance Participants or all Participants) that
votes in favor of such segregation, or offering to
the affected Participants the option of making such a
change; and
(ii) establishing a new registered investment company of
the type defined as a "management company" in Section
4(3) of the 1940 Act or a new separate account that
is operated as a management company.
(b) If the material irreconcilable conflict arises because of LIFE
COMPANY's decision to disregard Participant voting instructions and that
decision represents a minority position or would preclude a majority vote, LIFE
COMPANY may be required, at AVIF's election, to withdraw each Account's
investment in AVIF or any Fund. No charge or penalty will be imposed as a result
of such withdrawal. Any such withdrawal must take place within six (6) months
after AVIF gives notice to LIFE COMPANY that this provision is being
implemented, and until such withdrawal AVIF shall continue to accept and
implement orders by LIFE COMPANY for the purchase and redemption of Shares of
AVIF.
(c) If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to LIFE COMPANY conflicts with
the majority of other state regulators, then LIFE COMPANY will withdraw each
Account's investment in AVIF within six (6) months after AVIF's Board of
Directors informs LIFE COMPANY that it has determined that such decision has
created a material irreconcilable conflict, and until such withdrawal AVIF shall
continue to accept and implement orders by LIFE COMPANY for the purchase and
redemption of Shares of AVIF. No charge or penalty will be imposed as a result
of such withdrawal.
(d) LIFE COMPANY agrees that any remedial action taken by it in
resolving any material irreconcilable conflict will be carried out at its
expense and with a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event,
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however, will AVIF or any of its affiliates be required to establish a new
funding medium for any Contracts. LIFE COMPANY will not be required by the terms
hereof to establish a new funding medium for any Contracts if an offer to do so
has been declined by vote of a majority of Participants materially adversely
affected by the material irreconcilable conflict.
5.5 NOTICE TO LIFE COMPANY.
AVIF will promptly make known in writing to LIFE COMPANY the Board of
Directors' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS.
LIFE COMPANY and AVIF (or its investment adviser) will at least
annually submit to the Board of Directors of AVIF such reports, materials or
data as the Board of Directors may reasonably request so that the Board of
Directors may fully carry out the obligations imposed upon it by the provisions
hereof or any exemptive order granted by the SEC to permit Mixed and Shared
Funding, and said reports, materials and data will be submitted at any
reasonable time deemed appropriate by the Board of Directors. All reports
received by the Board of Directors of potential or existing conflicts, and all
Board of Directors actions with regard to determining the existence of a
conflict, notifying Participating Insurance Companies and Participating Plans of
a conflict, and determining whether any proposed action adequately remedies a
conflict, will be properly recorded in the minutes of the Board of Directors or
other appropriate records, and such minutes or other records will be made
available to the SEC upon request.
5.7 COMPLIANCE WITH SEC RULES.
If, at any time during which AVIF is serving as an investment medium
for variable life insurance Contracts, 1940 Act Rules 6e-3(T) or, if applicable,
6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with
respect to Mixed and Shared Funding, AVIF agrees that it will comply with the
terms and conditions thereof and that the terms of this Section 5 shall be
deemed modified if and only to the extent required in order also to comply with
the terms and conditions of such exemptive relief that is afforded by any of
said rules that are applicable.
5.8 OTHER REQUIREMENTS.
AVIF will require that each Participating Insurance Company and
Participating Plan enter into an agreement with AVIF that contains in substance
the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b),
4.5(a), 5, and 10 of this Agreement.
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SECTION 6. TERMINATION
6.1 EVENTS OF TERMINATION.
Subject to Section 6.4 below, this Agreement will terminate as to a
Fund:
(a) at the option of any party, with or without cause with respect to
the Fund, upon sixty (60) days advance written notice to the other parties, or,
if later, upon receipt of any required exemptive relief from the SEC, unless
otherwise agreed to in writing by the parties; or
(b) at the option of AVIF upon institution of formal proceedings
against LIFE COMPANY or its affiliates by the NASD, the SEC, any state insurance
regulator or any other regulatory body regarding LIFE COMPANY's obligations
under this Agreement or related to the sale of the Contracts, the operation of
each Account, or the purchase of Shares, if, in each case, AVIF reasonably
determines that such proceedings, or the facts on which such proceedings would
be based, have a material likelihood of imposing material adverse consequences
on the Fund with respect to which the Agreement is to be terminated; or
(c) at the option of LIFE COMPANY upon institution of formal
proceedings against AVIF, its principal underwriter, or its investment adviser
by the NASD, the SEC, or any state insurance regulator or any other regulatory
body regarding AVIF's obligations under this Agreement or related to the
operation or management of AVIF or the purchase of AVIF Shares, if, in each
case, LIFE COMPANY reasonably determines that such proceedings, or the facts on
which such proceedings would be based, have a material likelihood of imposing
material adverse consequences on LIFE COMPANY, or the Subaccount corresponding
to the Fund with respect to which the Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's Shares
are not registered and, in all material respects, issued and sold in accordance
with any applicable federal or state law, or (ii) such law precludes the use of
such Shares as an underlying investment medium of the Contracts issued or to be
issued by LIFE COMPANY; or
(e) upon termination of the corresponding Subaccount's investment in
the Fund pursuant to Section 5 hereof; or
(f) at the option of LIFE COMPANY if the Fund ceases to qualify as a
RIC under Subchapter M of the Code or under successor or similar provisions, or
if LIFE COMPANY reasonably believes that the Fund may fail to so qualify; or
(g) at the option of LIFE COMPANY if the Fund fails to comply with
Section 817(h) of the Code or with successor or similar provisions, or if LIFE
COMPANY reasonably believes that the Fund may fail to so comply; or
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(h) at the option of AVIF if the Contracts issued by LIFE COMPANY cease
to qualify as annuity contracts or life insurance contracts under the Code
(other than by reason of the Fund's noncompliance with Section 817(h) or
Subchapter M of the Code) or if interests in an Account under the Contracts are
not registered, where required, and, in all material respects, are not issued or
sold in accordance with any applicable federal or state law; or
(i) upon another Party's material breach of any provision of this
Agreement.
6.2 NOTICE REQUIREMENT FOR TERMINATION.
No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives prior written notice to the other Party
to this Agreement of its intent to terminate, and such notice shall set forth
the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provision of
Section 6.1(e) hereof, such prior written notice shall be given at least six (6)
months in advance of the effective date of termination unless a shorter time is
agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of
Sections 6.1(b) or 6.1(c) hereof, such prior written notice shall be given at
least ninety (90) days in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the provision of
Section 6.1(a) hereof, such prior written notice shall be given at least sixty
(60) days in advance of the effective date of termination unless a shorter time
is agreed to by the Parties hereto;
(d) in the event that any termination is based upon the provisions of
Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, such prior written
notice shall be given as soon as possible within twenty-four (24) hours after
the terminating Party learns of the event causing termination to be required.
6.3 FUNDS TO REMAIN AVAILABLE.
Notwithstanding any termination of this Agreement, AVIF will, at the
option of LIFE COMPANY, continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts). Specifically, without limitation, the
owners of the Existing Contracts will be permitted to reallocate investments in
the Fund (as in effect on such date), redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 6.3 will not apply to
any terminations under Section 5 and the effect of such terminations will be
governed by Section 5 of this Agreement.
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6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
All warranties and indemnifications will survive the termination of
this Agreement.
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
If any Party terminates this Agreement with respect to any Fund
pursuant to Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i)
hereof, this Agreement shall nevertheless continue in effect as to any Shares of
that Fund that are outstanding as of the date of such termination (the "Initial
Termination Date"). This continuation shall extend to the earlier of the date as
of which an Account owns no Shares of the affected Fund or a date (the "Final
Termination Date") six (6) months following the Initial Termination Date, except
that LIFE COMPANY may, by written notice shorten said six (6) month period in
the case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or
6.1(i).
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
The Parties hereto agree to cooperate and give reasonable assistance to
one another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to Section
6.1(a), the termination date specified in the notice of termination. Such steps
may include combining the affected Account with another Account, substituting
other mutual fund shares for those of the affected Fund, or otherwise
terminating participation by the Contracts in such Fund.
SECTION 8. ASSIGNMENT
This Agreement may not be assigned by any Party, except with the
written consent of each other Party.
SECTION 9. NOTICES
Notices and communications required or permitted will be given by means
mutually acceptable to the Parties concerned. Each other notice or communication
required or permitted by this Agreement will be given to the following persons
at the following addresses and facsimile numbers, or such other persons,
addresses or facsimile numbers as the Party receiving such notices or
communications may subsequently direct in writing:
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AIM VARIABLE INSURANCE FUNDS, INC.
A I M DISTRIBUTORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
RELIASTAR LIFE INSURANCE COMPANY
WASHINGTON SQUARE SECURITIES, INC.
20 Washington Avenue South
Minneapolis, Minnesota 55401
Facsimile: 612-342-7531
Attn: Stewart D. Gregg, Esq.
SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3
hereof, LIFE COMPANY will distribute all proxy material furnished by AVIF to
Participants to whom pass-through voting privileges are required to be extended
and will solicit voting instructions from Participants. LIFE COMPANY will vote
Shares in accordance with timely instructions received from Participants. LIFE
COMPANY will vote Shares that are (a) not attributable to Participants to whom
pass-through voting privileges are extended, or (b) attributable to
Participants, but for which no timely instructions have been received, in the
same proportion as Shares for which said instructions have been received from
Participants, so long as and to the extent that the SEC continues to interpret
the 1940 Act to require pass through voting privileges for Participants. Neither
LIFE COMPANY nor any of its affiliates will in any way recommend action in
connection with or oppose or interfere with the solicitation of proxies for the
Shares held for such Participants. LIFE COMPANY reserves the right to vote
shares held in any Account in its own right, to the extent permitted by law.
LIFE COMPANY shall be responsible for assuring that each of its Accounts holding
Shares calculates voting privileges in a manner consistent with that of other
Participating Insurance Companies or in the manner required by the Mixed and
Shared Funding exemptive order obtained by AVIF. AVIF will notify LIFE COMPANY
of any changes of interpretations or amendments to Mixed and Shared Funding
exemptive order it has obtained. AVIF will comply with all provisions of the
1940 Act requiring voting by shareholders, and in particular, AVIF either will
provide for annual meetings (except insofar as the SEC may interpret Section 16
of the 1940 Act not to require such meetings) or will comply with Section 16(c)
of the 1940 Act (although AVIF is not one of the trusts described in Section
16(c) of that Act) as well as with Sections 16(a) and, if and when applicable,
16(b). Further, AVIF will act in accordance with the SEC's interpretation of the
requirements of Section 16(a) with respect to periodic elections of directors
and with whatever rules the SEC may promulgate with respect thereto.
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SECTION 11. FOREIGN TAX CREDITS
AVIF agrees to consult in advance with LIFE COMPANY concerning any
decision to elect or not to elect pursuant to Section 853 of the Code to pass
through the benefit of any foreign tax credits to its shareholders.
SECTION 12. INDEMNIFICATION
12.1 OF AVIF AND AIM BY LIFE COMPANY AND UNDERWRITER.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c),
below, LIFE COMPANY and UNDERWRITER agree to indemnify and hold harmless AVIF,
AIM, their affiliates, and each person, if any, who controls AVIF, AIM, or their
affiliates within the meaning of Section 15 of the 1933 Act and each of their
respective directors and officers, (collectively, the "Indemnified Parties" for
purposes of this Section 12.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
LIFE COMPANY and UNDERWRITER) or actions in respect thereof (including, to the
extent reasonable, legal and other expenses), to which the Indemnified Parties
may become subject under any statute, regulation, at common law or otherwise;
PROVIDED, the Account owns or has owned shares of the Fund and insofar as such
losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in any Account's 1933 Act registration
statement, any Account Prospectus, the Contracts, or
sales literature or advertising for the Contracts (or
any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading; PROVIDED, that
this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or
such alleged statement or omission was made in
reliance upon and in conformity with information
furnished to LIFE COMPANY or UNDERWRITER by or on
behalf of AVIF or AIM for use in any Account's 1933
Act registration statement, any Account Prospectus,
the Contracts, or sales literature or advertising or
otherwise for use in connection with the sale of
Contracts or Shares (or any amendment or supplement
to any of the foregoing); or
(ii) arise out of or as a result of any other statements
or representations (other than statements or
representations contained in AVIF's 1933 Act
registration statement, AVIF Prospectus, sales
literature or advertising of AVIF, or any amendment
or supplement to any of the foregoing, not supplied
for use therein by or on behalf of LIFE COMPANY,
UNDERWRITER or their respective affiliates and on
which such persons have reasonably relied) or the
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negligent, illegal or fraudulent conduct of LIFE
COMPANY, UNDERWRITER or their respective affiliates
or persons under their control (including, without
limitation, their employees and "persons associated
with a member," as that term is defined in paragraph
(q) of Article I of the NASD's By-Laws), in
connection with the sale or distribution of the
Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in AVIF's 1933 Act registration statement,
AVIF Prospectus, sales literature or advertising of
AVIF, or any amendment or supplement to any of the
foregoing, or the omission or alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein
not misleading if such a statement or omission was
made in reliance upon and in conformity with
information furnished to AVIF, AIM or their
affiliates by or on behalf of LIFE COMPANY,
UNDERWRITER or their respective affiliates for use in
AVIF's 1933 Act registration statement, AVIF
Prospectus, sales literature or advertising of AVIF,
or any amendment or supplement to any of the
foregoing; or
(iv) arise as a result of any failure by LIFE COMPANY or
UNDERWRITER to perform the obligations, provide the
services and furnish the materials required of them
under the terms of this Agreement, or any material
breach of any representation and/or warranty made by
LIFE COMPANY or UNDERWRITER in this Agreement or
arise out of or result from any other material breach
of this Agreement by LIFE COMPANY or UNDERWRITER; or
(v) arise as a result of failure by the Contracts issued
by LIFE COMPANY to qualify as annuity contracts or
life insurance contracts under the Code, otherwise
than by reason of any Fund's failure to comply with
Subchapter M or Section 817(h) of the Code.
(b) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this
Section 12.1 with respect to any losses, claims, damages, liabilities or actions
to which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of that Indemnified Party's
reckless disregard of obligations or duties (i) under this Agreement, or (ii) to
AVIF or AIM.
(c) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this
Section 12.1 with respect to any action against an Indemnified Party unless AVIF
or AIM shall have notified LIFE COMPANY and UNDERWRITER in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the action shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service
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on any designated agent), but failure to notify LIFE COMPANY and UNDERWRITER of
any such action shall not relieve LIFE COMPANY and UNDERWRITER from any
liability which they may have to the Indemnified Party against whom such action
is brought otherwise than on account of this Section 12.1. Except as otherwise
provided herein, in case any such action is brought against an Indemnified
Party, LIFE COMPANY and UNDERWRITER shall be entitled to participate, at their
own expense, in the defense of such action and also shall be entitled to assume
the defense thereof, with counsel approved by the Indemnified Party named in the
action, which approval shall not be unreasonably withheld. After notice from
LIFE COMPANY or UNDERWRITER to such Indemnified Party of LIFE COMPANY's or
UNDERWRITER's election to assume the defense thereof, the Indemnified Party will
cooperate fully with LIFE COMPANY and UNDERWRITER and shall bear the fees and
expenses of any additional counsel retained by it, and neither LIFE COMPANY nor
UNDERWRITER will be liable to such Indemnified Party under this Agreement for
any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof, other than reasonable
costs of investigation.
12.2 OF LIFE COMPANY AND UNDERWRITER BY AVIF AND AIM.
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e), below, AVIF and AIM agree to indemnify and hold harmless LIFE COMPANY,
UNDERWRITER, their respective affiliates, and each person, if any, who controls
LIFE COMPANY, UNDERWRITER or their respective affiliates within the meaning of
Section 15 of the 1933 Act and each of their respective directors and officers,
(collectively, the "Indemnified Parties" for purposes of this Section 12.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of AVIF and/or AIM) or actions in respect
thereof (including, to the extent reasonable, legal and other expenses), to
which the Indemnified Parties may become subject under any statute, regulation,
at common law, or otherwise; PROVIDED, the Account owns or has owned shares of
the Fund and insofar as such losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in AVIF's 1933 Act registration statement,
AVIF Prospectus or sales literature or advertising of
AVIF (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading; PROVIDED, that this agreement to
indemnify shall not apply as to any Indemnified Party
if such statement or omission or such alleged
statement or omission was made in reliance upon and
in conformity with information furnished to AVIF or
its affiliates by or on behalf of LIFE COMPANY,
UNDERWRITER or their respective affiliates for use in
AVIF's 1933 Act registration statement, AVIF
Prospectus, or in sales literature or advertising or
otherwise for use in connection with the sale of
Contracts or Shares (or any amendment or supplement
to any of the foregoing); or
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(ii) arise out of or as a result of any other statements
or representations (other than statements or
representations contained in any Account's 1933 Act
registration statement, any Account Prospectus, sales
literature or advertising for the Contracts, or any
amendment or supplement to any of the foregoing, not
supplied for use therein by or on behalf of AVIF, AIM
or their affiliates and on which such persons have
reasonably relied) or the negligent, illegal or
fraudulent conduct of AVIF, AIM or their affiliates
or persons under their control (including, without
limitation, their employees and "persons associated
with a member" as that term is defined in Section (q)
of Article I of the NASD By-Laws), in connection with
the sale or distribution of AVIF Shares; or
(iii) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in any Account's 1933 Act registration
statement, any Account Prospectus, sales literature
or advertising covering the Contracts, or any
amendment or supplement to any of the foregoing, or
the omission or alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading, if such statement or omission was made in
reliance upon and in conformity with information
furnished to LIFE COMPANY, UNDERWRITER or their
respective affiliates by or on behalf of AVIF or AIM
for use in any Account's 1933 Act registration
statement, any Account Prospectus, sales literature
or advertising covering the Contracts, or any
amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by AVIF to perform
the obligations, provide the services and furnish the
materials required of it under the terms of this
Agreement, or any material breach of any
representation and/or warranty made by AVIF in this
Agreement or arise out of or result from any other
material breach of this Agreement by AVIF.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e) hereof, AVIF and AIM agree to indemnify and hold harmless the
Indemnified Parties from and against any and all losses, claims, damages,
liabilities (including amounts paid in settlement thereof with, the written
consent of AVIF and/or AIM) or actions in respect thereof (including, to the
extent reasonable, legal and other expenses) to which the Indemnified Parties
may become subject directly or indirectly under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or actions
directly or indirectly result from or arise out of the failure of any Fund to
operate as a regulated investment company in compliance with (i) Subchapter M of
the Code and regulations thereunder, or (ii) Section 817(h) of the Code and
regulations thereunder, including, without limitation, any income taxes and
related penalties, rescission charges, liability under state law to Participants
asserting liability against LIFE COMPANY pursuant to the Contracts, the costs of
any ruling and closing agreement or other settlement with the IRS, and the cost
of any substitution by LIFE COMPANY of Shares of another investment company or
portfolio for those of any adversely
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affected Fund as a funding medium for each Account that LIFE COMPANY reasonably
deems necessary or appropriate as a result of the noncompliance.
(c) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any losses, claims, damages, liabilities or actions to which an
Indemnified Party would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance by that Indemnified Party of
its duties or by reason of such Indemnified Party's reckless disregard of its
obligations and duties (i) under this Agreement, or (ii) to LIFE COMPANY,
UNDERWRITER, each Account or Participants.
(d) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any action against an Indemnified Party unless the Indemnified Party
shall have notified AVIF and/or AIM in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify AVIF or AIM of any such action shall not relieve
AVIF or AIM from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this Section
12.2. Except as otherwise provided herein, in case any such action is brought
against an Indemnified Party, AVIF and/or AIM will be entitled to participate,
at its own expense, in the defense of such action and also shall be entitled to
assume the defense thereof (which shall include, without limitation, the conduct
of any ruling request and closing agreement or other settlement proceeding with
the IRS), with counsel approved by the Indemnified Party named in the action,
which approval shall not be unreasonably withheld. After notice from AVIF and/or
AIM to such Indemnified Party of AVIF's or AIM"s election to assume the defense
thereof, the Indemnified Party will cooperate fully with AVIF and AIM and shall
bear the fees and expenses of any additional counsel retained by it, and AVIF
and AIM will not be liable to such Indemnified Party under this Agreement for
any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof, other than reasonable
costs of investigation.
(e) In no event shall AVIF or AIM be liable under the indemnification
provisions contained in this Agreement to any individual or entity, including,
without limitation, LIFE COMPANY, UNDERWRITER or any other Participating
Insurance Company or any Participant, with respect to any losses, claims,
damages, liabilities or expenses that arise out of or result from (i) a breach
of any representation, warranty, and/or covenant made by LIFE COMPANY or
UNDERWRITER hereunder or by any Participating Insurance Company under an
agreement containing substantially similar representations, warranties and
covenants; (ii) the failure by LIFE COMPANY or any Participating Insurance
Company to maintain its segregated asset account (which invests in any Fund) as
a legally and validly established segregated asset account under applicable
state law and as a duly registered unit investment trust under the provisions of
the 1940 Act (unless exempt therefrom); or (iii) the failure by LIFE COMPANY or
any Participating Insurance Company to maintain its variable annuity or life
insurance contracts (with respect to which any Fund serves as an underlying
funding vehicle) as annuity contracts or life insurance contracts under
applicable provisions of the Code.
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12.3 EFFECT OF NOTICE.
Any notice given by the indemnifying Party to an Indemnified Party
referred to in Sections 12.1(c) or 12.2(d) above of participation in or control
of any action by the indemnifying Party will in no event be deemed to be an
admission by the indemnifying Party of liability, culpability or responsibility,
and the indemnifying Party will remain free to contest liability with respect to
the claim among the Parties or otherwise.
12.4 SUCCESSORS.
A successor by law of any Party shall be entitled to the benefits of
the indemnification contained in this Section 12.
SECTION 13. APPLICABLE LAW
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Maryland law, without regard for that state's
principles of conflict of laws.
SECTION 14. EXECUTION IN COUNTERPARTS
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the same
instrument.
SECTION 15. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
SECTION 16. RIGHTS CUMULATIVE
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
SECTION 17. HEADINGS
The Table of Contents and headings used in this Agreement are for
purposes of reference only and shall not limit or define the meaning of the
provisions of this Agreement.
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SECTION 18. CONFIDENTIALITY
AVIF acknowledges that the identities of the customers of LIFE COMPANY
or any of its affiliates (collectively, the "LIFE COMPANY Protected Parties for
purposes of this Section 18), information maintained regarding those customers,
and all computer programs and procedures or other information developed by the
LIFE COMPANY Protected Parties or any of their employees or agents in connection
with LIFE COMPANY's performance of its duties under this Agreement are the
valuable property of the LIFE COMPANY Protected Parties. AVIF agrees that if it
comes into possession of any list or compilation of the identities of or other
information about the LIFE COMPANY Protected Parties' customers, or any other
information or property of the LIFE COMPANY Protected Parties, other than such
information as may be independently developed or compiled by AVIF from
information supplied to it by the LIFE COMPANY Protected Parties' customers who
also maintain accounts directly with AVIF, AVIF will hold such information or
property in confidence and refrain from using, disclosing or distributing any of
such information or other property except: (a) with LIFE COMPANY's prior written
consent; or (b) as required by law or judicial process. LIFE COMPANY
acknowledges that the identities of the customers of AVIF or any of its
affiliates (collectively, the "AVIF Protected Parties' for purposes of this
Section 18), information maintained regarding those customers, and all computer
programs and procedures or other information developed by the AVIF Protected
Parties or any of their employees or agents in connection with AVIF's
performance of its duties under this Agreement are the valuable property of the
AVIF Protected Parties. LIFE COMPANY agrees that if it comes into possession of
any list or compilation of the identities of or other information about the AVIF
Protected Parties' customers or any other information or property of the AVIF
Protected Parties, other than such information as may be independently developed
or compiled by LIFE COMPANY from information supplied to it by the AVIF
Protected Parties' customers who also maintain accounts directly with LIFE
COMPANY, LIFE COMPANY will hold such information or property in confidence and
refrain from using, disclosing or distributing any of such information or other
property except: (a) with AVIF's prior written consent; or (b) as required by
law or judicial process. Each party acknowledges that any breach of the
agreements in this Section 18 would result in immediate and irreparable harm to
the other parties for which there would be no adequate remedy at law and agree
that in the event of such a breach, the other parties will be entitled to
equitable relief by way of temporary and permanent injunctions, as well as such
other relief as any court of competent jurisdiction deems appropriate.
SECTION 19. TRADEMARKS AND FUND NAMES
(a) Except as may otherwise be provided in a License Agreement among A
I M Management Group, Inc., LIFE COMPANY and UNDERWRITER, neither LIFE COMPANY
nor UNDERWRITER or any of their respective affiliates, shall use any trademark,
trade name, service mark or logo of AVIF, AIM or any of their respective
affiliates, or any variation of any such trademark, trade name, service mark or
logo, without AVIF's or AIM's prior written consent, the granting of which shall
be at AVIF's or AIM's sole option.
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(b) Except as otherwise expressly provided in this Agreement, neither
AVIF, its investment adviser, its principal underwriter, or any affiliates
thereof shall use any trademark, trade name, service mark or logo of LIFE
COMPANY, UNDERWRITER or any of their affiliates, or any variation of any such
trademark, trade name, service mark or logo, without LIFE COMPANY's or
UNDERWRITER's prior written consent, the granting of which shall be at LIFE
COMPANY's or UNDERWRITER's sole option.
SECTION 20. PARTIES TO COOPERATE
Each party to this Agreement will cooperate with each other party and
all appropriate governmental authorities (including, without limitation, the
SEC, the NASD and state insurance regulators) and will permit each other and
such authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
SECTION 21. AMENDMENTS
No provision of this Agreement may be amended or modified in any manner
except by a written agreement executed by all parties hereto.
27
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized officers
signing below.
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: ________________________ By: _____________________________________
Name: Nancy L. Martin Name: Robert H. Graham
Title Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: ________________________ By: _____________________________________
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title: President
RELIASTAR LIFE INSURANCE COMPANY,
on behalf of itself and
its separate accounts
Attest: ________________________ By: _____________________________________
Name: ________________________ Name: _____________________________________
Title: ________________________ Title: _____________________________________
WASHINGTON SQUARE SECURITIES, INC.
Attest: ________________________ By: _____________________________________
Name: ________________________ Name: _____________________________________
Title: ________________________ Title: _____________________________________
28
<PAGE>
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
- -----------------------------------
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Dent Demographic Trends Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
- -------------------------------------
ReliaStar Select Variable Account
ReliaStar Select*Life Variable Account
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
- -----------------------------------------
Select*Annuity III
- ------------------
Advantage SE Variable Annuity
- -----------------------------
Select*Life II
- --------------
Select*Life II
- --------------
SVUL
- ----
Flex Design
- -----------
29
<PAGE>
SCHEDULE B
AIM'S PRICING ERROR POLICIES
Determination of Materiality
In the event that AIM discovers an error in the calculation of the Fund's net
asset value, the following policies will apply:
If the amount of the error is less than $.01 per share, it is considered
immaterial and no adjustments are made.
If the amount of the error is $.01 per share or more, then the following
thresholds are applied:
a. If the amount of the difference in the erroneous net asset
value and the correct net asset value is less than .5% of the
correct net asset value, AIM will reimburse the affected Fund
to the extent of any loss resulting from the error. No other
adjustments shall be made.
b. If the amount of the difference in the erroneous net asset
value and the correct net asset value is .5% of the correct
net asset value or greater, then AIM will determine the impact
of the error to the affected Fund and shall reimburse such
Fund (and/or LIFE COMPANY, as appropriate, such as in the
event that the error was not discovered until after LIFE
COMPANY processed transactions using the erroneous net asset
value) to the extent of any loss resulting from the error. To
the extent that an overstatement of net asset value per share
is detected quickly and LIFE COMPANY has not mailed redemption
checks to Participants, LIFE COMPANY and AIM agree to examine
the extent of the error to determine the feasibility of
reprocessing such redemption transaction (for purposes of
reimbursing the Fund to the extent of any such overpayment).
Reprocessing Cost Reimbursement
To the extent a reprocessing of Participant transactions is required pursuant to
paragraph (b), above, AIM shall reimburse LIFE COMPANY for LIFE COMPANY's
reprocessing costs in an amount not to exceed $3.00 per contract affected by $10
or more. The reprocessing costs may be amended upon mutual agreement of the
Parties in writing.
The Pricing Policies described herein may be modified by AVIF as approved by its
Board of Directors. AIM agrees to use its best efforts to notify LIFE COMPANY at
least five (5) days prior to any such meeting of the Board of Directors of AVIF
to consider such proposed changes.
30
<PAGE>
SCHEDULE C
EXPENSE ALLOCATIONS
<TABLE>
<CAPTION>
=========================================================== ========================================================
LIFE COMPANY AVIF / AIM
- ----------------------------------------------------------- --------------------------------------------------------
<S> <C>
Preparing and filing the Account's registration statement Preparing and filing the Fund's registration statement
- ----------------------------------------------------------- --------------------------------------------------------
Text composition for Account prospectuses and supplements Text composition for Fund prospectuses and supplements
- ----------------------------------------------------------- --------------------------------------------------------
Text alterations of prospectuses (Account) and Text alterations of prospectuses (Fund) and
supplements (Account) supplements (Fund)
- ----------------------------------------------------------- --------------------------------------------------------
Printing Account and Fund prospectuses and supplements Camera ready and HTML Fund prospectus,
for prospective purchasers Printing of Fund prospectus for policy owners of record
- ----------------------------------------------------------- --------------------------------------------------------
Text composition and printing Account SAIs Text composition and printing Fund SAIs
- ----------------------------------------------------------- --------------------------------------------------------
Mailing and distributing Account SAIs to policy owners Mailing and distributing Fund SAIs to policy owners
upon request by policy owners upon request by policy owners
- ----------------------------------------------------------- --------------------------------------------------------
Mailing and distributing Account prospectus and Mailing and distributing Fund prospectus and Account
Account supplements to policy owners of record as required supplements to policy owners of record as required by
by Federal Securities Laws and to prospective purchasers Federal Securities Laws
- ----------------------------------------------------------- --------------------------------------------------------
Text composition, printing, mailing, and distributing Text composition, printing, mailing, and distributing
annual and semi-annual reports for Account annual and semi-annual reports for Fund
- ----------------------------------------------------------- --------------------------------------------------------
Text composition, printing, mailing, distributing, and Text composition, printing, mailing, distributing and
tabulation of proxy statements and voting instruction tabulation of proxy statements and voting instruction
solicitation materials to policy owners with respect to solicitation materials to policy owners with respect
proxies related to the Account to proxies related to the Fund
- ----------------------------------------------------------- --------------------------------------------------------
Preparation, printing and distributing sales material and
advertising relating to the Funds, insofar as such materials
are prepared by LIFE COMPANY and relate to the Contracts and
filing such materials with and obtaining approval from, the
SEC, the NASD, any state insurance regulatory authority, and
any other
31
<PAGE>
appropriate regulatory authority, to the extent
required
=========================================================== ========================================================
</TABLE>
32
EXHIBIT 1.A.(8)(p)
ADMINISTRATIVE SERVICES AGREEMENT
RELIASTAR LIFE INSURANCE COMPANY, NORTHERN LIFE INSURANCE COMPANY,
RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK ("INSURERS") and A I M ADVISORS,
INC. ("AIM") (collectively, the "Parties") mutually agree to the arrangements
set forth in this Administrative Services Agreement (the "Agreement") dated as
of ___________, 2000.
WHEREAS, AIM is the investment adviser to AIM Variable Insurance Funds,
Inc. (the "Fund"); and
WHEREAS, AIM has entered into an amended Master Administrative Services
Agreement, dated May 1, 1998, with the Fund ("Master Agreement") pursuant to
which it has agreed to provide, or arrange to provide, certain administrative
services, including such services as may be requested by the Fund's Board of
Directors from time to time; and
WHEREAS, INSURERS issues variable life insurance policies and/or
variable annuity contracts (collectively, the "Contracts"); and
WHEREAS, INSURERS have entered into a participation
agreements,("Participation Agreements") with the Fund, pursuant to which the
Fund has agreed to make shares of certain of its portfolios ("Portfolios")
available for purchase by one or more of INSURERS' separate accounts or
divisions thereof (each, a "Separate Account"), in connection with the
allocation by Contract owners of purchase payments to corresponding investment
options offered under the Contracts; and
WHEREAS, INSURERS and AIM expect that the Fund, and its Portfolios, can
derive substantial savings in administrative expenses by virtue of having one or
more Separate Accounts of INSURERS each as a single shareholder of record of
Portfolio shares, rather than having numerous public shareholders of such
shares; and
WHEREAS, INSURERS and AIM expect that the Fund, and its Portfolios, can
derive such substantial savings because INSURERS performs the administrative
services listed on Schedule A hereto for the Fund in connection with the
Contracts issued by INSURERS; and
WHEREAS, INSURERS have no contractual or other legal obligation to
perform such administrative services, other than pursuant to this Agreement and
the Participation Agreements; and
WHEREAS, INSURERS desire to be compensated for providing such
administrative services; and
1
<PAGE>
WHEREAS, AIM desires that the Fund benefit from the lower
administrative expenses resulting from the administrative services performed by
INSURERS; and
WHEREAS, AIM desires to retain the administrative services of INSURERS
and to compensate INSURERS for providing such administrative services;
NOW, THEREFORE, the Parties agree as follows:
SECTION 1. ADMINISTRATIVE SERVICES; PAYMENTS THEREFOR.
(a) INSURERS shall provide the administrative services set out in
Schedule A hereto and made a part hereof, as the same may be amended from time
to time. For such services, AIM agrees to pay to INSURERS a quarterly fee
("Quarterly Fee") equal to a percentage of the average daily net assets of the
Fund attributable to the Contracts issued by INSURERS ("INSURERS Fund Assets) at
the annual rate of 0.25%.
(b) AIM shall calculate the Quarterly Fee at the end of each calendar
quarter and will make such payment to INSURERS, without demand or notice by
INSURERS, within 30 days thereafter, in a manner mutually agreed upon by the
Parties from time to time.
(c) From time to time, the Parties shall review the Quarterly Fee to
determine whether it exceeds or is reasonably expected to exceed the incurred
and anticipated costs, over time, of INSURERS. The Parties agree to negotiate in
good faith a reduction to the Quarterly Fee as necessary to eliminate any such
excess or as necessary to reflect a reduction in the fee paid by the Fund to AIM
pursuant to the Master Agreement.
SECTION 2. NATURE OF PAYMENTS.
The Parties to this Agreement recognize and agree that AIM's payments
hereunder are for administrative services only and do not constitute payment in
any manner for investment advisory services or for costs of distribution of
Contracts or of Portfolio shares, and are not otherwise related to investment
advisory or distribution services or expenses. INSURERS represent and warrant
that the fees to be paid by AIM for services to be rendered by INSURERS pursuant
to the terms of this Agreement are to compensate the INSURERS for providing
administrative services to the Fund, and are not designed to reimburse or
compensate INSURERS for providing administrative services with respect to the
Contracts or any Separate Account (it being understood that for accounting
purposes INSURER does not allocate fees received to specific services provided
or expenses incurred on a dollar for dollar basis).
SECTION 3. TERM AND TERMINATION.
Any Party may terminate this Agreement, without penalty, on 60 days
written notice to the other Party. Unless so terminated, this Agreement shall
continue in effect for so long as AIM or its
2
<PAGE>
successor(s) in interest, or any affiliate thereof, continues to perform in a
similar capacity for the Fund, and for so long as INSURERS provide the services
contemplated hereunder with respect to Contracts under which values or monies
are allocated to a Portfolio.
SECTION 4. AMENDMENT.
This Agreement may be amended upon mutual agreement of the Parties in
writing.
SECTION 5. NOTICES.
All notices, requests, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered
RELIASTAR LIFE INSURANCE COMPANY
20 Washington Avenue South
Minneapolis, Minnesota 55401
Facsimile: (612) 342-7531
Attention: Stewart D. Gregg, Esq.
NORTHERN LIFE INSURANCE COMPANY
Street address
City, State Zip
Facsimile:
Attention:
RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK
Street address
City, State Zip
Facsimile:
Attention:
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attention: Nancy L. Martin, Esq.
SECTION 6. MISCELLANEOUS.
(a) Successors and Assigns. This Agreement shall be binding upon the
Parties and their transferees, successors and assigns. The benefits of and the
right to enforce this Agreement shall accrue to the Parties and their
transferees, successors and assigns.
3
<PAGE>
(b) Assignment. Neither this Agreement nor any of the rights,
obligations or liabilities of any Party hereto shall be assigned without the
written consent of the other Party.
(c) Intended Beneficiaries. Nothing in this Agreement shall be
construed to give any person or entity other than the Parties, as well as the
Fund, any legal or equitable claim, right or remedy. Rather, this Agreement is
intended to be for the sole and exclusive benefit of the Parties, as well as the
Fund.
(d) Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original but all of which shall together constitute
one and the same instrument.
(e) Applicable Law. This Agreement shall be interpreted, construed, and
enforced in accordance with the laws of the State of Delaware without reference
to the conflict of law principles thereof.
(f) Severability. If any portion of this Agreement shall be found to be
invalid or unenforceable by a court or tribunal or regulatory agency of
competent jurisdiction, the remainder shall not be affected thereby, but shall
have the same force and effect as if the invalid or unenforceable portion had
not been inserted.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date of first above written.
RELIASTAR LIFE INSURANCE COMPANY
By: ____________________________________
Title: ____________________________________
NORTHERN LIFE INSURANCE COMPANY
By: ____________________________________
Title: ____________________________________
RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK
By: ____________________________________
Title: ____________________________________
A I M ADVISORS, INC.
By: ____________________________________
4
<PAGE>
Title: ____________________________________
5
<PAGE>
SCHEDULE A
ADMINISTRATIVE SERVICES FOR
AIM VARIABLE INSURANCE FUNDS, INC.
INSURERS shall provide certain administrative services respecting the
operations of the Fund, as set forth below. This Schedule, which may be amended
from time to time as mutually agreed upon by INSURERS and AIM, constitutes an
integral part of the Agreement to which it is attached. Capitalized terms used
herein shall, unless otherwise noted, have the same meaning as the defined terms
in the Agreement to which this Schedule relates.
A. RECORDS OF PORTFOLIO SHARE TRANSACTIONS; MISCELLANEOUS RECORDS
1. INSURERS shall maintain master accounts with the Fund, on behalf of
each Portfolio, which accounts shall bear the name of INSURERS as the record
owner of Portfolio shares on behalf of each Separate Account investing in the
Portfolio.
2. INSURERS shall maintain a daily journal setting out the number of
shares of each Portfolio purchased, redeemed or exchanged by Contract owners
each day, as well as the net purchase or redemption orders for Portfolio shares
submitted each day, to assist AIM, the Fund and/or the Fund's transfer agent in
tracking and recording Portfolio share transactions, and to facilitate the
computation of each Portfolio's net asset value per share. INSURERS shall
promptly provide AIM, the Fund, and the Fund's transfer agent with a copy of
such journal entries or information appearing thereon in such format as may be
reasonably requested from time to time. INSURERS shall provide such other
assistance to AIM, the Fund, and the Fund's transfer agent as may be necessary
to cause various Portfolio share transactions effected by Contract owners to be
properly reflected on the books and records of the Fund.
3. In addition to the foregoing records, and without limitation,
INSURERS shall maintain and preserve all records as required by law to be
maintained and preserved in connection with providing administrative services
hereunder.
B. ORDER PLACEMENT AND PAYMENT
1. INSURERS shall determine the net amount to be transmitted to the
Separate Accounts as a result of redemptions of each Portfolio's shares based on
Contract owner redemption requests and shall disburse or credit to the Separate
Accounts all proceeds of redemptions of Portfolio shares. INSURERS shall notify
the Fund of the cash required to meet redemption payments.
2. INSURERS shall determine the net amount to be transmitted to the
Fund as a result of purchases of Portfolio shares based on Contract owner
purchase payments and transfers allocated to the Separate Accounts investing in
each Portfolio. INSURERS shall transmit net purchase payments to the Fund's
custodian.
6
<PAGE>
C. ACCOUNTING SERVICES
INSURERS shall perform miscellaneous accounting services as may be
reasonably requested from time to time by AIM, which services shall relate to
the business contemplated by the Participation Agreements between INSURERS and
the Fund, as amended from time to time. Such services shall include, without
limitation, periodic reconciliation and balancing of INSURERS' books and records
with those of the Fund with respect to such matters as cash accounts, Portfolio
share purchase and redemption orders placed with the Fund, dividend and
distribution payments by the Fund, and such other accounting matters that may
arise from time to time in connection with the operations of the Fund as related
to the business contemplated by the Participation Agreements.
D. REPORTS
INSURERS acknowledges that AIM may, from time to time, be called upon
by the Fund's Board of Directors ("Board"), to provide various types of
information pertaining to the operations of the Fund and related matters, and
that AIM also may, from time to time, decide to provide such information to the
Board in its own discretion. Accordingly, INSURERS agree to provide AIM with
such assistance as AIM may reasonably request so that AIM can report such
information to the Fund's Board in a timely manner. INSURERS acknowledges that
such information and assistance shall be in addition to the information and
assistance required of INSURERS pursuant to the Fund's mixed and shared funding
SEC exemptive order, described in the Participation Agreements.
INSURERS further agree to provide AIM with such assistance as AIM may
reasonably request with respect to the preparation and submission of reports and
other documents pertaining to the Fund to appropriate regulatory bodies and
third party reporting services.
E. FUND-RELATED CONTRACT OWNER SERVICES
INSURERS agree to print and distribute, in a timely manner,
prospectuses, statements of additional information, supplements thereto,
periodic reports, proxy materials and any other materials of the Fund required
by law or otherwise to be given to its shareholders, including, without
limitation, Contract owners investing in Portfolio shares. INSURERS further
agree to provide telephonic support for Contract owners, including, without
limitation, advice with respect to inquiries about the Fund and each Portfolio
thereof (not including information about performance or related to sales),
communicating with Contract owners about Fund (and Separate Account)
performance, and assisting with proxy solicitations, specifically with respect
to soliciting voting instructions from Contract owners.
F. MISCELLANEOUS SERVICES
INSURERS shall provide such other administrative support to the Fund as
mutually agreed between INSURERS and AIM or the Fund from time to time. INSURERS
shall, from time to time, relieve the Fund of other usual or incidental
administration services of the type ordinarily borne by mutual funds that offer
shares to individual members of the general public.
7
EXHIBIT 99.C1
INDEPENDENT AUDITORS' CONSENT
Board of Directors
Select*Life Variable Account
We consent to the use in this Post-Effective Amendment No. 11 to
Registration Statement No. 33-57244 on Form S-6 of Select*Life Variable Account
filed under the Securities Act of 1933 of our report dated February 11, 2000
related to the financial statements of Select*Life Variable Account as of
December 31, 1999 and for each of the three years in the period then ended, and
our report dated February 1, 2000 related to the consolidated financial
statements of ReliaStar Life Insurance Company and subsidiaries as of and for
the years ended December 31, 1999 and 1998, appearing in the Prospectus, which
is a part of such Registration Statement, and to the reference to us under the
heading "Experts" in such Prospectus.
Deloitte & Touche
Minneapolis, MN
March 30, 2000
EXHIBIT 99.C6
ACTUARIAL OPINION AND CONSENT
March 29, 2000
ReliaStar Life Insurance Company
20 Washington Avenue South
Minneapolis, MN 55401
Madam/Sir:
This opinion is furnished in connection with the registration by ReliaStar
Life Insurance Company of a flexible premium variable life insurance policy (the
"Contract") under the Securities Act of 1933, as amended. The Contract is
described in the Prospectus constituting a part of the Registration Form S-6.
Post-Effective Amendment No. 11 to the Registration Form S-6, File No. 33-57244.
The form of Contract was reviewed by me, and I am familiar with the
Registration Statement and Exhibits thereto.
In my opinion:
The illustrations of Accumulation Values, Surrender Charges, Cash
Surrender Values, and Death Benefits, shown in this Post-Effective
Amendment No. 11 to the Registration Statement on Form S-6 as Exhibit
1.A.(5)(k) and (l) based on the assumptions stated in the illustrations,
are consistent with the provisions of the Contract. The rate structure of
the Contract has not been designed so as to make the relationship between
premiums and benefits, as shown in the illustrations, appear more
favorable to a prospective purchaser of a Contract for a male age 40
nonsmoker Rate Class than to prospective purchasers to the Contract for
other ages or rate classes, or for females. In any state where charges
cannot be based upon the insured's sex, the rate structure of the
Contract has not been designed so as to make the relationship between
premium and benefits, as shown in the illustrations, appear more
favorable to a prospective purchaser of the Contract for an insured age
40 than to prospective purchasers of the Contract for other ages or Rate
Classes.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to my name under the heading
"Experts" in the Prospectus constituting a part of the Registration Statement.
Sincerely,
/S/ CRAIG A. KROGSTAD
Craig A. Krogstad, FSA, MAAA
Assistant Vice President and Actuary
EXHIBIT 99.2
LEGAL OPINION AND CONSENT
March 29, 2000
ReliaStar Life Insurance Company
20 Washington Avenue S.
Minneapolis, MN 55440
Dear Sir or Madam:
In connection with the proposed registration under the Securities Act of
1933, as amended, of flexible premium variable life insurance policies (the
"Policies") and interests in Select*Life Variable Account (the "Variable
Account"), I have examined documents relating to the establishment of the
Variable Account by the Board of Directors of ReliaStar Life Insurance Company
(the "Company") as a separate account for assets applicable to variable
contracts, pursuant to Minnesota Statutes Section 61A.13 to 61A.21, as amended,
and Post-Effective Amendment No. 11 to the Registration Statement, on Form S-6,
File No. 33-57244 (the "Registration Statement") and I have examined such other
documents and have reviewed such matters as I deemed necessary for this opinion,
and I advise you that in my opinion:
1. The Variable Account is a separate account of the Company duly created
and validly existing pursuant to the laws of the State of Minnesota.
2. The Policies, when issued in accordance with the Prospectus
constituting a part of the Registration Statement and upon compliance
with applicable local law, will be legal and binding obligations of
the Company in accordance with their respective terms.
3. The portion of the assets held in the Variable Account equal to
reserves and other contract liabilities with respect to the Variable
Accounts are not chargeable with liabilities arising out of any other
business the Company may conduct.
4. Amendment No. 11 does not contain disclosures that would render it
ineligible to become effective under Rule 485(b) of the Securities Act
of 1933.
I consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of my name under the heading "Legal Matters" in the
Prospectus constituting a part of the Registration Statement and to the
references to me wherever appearing therein.
Sincerely,
/S/ STEWART D. GREGG
Stewart D. Gregg
Counsel
