<PAGE>
File No.33-90474
- --------------------------------------------------------------------------------
811-9002
As Filed with the Securities and Exchange Commission
April 25, 1997
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 [ X ]
Pre-Effective Amendment No. [ ]
--------
Post-Effective Amendment No. 3 [ X ]
-------
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [ X ]
Amendment No. 4 [ X ]
------
SEPARATE ACCOUNT ONE
(Exact Name of Registrant as Specified in its Charter)
NORTHERN LIFE INSURANCE COMPANY
(Name of Depositor)
1110 Third Avenue, Seattle, Washington 98101
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (206) 292-1111
James E. Nelson
Northern Life Insurance Company
1110 Third Avenue
Seattle, Washington 98101
(Name and Address of Agent for Service)
Approximate date of proposed Public Offering: As soon as
practicable after the Registration Statement becomes effective.
It is proposed that this filing will become effective (check appropriate space):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on April 30, 1997 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on April 30, 1997 pursuant to paragraph (a) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
Registrant has chosen to register an indefinite amount of securities
pursuant to Rule 24f-2 under the Investment Company Act of 1940. The
Rule 24f-2 Notice for Registrant's most recent fiscal year was filed on or about
February 21, 1997.
<PAGE>
SEPARATE ACCOUNT ONE
Cross Reference Sheet Pursuant to Rule 495(a)
Form N-4
Item Number Part A Heading in Prospectus
- ----------- ----------------------------
1. Cover Page
2. Definitions
3. Summary
4. Condensed Financial Information
5. The Company; The Variable Account; Investments of the Variable
Account
6. Charges Made by the Company
7. The Contracts
8. Annuity Provisions
9. The Contracts
10. The Contracts
11. The Contracts
12. Federal Tax Status
13. Legal Proceedings
14. Statement of Additional Information Table of Contents
Part B Heading in Statement of Additional Information
-----------------------------------------------------
15. Cover Page
16. Table of Contents
17. Introduction
18. Not Applicable
19 Distribution of the Contracts
20. Distribution of the Contracts
21. Calculation of Yields and Total Returns
22. Annuity Provisions (In Prospectus)
23. Financial Statements
Part C Headings
---------------
24 Financial Statements and Exhibits
25. Directors and Officers of the Depositor
26. Persons Controlled by or Under Common Control with the Depositor
or Registrant
27. Number of Contract Owners
28. Indemnification
29. Principal Underwriter
30. Location of Accounts and Records
31. Not Applicable
32. Undertakings
<PAGE>
P R O S P E C T U S
April 30, 1997
<PAGE>
SEPARATE ACCOUNT ONE
INDIVIDUAL DEFERRED VARIABLE/FIXED ANNUITY CONTRACTS
ISSUED BY
NORTHERN LIFE INSURANCE COMPANY
1110 THIRD AVENUE, SEATTLE, WASHINGTON 98101
TELEPHONE: (206) 292-1111
The Individual Deferred Variable/Fixed Annuity Contracts described in this
Prospectus ("Contracts") are offered by Northern Life Insurance Company (the
"Company") for use in connection with retirement plans qualifying for special
tax treatment under Sections 401(a), 403(b), and 408 of the Internal Revenue
Code of 1986, as amended (the "Code"). In addition, one of the Contracts
described in this Prospectus is offered on a non-qualified basis.
This Prospectus offers two series of flexible premium annuity Contracts
which differ in the amount of Purchase Payments required, when Purchase Payments
can be made and certain charges imposed under the Contracts.
The Contracts provide for accumulation of Contract Value and payment of
annuity benefits on a variable or fixed basis, or a combination variable and
fixed basis. Annuity Payouts under the Contracts are deferred until a selected
later date.
Purchase Payments may be allocated to one or more of the available
Sub-Accounts of Separate Account One (the "Variable Account"), a separate
account of the Company and/or to one or both Fixed Account options, Fixed
Account A and Fixed Account B, which are part of the general account of the
Company. Information about Fixed Account A and Fixed Account B is contained in
Appendix A, on page A-1.
Purchase Payments allocated to one or more of the available Sub-Accounts of
the Variable Account, as selected by the Contract Owner, will be invested in
shares at net asset value of one or more of a group of investment funds (the
"Funds"). The Funds are currently three porfolios of the Northstar Variable
Trust, four portfolios of the Variable Insurance Products Fund, four portfolios
of the Variable Insurance Products Fund II and four portfolios of The Alger
Amercan Fund. The Variable Account Contract Value and the amount of Variable
Annuity Payouts will vary, depending on the investment performance of the Funds
whose shares are held in the Sub-Accounts selected. This Prospectus is valid
only when accompanied by Prospectuses for the Funds.
Additional information about the Contracts, the Company and the Variable
Account is contained in a Statement of Additional Information dated April 30,
1997, which has been filed with the Securities and Exchange Commission ("SEC")
and is available upon request without charge by writing to Northern Life
Insurance Company, P.O. Box 12530, Seattle, Washington 98111 or by accessing the
SEC's internet web site (http://www.sec.gov). The Statement of Additional
Information is incorporated by reference in this Prospectus. The Table of
Contents for the Statement of Additional Information may be found on page 32 of
this Prospectus.
THIS PROSPECTUS SETS FORTH CONCISELY THE INFORMATION ABOUT THE CONTRACTS
THAT A PROSPECTIVE INVESTOR OUGHT TO KNOW BEFORE INVESTING AND SHOULD BE
RETAINED FOR FUTURE REFERENCE.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR ACCOMPANYING
FUND PROSPECTUSES AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR SOLICITATION IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES OF THE FUNDS AND INTERESTS IN THE CONTRACTS ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, A BANK, AND THE SHARES AND
INTERESTS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THE DATE OF THIS PROSPECTUS IS APRIL 30, 1997.
15500 5-97
<PAGE>
TABLE OF CONTENTS
Definitions .................................................................. 3
Summary Of Contract Expenses ................................................. 5
Summary ...................................................................... 7
Purpose of Contracts ....................................................... 7
Series of Contracts ........................................................ 7
Investment Alternatives .................................................... 8
Purchasing a Contract ...................................................... 8
Withdrawals ................................................................ 8
Withdrawal Charge .......................................................... 8
Other Charges .............................................................. 8
Reallocations .............................................................. 8
Fixed and Variable Annuity Payouts ......................................... 9
Revocation ................................................................. 9
Condensed Financial Information .............................................. 9
Performance Information ..................................................... 10
The Company ................................................................. 12
The Variable Account ........................................................ 12
Investments Of The Variable Account ......................................... 12
Reinvestment .............................................................. 15
Addition, Deletion or Substitution of Fund Shares 15
Charges Made By The Company ................................................. 15
Withdrawal Charge (Contingent Deferred Sales Charge) ...................... 15
Partial Waiver of Withdrawal Charge ....................................... 16
Annual Contract Charge .................................................... 17
Mortality Risk Charge ..................................................... 17
Expense Risk Charge ....................................................... 17
Administrative Charge ..................................................... 17
Sufficiency of Charges .................................................... 18
Premium and Other Taxes ................................................... 18
Reduction of Charges ...................................................... 18
Expenses of the Funds ..................................................... 18
Administration .............................................................. 18
The Contracts ............................................................... 18
Contract Application and Purchase Payments ................................ 18
Revocation ................................................................ 19
Allocation of Purchase Payments ........................................... 19
Accumulation Unit Value ................................................... 19
Net Investment Factor ..................................................... 19
Death Benefit Before the Start Date ....................................... 20
Payment of Death Benefit Before the Start
Date ..................................................................... 20
Death Benefit After Start Date ............................................ 20
Withdrawal (Redemption) ................................................... 21
Systematic Withdrawals .................................................... 21
Loans Available from Certain Qualified
Contracts ................................................................ 21
Reallocations ............................................................. 22
Written Reallocations ................................................... 22
Telephone Reallocations ................................................. 23
Automatic Reallocations ................................................. 23
Dollar Cost Averaging Reallocations ..................................... 23
Reallocations from the Fixed Accounts ................................... 24
Assignments ............................................................... 24
Contract Owner and Beneficiaries .......................................... 24
Contract Inquiries ........................................................ 24
Annuity Provisions .......................................................... 25
Start Date ................................................................ 25
Annuity Payout Selection .................................................. 25
Forms of Annuity Payouts .................................................. 25
Frequency and Amount of Annuity Payouts ................................... 25
Annuity Payouts ........................................................... 25
Sub-Account Annuity Unit Value ............................................ 26
Assumed Investment Rate ................................................... 26
Partial Annuitization ....................................................... 26
Federal Tax Status .......................................................... 26
Introduction .............................................................. 26
Tax Status of the Contract ................................................ 27
Taxation of Annuities ..................................................... 28
Possible Changes in Taxation .............................................. 29
Transfers, Assignments or Exchanges of a Contract ......................... 29
Withholding ............................................................... 29
Multiple Contracts ........................................................ 29
Taxation of Qualified Plans ............................................... 29
Corporate Pension and Profit-Sharing Plans and H.R. 10 Plans .............. 30
Individual Retirement Annuities ........................................... 30
Tax Sheltered Annuities ................................................... 30
Possible Charge for the Company's Taxes ................................... 30
Other Tax Consequences .................................................... 30
Voting of Fund Shares ....................................................... 30
Distribution Of The Contracts ............................................... 31
Reports To Contract Owners .................................................. 31
Legal Proceedings ........................................................... 31
Financial Statements And Experts ............................................ 31
Further Information ......................................................... 31
Statement of Additional Information Table of Contents ....................... 32
Appendix A ................................................................. A-1
Fund Prospectuses
Northstar Variable Trust (Northstar):
Northstar Income and Growth Fund ................................. Northstar-1
Northstar Multi-Sector Bond Fund ................................. Northstar-1
Northstar Growth Fund ............................................ Northstar-1
Fidelity's Variable Insurance Products Fund (VIP):
Money Market Portfolio ................................................. VIP-1
Growth Portfolio ....................................................... VIP-1
Equity-Income Portfolio ................................................ VIP-1
Overseas Portfolio ..................................................... VIP-1
Fidelity's Variable Insurance Products Fund II (VIP II):
Asset Manager Portfolio .............................................. VIPII-1
Asset Manager: Growth Portfolio ...................................... VIPII-1
Index 500 Portfolio .................................................. VIPII-1
Contrafund Portfolio ................................................. VIPII-1
The Alger American Fund:
Alger American Small Capitalization Portfolio ........................ Alger-1
Alger American Growth Portfolio ...................................... Alger-1
Alger American MidCap Growth
Portfolio ........................................................... Alger-1
Alger American Leveraged AllCap
Portfolio ........................................................... Alger-1
2
<PAGE>
DEFINITIONS
ACCUMULATION UNIT - A unit of measure used to determine the Variable Account
Contract Value.
ALGER - The Alger American Fund.
ANNUITANT - The person whose life determines the annuity payouts payable at the
Start Date under a Contract.
ANNUITY PAYOUT DATE - Unless otherwise agreed to by the Company, the first
business day of any calendar month in which a Fixed or Variable Annuity
Payout is made under a Contract.
ANNUITY UNIT - A unit of measure used to determine the amount of a Variable
Annuity Payout after the first Variable Annuity Payout.
BENEFICIARY - The person(s) named by the Contract Owner to receive the Death
Benefit upon the death of the Contract Owner or Annuitant, if applicable,
before the Start Date and to receive the balance of annuity payouts, if any,
under the annuity payout(s) in effect at the Annuitant's death.
CODE - The Internal Revenue Code of 1986, as amended.
CONTINGENT BENEFICIARY - The person(s) named to become the Beneficiary if the
Beneficiary dies.
CONTRACT ANNIVERSARY - The same day and month as the Issue Date each year.
CONTRACT EARNINGS - For a Transfer Series Contract, the Contract Value on any
Valuation Date, plus the aggregate Purchase Payments withdrawn up to that
date, minus the aggregate Purchase Payments made up to that date.
CONTRACT OWNER - The person who controls all the rights and privileges under a
Contract.
CONTRACT VALUE - The sum of the Variable Account Contract Value, plus the sum of
the Fixed Account A and Fixed Account B Contract Values.
CONTRACT YEAR - Each twelve-month period starting with the Issue Date and each
Contract Anniversary thereafter.
DEATH BENEFIT - The amount payable, if any, upon the death, before the Start
Date of the Contract Owner of a qualified Contract or the Annuitant or
Contract Owner in the case of a non-qualified Contract.
DEATH BENEFIT VALUATION DATE - The Valuation Date next following the date the
Company receives proof of death and an appropriate written request for
payment of the Death Benefit from the Beneficiary.
FIXED ACCOUNT A - Part of the general account of the Company, which consists of
all assets of the Company, other than those assets allocated to separate
accounts of the Company.
FIXED ACCOUNT A CONTRACT VALUE - An amount equal to the sum of Purchase Payments
allocated to Fixed Account A, increased by reallocations made to Fixed
Account A (including amounts reallocated to the Loan Account) and interest
credited to Fixed Account A, less reallocations out of Fixed Account A,
withdrawals from Fixed Account A (including amounts applied to purchase
annuity payouts, withdrawal charges and applicable premium taxes) and
deductions for the Annual Contract Charge.
FIXED ACCOUNT B - Part of the general account of the Company, which consists of
all assets of the Company, other than those assets allocated to separate
accounts of the Company.
FIXED ACCOUNT B CONTRACT VALUE - An amount equal to the sum of Purchase Payments
allocated to Fixed Account B, increased by reallocations made to Fixed
Account B and interest credited to Fixed Account B, less reallocations out of
Fixed Account B, withdrawals from Fixed Account B (including amounts applied
to purchase annuity payouts, withdrawal charges and applicable premium taxes)
and deductions for the Annual Contract Charge.
FIXED ANNUITY PAYOUT - A series of periodic payments to the Payee which do not
vary in amount, are guaranteed as to principal and interest, and are paid
from the general account of the Company.
FUND - Any open-end management investment company (or portfolio thereof) or unit
investment trust (or series thereof) in which a Sub-Account invests as
described herein.
ISSUE DATE - The date on which the Contract is issued as shown on the Contract
data page.
3
<PAGE>
LOAN ACCOUNT - The portion of Contract Value segregated within Fixed Account A
which is designated as security for a loan under the Contract.
NORTHSTAR - Northstar Variable Trust.
OUTSTANDING LOAN BALANCE - The aggregate value of all existing loans, plus any
accumulated loan interest, less any loan repayments.
PAYEE - The person to whom the Company will make Annuity Payouts.
PURCHASE PAYMENT - A payment made to the Company under a Contract which, if
permitted under a Contract includes periodic, single lump sum, rollover and
transfer payments.
QUALIFIED PLAN - A retirement plan under Sections 401(a), 403(b), or 408 of the
Code.
SEC - The Securities and Exchange Commission.
SPECIFIED CONTRACT ANNIVERSARY - Each sixth Contract Anniversary.
START DATE - The date on which all of the Contract Value is used to purchase a
Fixed and/or Variable Annuity Payout.
SUB-ACCOUNT - A subdivision of the Variable Account available under a Contract
which invests in shares of a specific Fund.
SUB-ACCOUNT CONTRACT VALUE - For any Sub-Account, an amount equal to the number
of accumulation units of that Sub-Account under a Contract when the
Sub-Account Contract Value is computed, multiplied by the accumulation unit
value for that Sub-Account.
WITHDRAWAL VALUE - The Contract Value less any applicable Withdrawal Charge, any
Outstanding Loan Balance and in the case of a full withdrawal, less the
Annual Contract Charge.
VALUATION DATE - Each day on which the New York Stock Exchange is open for
business except for a day that a Sub-Account's corresponding Fund does not
value its shares. The New York Stock Exchange is currently closed on weekends
and on the following holidays: New Year's Day; President's Day; Good Friday;
Memorial Day; July Fourth; Labor Day; Thanksgiving Day; and Christmas Day.
VALUATION PERIOD - The period of time between a Valuation Date and the next
Valuation Date.
VARIABLE ACCOUNT - Separate Account One, which is a separate investment account
of the Company.
VARIABLE ACCOUNT CONTRACT VALUE - The sum of all Sub-Account Contract Values
under a Contract.
VARIABLE ANNUITY PAYOUT - A series of periodic payments to the Payee which will
vary in amount based on the investment performance of the Sub-Accounts
selected under a Contract.
VIP - Variable Insurance Products Fund.
VIP II - Variable Insurance Products Fund II.
4
<PAGE>
SUMMARY OF CONTRACT EXPENSES
<TABLE>
<S> <C>
CONTRACT OWNER TRANSACTION EXPENSES
Sales Charge Imposed on Purchases............................................................. None
Maximum Withdrawal Charge Transfer Series (a)................................................. 6%
Maximum Withdrawal Charge Flex Series (a)..................................................... 8%
Reallocation Charge (b)....................................................................... None
ANNUAL CONTRACT CHARGE........................................................................ $30(c)
VARIABLE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Charges............................................................ 1.25%
Other Account Fees and Expenses (See "Administrative Charge" on page 17.)..................... .15%
Total Variable Account Annual Expenses........................................................ 1.40%
</TABLE>
ANNUAL FUND EXPENSES
(as a percentage of Fund average net assets)
<TABLE>
<CAPTION>
NORTHSTAR NORTHSTAR NORTHSTAR
INCOME AND GROWTH MULTI-SECTOR GROWTH
FUND (d) BOND FUND (d) FUND (d)
--------------------- ----------------- -------------
<S> <C> <C> <C>
Management (Advisory) Fees.............................. 0.75% 0.75% 0.75%
Other Expenses.......................................... 0.05% 0.05% 0.05%
Total Fund Annual Expense............................... 0.80% 0.80% 0.80%
</TABLE>
<TABLE>
<CAPTION>
VIP VIP VIP VIP
MONEY MARKET GROWTH EQUITY-INCOME OVERSEAS
PORTFOLIO PORTFOLIO (e) PORTFOLIO (e) PORTFOLIO (e)
----------------- --------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Management (Advisory) Fees............. 0.21% 0.61% 0.51% 0.76%
Other Expenses......................... 0.09% 0.08% 0.07% 0.17%
Total Fund Annual Expense.............. 0.30% 0.69% 0.58% 0.93%
<CAPTION>
VIP II
VIP II ASSET MANAGER: VIP II VIP II
ASSET MANAGER GROWTH INDEX 500 CONTRAFUND
PORTFOLIO (e) PORTFOLIO (e) PORTFOLIO (f) PORTFOLIO (e)
----------------- --------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Management (Advisory) Fees............. 0.64% 0.65% 0.13% 0.61%
Other Expenses......................... 0.10% 0.22% 0.15% 0.13%
Total Fund Annual Expense.............. 0.74% 0.87% 0.28% 0.74%
<CAPTION>
ALGER ALGER ALGER
AMERICAN ALGER AMERICAN AMERICAN
SMALL AMERICAN MIDCAP LEVERAGED
CAPITALIZATION GROWTH GROWTH ALLCAP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------- --------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Management (Advisory) Fees............. 0.85% 0.75% 0.80% 0.85%
Other Expenses (excluding interest).... 0.03% 0.04% 0.04% 0.21%
Interest Expense....................... -- -- -- 0.03%
Total Fund Annual Expense.............. 0.88% 0.79% 0.84% 1.09%
</TABLE>
5
<PAGE>
EXAMPLES
If a full withdrawal of the Contract Value is made at the end of the
applicable time period, the following expenses on a $1,000 investment, assuming
a 5% annual return on assets, would be paid:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------- ----------------- ----------------- -----------------
TRANSFER FLEX TRANSFER FLEX TRANSFER FLEX TRANSFER FLEX
SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Northstar Income and Growth Fund.................. $79 $ 99 $122 $145 $149 $182 $280 $280
Northstar Multi-Sector Bond Fund.................. 79 99 122 145 149 182 280 280
Northstar Growth Fund............................. 79 99 122 145 149 182 280 280
VIP Money Market Portfolio........................ 74 94 107 131 124 158 229 229
VIP Growth Portfolio.............................. 78 98 119 142 144 177 269 269
VIP Equity-Income Portfolio....................... 77 100 115 139 138 172 258 258
VIP Overseas Portfolio............................ 80 100 126 148 156 189 293 293
VIP II Asset Manager Portfolio.................... 78 98 120 143 146 180 274 274
VIP II Asset Manager:
Growth Portfolio................................ 80 99 124 147 153 186 287 287
VIP II Index 500 Portfolio........................ 74 94 106 130 123 157 227 227
VIP II Contrafund Portfolio....................... 78 98 120 143 146 180 274 274
Alger American Small Capitalization Portfolio..... 80 100 124 147 153 186 288 288
Alger American Growth Portfolio................... 79 99 122 144 149 182 279 279
Alger American MidCap Growth Portfolio............ 79 99 123 146 151 184 284 284
Alger American Leveraged AllCap Portfolio......... 82 101 131 153 164 196 309 309
</TABLE>
If the Contract is annuitized at the end of the applicable time period or if
it is not surrendered, the following expenses on a $1,000 investment assuming a
5% annual return would be paid:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------- ----------------- ----------------- -----------------
TRANSFER FLEX TRANSFER FLEX TRANSFER FLEX TRANSFER FLEX
SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Northstar Income and Growth Fund.................. $25 $25 $ 77 $ 77 $131 $131 $280 $280
Northstar Multi-Sector Bond Fund.................. 25 25 77 77 131 131 280 280
Northstar Growth Fund............................. 25 25 77 77 131 131 280 280
VIP Money Market Portfolio........................ 20 20 62 62 106 106 229 229
VIP Growth Portfolio.............................. 24 24 74 74 126 126 269 269
VIP Equity-Income Portfolio....................... 23 23 70 70 120 120 258 258
VIP Overseas Portfolio............................ 26 26 81 81 138 138 293 293
VIP II Asset Manager Portfolio.................... 24 24 75 75 128 128 274 274
VIP II Asset Manager:
Growth Portfolio................................ 26 26 79 79 135 135 287 287
VIP II Index 500 Portfolio........................ 20 20 61 61 105 105 227 227
VIP II Contrafund Portfolio....................... 24 24 75 75 128 128 274 274
Alger American Small Capitalization Portfolio..... 26 26 79 79 135 135 288 288
Alger American Growth Portfolio................... 25 25 77 77 131 131 279 279
Alger American MidCap Growth Portfolio............ 25 25 78 78 133 133 284 284
Alger American Leveraged AllCap Portfolio......... 28 28 86 86 146 146 309 309
</TABLE>
6
<PAGE>
(a) The Withdrawal Charge for the Transfer Series Contracts applies to each
Purchase Payment. The Withdrawal Charge is 6% in the Contract Year a
Purchase Payment is received by the Company and the Contract Year
immediately following. It decreases to 0% beginning the sixth year after a
Purchase Payment was received by the Company. For the Flex Series
Contracts, the Withdrawal Charge is based on Contract Years. It decreases
from 8% in the first three Contract Years to 0% after the tenth Contract
Year. Under certain situations amounts may be withdrawn free of any
Withdrawal Charge or the Withdrawal Charge may be reduced or waived. For
more information on the Withdrawal Charge, see "Withdrawal Charge
(Contingent Deferred Sales Charge)" on page 15. The Company reserves the
right to charge a partial withdrawal processing fee not to exceed the
lesser of 2% of the partial withdrawal amount or $25. For more information
on the processing fee, see "Withdrawal Charge (Contingent Deferred Sales
Charge)" on page 15.
(b) The Company currently does not assess a charge on reallocations between
Sub-Accounts or to or from the Fixed Accounts, although the Company
reserves the right to assess a charge not to exceed $25 per each
reallocation.
(c) The Company currently deducts an Annual Contract Charge of $30 from the
Contract Value, but reserves the right to waive the charge where the
Contract Value exceeds $25,000.
(d) The investment adviser to the Northstar Variable Trust has agreed to
reimburse the three Northstar Funds for any expenses in excess of 0.80% of
each Fund's average daily net assets. In the absence of the investment
adviser's expense reimbursements, the actual expenses that would have been
paid by each Fund during its fiscal year ending December 31, 1996 would
have been: Income and Growth Fund - 1.40%; Multi-Sector Bond Fund - 1.68%;
and Growth Fund - 1.70%.
(e) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds have entered into
arrangements with their custodian and transfer agent whereby interest
earned on uninvested cash balances was used to reduce custodian and
transfer agent expenses. Including these reductions, the total operating
expenses presented in the table would have been .67 for Growth Portfolio,
.56 for Equity-Income Portfolio, .92 for Overseas Portfolio, .73 for Asset
Manager Portfolio, .85 for Asset Manager Growth Portfolio and .71 for
Contra Fund Portfolio.
(f) FMR agreed to reimburse a portion of Index 500 Portfolio's expenses during
the period. Without this reimbursement, the fund's management fee, other
expenses and total expenses would have been .28%, .15%, and .43%
respectively on an annualized basis.
The examples shown in the table above should not be considered
representations of past or future expenses. Actual expenses may be more or less
than those shown. THE 5% ANNUAL RETURN ASSUMED IS HYPOTHETICAL AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS, WHICH MAY BE
GREATER OR LESS THAN THE ASSUMED RATE.
The purpose of this table is to assist a Contract Owner in understanding the
various costs and expenses that a Contract Owner will bear either directly or
indirectly. The table reflects the anticipated expenses of the Variable Account
as well as the actual expenses of the Funds. The $30 Annual Contract Charge is
reflected as an annual percentage charge in this table based on an anticipated
average Contract Value of $10,000.
In addition to the costs and expenses shown in this table, state premium
taxes may also be applicable. For more information on state premium taxes, see
page 18, "Premium and Other Taxes".
SUMMARY
PURPOSE OF CONTRACTS
The Contracts are designed to provide individuals with retirement benefits
through the accumulation of Purchase Payments on a fixed or variable basis, and
by applying such accumulations to provide Fixed, Variable, or combination Fixed
and Variable Annuity Payouts. The purpose of variable accumulation and Variable
Annuity Payouts is to provide returns to Contract Owners which offset or exceed
the effects of inflation. There is, however, no assurance that this purpose will
be achieved.
SERIES OF CONTRACTS
This Prospectus describes two series of individual deferred variable/fixed
annuity Contracts. Transfer Series Contracts include an individual deferred tax
sheltered annuity contract, an individual deferred retirement annuity contract
and an individual deferred annuity contract ("Transfer Series"). The Flex Series
Contracts include a flexible premium individual deferred tax sheltered annuity
contract and a flexible premium individual retirement annuity contract ("Flex
Series"). For Transfer Series Contracts and Flex Series Contracts which are
Qualified Plans, the Company will accept
7
<PAGE>
periodic, single sum, rollover and transfer Purchase Payments as permitted by
the Code which are not less than the specific contract minimum Purchase Payment.
For the non-qualified Transfer Series Contract, the Company will accept periodic
and single sum Purchase Payments, as well as amounts transferred under Section
1035 of the Code, which are not less than the specified Contract minimum
Purchase Payment. The Transfer Series and Flex Series Contracts differ in terms
of the amount of Purchase Payments required, when Purchase Payments can be made
and certain charges. (See "Contract Application and Purchase Payments" on page
18, and "Charges Made by the Company" on page 15.)
INVESTMENT ALTERNATIVES
Purchase Payments may be allocated to one or more of the available
Sub-Accounts of the Variable Account and to Fixed Account A and/or Fixed Account
B. Purchase Payments allocated to one or more Sub-Accounts will be invested in
shares of one or more of the Funds at net asset value. The Variable Account
Contract Value and the amount of Variable Annuity Payouts will vary, primarily
based on the investment performance of the Funds whose shares are held in the
Sub-Accounts selected. (See "Investments of the Variable Account" on page 12.)
Amounts in Fixed Account A and Fixed Account B earn various rates of interest,
with the minimum being the guaranteed rate.
PURCHASING A CONTRACT
Individuals who want to purchase a Contract must complete an application and
provide an initial Purchase Payment which will be sent to the Company's Home
Office. The minimum and maximum amount of Purchase Payments vary depending on
the type and series of Contract purchased. (See "Contract Application and
Purchase Payments" on page 18.)
WITHDRAWALS
The Contract Owner may, subject to applicable law, make a total or partial
withdrawal at any time prior to the Start Date by giving a written request to
the Company. (See "Withdrawal (Redemption)" on page 21, and "Taxation of
Annuities" on page 28.)
WITHDRAWAL CHARGE
No deduction for a sales charge is made from Purchase Payments. A Withdrawal
Charge (Contingent Deferred Sales Charge) may, however, apply to full or partial
withdrawals, with certain exceptions. The maximum Withdrawal Charge on a full or
partial withdrawal under a Transfer Series Contract is 6% of the amount
withdrawn. The maximum Withdrawal Charge on a full or partial withdrawal under a
Flex Series Contract is 8% of the amount withdrawn. The Company may decrease or
eliminate the Withdrawal Charge applicable to Contracts sold in certain
circumstances if it estimates that its sales expenses will be lower. (See
"Withdrawal Charge (Contingent Deferred Sales Charge)" on page 15.)
OTHER CHARGES
On each Contract Anniversary before the Start Date (and upon full withdrawal
of the Contract Value on a date other than a Contract Anniversary) the Company
will deduct from the Contract Value an Annual Contract Charge of $30. The
Company reserves the right to waive the Annual Contract Charge where the
Contract Value exceeds $25,000. The Annual Contract Charge is to reimburse the
Company for administrative expenses relating to the issue and maintenance of the
Contracts. The Company may decrease or eliminate the Annual Contract Charge
applicable to a particular Contract sold in certain circumstances if it
estimates that its administrative expenses will be lower. (See "Annual Contract
Charge" on page 17.)
The Company also deducts a Mortality Risk Charge, an Expense Risk Charge and
an Administrative Charge, equal to an annual rate of 1.40% of the daily net
assets of the available Sub-Accounts of the Variable Account. (See "Mortality
Risk Charge", "Expense Risk Charge" and "Administrative Charge" on page 17.)
Additionally, in certain states a deduction for premium tax is made. (See
"Premium and Other Taxes" on page 18.)
A daily charge, based on a percentage of average daily net assets, is paid
by each Fund to its investment adviser for investment management. These charges,
and other Fund charges and expenses, are more fully described in the
prospectuses for the Funds and are summarized in the Summary of Contract
Expenses on page 5. All of these charges and expenses are borne indirectly by
Contract Owners.
REALLOCATIONS
The Contract Owner may reallocate Contract Value among the Sub-Accounts, and
from one or more Sub-Accounts to the Fixed Accounts. Reallocations may also be
made from the Fixed Accounts subject to certain limitations. After Annuity
Payouts begin, Annuity Unit Values may be reallocated among the Sub-Accounts,
but no reallocations may be made to or from the Fixed Accounts. The Company
reserves the right to impose a charge of up to $25 for each reallocation and to
limit the amount and number of reallocations that may be made. (See
"Reallocations" on page 22.)
8
<PAGE>
FIXED AND VARIABLE ANNUITY PAYOUTS
At the Contract Owner's option, the Annuitant may receive Fixed Annuity
Payouts, Variable Annuity Payouts or a combination of Fixed and Variable Annuity
Payouts.
REVOCATION
The Contract Owner may return the Contract within ten days after it was
delivered to the Contract Owner. In such cases the Company will refund the
Contract Value. However, if required by applicable law, the Company will refund
all Purchase Payments it has received under the Contract. (See "Revocation" on
page 19.)
CONDENSED FINANCIAL INFORMATION
The following table shows, for each Sub-Account of the Variable Account, the
value of a Sub-Account Accumulation Unit as it is invested in portfolios at the
dates shown, and the total number of Sub-Account Accumulation Units outstanding
at the end of each period:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
------------ ------------
1995 1996
------------ ------------
<S> <C> <C>
SUB-ACCOUNT INVESTING IN NORTHSTAR'S:
(all Sub-Accounts from October 20, 1995):
Income and Growth Fund
Beginning of period............................................................................. $ 10.0000 $ 10.3844
End of period................................................................................... $ 10.3844 $ 11.6518
Units outstanding at end of period.............................................................. 2,292 62,237
Multi-Sector Bond Fund
Beginning of period............................................................................. $ 10.0000 $ 10.2402
End of period................................................................................... $ 10.2402 $ 11.4373
Units outstanding at end of period.............................................................. 1,937 52,791
Growth Fund
Beginning of period............................................................................. $ 10.0000 $ 10.1010
End of period................................................................................... $ 10.1010 $ 12.2600
Units outstanding at end of period.............................................................. 1,068 318,138
FIDELITY'S VIP:
(all Sub-Accounts from October 20, 1995):
Money Market Portfolio
Beginning of period............................................................................. $ 10.0000 $ 10.0743
End of period................................................................................... $ 10.0743 $ 10.4712
Units outstanding at end of period.............................................................. -- 104,844
Growth Portfolio
Beginning of period............................................................................. $ 10.0000 $ 9.8237
End of period................................................................................... $ 9.8237 $ 11.1103
Units outstanding at end of period.............................................................. 5,112 210,258
Equity-Income Portfolio
Beginning of period............................................................................. $ 10.0000 $ 10.7172
End of period................................................................................... $ 10.7172 $ 12.0764
Units outstanding at end of period.............................................................. 3,922 370,036
Overseas Portfolio
Beginning of period............................................................................. $ 10.0000 $ 10.3139
End of period................................................................................... $ 10.3139 $ 11.5134
Units outstanding at end of period.............................................................. 1,765 106,840
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
------------ ------------
1995 1996
------------ ------------
FIDELITY'S VIP II:
(all Sub-Accounts from October 20, 1995):
<S> <C> <C>
Asset Manager Portfolio
Beginning of period............................................................................. $ 10.0000 $ 10.4586
End of period................................................................................... $ 10.4586 $ 11.8181
Units outstanding at end of period.............................................................. 1,960 64,183
Asset Manager: Growth Portfolio
Beginning of period............................................................................. $ 10.0000 $ 10.3997
End of period................................................................................... $ 10.3997 $ 12.2981
Units outstanding at end of period.............................................................. 6,432 58,201
Index 500 Portfolio
Beginning of period............................................................................. $ 10.0000 $ 10.5862
End of period................................................................................... $ 10.5862 $ 12.8201
Units outstanding at end of period.............................................................. 702 231,904
Contrafund Portfolio
Beginning of period............................................................................. $ 10.0000 $ 10.2935
End of period................................................................................... $ 10.2935 $ 12.3118
Units outstanding at end of period.............................................................. 7,417 314,103
ALGER AMERICAN FUND'S:
(all Sub-Accounts from October 20, 1995):
Small Capitalization Portfolio
Beginning of period............................................................................. $ 10.0000 $ 9.8255
End of period................................................................................... $ 9.8255 $ 10.0929
Units outstanding at end of period.............................................................. 9,498 261,902
Growth Portfolio
Beginning of period............................................................................. $ 10.0000 $ 10.0072
End of period................................................................................... $ 10.0072 $ 11.1841
Units outstanding at end of period.............................................................. 7,531 162,852
MidCap Growth Portfolio
Beginning of period............................................................................. $ 10.0000 $ 9.8937
End of period................................................................................... $ 9.8937 $ 10.9156
Units outstanding at end of period.............................................................. 2,208 227,029
Leveraged AllCap Portfolio
Beginning of period............................................................................. $ 10.0000 $ 10.2636
End of period................................................................................... $ 10.2636 $ 11.3381
Units outstanding at end of period.............................................................. 3,864 130,393
</TABLE>
The Sub-Accounts investing in Northstar Variable Trust, Fidelity's Variable
Insurance Products Fund, Fidelity's Variable Insurance Products Fund II and The
Alger American Fund were not available under the Contracts prior to 1995.
PERFORMANCE INFORMATION
From time to time, the Company may advertise or include in sales literature
yields, effective yields, and total returns for the available Sub-Accounts.
THESE FIGURES ARE BASED ON HISTORICAL EARNINGS AND DO NOT INDICATE OR PROJECT
FUTURE PERFORMANCE. Each Sub-Account may, from time to time, advertise or
include in sales literature performance relative to certain performance rankings
and indices compiled by independent organizations. More detailed information as
to the calculation of performance information, and comparisons with unmanaged
market indices appears in the Statement of Additional Information.
Yields, effective yields and total returns for the Sub-Accounts are based on
the investment performance of the corresponding portfolios of the Funds. The
performance, in part, reflects the Funds' expenses. See the Prospectuses for the
Funds.
The yield of the Sub-Account investing in the VIP Money Market Portfolio
refers to the annualized income generated by an investment in the Sub-Account
over a specified seven-day period. The yield is calculated by assuming
10
<PAGE>
that the income generated for that seven-day period is generated each seven-day
period over a 52-week period and is shown as a percentage of the investment. The
effective yield is calculated similarly but, when annualized, the income earned
by an investment in the Sub-Account is assumed to be reinvested. The effective
yield will be slightly higher than the yield because of the compounding effect
of this assumed reinvestment.
The yield of a Sub-Account (except the Money Market Sub-Account investing in
the VIP Money Market Portfolio) refers to the annualized income generated by an
investment in the Sub-Account over a specified 30 day or one-month period. The
yield is calculated by assuming that the income generated by the investment
during that 30-day or one-month period is generated each period over a 12-month
period and is shown as a percentage of the investment.
The total return of a Sub-Account refers to return quotations assuming an
investment under a Contract has been held in the Sub-Account for various periods
of time including, but not limited to, a period measured from the date the
Sub-Account commenced operations. Average annual total return refers to total
return quotations that are annualized based on an average return over various
periods of time.
The average annual total return quotations represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a Contract to the redemption value of the investment as of the last day of
each of the periods for which total return quotations are provided. Average
annual total return information shows the average percentage change in the value
of an investment in the Sub-Account from the beginning date of the measuring
period to the end of that period. This version of average annual total return
reflects all historical investment results, less all charges and deductions
applied against the Sub-Account (including any Withdrawal Charge that would
apply if a Contract Owner terminated the Contract at the end of each period
indicated, but excluding any deductions for premium taxes).
When a Sub-Account has been in operation for one, five, and ten years,
respectively, the average annual total return for these periods will be
provided. For periods prior to the date the Sub-Account commenced operations,
performance information for Contracts funded by the Sub-Accounts will be
calculated based on the performance of the Funds' Portfolios and the assumption
that the Sub-Accounts were in existence for the same periods as those indicated
for the Funds' Portfolios, with the level of Contract Charges that were in
effect at the inception of the Sub-Accounts for the Contracts.
Average total return information may be presented, computed on the same
basis as described above, except deductions will not include the Withdrawal
Charge. In addition, the Company may from time to time disclose average annual
total return in non-standard formats and cumulative total return for Contracts
funded by the Sub-Accounts.
The Company may, from time to time, also disclose yields and total returns
for the Portfolios of the Funds, including such disclosure for periods prior to
the dates the Sub-Accounts commenced operations.
For additional information regarding the calculation of other performance
data, please refer to the Statement of Additional Information.
In advertising and sales literature, the performance of each Sub-Account may
be compared to the performance of other variable annuity issuers in general or
to the performance of particular types of variable annuities investing in mutual
funds, or investment series of mutual funds with investment objectives similar
to each of the Sub-Accounts. Lipper Analytical Services, Inc. ("Lipper"),
Morningstar, Inc. ("Morningstar") and the Variable Annuity Research Data Service
("VARDS") are independent services which monitor and rank the performance of
variable annuity issuers in each of the major categories of investment
objectives on an industry-wide basis.
Lipper's and Morningstar's rankings include variable life insurance issuers
as well as variable annuity issuers. VARDS rankings compare only variable
annuity issuers. The performance analyses prepared by Lipper, Morningstar and
VARDS each rank such issuers on the basis of total return, assuming reinvestment
of distributions, but do not take sales charges, redemption fees, or certain
expense deductions at the separate account level into consideration. In
addition, VARDS prepares risk adjusted rankings, which consider the effects of
market risk on total return performance. This type of ranking provides data as
to which funds provide the highest total return within various categories of
funds defined by the degree of risk inherent in their investment objectives.
Advertising and sales literature may also compare the performance of each
Sub-Account to the Standard & Poor's Composite Index of 500 Common Stocks, a
widely used measure of stock performance. This unmanaged index assumes the
reinvestment of dividends but does not reflect any "deduction" for the expense
of operating or managing an investment portfolio. Other independent ranking
services and indices may also be used as a source of performance comparison.
11
<PAGE>
The Company may also report other information including the effect of
tax-deferred compounding on a Sub-Account's investment returns, or returns in
general, which may be illustrated by tables, graphs, or charts. The Company may
also illustrate the accumulation of Contract Value and payment of annuity
benefits on a variable or fixed basis, or a combination variable and fixed
basis, based on hypothetical rates of return, and compare those illustrations to
mutual fund hypothetical illustrations, using charts, tables, and graphs,
including software programs utilizing such charts, tables, and graphs. All
income and capital gains derived from Sub-Account investments are reinvested and
can lead to substantial long-term accumulation of assets, provided that the
underlying portfolio's investment experience is positive.
THE COMPANY
The Company, organized in 1906, is a stock life insurance company
incorporated under the laws of the State of Washington. The Company is an
indirect, wholly-owned subsidiary of ReliaStar Financial Corp., formerly known
as The NWNL Companies, Inc., a publicly-traded holding company incorporated
under the laws of the State of Delaware, whose subsidiaries specialize in the
life insurance and related financial services businesses. The Company offers
individual and group annuity contracts. The Company is admitted to do business
in the District of Columbia and all states except New York. Its Home Office is
at 1110 Third Avenue, Seattle, Washington 98101.
THE VARIABLE ACCOUNT
The Variable Account is a separate account of the Company established under
the insurance laws of the State of Washington on March 22, 1994. The Variable
Account is registered with the SEC as a unit investment trust under the
Investment Company Act of 1940, as amended ("1940 Act"). Such registration does
not involve supervision by the SEC of the management or investment policies or
practices of the Variable Account, the Company or the Funds. The Company has
complete ownership and control of the assets in the Variable Account, but these
assets are held separately from the Company's other assets and are not part of
the Company's general account.
The portion of the assets of the Variable Account equal to its reserves and
other Contract liabilities will not be chargeable with liabilities arising out
of any other business of the Company. The income, gains and losses, realized or
unrealized, from assets allocated to the Variable Account will be credited to or
charged against the Variable Account, without regard to the other income, gains,
or losses of the Company.
Purchase Payments allocated to the Variable Account are allocated to one or
more Sub-Accounts selected by the Contract Owner. Each Sub-Account invests in
shares of a specific Fund at net asset value. The future Variable Account
Contract Value will depend, primarily, on the investment performance of the
Funds whose shares are held in the Sub-Accounts.
INVESTMENTS OF THE VARIABLE ACCOUNT
When a Contract is applied for, the Contract Owner may elect to have
Purchase Payments allocated to one or more of the available Sub-Accounts. The
Contract Owner may also, subject to the limits discussed below, change a
Purchase Payment allocation for future Purchase Payments and may reallocate all
or part of any Sub-Account Contract Value to another Sub-Account that invests in
shares of another Fund.
There are currently fifteen Sub-Accounts, each of which invests in shares of
one of the Funds. The Company reserves the right, subject to compliance with
applicable law, to offer additional Sub-Accounts, each of which could invest in
a new fund with a specified investment objective. The Company contemplates that
if it adds additional Sub-Accounts to the Variable Account, a Contract Owner
would be limited to participating in a maximum of sixteen Sub-Accounts over the
lifetime of the Contract. The Contract Owner would not be required to select the
Sub-Accounts in advance, but upon reaching participation in sixteen Sub-Accounts
since issue of the Contract, the Contract Owner would only be able to transfer
within the sixteen Sub-Accounts already selected and which are still available
under the Variable Account.
For example, assume a Contract Owner selects six Sub-Accounts. Later, the
Contract Owner transfers out of all of the six initial selections and chooses
ten different Sub-Accounts, none of which are the same as the original six
selections. The Contract Owner has now used the maximum selection of sixteen
Sub-Accounts. The Contract Owner may still allocate Purchase Payments or
transfer Contract Values among any of the sixteen Sub-Accounts that were
previously selected. However, the Contract Owner may not allocate funds to the
remaining Sub-Accounts at any time. A Contract Owner may transfer partial or
complete Contract Values from the Variable Account to Fixed Accounts A and B at
any time.
12
<PAGE>
Northstar Investment Management Corporation is the investment adviser for
the three Northstar Funds offered through the Contracts. Fidelity Management &
Research Company is the investment adviser for the four portfolios of VIP and
the four portfolios of VIP II offered through the Contracts. Fred Alger
Management, Inc. is the investment adviser for the four portfolios of the Alger
American Fund offered through the contracts. The investment advisers are paid
fees for their services by the Funds they manage. The Funds currently offered,
together with their investment objectives, are briefly described below. More
detailed information concerning the investment objectives, policies and
restrictions pertaining to the Funds and the expenses, investment advisory
services and charges and risks attendant to investing in the Funds and other
aspects of their operations can be found in the current prospectuses for the
Funds which accompany this Prospectus and the current Statement of Additional
Information for each Fund. THE FUND PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE
ANY DECISION IS MADE CONCERNING THE ALLOCATION OF PURCHASE PAYMENTS OR
REALLOCATIONS AMONG THE SUB-ACCOUNTS.
NORTHSTAR VARIABLE TRUST (NORTHSTAR)
Northstar is a mutual fund offering multiple investment portfolios, of which
the following three portfolios are offered under the Contracts:
NORTHSTAR INCOME AND GROWTH FUND is a diversified portfolio with an
investment objective of seeking current income balanced with the objective of
achieving capital appreciation. The Fund seeks to achieve its objective through
investments in common and preferred stocks, convertible securities, and
investment grade debt securities of corporate and government issues, selected
for their prospects of producing income and growth of capital. Wilson/Bennett
Capital Management, Inc. is the sub-advisor to this Fund and is responsible for
the day-to-day investment management of the Fund, subject to the supervision of
the investment adviser and the Trustees of the Fund. All fees and expenses of
the subadvisory arrangement are borne by the investment adviser.
NORTHSTAR MULTI-SECTOR BOND FUND is a diversified portfolio with an
investment objective of maximizing current income consistent with the
preservation of capital. The Fund will seek to achieve its objective by
investment in a number of sectors of the fixed income securities markets.
NORTHSTAR GROWTH FUND is a diversified portfolio with an investment
objective of long-term capital growth primarily through investments in equity
securities diversified over industries and companies which are believed to
provide above average potential for capital appreciation. Navellier Fund
Management, Inc. serves as sub-adviser to the Fund and is responsible for the
day-to-day investment management of the Fund, subject to the supervision of the
investment adviser and the Trustees of the Fund. All fees and expenses of the
subadvisory arrangement are borne by the investment adviser.
VARIABLE INSURANCE PRODUCTS FUND (VIP)
VIP is a mutual fund trust currently including five investment portfolios,
each with a different investment objective. Presently the following four
portfolios are offered in the Contracts:
MONEY MARKET PORTFOLIO seeks to obtain as high a level of current income as
is consistent with preserving capital and providing liquidity. The Portfolio
will invest only in high-quality U.S. dollar denominated money market
instruments of domestic and foreign issuers. An investment in the Portfolio is
not insured or guaranteed by the U.S. Government, and there can be no assurance
that the Portfolio will maintain a stable net asset value per share of $1.00.
GROWTH PORTFOLIO seeks to achieve capital appreciation. The Portfolio
normally purchases common stocks, although its investments are not restricted to
any one type of security. Capital appreciation may also be found in other types
of securities, including bonds and preferred stocks.
EQUITY-INCOME PORTFOLIO seeks reasonable income by investing primarily in
income-producing equity securities. In choosing these securities the Portfolio
will also consider the potential for capital appreciation. The Portfolio's goal
is to achieve a yield which exceeds the composite yield on the securities
comprising the Standard & Poor's Composite Index of 500 Stocks.
OVERSEAS PORTFOLIO seeks long-term growth of capital primarily through
investments in foreign securities. Overseas Portfolio provides a means for
investors to diversify their own portfolios by participating in companies and
economies outside of the United States.
VARIABLE INSURANCE PRODUCTS FUND II (VIP II)
VIP II is a mutual fund trust currently including five investment
portfolios, each with a different investment objective. Presently the following
four portfolios are offered in the Contracts:
ASSET MANAGER PORTFOLIO seeks high total return with reduced risk over the
long-term by allocating its assets among domestic and foreign stocks, bonds and
short-term, fixed-income, instruments.
13
<PAGE>
ASSET MANAGER: GROWTH PORTFOLIO seeks to maximize long-term total return
with less risk than a pure stock investment. The Portfolio seeks maximum total
return by allocating its assets among stocks offering the greatest growth
potential for long-term goals; bonds which provide balance and income to offset
the volatility of stocks; and short term instruments adding liquidity and
stability to the overall mix.
INDEX 500 PORTFOLIO seeks to provide investment results that correspond to
the total return (i.e., the combination of capital changes and income) of common
stocks publicly traded in the United States. In seeking this objective, the
Portfolio attempts to duplicate the composition and total return of the Standard
& Poor's Composite Index of 500 Stocks while keeping transaction costs and other
expenses low.
CONTRAFUND PORTFOLIO seeks capital appreciation by investing in companies
believed to be undervalued due to an overly pessimistic appraisal by the public.
The portfolio usually invests primarily in common stock and securities
convertible into common stock, but it has the flexibility to invest in any type
of security that may produce capital appreciation.
THE ALGER AMERICAN FUND
The Alger American Fund is a mutual fund offering six investment portfolios,
of which the following four portfolios are offered under the Contract.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO seeks to obtain long-term
capital appreciation. Except during temporary defensive periods, the Portfolio
invests at least 65% of its total assets in equity securities of companies that,
at the time of purchase of the securities, have total market capitalization
within the range of companies included in the Russell 2000 Growth Index
("Russell Index") or the S&P SmallCap 600 Index ("S&P Index"), updated
quarterly. Both indexes are broad indexes of small capitalization stocks. As of
March 31, 1997, the range of market capitalization companies in the Russell
Index was $10 million to $1.94 billion; the range of market capitalization of
the companies in the S&P Index at that date was $32 million to $2.579 billion.
The combined range was $10 million to $2.579 billion.
ALGER AMERICAN GROWTH PORTFOLIO seeks to obtain long-term capital
appreciation. The Portfolio will invest its assets primarily in companies whose
securities are traded on domestic stock exchanges or in the over-the-counter
market. Except during temporary defensive periods, the Portfolio will invest at
least 65% of its total assets in the securities of companies that, at the time
of purchase of the securities, have a total market capitalization of $1 billion
or greater.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO seeks long-term capital appreciation.
Except during temporary defensive periods, the Portfolio invests at least 65% of
its total assets in equity securities of companies that, at the time of purchase
of the securities, have total market capitalization within the range of
companies included in the S&P MidCap 400 Index, updated quarterly. The S&P
MidCap 400 Index is designed to track the performance of medium capitalization
companies. As of March 31, 1997, the range of market capitalization of these
companies was $120 million to $7.193 billion.
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO seeks long-term capital
appreciation. The Portfolio may purchase put and call options and sell (write)
covered call and put options on securities and securities indexes to increase
gain and to hedge against the risk of unfavorable price movements, and may enter
into futures contracts on securities indexes and purchase and sell call and put
options on these futures contracts. The Portfolio may also borrow money for the
purchase of additional securities. The Portfolio may borrow only from banks and
may not borrow in excess of one third of the market value of its assets, less
liabilities other than such borrowing. The Portfolio will invest 85% of its net
assets in equity securities of companies of any size.
THERE IS NO ASSURANCE THAT THE STATED OBJECTIVES AND POLICIES OF ANY OF THE
FUNDS WILL BE ACHIEVED.
The Company or its affiliates may receive compensation from an affiliate or
affiliates of certain of the Funds based upon an annual percentage of the
average net assets held in that Fund by the Company and certain of the Company's
insurance company affiliates. These amounts are intended to compensate the
Company or the Company's affiliates for administrative, record keeping,
distribution, and other services provided by such parties to the Funds and/or
the Funds' affiliates. Payments of such amounts by an affiliate or affiliates of
the Funds do not increase the fees paid by the Funds or their shareholders.
The Funds are available to registered separate accounts of insurance
companies, other than the Company, offering variable annuity Contracts and
variable life insurance policies. The Company currently does not foresee any
disadvantages to Contract Owners resulting from the Funds selling shares to fund
products other than the Contracts. However, there is a possibility that a
material conflict may arise between Contract Owners whose Contract Values are
allocated to the Variable Account and the Contract Owners of variable life
insurance policies and variable annuity Contracts issued
14
<PAGE>
by the Company or by such other companies whose assets are allocated to one or
more other separate accounts investing in any one of the Funds. In the event of
a material conflict the Company will take any necessary steps, including
removing the Variable Account's investment in the Fund, to resolve the matter.
The Board of Directors or Trustees of each Fund will monitor events in order to
identify any material conflicts that possibly may arise and determine what
action, if any, should be taken in response to those events or conflicts. See
each individual Fund prospectus for more information.
REINVESTMENT
The Funds described above have as a policy the distribution of income
dividends and capital gains. However, under the Contracts described in this
Prospectus there is an automatic reinvestment of such distributions.
ADDITION, DELETION OR SUBSTITUTION OF FUND SHARES
The Company reserves the following rights:
- The Company may add to, delete from or substitute shares that
may be purchased for or held in the Variable Account. If the
shares of a Fund are no longer available for investment or if
in the Company's judgment further investment in a Fund should
become inappropriate in view of the purposes of the Variable
Account, the Company may redeem the shares, if any, of that
portfolio and substitute shares of another registered open-end
management investment company.
- The Company may establish additional Sub-Accounts, each of
which would invest in shares of a new portfolio of a Fund or in
shares of another investment company having a specified
investment objective. The Company may, in its sole discretion,
establish new Sub-Accounts or eliminate one or more
Sub-Accounts if marketing, tax considerations or investment
conditions warrant. Any new Sub-Accounts may be made available
to existing Contract Owners on a basis to be determined by the
Company.
- The Company may, if it deems it to be in the best interests of
Contract Owners and Annuitants: (a) manage the Variable Account
as a management investment company under the 1940 Act; (b)
deregister the Variable Account under the 1940 Act if
registration is no longer required; (c) combine the Variable
Account with other separate account(s) of the Company; or (d)
reallocate assets of the Variable Account to another Separate
Account.
- Make any changes required by the 1940 Act.
- Restrict or eliminate any voting privileges of Contract Owners
or other persons who have voting privileges as to the Variable
Account.
- In the event any of the foregoing changes or substitutions are
made, the Company may endorse the Contracts to reflect the
change or substitution.
The Company's reservation of rights is expressly subject to the following
when required:
- Applicable Federal and state laws and regulations.
- Notice to Contract Owners
- Approval of the SEC and/or state insurance authorities.
CHARGES MADE BY THE COMPANY
WITHDRAWAL CHARGE (CONTINGENT DEFERRED SALES CHARGE)
No deduction for a sales charge is made from Purchase Payments. However, if
part or all of the Purchase Payments made under a Transfer Series Contract, or
part or all of Contract Value under a Flex Series Contract, are withdrawn, a
Withdrawal Charge (Contingent Deferred Sales Charge) may be made by the Company.
Withdrawal Charges are deducted from the amount being withdrawn and are
considered a part of the withdrawal.
The Withdrawal Charge is intended to reimburse the Company for expenses
relating to the sale of the Contracts, including commissions to sales personnel,
costs of sales material and other promotional activities and sales
administration costs.
15
<PAGE>
TRANSFER SERIES CONTRACT - For purposes of determining Withdrawal Charges,
withdrawals will be taken first from Purchase Payments on a first-in, first-out
basis, then from Contract Earnings as of the Valuation Date next following the
date of the Company's receipt of the withdrawal request.
The Withdrawal Charge for full or partial withdrawal is determined by
multiplying the amount of each Purchase Payment withdrawn that is not eligible
for a free withdrawal, by the applicable Withdrawal Charge percentage as set
forth in the following table:
<TABLE>
<CAPTION>
WITHDRAWAL CHARGE PERCENTAGE TABLE
- ---------------------------------------------------------
CONTRACT YEAR OF WITHDRAWAL CHARGE AS A
WITHDRAWAL MINUS CONTRACT PERCENTAGE OF EACH PURCHASE
YEAR OF PURCHASE PAYMENT PAYMENT
- -------------------------- -----------------------------
<S> <C>
0 6%
1 6
2 5
3 5
4 4
5 2
6 and later 0
</TABLE>
FLEX SERIES CONTRACTS - If a Flex Series Contract is withdrawn in full or in
part before the eleventh Contract Year, the Company may deduct a Withdrawal
Charge from the Contract Value. The Withdrawal Charge is determined by
multiplying the Contract Value subject to the charge by the applicable
Withdrawal Charge percentage as set forth in the following table:
<TABLE>
<CAPTION>
CONTRACT YEAR WITHDRAWAL CHARGE
- -------------------------- -----------------------------
<S> <C>
1 8%
2 8
3 8
4 7
5 6
6 5
7 4
8 3
9 2
10 1
11+ 0
</TABLE>
PARTIAL WAIVER OF WITHDRAWAL CHARGE
During any 12-month period after the Issue Date, the Contract Owner may
withdraw a portion of the Contract Value without a Withdrawal Charge. The
12-month period begins with the Contract Owner's first withdrawal. For the first
withdrawal, the amount available without a Withdrawal Charge will be determined
on the date of the requested withdrawal and will be the greater of:
1. 10% of the Contract Value less any Outstanding Loan Balance; or
2. For Transfer Series Contracts, the Purchase Payments remaining which are
no longer subject to a Withdrawal Charge, and for Flex Series Contracts,
the Contract Value no longer subject to a Withdrawal Charge.
We call this amount the "Free Surrender Amount".
If the first withdrawal equals the Free Surrender Amount, other withdrawals
during the 12-month period are subject to the Withdrawal Charge. If the first
withdrawal exceeds the Free Surrender Amount, the excess is subject to the
Withdrawal Charge, as are all other Withdrawals requested during the 12-month
period.
If the first withdrawal is less than the Free Surrender Amount, the Company
will keep track of the unused portion of the Free Surrender Amount for the
12-month period. The unused portion of the Free Surrender Amount may be applied
against no more than three (3) additional withdrawals during the 12-month
period.
16
<PAGE>
The unused portion of the Free Surrender Amount available for withdrawal
will be computed by the Company on the date of any withdrawal request made after
the first withdrawal in the 12-month period and will be based upon:
10% X [(Greater of A or B)-C]-D
Where:
A=Contract Value on the date of the first withdrawal in the 12-month period;
B=Contract Value on the date of the withdrawal request;
C=Outstanding Loan Balance on the date of the withdrawal request;
D=Any prior withdrawals made during the same 12-month period.
GENERAL INFORMATION - The Withdrawal Charges described above will be waived
in the event of the death of the Contract Owner or in the case of a
non-qualified Contract, the death of the Annuitant. In addition, for Contracts
qualified under Section 403(b) of the Code only, Withdrawal Charges may be
waived under certain circumstances.
The Company reserves the right to charge a partial withdrawal processing fee
not to exceed the lesser of 2% of the amount withdrawn or $25.
Withdrawals may be subject to a 10% federal penalty tax if made by the
Contract Owner before age 59 1/2. (See "Taxation of Annuities" on page 28.)
Contracts purchased as "tax sheltered annuities", and Contracts purchased
under state optional retirement programs are subject to certain withdrawal
restrictions. (See "Withdrawal (Redemption)" on page 21.)
ANNUAL CONTRACT CHARGE
On each Contract Anniversary prior to the Start Date, the Company deducts an
Annual Contract Charge of $30 from the Contract Value to reimburse it for
administrative expenses relating to the Contract, the Variable Account and the
Sub-Accounts. The Company will not increase the Annual Contract Charge. The
Company reserves the right to waive the Annual Contract Charge where the
Contract Value exceeds $25,000, however, the Company reserves the right to
reinstate the Charge on Contracts qualifying for the waiver. For all Contract
Values, in any Contract Year when a full withdrawal of Contract Value is made on
other than the Contract Anniversary, the Annual Contract Charge will be deducted
at the time of such withdrawal.
MORTALITY RISK CHARGE
The Variable Annuity Payouts made to Annuitants will vary in accordance with
the investment performance of the Sub-Account selected by the Contract Owner.
However, they will not be affected by the mortality experience (death rate) of
persons receiving Variable Annuity Payouts. The Company assumes this "mortality
risk" and has guaranteed the annuity rates incorporated in the Contract, which
cannot be changed.
To compensate the Company for assuming this mortality risk and the mortality
risk that Beneficiaries of Annuitants dying before the Start Date may receive
amounts in excess of the then current Contract Value, the Company deducts a
Mortality Risk Charge from the Variable Account Contract Value. (See "Death
Benefit Before Start Date" on page 20.) This deduction is made daily in an
amount that is equal to an annual rate of .85% of the daily Contract Values
under the Variable Account. The Company may not increase the rate charged for
the Mortality Risk Charge under any Contract.
EXPENSE RISK CHARGE
The Company will not increase charges for administrative expenses regardless
of its actual expenses. To compensate the Company for assuming this expense
risk, the Company deducts an Expense Risk Charge from the Variable Account
Contract Value. This deduction is made daily in an amount that is equal to an
annual rate of .40% of the daily Variable Account Contract Values. The Company
may not increase the rate of the Expense Risk Charge under any Contract.
ADMINISTRATIVE CHARGE
The Company deducts a daily Administrative Charge from the Variable Account
Contract Value in an amount equal to an annual rate of .15% of the daily
Variable Account Contract Values. This charge is deducted to reimburse the
Company for the cost of providing administrative services under the Contracts
and the Variable Account. The Company may not increase the rate of the
Administrative Charge under any Contract. Although there is not necessarily a
relationship between the amount of the Administrative Charge imposed on a given
Contract and the amount of expenses that may be attributable to that Contract.
17
<PAGE>
SUFFICIENCY OF CHARGES
If the amount of the Withdrawal Charge assessed in connection with the
Contracts is not enough to cover all distribution expenses incurred in
connection therewith, the loss will be borne by the Company. Any excess
distribution expenses borne by the Company will be paid out of its general
account which may include, among other things, proceeds derived from the
Mortality Risk Charge and the Expense Risk Charge deducted from the Variable
Account.
The Company does not currently believe that the Withdrawal Charges imposed
will cover the expected costs of distributing the Contracts.
If the amount derived from the Mortality Risk Charge and the Expense Risk
Charge is not sufficient to cover the actual cost of the mortality and expense
risks assumed by the Company, the Company will bear the shortfall. Conversely,
if the charges prove more than sufficient, the excess will be profit to the
Company and will be available for any proper corporate purpose including, among
other things, payment of distribution expenses.
PREMIUM AND OTHER TAXES
Various states and other governmental entities levy a premium tax, currently
ranging up to 3.50%, on annuity Contracts issued by insurance companies. If a
Contract Owner lives in a jurisdiction that levies such a tax, the Company will
pay the taxes when due and reserves the right to deduct the amount of the tax
either from Purchase Payments as they are received or from the Contract Value
immediately before Contract Value is applied to an Annuity Payout as permitted
or required by applicable law.
The current range of premium tax rates is a guide only and should not be
relied on to determine actual premium taxes on any Purchase Payment or Contract
because the taxes are subject to change from time to time by legislative and
other governmental action. The timing of tax levies also varies from one taxing
authority to another. Consequently, in many cases the Contract Owner will not be
able to accurately determine the premium tax applicable to the Contract by
reference to the range of tax rates described above. The Company reserves the
right to deduct charges for any other tax or economic burden resulting from the
application of the tax laws that it determines to be applicable to the Contract.
REDUCTION OF CHARGES
The Withdrawal and Contract Charges described above (except the Mortality
Risk Charge) may be reduced or eliminated for Contracts issued in circumstances
where the Company estimates that it will incur lower distribution or
administrative expenses or perform fewer sales or administrative services than
those originally contemplated in establishing the level of those charges. Lower
distribution and administrative expenses may be the result of economics
associated with (a) the use of mass enrollment procedures, (b) the performance
of administrative or enrollment functions by an employer, (c) the use by an
employer of automated techniques in submitting Purchase Payments or information
related to Purchase Payments on behalf of its employees, or (d) any other
circumstances which reduce distribution or administrative expenses. The exact
amount of Withdrawal and Contract Charges applicable to a particular Contract
will be stated in that Contract.
EXPENSES OF THE FUNDS
There are investment advisory fees, direct operating expenses and investment
related expenses of the Funds that are reflected in each Fund's daily share
price. These fees and expenses are described in the accompanying prospectuses
for the Funds.
ADMINISTRATION
The Company has primary responsibility for all administration of the
Contracts and the Variable Account. The Company's Administrative Service Center
is located at the Home Office of the Company, P.O. Box 12530, Seattle,
Washington 98111-4530, and its telephone number is 1-800-426-7050.
The administrative services provided include, but are not limited to:
issuance of the Contracts; maintenance of Contract Owner records; Contract Owner
services; calculation of Accumulation Unit Values; and preparation of Contract
Owner reports.
THE CONTRACTS
CONTRACT APPLICATION AND PURCHASE PAYMENTS
Individuals who want to purchase a Contract must complete an application and
provide an initial Purchase Payment which will be sent to the Company's Home
Office. The initial Purchase Payment will be credited within two business days
after receipt at the Company's Home Office if accompanied by a complete
application. The Company may retain Purchase Payments for up to five business
days while attempting to complete an incomplete application. If an
18
<PAGE>
incomplete application cannot be completed within five days of its receipt, the
applicant will be notified of the reasons for the delay and any Purchase
Payments received will be returned immediately unless the applicant specifically
consents to have the Company retain them pending completion of the application.
For Transfer Series Contracts and Flex Series Contracts which are Qualified
Plans, the Company will accept periodic, single sum, rollover and transfer
Purchase Payments as permitted by the Code. For the non-qualified Transfer
Series Contract, the Company will accept periodic and single sum Purchase
Payments, as well as amounts transferred under Section 1035 of the Code. The
minimum initial Purchase Payment the Company will accept under a Transfer Series
Contract is $15,000 and subsequent payments may not be less than $5,000. The
minimum amount of the initial and subsequent Purchase Payments the Company will
accept under a Flex Series Contract is $50.
The Company may choose not to accept any subsequent Purchase Payment under
the Transfer Series Contracts and Flex Series Contracts if the Purchase Payment,
together with the Contract Value at the next Valuation Date, exceeds $1,000,000.
Any Purchase Payment not accepted by the Company will be refunded. The Company
reserves the right to accept smaller or larger initial and subsequent Purchase
Payments in connection with special circumstances, including, but not limited to
sales through group or sponsored arrangements.
REVOCATION
The Contract Owner may revoke a Contract by sending the Contract and written
notice of revocation to the Company, P.O. Box 12530, Seattle, Washington
98111-4530, or to the agent from whom a Contract was purchased, no later than
the 10th day after the Contract Owner's receipt of the Contract. As soon as the
Company receives the Contract, it will be deemed void. The Company will refund
the Contract Value as of the next Valuation Date after receipt of the Contract
and written notice of revocation. If required by applicable law, the Company
will refund all Purchase Payments it has received under the Contract.
The liability of the Variable Account under this provision is limited to the
Contract Value in each Sub-Account on the date of revocation. Any additional
amounts refunded to the Contract Owner will be paid by the Company.
ALLOCATION OF PURCHASE PAYMENTS
The Contract Owner may allocate Purchase Payments among Sub-Accounts, Fixed
Account A and/or Fixed Account B. (See Appendix A.)
Upon allocation to Sub-Accounts of the Variable Account, a Purchase Payment
is converted into Accumulation Units of the Sub-Account, by dividing the amount
of the Purchase Payment allocated to the Sub-Account by the value of an
Accumulation Unit for the Sub-Account.
ACCUMULATION UNIT VALUE
Each Accumulation Unit of a Sub-Account was initially valued at $10 when the
first Fund shares were purchased. Thereafter the value of each Accumulation Unit
will vary up or down according to a Net Investment Factor, described below.
Dividend and capital gain distributions from a Fund will be automatically
reinvested in additional shares of such Fund and allocated to the appropriate
Sub-Account. The number of Accumulation Units does not increase because of the
additional shares, but the Accumulation Unit value may increase.
NET INVESTMENT FACTOR
The Net Investment Factor is an index number which reflects charges under
the Contract and the investment performance during a Valuation Period of the
Fund whose shares are held in the particular Sub-Account. If the Net Investment
Factor is greater than one, the Accumulation Unit or Annuity Unit value has
increased. If the Net Investment Factor is less than one, Accumulation Unit or
Annuity Unit value has decreased. The Net Investment Factor for a Sub-Account is
determined by dividing (1) by (2) then subtracting (3) from the result, where:
(1) Is the net result of:
(a) The net asset value per share of the Fund shares held in the
Sub-Account, determined at the end of the current Valuation Period;
(b) PLUS the per share amount of any dividend or capital gain
distributions made on the Fund shares held in the Sub-Account during
the current Valuation Period;
(c) PLUS a per share credit or MINUS a per share charge for any taxes
reserved for which the Company determines to have resulted from the
operations of the Sub-Account and to be applicable to a Contract.
19
<PAGE>
(2) Is the net result of:
(a) 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;
(b) PLUS a per share credit or MINUS a per share charge for any taxes
reserved for the last prior Valuation Period which the Company
determines to have resulted from the investment operations of the Sub-
Account and to be applicable to the Contract.
(3) Is a daily factor representing the Mortality Risk Charge, the Expense
Risk Charge and the Administrative Charge adjusted for the number of days
in the period, which is equal to, on an annual basis, 1.40% of the daily
net asset value of the Sub-Account.
DEATH BENEFIT BEFORE THE START DATE
Before the Start Date, the Beneficiary will be entitled to receive the Death
Benefit described below. The Death Benefit will be:
(1) If the Contract owner dies before the first day of the month following
the Contract owner's 80th birthday, or in the case of a non-qualified
Contract, the Annuitant dies one month before the Annuitant's 80th
birthday, then as of the Death Benefit Valuation Date, the greatest of:
(a) The Contract Value less any Outstanding Loan Balance;
(b) The sum of the Purchase Payments received by the Company under the
Contract, less any withdrawals, amounts used to purchase annuity
payouts, any Outstanding Loan Balance, and the amount of previously
deducted Annual Contract Charges; or
(c) The Contract Value on the Specified Contract Anniversary immediately
preceding the Contract Owner's or the Annuitant's death, whichever is
applicable, plus any Purchase Payments since that Anniversary, less
any withdrawals or amounts used to purchase annuity payouts since that
Anniversary, less the amount of any previously deducted Annual
Contract Charges since that Anniversary and less the Outstanding Loan
Balance.
(2) If the Contract Owner, or in the case of a non-qualified Contract, the
Annuitant, dies after the first day of the month following the Contract
Owner's or Annuitant's 80th birthday, the Contract Value less the
Outstanding Loan Balance as of the Death Benefit Valuation Date.
(3) If the Contract Owner of a non-qualified Contract dies, the Withdrawal
Value as of the Death Benefit Valuation Date.
PAYMENT OF DEATH BENEFIT BEFORE THE START DATE
The Beneficiary may elect to have any portion of the Death Benefit:
(1) Paid in a single sum;
(2) Applied to any of the annuity payouts (in no event may annuity payouts
to a Beneficiary extend beyond the Beneficiary's life expectancy or any
period certain greater than the Beneficiary's life expectancy); or
(3) Paid by another distribution method acceptable to the Company.
The timing and manner of payment must satisfy certain requirements under the
Code. In general, the Death Benefit must either be applied to an annuity payout
within one year of the Contract Owner's or Annuitant's death, or the entire
Contract Value must be distributed within five years of the Contract Owner's or
Annuitant's date of death. An exception to this provision applies if the
Beneficiary is the surviving spouse, in which case the Beneficiary may continue
the Contract as the Contract Owner and generally may exercise all rights to the
Contract. (See "Federal Tax Status" on page 26.)
If the Beneficiary requests payment of the Death Benefit in a single sum, it
will be paid to the Beneficiary within seven days after the Death Benefit
Valuation Date. An annuity payout selection or request for another form of
distribution method must be in writing and received by the Company within a time
period permitted under the Code, or the Death Benefit as of the Death Benefit
Valuation Date will be paid in a single sum to the Beneficiary and the Contract
will be cancelled.
DEATH BENEFIT AFTER START DATE
If the Annuitant dies after the Start Date, remaining annuity payouts, if
any, will be as stated in the form of annuity payout in effect.
20
<PAGE>
WITHDRAWAL (REDEMPTION)
If permitted by law or any applicable Qualified Plan, the Contract Owner may
withdraw all or part of the Withdrawal Value of the Contract by sending a
properly completed withdrawal request to the Company. (See "Federal Tax Status"
on page 26.) The Contract Owner may request withdrawal of either (a) a gross
amount, in which case the applicable Withdrawal Charge and taxes will be
deducted from the gross amount requested, or (b) a specific amount after
deduction of the applicable Withdrawal Charge and taxes. If a full withdrawal
occurs on a date other than the Contract Anniversary, a deduction will be made
for the Annual Contract Charge in addition to the deduction made on the previous
Contract Anniversary. (See "Withdrawal Charge (Contingent Deferred Sales
Charge)" on page 15, and "Annual Contract Charge" on page 17.) Partial
withdrawals may be made in amounts not less than $1,000 and no partial
withdrawal may cause the Contract Value to fall below the greater of (a) $1,000,
or (b) the Outstanding Loan Balance divided by 85%. The Company will not honor
requests that do not meet these requirements.
A withdrawal will be processed on the next Valuation Date after a properly
completed withdrawal request is received by the Company and payment will be made
within seven days after such Valuation Date. Unless otherwise agreed to by the
Company, a partial withdrawal will be taken proportionately from the Fixed
Accounts and Sub-Accounts on a basis that reflects their proportionate
percentage of the Withdrawal Value.
The Company reserves the right to assess a processing fee not to exceed the
lesser of 2% of the partial withdrawal amount or $25. No processing fee will be
charged in connection with full withdrawals.
The Company may cancel the Contract when: (a) the entire Withdrawal Value is
withdrawn on or before the Start Date or (b) the Outstanding Loan Balance is
equal to or greater than the Contract Value less applicable Withdrawal Charges.
If a Contract is purchased as a "tax-sheltered annuity" under Code Section
403(b), it is subject to certain restrictions on withdrawals imposed by Section
403(b)(11) of the Code. (See "Tax-Sheltered Annuities" on page 30.) Section 403
(b)(11) of the Code restricts the distribution under Section 403(b) annuity
contracts of: (i) contributions made pursuant to a salary reduction agreement in
years beginning after December 31, 1988; (ii) earnings on those contributions;
and (iii) earnings in such years on amounts held as of the first year beginning
before January 1, 1989. Distributions of the foregoing amounts may only occur
upon the death of the employee, attainment of age 59 1/2, separation from
service, disability or hardship. In addition, income attributable to salary
reduction contributions may not be distributed in the case of hardship. Similar
restrictions may apply on distributions from Contracts used in connection with
state optional retirement programs.
Withdrawal payments may be taxable. For tax purposes such payments shall be
deemed to be from earnings until cumulative withdrawal payments equal all
accumulated earnings and thereafter from Purchase Payments received by the
Company. Consideration should be given to the tax implications of a withdrawal
prior to making a withdrawal request, including a withdrawal in connection with
a Qualified Plan.
SYSTEMATIC WITHDRAWALS
A Systematic Withdrawal is an automatic form of partial withdrawal. (See
"Withdrawal (Redemption)" on page 21.) The Contract Owner may elect to take
Systematic Withdrawals by withdrawing a specified dollar amount or percentage of
the Contract Value on a monthly, quarterly, semi-annual or annual basis.
Withdrawal Charges are not waived on Systematic Withdrawals. (See "Withdrawal
Charge (Contingent Deferred Sales Charge)" on page 15.) Systematic Withdrawals
may be discontinued by the Contract Owner at any time by notifying the Company
in writing.
The Company reserves the right to modify or discontinue offering Systematic
Withdrawals, however, any such modification or discontinuation will not affect
any Systematic Withdrawal programs already commenced. While the Company does not
currently charge a processing fee for partial withdrawals under this program, it
reserves the right to charge a processing fee not to exceed the lesser of 2% of
each Systematic Withdrawal payment or $25.
Systematic Withdrawals may be included in the Contract Owner's gross income
in the year in which the Systematic Withdrawal occurs. Systematic Withdrawals
occurring before the Contract Owner reaches age 59 1/2 may also be subject to a
10% Federal tax penalty. The Contract Owner should consult with his or her tax
adviser before requesting any Systematic Withdrawal. (See "FEDERAL TAX STATUS -
Taxation of Annuities" on page 28.)
Contract Owners interested in participating in the Systematic Withdrawal
program may obtain a separate application form and full information concerning
the program and its restrictions from their registered representative.
LOANS AVAILABLE FROM CERTAIN QUALIFIED CONTRACTS
Loans may be available from Contracts issued for use with Qualified Plans
qualified under Section 403(b) of the Code, provided that the loans are
permitted by the Contract Owner's Qualified Plan. A loan generally will not be
treated
21
<PAGE>
as a taxable distribution provided that the term is no longer than five years
(except for certain home loans) and the loan amount does not exceed certain
limits discussed below. Loans are subject to the limitations, interest rates,
and repayment procedures set forth in the loan document and Contract. The loan
must be repaid, in substantially equal payments, by the earlier of five years
from the date of approval of the loan or the Start Date, or if used to purchase
a primary residence of the Contract Owner, the earlier of 20 years or the Start
Date.
Under the Code, the maximum amount that may be borrowed, including loans
from other Qualified Plans of the employer, generally may not exceed the lesser
of $50,000 or 50% of the current value of an employee's interest in the Plans.
For Plans other than Plans subject to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), up to $10,000 may be borrowed even if it is
more than 50% of the value of the employee's accrued benefit under the Qualified
Plans. The $50,000 dollar limit is reduced by the highest loan balances owed
during the prior one-year period. The Company allows loan amounts (minimum
$1,000) that do not exceed the Withdrawal Value less an amount representing
annual loan interest, provided such amount does not exceed the maximum loan
amount set by law.
Upon the Company's receipt of a properly completed loan document, an amount
equal to the loan will be reallocated from the Contract Value, on a pro rata
basis, to the Loan Account, which is part of Fixed Account A. The Contract Value
reallocated to the Loan Account will be used to secure the loan. Amounts
reallocated from the Sub-Accounts to the Loan Account will be valued on the next
Valuation Date following the Company's receipt of the loan document. Amounts
transferred from the Sub-Accounts to the Loan Account will result in a reduction
of Variable Account Contract Value and will not participate in the investment
experience of any Sub-Account. A loan document can be obtained by writing to the
Company at P.O. Box 12530, Seattle, Washington 98111-4530.
The amounts reallocated to the Loan Account may earn an interest rate less
than that credited to other amounts allocated to Fixed Account A, but it will
never earn less than the guaranteed rate of three percent (3%). The annual
interest rate assessed by the Company on the loan will not exceed 8% in arrears
and will never be less than 5.5% in arrears.
If any loan repayment due under a loan is not paid within 90 days of the
scheduled payment date, the Company will declare the Outstanding Loan Balance
immediately due and payable without notice to the Contract Owner. Unless
prohibited by law, the Outstanding Loan Balance, along with any applicable
Withdrawal Charges will be withdrawn from the Loan Account. Such forfeiture of
Contract Value is a taxable event, and may be subject to a 10% penalty tax for
early withdrawal or adversely affect the treatment of the Contract under Section
403(b) of the Code. (See "Tax Sheltered Annuities" on page 30.)
The Company reserves the right to charge a loan service fee not to exceed
$25 for each loan and to limit loans in the first Contract Year and after the
Contract Owner reaches age 70 1/2.
The foregoing discussion of Contract loans is general and does not address
the tax consequences resulting from all situations in which a person may receive
a Contract loan. A competent tax adviser should be consulted before obtaining a
Contract loan.
REALLOCATIONS
Prior to the Start Date, the Contract Owner may transfer Variable Account
Contract Value among and between the Sub-Accounts and may transfer Fixed Account
Contract Value to various Sub-Accounts. Likewise, Variable Contract Value may be
transferred from a Sub-Account to either Fixed Account A or Fixed Account B.
Transfers of Variable Contract Values from one Sub-Account to another involve
the exchange of accumulation units of one Sub-Account for another on a
dollar-equivalent basis. Subject to certain limitations, Fixed Account Contract
Value may be transferred from either Fixed Account to the other Fixed Account or
to a Sub-Account. (See "Reallocations from the Fixed Accounts", on page 24.)
Currently, there are four methods by which a Contract Owner may make the
transfers described above ("Reallocations"): in writing, by telephone, Automatic
Reallocations and by Dollar Cost Averaging.
WRITTEN REALLOCATIONS - The Contract Owner may request a reallocation in
writing. All or part of a Sub-Account's value may be reallocated to other
Sub-Accounts or to the Fixed Accounts. The reallocations will be made by the
Company on the first Valuation Date after the request for such a reallocation is
received by the Company. Currently, there is no charge for such a reallocation.
The Company reserves the right, however, to charge a reallocation fee not to
exceed $25 per reallocation and to limit the amount and number of reallocations
made by the Contract Owner. After the Start Date, an Annuitant who has selected
Variable Annuity Payouts may request reallocation of Annuity Unit values in the
same manner and subject to the same requirements as for a reallocation of
Accumulation Unit values. However no reallocations of Annuity Unit values may be
made to or from the Fixed Accounts after the Start Date.
The conditions applicable to written reallocations also apply to telephone
reallocations, Automatic Reallocations and Dollar Cost Averaging Reallocations.
22
<PAGE>
TELEPHONE REALLOCATIONS - Telephone reallocations are available when the
Contract Owner completes a telephone reallocation form and a personal
identification number has been assigned. If the Contract Owner elects to
complete the telephone reallocation form, the Contract Owner thereby agrees that
the Company will not be liable for any loss, liability, cost or expense when the
Company acts in accordance with the telephone reallocation instructions which
are received and recorded on voice recording equipment. If a telephone
reallocation, processed after the Contract Owner has completed the telephone
reallocation form is later determined not to have been made by the Contract
Owner or was made without the Contract Owner's authorization, and a loss results
from such unauthorized reallocation, the Contract Owner bears the risk of this
loss. The Company will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. In the event the Company does not employ
such procedures, the Company may be liable for any losses due to unauthorized or
fraudulent instructions. Such procedures may include, among others, requiring
forms of personal identification prior to acting upon telephone instructions,
providing written confirmation of such instructions and/or tape recording
telephone instructions.
AUTOMATIC REALLOCATIONS - The Contract Owner may elect to have the Company
automatically reallocate Contract Value on each quarterly anniversary of the
Issue Date or other date as permitted by Company practice to maintain a certain
percentage of Contract Value in particular Sub-Accounts. The Contract Value
allocated to each Sub-Account, as selected by the Contract Owner, will grow or
decline in value at different rates during the quarter. Automatic reallocation
is intended to reallocate Contract Value from those Sub-Accounts that have
increased in value to those Sub-Accounts that have declined in value or
increased at a slower rate. This investment method does not guarantee profits
nor does it assure that a Contract Owner will avoid losses.
To elect automatic reallocations, the Contract Value must be at least
$10,000 and an automatic reallocation application in proper form must be
received at the Home Office of the Company. An automatic reallocation
application can be obtained by writing to the Company's Home Office at P.O. Box
12530, Seattle, Washington 98111-4530. The Contract Owner must indicate on the
application the applicable Sub-Accounts and the percentage of Contract Value to
be maintained on a quarterly basis in each Sub-Account. All Contract Value in a
selected Sub-Account will be available for the automatic reallocations.
Automatic reallocation of Contract Value will occur on each quarterly
anniversary of the Issue Date or other date as permitted by Company practice,
which the Company received the automatic reallocation application in proper
form. The amounts reallocated will be credited at the Accumulation Unit value as
of the end of the Valuation Dates on which the reallocations are made.
A Contract Owner may instruct the Company at any time to terminate automatic
reallocations by written request to the Company's Home Office. Any Contract
Value in a Sub-Account that has not been reallocated will remain in that
Sub-Account regardless of the percentage allocation unless the Contract Owner
instructs otherwise. If a Contract Owner wants to continue automatic
reallocations after they have been terminated, a new automatic reallocation
application must be completed and sent to the Company's Home Office and the
Contract Value at the time the request is made must be at least $10,000.
The Company reserves the right to discontinue, modify or suspend automatic
reallocations and it reserves the right to charge a fee not to exceed $25 per
each reallocation between Sub-Accounts or from the unencumbered portion of Fixed
Account A Contract Value. Contract Value in Fixed Account B is not eligible for
automatic reallocations.
DOLLAR COST AVERAGING REALLOCATIONS - The Contract Owner may direct the
Company to automatically transfer a fixed dollar amount or a specified
percentage of Sub-Account Contract Value or Fixed Account A Contract Value to
any one or more other Sub-Accounts or to the Fixed Accounts. No reallocations
from Fixed Account B are permitted under this service. Reallocations of this
type may be made on a monthly, quarterly, semi-annual or annual basis. This
service is intended to allow the Contract Owner to utilize "Dollar Cost
Averaging," a long term investment method which provides for regular investments
over time in a level or variable amount. The Company makes no guarantees that
dollar cost averaging will result in a profit or protect against loss. The
Contract Owner may discontinue dollar cost averaging at any time by notifying
the Company in writing.
Contract Owners interested in dollar cost averaging may obtain a separate
application form and full information concerning this service and its
restrictions from their registered representatives.
The Company reserves the right to discontinue, modify or suspend dollar cost
averaging. Although the Company currently charges no fees for reallocations made
under the dollar cost averaging program, the Company reserves the right to
charge a processing fee not to exceed $25 for each dollar cost averaging
reallocation between Sub-Accounts or from Fixed Account A.
23
<PAGE>
REALLOCATIONS FROM THE FIXED ACCOUNTS - Subject to the conditions applicable
to reallocations among Sub-Accounts, reallocations of amounts from Fixed Account
A not designated to the Loan Account may be made to the Sub-Accounts or to Fixed
Account B any time before the Start Date. After the Start Date, amounts
supporting Fixed Annuity Payouts cannot be reallocated.
Reallocations of Fixed Account B Contract Value to the Sub-Accounts or to
Fixed Account A are subject to the following conditions:
(a) Reallocations may only be made during the period starting 30 days before
and ending 30 days after the Contract Anniversary, and only one
reallocation may be made during such period;
(b) The Company must receive the reallocation request no more than 30 days
before the start of the reallocation period and not later than 10 days
before the end of the reallocation;
(c) Reallocations not in excess of the greater of 25% of Fixed Account B
Contract Value or $1,000 may be made (unless the balance after such
reallocation would be less than $1,000, in which case the full Fixed
Account B Contract Value may be reallocated); and
(d) Such reallocation must involve at least $250 of the total Fixed Account
B Contract Value (or the total Fixed Account B Contract Value, if less).
After the Start Date, reserves supporting Fixed Annuity Payouts cannot be
reallocated.
The Company reserves the right to permit reallocations from Fixed Accounts A
and B in excess of the limits described above on a non-discriminatory basis.
ASSIGNMENTS
If the Contract is issued pursuant to or in connection with a Qualified
Plan, it may not be sold, transferred, pledged or assigned to any person or
entity other than the Company. In other circumstances, an assignment of the
Contract is permitted, but only before the Start Date, by giving the Company the
original or a certified copy of the assignment. The Company shall not be bound
by any assignment until it is actually received by the Company and shall not be
responsible for the validity of any assignment. Any payments made or actions
taken by the Company before the Company actually receives any assignment shall
not be affected by the assignment.
CONTRACT OWNER AND BENEFICIARIES
Unless someone else is named as the Contract Owner in the application for
the Contract, the applicant is the Contract Owner of the Contract and before the
Start Date may exercise all of the Contract Owner's rights under the Contract.
The Contract Owner may name a Beneficiary and a Contingent Beneficiary. In
the event a Contract Owner or the Annuitant in the case of a non-qualified
Contract, dies before the Start Date, the Beneficiary shall receive a Death
Benefit as provided in the Contract. In the event the Payee dies on or after the
date Annuity Payouts commence, the Beneficiary, if the Annuity Payout in effect
at the Contract Owner's death so provides, may continue receiving payouts or be
paid a lump sum. If the Beneficiary or Contingent Beneficiary is not living on
the date payment is due or if no Beneficiary or Contingent Beneficiary has been
named, the Payee's estate will receive the applicable proceeds.
A person named as an Annuitant, a Payee, a Beneficiary or a Contingent
Beneficiary shall not be entitled to exercise any rights relating to the
Contract or to receive any payments or settlements under the Contract or any
Annuity Payout, unless such person is living on the day due proof of death of
the Contract Owner, the Annuitant or the Beneficiary, whichever is applicable,
is received by the Company.
Unless different arrangements have been made with the Company by the
Contract Owner, if more than one Beneficiary is entitled to payments from the
Company the payments shall be in equal shares.
Before the Start Date, the Contract Owner may change the Beneficiary or the
Contingent Beneficiary by giving the Company written notice of the change, but
the change shall not be effective until actually received by the Company. Upon
receipt by the Company of a notice of change, it will be effective as of the
date it was signed but shall not affect any payments made or actions taken by
the Company before the Company received the notice, and the Company shall not be
responsible for the validity of any change.
CONTRACT INQUIRIES
Inquiries regarding a Contract may be made by writing to the Company's Home
Office, P.O. Box 12530, Seattle, Washington 98111-4530.
24
<PAGE>
ANNUITY PROVISIONS
START DATE
Unless otherwise agreed to by the Company, the Start Date must be the first
business day of any calendar month. The Contract Owner may change the Start Date
by giving written notice received by the Company at least 30 days before the
Start Date currently in effect and the new Start Date. The new Start Date must
satisfy the requirements for a Start Date. If the Contract Owner does not select
a Start Date, the Start Date will be the Contract Owner's 85th birthday. If the
Start Date selected by the Contract Owner does not occur on a Valuation Date at
least 60 days after the date on which the Contract was issued, the Company
reserves the right to adjust the Start Date to the first Valuation Date after
the Start Date selected by the Contract Owner which is at least 60 days after
the Contract issue date. For Contracts issued in connection with Qualified
Plans, the Start Date and form of payout must satisfy certain requirements under
the Code. (See "Federal Tax Status" on page 26.)
ANNUITY PAYOUT SELECTION
The Contract Owner may select a Variable Annuity Payout, a Fixed Annuity
Payout, or both, with payments starting at the Start Date selected by the
Contract Owner. The Contract Owner may change the form of Annuity Payout(s) by
giving written notice received by the Company before the Start Date. If the
Contract Owner has not selected the form of Annuity Payout(s) before the Start
Date, the Company will apply the Fixed Account Contract Value to provide Fixed
Annuity Payouts and the Variable Account Contract Value to provide Variable
Annuity Payouts, both in the form of a Life Annuity with Payments Guaranteed for
10 years (120 months) which will be automatically effective.
FORMS OF ANNUITY PAYOUTS
Variable Annuity Payouts and Fixed Annuity Payouts are available in any of
the following Annuity Forms:
LIFE ANNUITY - Unless otherwise agreed to by the Company, an annuity payable
on the first business day of each calendar month during the Annuitant's life,
starting with the first payment due according to the Contract. Payments cease
with the payment made on the first business day of the calendar month in which
the Annuitant's death occurs. IT WOULD BE POSSIBLE UNDER THIS ANNUITY PAYOUT FOR
THE ANNUITANT TO RECEIVE ONLY ONE PAYMENT IF HE OR SHE DIED BEFORE THE SECOND
ANNUITY PAYMENT, ONLY TWO PAYMENTS IF HE OR SHE DIED BEFORE THE THIRD ANNUITY
PAYMENT, ETC.
LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 YEARS (120 MONTHS) - Unless
otherwise agreed to by the Company, an annuity payable on the first business day
of each calendar month during the Annuitant's life, starting with the first
payment due according to the Contract. If the Annuitant receives all of the
guaranteed payments, payments will continue thereafter but cease with the
payment made on the first business day of the calendar month in which the
Annuitant's death occurs. If all of the guaranteed payments have not been made
before the Annuitant's death, the unpaid installments of the guaranteed payments
will be continued to the Beneficiary.
JOINT AND FULL SURVIVOR ANNUITY - Unless otherwise agreed to by the Company,
an annuity payable on the first business day of each month during the
Annuitant's life and the life of a named person (the "Joint Annuitant"),
starting with the first payment due according to the Contract. Payments will
continue while either the Annuitant or the Joint Annuitant is living and cease
with the payment made on the first business day of the calendar month in which
the death of the Annuitant or the Joint Annuitant, whichever lives longer,
occurs. THERE IS NO MINIMUM NUMBER OF PAYMENTS GUARANTEED UNDER THIS ANNUITY
PAYOUT. PAYMENTS CEASE UPON THE DEATH OF THE LAST SURVIVOR OF THE ANNUITANT AND
THE JOINT ANNUITANT REGARDLESS OF THE NUMBER OF PAYMENTS RECEIVED.
The Company will pay Fixed and Variable Annuity Payouts under other Annuity
Forms that may be offered by the Company. Your registered representative can
provide you with the details.
FREQUENCY AND AMOUNT OF ANNUITY PAYOUTS
Annuity Payouts will be paid as monthly installments, unless the Annuitant
and the Company agree to a different payout schedule. However, if the Contract
Value less any Outstanding Loan Balance at the Start Date is less than $5,000,
the Company may pay the difference in a single sum and the Contract will be
cancelled. Also if a monthly payout would be or become less than $100, the
Company may change the frequency of payouts to intervals that will result in
payouts of at least $100 each.
ANNUITY PAYOUTS
The amount of the first Fixed Annuity Payout is determined by applying the
Contract Value to be used for a fixed annuity at the Start Date to the annuity
table in the Contract for the Fixed Annuity Payout selected. The table shows the
minimum guaranteed amount of the initial annuity payment for each $1,000
applied. All subsequent payments shall be equal to the initial annuity payment.
25
<PAGE>
The amount of the first Variable Annuity Payout is determined by applying
the Contract Value to be used for a variable annuity at the Start Date to the
annuity table in the Contract for the Annuity Payout selected. Subsequent
Variable Annuity Payouts vary in amount in accordance with the investment
performance of the applicable Sub-Account. Assuming annuity payouts are based on
the Annuity Unit Values of a single Sub-Account, the dollar amount of the first
annuity payout, determined as set forth above, is divided by the Sub-Account
Annuity Unit Value as of the Start Date to establish the number of Annuity Units
representing each annuity payout. This number of Annuity Units remains fixed
during the annuity payout period. The dollar amount of the second and subsequent
payouts is not predetermined and may change from month to month. The dollar
amount of the second and each subsequent annuity payout is determined by
multiplying the fixed number of Annuity Units by the Sub-Account Annuity Unit
Value for the Valuation Period with respect to which the annuity payout is due.
If the monthly payout is based upon the Annuity Unit Values of more than one
Sub-Account, the foregoing procedure is repeated for each applicable Sub-Account
and the sum of the payments based on each Sub-Account is the amount of the
monthly annuity payout.
The annuity tables in the Contracts are based on the 1983 Mortality Table
and a 3% interest rate. Unisex rates will apply for Contracts issued under
Qualified Plans and sex distinct rates will apply for non-qualified Transfer
Series Contracts.
The Company guarantees that the dollar amount of each Variable Annuity
Payout after the first payout will not be affected by variations in expenses
(including those related to the Variable Account) or in mortality experience
from the mortality assumptions used to determine the first payout.
SUB-ACCOUNT ANNUITY UNIT VALUE
Each Sub-Account's Annuity Units were initially valued at $10 each at the
time Accumulation Units with respect to the Sub-Account were first converted
into Annuity Units. The Sub-Account Annuity Unit value for any subsequent
Valuation Period is determined by multiplying the Sub-Account Annuity Unit value
for the immediately preceding Valuation Period by the Net Investment Factor for
the Sub-Account for the Valuation Period for which the Sub-Account Annuity Unit
Value is being calculated, and multiplying the result by an interest factor to
neutralize the assumed investment rate of 3% per annum built into the annuity
tables contained in the Contracts. (See "Net Investment Factor" on page 19.)
ASSUMED INVESTMENT RATE
A 3% assumed investment rate is built into the annuity tables contained in
the Contracts. If the actual net investment rate on the assets of the Variable
Account is equal to the assumed investment rate, Variable Annuity Payouts will
remain level. If the actual net investment rate exceeds the assumed investment
rate, Variable Annuity Payouts will increase and conversely, if it is less, then
the payouts will decrease.
PARTIAL ANNUITIZATION
Any time before the Start Date, a Contract Owner may apply a portion of the
Contract Value to the purchase of Fixed or Variable Annuity Payouts or to a
combination of Fixed and Variable Annuity Payouts. This is called a partial
annuitization and occurs in the same manner as described above for application
of the entire Contract Value to Annuity Payouts at the Start Date except that
values as of the Valuation Date immediately following receipt by the Company of
a written request for a partial annuitization are used in place of values as of
the Start Date.
Upon the occurrence of a partial annuitization, the Contract Value applied
to purchase Annuity Payouts is considered a withdrawal from the Contract. (See
"Withdrawals (Redemptions)" on page 21 and "Taxation of Annuities" on page 28.)
The Company reserves the right to deduct the amount of any premium taxes not
already paid under a Contract.
After a partial annuitization, Annuity Payouts based on the Contract Value
applied and the annuity options selected are made in the same manner as if the
Start Date had occurred and no Contract Value remained under the Contract. Any
remaining Contract Value not applied to purchase Annuity Payouts, the Contract
continues as if no partial annuitization had occurred.
FEDERAL TAX STATUS
INTRODUCTION
THIS DISCUSSION IS GENERAL AND NOT INTENDED AS TAX ADVICE. This discussion
is not intended to address the tax consequences resulting from all of the
situations in which a person may be entitled to or may receive a distribution
under a Contract. The Contracts are designed for use by individuals in
connection with retirement plans which may or may not be Qualified Plans under
the provisions of the Code. The ultimate effect of federal income taxes on the
Contract Value,
26
<PAGE>
on Annuity Payouts and on the economic benefit to the Contract Owner, the
Annuitant, as Payee or the Beneficiary depends upon the type of retirement plan
for which the Contract is purchased, and upon the tax and employment status of
the individual concerned. No attempt is made to consider any applicable state or
other tax laws. The discussion is based on the Company's understanding of
Federal Income Tax Laws as currently interpreted. No representation is made
regarding the likelihood of the continuation of the present Federal Income Tax
Laws or the current interpretation by the Internal Revenue Service ("IRS").
A Contract may be purchased on a non-qualified basis ("Non-Qualified
Contract") or purchased and used in connection with plans qualifying for
favorable tax treatment ("Qualified Contract"). A Qualified Contract is designed
for use by individuals whose Purchase Payments are comprised solely of proceeds
from and/or contributions under retirement plans which are intended to qualify
as plans entitled to special income tax treatment under Sections 401(a), 403(b),
or 408 of the Code. The ultimate effect of federal income taxes on the amounts
held under a Contract, or Annuity Payouts, and on the economic benefit to the
Contract Owner, the Annuitant, the Payee or the Beneficiary depends on the type
of retirement plan, on the tax and employment status of the individual
concerned, and on the Company's tax status. In addition, certain requirements
must be satisfied in purchasing a Qualified Contract with proceeds from a
Qualified Plan and receiving distributions from a Qualified Contract in order to
continue receiving favorable tax treatment. Therefore, purchasers of Qualified
Contracts should seek competent legal and tax advice regarding the suitability
of a Contract for their situation, the applicable requirements, and the tax
treatment of the rights and benefits of a Contract. The following discussion
assumes that Qualified Contracts are purchased and proceeds from and/or
contributions under retirement plans that qualify for the intended special
federal income tax treatment.
TAX STATUS OF THE CONTRACT
DIVERSIFICATION REQUIREMENTS
Section 817(h) of the Code provides that separate account investments
underlying a Contract must be "adequately diversified" in accordance with
Treasury regulations in order for the Contract to qualify as an annuity Contract
under Section 72 of the Code. The Variable Account, through each of the Funds,
intends to comply with the diversification requirements prescribed in
regulations under Section 817(h) of the Code, which affect how the assets in the
various Sub-Accounts may be invested. The Company expects that each Fund in
which the Variable Account owns shares will meet the diversification
requirements and that the Contract will be treated as an annuity Contract under
the Code.
The Treasury has also announced that the diversification regulations do not
provide guidance concerning the extent to which Contract Owners may direct their
investments to particular Sub-Accounts of the Variable Account or how
concentrated the investments of the Funds underlying the Variable Account may
be. It is possible that if additional guidance in this regard is issued, the
Contract may need to be modified to comply with such additional guidance. For
these reasons, the Company reserves the right to modify the Contracts as
necessary to attempt to prevent the Contract Owner from being considered the
owner of the assets of the Funds or otherwise to qualify the Contract for
favorable tax treatment.
REQUIRED DISTRIBUTIONS
In order to be treated as an annuity Contract for federal income tax
purposes, Section 72(s) of the Code also requires any Non-Qualified Contract to
provide that: (a) if any Contract Owner dies on or after the Start Date but
prior to the time the entire interest in the Contract has been distributed, the
remaining portion of such interest will be distributed at least as rapidly as
under the method of distribution being used as of the date of that Contract
Owner's death; and (b) if any Contract Owner dies prior to the Start Date, the
entire interest in the Contract will be distributed within five years after the
date of the Contract Owner's death. These requirements will be considered
satisfied as to any portion of the Contract Owner's interest which is payable to
or for the benefit of a "designated Beneficiary" and which is distributed over
the life of such Beneficiary or over a period not extending beyond the life
expectancy of that Beneficiary, provided that such distributions begin within
one year of that Contract Owner's death. The Contract Owner's "designated
Beneficiary" is the person designated by such Contract Owner as a Beneficiary
and to whom ownership of the Contract passes by reason of death and must be a
natural person. However, if the Contract Owner's "designated Beneficiary" is the
surviving spouse of the Contract Owner, the Contract may be continued with the
surviving spouse as the new Contract Owner. If the Contract Owner is not an
individual, any change in the primary Annuitant is treated as a change of
Contract Owner for tax purposes.
The Non-Qualified Contracts contain provisions which are intended to comply
with the requirements of Section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. The Company intends to
review such provisions and modify them if necessary to assure that they comply
with the requirements of Code Section 72(s) when clarified by regulation or
otherwise. Other rules may apply to Qualified Contracts.
27
<PAGE>
TAXATION OF ANNUITIES
IN GENERAL
Section 72 of the Code governs taxation of annuities in general. The Company
believes that a Contract Owner who is a natural person generally is not taxed on
increases in the value of a Contract until distribution occurs by withdrawing
all or part of the Contract Value (e.g., partial withdrawals and complete
withdrawals) or as Annuity Payouts under the form of Annuity Payout selected.
For this purpose, the assignment, pledge, or agreement to assign or pledge any
portion of the Contract Value (and in the case of a Qualified Contract, any
portion of an interest in the qualified plan) generally will be treated as a
distribution. The taxable portion of a distribution (in the form of a single sum
payment or annuity) is taxable as ordinary income.
A Contract Owner who is not a natural person generally must include in
income any increase in the excess of the net withdrawal value over the
"investment in the Contract" during the taxable year.
The following discussion generally applies to Contracts owned by natural
persons.
WITHDRAWALS
In the case of a withdrawal from a Qualified Contract, under Section 72(e)
of the Code a ratable portion of the amount received is taxable, generally based
on the ratio of the "investment in the Contract" to the participant's total
accrued benefit or balance under the retirement plan. The "investment in the
Contract" generally equals the portion, if any, of any Purchase Payments paid by
or on behalf of any individual under a Contract which was not under excluded
from the individual's gross income. For Contracts issued in connection with
Qualified Plans, the "investment in the Contract" can be zero. Special tax rules
may be available for certain distributions from Qualified Contracts.
In the case of a withdrawal (including Systematic Withdrawals) from a
Non-Qualified Contract before the Start Date, under Code Section 72(e) amounts
received are generally first treated as taxable income to the extent that the
Contract Value immediately before withdrawal exceeds the "investment in the
Contract" at that time. Any additional amount withdrawn is not taxable.
In the case of a full withdrawal under a Qualified or Non-Qualified
Contract, the amount received generally will be taxable only to the extent it
exceeds the "investment in the Contract."
A Federal penalty tax may apply to certain withdrawals from Qualified and
Non-Qualified Contracts. (See "Penalty Tax on Certain Distributions" below.)
ANNUITY PAYOUTS
Although tax consequences may vary depending on the annuity form selected
under the Contract, in general, only the portion of the Annuity Payout that
represents the amount by which the Contract Value exceeds the investment in the
Contract will be taxed; after the investment in the Contract is recovered, the
full amount of any additional Annuity Payouts is taxable. For Variable Annuity
Payouts, the taxable portion is generally determined by an equation that
establishes a specific dollar amount of each payment that is not taxed. The
dollar amount is determined by dividing the investment in the Contract by the
total number of expected periodic Annuity Payouts. However, the entire
distribution will be taxable once the recipient has recovered the dollar amount
of his or her investment in the Contract. For Fixed Annuity Payouts, in general
there is no tax on the portion of each payout which represents the same ratio
that the investment in the Contract bears to the total expected value of the
Annuity Payouts for the term of the payouts; however, the remainder of each
Annuity Payout is taxable until the recovery of the investment in the Contract,
and thereafter the full amount of each Annuity Payout is taxable.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed from a Contract because of the death of a
Contract Owner or an Annuitant. Generally, such amounts are includible in the
income of the recipient as follows: (i) if distributed in a lump sum, they are
taxed in the same manner as a full withdrawal from the Contract; or (ii) if
distributed under a payout option, they are taxed in the same way as Annuity
Payouts.
PENALTY TAX ON CERTAIN DISTRIBUTIONS
In the case of a distribution pursuant to a Non-Qualified Contract, a
Federal penalty equal to 10% of the amount treated as taxable income may be
imposed. In general, however, there is no penalty on distributions:
1. Made on or after the taxpayer reaches age 59 1/2;
2. Made on or after the death of the holder (a holder is considered a
Contract Owner) (or if the holder is not an individual, the death of the
primary annuitant);
3. Attributable to the taxpayer becoming disabled;
28
<PAGE>
4. A part of a series of substantially equal periodic payments (not less
frequently than annually) for the life (or life expectancy) of the
taxpayer or the joint lives (or joint life expectancies) of the taxpayer
and his or her designated beneficiary;
5. Made under an annuity Contract that is purchased with a single premium
when the annuity starting date is no later than a year from purchase of
the annuity and substantially equal periodic payments are made, not less
frequently than annually, during the annuity period; and
6. Made under certain annuities issued in connection with structured
settlement agreements.
Other tax penalties may apply to certain distributions under a Qualified
Contract, as well as to certain contributions to, loans from, and other
circumstances, applicable to the Qualified Plan of which the Qualified Contract
is part.
POSSIBLE CHANGES IN TAXATION
In past years, legislation has been proposed that would have adversely
modified the Federal taxation of certain annuities. For example, one such
proposal would have changed the tax treatment of non-qualified annuities that
did not have "substantial life contingencies" by taxing income as it is credited
to the annuity. Although as of the date of this prospectus Congress is not
considering any legislation regarding the taxation of annuities, there is always
the possibility that tax treatment of annuities could change by legislation or
other means (such as IRS regulations, revenue rulings, judicial decisions,
etc.). Moreover, it is also possible that any change could be retroactive (that
is, effective prior to the date of the change).
TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A CONTRACT
A transfer of ownership or assignment of a Contract, the designation of an
Annuitant, Payee or other Beneficiary who is not also the Contract Owner, or the
exchange of a Contract may result in certain tax consequences to the Contract
Owner that are not discussed herein. A Contract Owner contemplating any such
transfer, assignment, or exchange of a Contract should contact a competent tax
adviser with respect to the potential tax effects of such a transaction.
WITHHOLDING
Pension and annuity distributions generally are subject to withholding for
the recipient's Federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients, however,
generally are provided the opportunity to elect not to have tax withheld from
distributions. Effective January 1, 1993, distributions from certain qualified
plans are generally subject to mandatory withholding. Withholding for Contracts
issued to retirement plans established under Section 401 of the Code is the
responsibility of the plan trustee.
MULTIPLE CONTRACTS
Section 72(e)(11) of the Code treats all non-qualified deferred annuity
Contracts entered into after October 21, 1988 that are issued by the Company (or
its affiliates) to the same Contract Owner during any calendar year as one
annuity Contract for purposes of determining the amount includible in gross
income under Code Section 72(e). The effects of this rule are not clear;
however, it could affect the time when income is taxable and the amount that
might be subject to the 10% penalty tax described above. In addition, the
Treasury Department has specific authority to issue regulations that prevent the
avoidance of Section 72(e) through the serial purchase of annuity Contracts or
otherwise. There may also be other situations in which the Treasury may conclude
that it would be appropriate to aggregate two or more annuity Contracts
purchased by the same Contract Owner. Accordingly, a Contract Owner should
consult a competent tax adviser before purchasing more than one annuity
Contract.
TAXATION OF QUALIFIED PLANS
The Contracts are designed for use with several types of Qualified Plans.
The tax rules applicable to participants in these Qualified Plans vary according
to the type of Plan and the terms and conditions of the Plan itself. Special
favorable tax treatment may be available for certain types of contributions and
distributions. Adverse tax consequences may result from contributions in excess
of specified limits; distributions prior to age 59 1/2 (subject to certain
exceptions); distributions that do not conform to specified commencement and
minimum distribution rules; aggregate distributions in excess of a specified
annual amount; and in other specified circumstances. Therefore, no attempt is
made to provide more than general information about the use of the Contracts
with the various types of Qualified Plans. Contract Owners, Annuitants Payees
and Beneficiaries are cautioned that the rights of any person to any benefits
under these Qualified Plans will be subject to the terms and conditions of the
Plans themselves, regardless of the terms and conditions of the Contracts issued
in connection with the Plans. The Company shall not be bound by the terms and
conditions of such Qualified Plans to the extent such terms contradict the
Contract, unless the Company consents. Some retirement plans
29
<PAGE>
are subject to distribution and other requirements that are not incorporated
into the Company's Contract administration procedures. Contract Owners,
participants and Beneficiaries are responsible for determining that
contributions, distributions and other transactions with respect to the
Contracts comply with applicable law. Brief descriptions follow of the various
types of Qualified Plans in connection with a Contract.
CORPORATE PENSION AND PROFIT-SHARING PLANS AND H.R. 10 PLANS
Code Section 401(a) permits employers to establish various types of
retirement plans for employees, and permit self-employed individuals to
establish retirement plans for themselves and their employees. These retirement
plans may permit the purchase of the Contracts to accumulate retirement savings
under the plans. Adverse tax consequences to the plan, to the participant or to
both may result if this Contract is assigned or transferred to any individual as
a means to provide benefit payments.
INDIVIDUAL RETIREMENT ANNUITIES
Section 408 of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity" or
"IRA". These IRAs are subject to limits on the amount that may be contributed,
the persons who may be eligible, and on the time when distributions may
commence. Also, distributions from certain other types of qualified retirement
plans may be "rolled over" on a tax-deferred basis into an IRA. Sales of a
Contract for use with IRAs may be subject to special requirements of the IRS.
The IRS has not reviewed the Contract for qualification as an IRA, and has not
addressed in a ruling of general applicability whether a death benefit provision
such as the provision in the Contract comports with IRA qualification
requirements.
TAX SHELTERED ANNUITIES
Section 403(b) of the Code allows employees of certain Section 501(c)(3)
organizations and public schools to exclude from their gross income the Purchase
Payments paid, within certain limits, on a Contract that will provide an annuity
for the employee's retirement. Code Section 403(b)(11) restricts the
distribution under Code Section 403(b) annuity Contracts of: (i) elective
contributions made in years beginning after December 31, 1988; (ii) earnings on
those contributions; and (iii) earnings in such years on amounts held as of the
last year beginning before January 1, 1989. Distribution of those amounts may
only occur upon death of the employee, attainment of age 59 1/2, separation from
service, disability, or financial hardship. In addition, income attributable to
elective contributions may not be distributed in the case of hardship.
POSSIBLE CHARGE FOR THE COMPANY'S TAXES
At the present time, the Company makes no charge to the Sub-Accounts for any
Federal, state, or local taxes that the Company incurs which may be attributable
to such Sub-Accounts or to the Contracts. The Company, however, reserves the
right in the future to make a charge for any such tax that it determines to be
properly attributable to the Sub-Accounts of the Contracts.
OTHER TAX CONSEQUENCES
As noted above, the foregoing comments about the Federal tax consequences
under these Contracts are not exhaustive, and special rules are provided with
respect to other tax situations not discussed in this Prospectus. Further, the
Federal income tax consequences discussed herein reflect the Company's
understanding of current law and the law may change. Federal estate and state
and local estate, inheritance, and other tax consequences of ownership or
receipt of distributions under a Contract depend on the individual circumstances
of each Contract Owner or recipient of the distribution. A competent tax adviser
should be consulted for further information.
VOTING OF FUND SHARES
As long as the Variable Account is registered as a unit investment trust
under the Investment Company Act of 1940 and the assets of the Variable Account
are allocated to Sub-Accounts that are invested in Fund shares, the Fund shares
held in the Sub-Accounts will be voted by the Company in accordance with the
instructions received from the person having voting interests under the
Contracts as described below. If the Company determines pursuant to applicable
law or regulation that Fund shares held in the Sub-Accounts and attributable to
the Contracts need not be voted pursuant to instructions received from persons
otherwise having the voting interests, then the Company may vote such Fund
shares held in the Sub-Accounts in its own right.
Before Variable Annuity Payouts begin, the Contract Owner will have the
voting interest with respect to the Fund shares attributable to a Contract.
After Variable Annuity Payouts begin, the Annuitant will have the voting
interest with respect to the Fund shares attributable to the Annuity Units under
a Contract. Such voting interest will generally decrease during the Variable
Annuity Payout period.
30
<PAGE>
Any Fund shares held in the Variable Account for which the Company does not
receive timely voting instructions, or which are not attributable to Contract
Owners, will be voted by the Company in proportion to the instructions received
from all Contract Owners having a voting interest in the Fund. Any Fund shares
held by the Company or any of its 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.
All Fund proxy material will be sent to persons having voting interests
together with appropriate forms which may be used to give voting instructions.
Persons entitled to voting interests and the number of votes which they may cast
shall be determined as of a record date, to be selected by the Fund.
Persons having voting interests under the Contracts as described above will
not, as a result thereof, have voting interests with respect to meetings of the
stockholders of the Company.
DISTRIBUTION OF THE CONTRACTS
The Contracts will be sold by licensed insurance agents in those states
where the Contracts may be lawfully sold. Such agents will be registered
representatives of broker-dealers registered under the Securities Exchange Act
of 1934 who are members of the National Association of Securities Dealers, Inc.
The Contracts will be distributed by the Principal Underwriter, Washington
Square Securities, Inc., 20 Washington Avenue South, Minneapolis, Minnesota
55401, which is an affiliate of the Company. Commissions and other distribution
compensation will be paid by the Company. Generally such payments will not
exceed 7.00% of the Purchase Payments. In some cases a trail commission based on
the Contract Value may also be paid.
REPORTS TO CONTRACT OWNERS
The Company will mail to the Contract Owner, at the last known address of
record at the Home Office of the Company, an annual report after the first
Contract Year containing such information as may be required by any applicable
law or regulation and a statement showing the Contract Value. The Company will
also provide to Contract Owners immediate written confirmation of every
financial transaction made under their Contracts; however, Contract Owners who
make Purchase Payments through salary reduction arrangements with their
employers will receive quarterly confirmations of Purchase Payments made to
their Contracts.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account is a party. The
Company is a defendant in various lawsuits in connection with the normal conduct
of its operations. In the opinion of management, the ultimate resolution of such
litigation will not result in any significant liability to the Company.
FINANCIAL STATEMENTS AND EXPERTS
The annual financial statements of Separate Account One as of December 31,
1996 and the annual financial statements of Northern Life Insurance Company,
which are included in the Statement of Additional Information, have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their reports,
which are 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.
FURTHER INFORMATION
A Registration Statement under the Securities Act of 1933 has been filed
with the Securities and Exchange Commission, with respect to the Contracts
described herein. The Prospectus does not contain all of the information set
forth in the Registration Statement and exhibits thereto, to which reference is
hereby made for further information concerning the Variable Account, the Company
and the Contracts. The information so omitted may be obtained from the
Commission's principal office in Washington, D.C., upon payment of the fee
prescribed by the Commission, or examined there without charge. Statements
contained in this Prospectus as to the provisions of the Contracts and other
legal documents are summaries, and reference is made to the documents as filed
with the Commission for a complete statement of the provisions thereof.
31
<PAGE>
SEPARATE ACCOUNT ONE
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Introduction...................................................................2
Custody of Assets..............................................................2
Independent Auditors...........................................................2
Distribution of the Contracts..................................................3
Calculation of Yields and Total Returns........................................3
Company Holidays..............................................................12
Financial Statements..........................................................12
- --------------------------------------------------------------------------------
If you would like to receive a copy of the Separate Account One Statement of
Additional Information, please call 1-800-333-6965 or return this request to:
WASHINGTON SQUARE SECURITIES, INC.
20 WASHINGTON AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55401
Your name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City ___________________________________________ State _________________________
Zip ___________________
Please send me a copy of the Separate Account One Statement of Additional
Information.
- --------------------------------------------------------------------------------
32
<PAGE>
APPENDIX A
THE FIXED ACCOUNTS
CONTRIBUTIONS AND REALLOCATIONS TO FIXED ACCOUNT A AND FIXED ACCOUNT B
(COLLECTIVELY, THE "FIXED ACCOUNTS") UNDER THE CONTRACTS BECOME PART OF THE
GENERAL ACCOUNT OF THE COMPANY (THE "GENERAL ACCOUNT"), WHICH SUPPORTS INSURANCE
AND ANNUITY OBLIGATIONS. BECAUSE OF EXEMPTIVE AND EXCLUSIONARY PROVISIONS,
INTERESTS IN THE FIXED ACCOUNTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 ("1933 ACT") NOR ARE THE FIXED ACCOUNTS REGISTERED AS INVESTMENT
COMPANIES UNDER THE INVESTMENT COMPANY ACT OF 1940 ("1940 ACT"). ACCORDINGLY,
NEITHER THE FIXED ACCOUNTS NOR ANY INTERESTS THEREIN ARE GENERALLY SUBJECT TO
THE PROVISIONS OF THE 1933 OR 1940 ACTS AND THE COMPANY HAS BEEN ADVISED THAT
THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION HAS NOT REVIEWED THE
DISCLOSURES IN THIS PROSPECTUS WHICH RELATE TO THE FIXED PORTION OF THE
CONTRACTS. DISCLOSURES REGARDING THE FIXED PORTION OF THE CONTRACTS AND THE
FIXED ACCOUNTS, HOWEVER, MAY BE SUBJECT TO CERTAIN GENERALLY APPLICABLE
PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE ACCURACY AND
COMPLETENESS OF STATEMENTS MADE IN PROSPECTUSES.
The Fixed Accounts are part of the General Account, which is made up of all
of the general assets of the Company other than those allocated to any separate
account. We offer the option of having all or a portion of Purchase Payments
allocated to the Fixed Accounts as selected by the Contract Owner at the time of
purchase or as subsequently changed. The Company will invest the assets
allocated to the Fixed Accounts in those assets chosen by the Company and
allowed by applicable law. Investment income from such Fixed Accounts' assets
will be allocated between the Company and the Contracts participating in the
Fixed Accounts, in accordance with the terms of such Contracts.
Fixed Annuity Payouts made to Annuitants under the Contracts will not be
affected by the mortality experience (death rate) of persons receiving such
payments or of the general population. The Company assumes this "mortality risk"
by virtue of annuity rates incorporated in the Contracts which cannot be
changed. In addition, the Company guarantees that it will not increase charges
for maintenance of the Contracts regardless of its actual expenses.
Investment income from the Fixed Accounts allocated to the Company includes
compensation for mortality and expense risks borne by the Company in connection
with Fixed Account Contracts. The Company expects to derive a profit from this
compensation.
The Company may credit interest in excess of the guaranteed rate of 3%. Any
interest rate in effect when an amount is allocated or reallocated to the Fixed
Accounts is guaranteed for that amount until the end of the calendar year in
which it is received. After the end of that calendar year, the Company may
change the amount of interest credited at its discretion. All amounts in the
Fixed Accounts after the end of the calendar years referenced above are credited
with excess interest at the rates then in effect for the then current calendar
year. Such rates are established at the beginning of each calendar year and are
guaranteed for the entire calendar year. There is no specific formula for the
determination of excess interest credits. Such credits, if any, will be
determined by the Company based on many factors, including, but not limited to:
investment yield rates, taxes, Contract persistency, and other experience
factors. ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE FIXED ACCOUNTS IN
EXCESS OF 3% PER YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF THE COMPANY.
THE CONTRACT OWNER ASSUMES THE RISK THAT INTEREST CREDITED TO FIXED ACCOUNT
ALLOCATIONS MAY NOT EXCEED THE MINIMUM GUARANTEE OF 3% FOR ANY GIVEN YEAR.
The Company is aware of no statutory limitations on the maximum amount of
interest it may credit, and the Board of Directors has set no limitations.
However, inherent in the Company's exercise of discretion in this regard is the
equitable allocation of distributable earnings and surplus among its various
Contractholders and Contract Owners and to its stockholder.
Excess interest, if any, will be credited on the Fixed Account Contract
Value. The Company guarantees that, at any time, the Fixed Account Contract
Value will not be less than the amount of Purchase Payments and transfers
allocated to the Fixed Accounts, plus interest at the rate of 3% per year,
compounded annually, plus any additional interest which the Company may, in its
discretion, credit to the Fixed Accounts, less the sum of all annual
administrative charges or Withdrawal Charges levied, any applicable premium
taxes, and less any amounts withdrawn or reallocated from the Fixed Accounts. If
the Contract Owner makes a full withdrawal, the amount available from the Fixed
Accounts will be reduced by any applicable Withdrawal Charge and Annual Contract
Charge. (See "Charges Made by the Company" on page 15).
A-1
<PAGE>
[LOGO]
Northern Life
P. O. Box 12530 - Seattle, WA 98111-4530
A RELIASTAR COMPANY
For marketing information call:
1-800-426-7050
For policy administration call:
1-800-870-0453
FORM NO. 15500 5-97
A Variable Annuity Issued by Northern Life Insurance Company
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
----------
INDIVIDUAL DEFERRED VARIABLE/FIXED ANNUITY CONTRACTS
ISSUED BY
SEPARATE ACCOUNT ONE
AND
NORTHERN LIFE INSURANCE COMPANY
This Statement of Additional Information is not a Prospectus, but should be
read in conjunction with the Prospectus, dated April 30, 1997 (the "Prospectus")
relating to the Individual Deferred Variable/Fixed Annuity Contracts issued by
Separate Account One (the "Variable Account") and Northern Life Insurance
Company (the "Company"). Much of the information contained in this Statement of
Additional Information expands upon subjects discussed in the Prospectus. A
copy of the Prospectus may be obtained from Washington Square Securities, Inc.,
20 Washington Avenue South, Minneapolis, Minnesota 55401.
Capitalized terms used in this Statement of Additional Information that are
not otherwise defined herein shall have the meanings given to them in the
Prospectus.
-------------
TABLE OF CONTENTS
Page
----
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Custody of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Distribution of the Contracts. . . . . . . . . . . . . . . . . . . . . . 3
Calculation of Yields and Total Returns. . . . . . . . . . . . . . . . . 3
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Company Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
---------
The date of this Statement of Additional Information is April 30, 1997.
1
<PAGE>
INTRODUCTION
The Individual Deferred Variable/Fixed Annuity Contracts described in the
Prospectus are flexible Purchase Payment Contracts. The Contracts are sold to
or in connection with retirement plans which may or may not qualify for special
federal tax treatment under the Internal Revenue Code. (See "Federal Tax
Status" on page 26 of the Prospectus.) Annuity Payouts under the Contracts are
deferred until a later date selected by the Contract Owner.
Purchase Payments may be allocated to one or more of the available Sub-
Accounts of the Variable Account, a separate account of the Company, and/or to
Fixed Account A and/or Fixed Account B (which are part of the general account of
the Company).
Purchase Payments allocated to one or more of the available Sub-Accounts of
the Variable Account, as selected by the Contract Owner, will be invested in
shares at net asset value of one or more of a group of investment funds (the
"Funds"). The Funds currently are the Income and Growth Fund, Multi-Sector Bond
Fund and Growth Fund of the Northstar Variable Trust, which is managed by
Northstar Investment Management Corporation of Greenwich, Connecticut, an
affiliate of the Company; the Money Market Portfolio, Growth Portfolio, Equity-
Income Portfolio and Overseas Portfolio of the Variable Insurance Products Fund
and the Asset Manager Portfolio, Asset Manager: Growth Portfolio, Index 500
Portfolio and Contrafund Portfolio of the Variable Insurance Products Fund II,
all of which are managed by Fidelity Management & Research Company of Boston,
Massachusetts; and American Small Capitalization Portfolio, American Growth
Portfolio, American MidCap Growth Portfolio and American Leveraged AllCap
Portfolio of The Alger American Fund which are managed by Fred Alger Management,
Inc. The Variable Account Contract Value and the amount of Variable Annuity
Payouts will vary, depending on the investment performance of the Funds whose
shares are held in the Sub-Accounts selected. For more information about the
Funds, see "Investments of the Variable Account" on page 12 of the Prospectus.
Purchase Payments allocated to Fixed Account A or Fixed Account B, which
are part of the general account of the Company, will be credited with interest
at a rate not less than 3% per year. Interest credited in excess of 3%, if any,
will be determined at the sole discretion of the Company. That part of the
Contract relating to Fixed Account A and Fixed Account B is not registered under
the Securities Act of 1933 and the Fixed Accounts are not subject to the
restrictions of the Investment Company Act of 1940. (See Appendix A to the
Prospectus.)
CUSTODY OF ASSETS
The Company, whose address appears on the cover of the Prospectus,
maintains custody of the assets of the Variable Account.
INDEPENDENT AUDITORS
The financial statements of Separate Account One and Northern Life
Insurance Company, which are included in the Statement of Additional
Information, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports which are 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.
<PAGE>
DISTRIBUTION OF THE CONTRACTS
The Contracts will be sold by licensed insurance agents in those states
where the Contracts may be lawfully sold. Such agents will be registered
representatives of broker-dealers registered under the Securities Exchange Act
of 1934 who are members of the National Association of Securities Dealers, Inc.
The Contracts will be distributed by Washington Square Securities, Inc. ("WSSI")
the principal underwriter which is an affiliate of the Company.
For the years ended December 31, 1995 and 1996, WSSI was paid fees,
including gross concessions, by the Company in connection with distribution
of the Contracts aggregating $750 and $641,620.59, respectively.
The offering of the Contracts is continuous.
There are no special purchase plans or exchange privileges not described in
the Prospectus. (See "Reduction of Charges" at page 18 of the Prospectus.)
No deduction for a sales charge is made from Purchase Payments for the
Contracts. However, if part or all of a Contract's Value is withdrawn,
Withdrawal Charges (which may be deemed to be Contingent Deferred Sales
Charges) may be made by the Company. The method used to determine the amount
of such charges is described in the Prospectus under the heading "Charges
Made By The Company -- Withdrawal Charge (Contingent Deferred Sales Charge)"
on page 15. There is no difference in the amount of this charge or any of the
other charges described in the Prospectus as between Contracts purchased by
members of the public as individuals or groups, and Contracts purchased by
any class of individuals, such as officers, directors or employees of the
Company or of the Principal Underwriter.
CALCULATION OF YIELDS AND TOTAL RETURNS
From time to time, the Company may disclose yields, total returns, and
other performance data pertaining to the Contracts for a Sub-Account. Such
performance data will be computed, or accompanied by performance data computed,
in accordance with the standards defined by the Securities and Exchange
Commission.
Because of the charges and deductions imposed under a Contract, the yield
for the Sub-Accounts will be lower than the yield for their respective
portfolios. The calculations of yields, total returns, and other performance
data do not reflect the effect of any premium tax that may be applicable to a
particular Contract. Premium taxes currently range from 0% to 3.5% of premium
based on the state in which the Contract is sold.
VIP MONEY MARKET PORTFOLIO SUB-ACCOUNT YIELD. From time to time,
advertisements and sales literature may quote the current annualized yield of
the Money Market Sub-Account for a seven-day period in a manner which does not
take into consideration any realized or unrealized gains or losses on shares of
the VIP Money Market Portfolio or on its portfolio securities.
The current annualized yield is computed by determining the net change
(exclusive of realized gains and losses on the sale of securities and unrealized
appreciation and depreciation) at the end of the seven-day period in the value
of a hypothetical account under a Contract having a balance of one Accumulation
Unit of the Money Market Sub-Account at the beginning of the period dividing
such net change in account value of the hypothetical account to determine the
base period return, and annualizing this quotient on a 365-day basis. The net
change in account value reflects: 1) net income from the Portfolio attributable
to the hypothetical account; and 2) charges and deductions imposed under the
Contract which are attributable to the hypothetical account. The charges and
deductions include the per unit charges for the hypothetical account for: 1) the
Annual Contract Charge; 2) Administration Charge; and 3) the Mortality and
Expense Risk Charges. For purposes of calculating current yields for a
Contract, an average per unit administration fee is used based on the $30 Annual
<PAGE>
Contract Charge deducted at the end of each Contract Year. Current Yield will
be calculated according to the following formula:
Current Yield = ((NCS - ES)/UV) x (365/7)
Where:
NCS = the net change in the value of the Portfolio (exclusive of
realized gains or losses on the sale of securities and unrealized
appreciation and depreciation) for the seven-day period
attributable to a hypothetical account having a balance of 1 Sub-
Account Accumulation Unit.
ES = per unit expenses attributable to the hypothetical account
for the seven-day period.
UV = The Accumulation Unit value on the first day of the seven-
day period.
The current yield of the sub-account for the seven day period ended
December 31, 1996 was 4.17%
Effective Yield. The effective yield of the Money Market Sub-Account
determined on a compounded basis for the same seven-day period may also be
quoted.
The effective yield is calculated by compounding the unannualized base
period return according to the following formula:
365/7
Effective Yield = (1 + ((NCS - ES)/UV)) -1
Where:
NCS = the net change in the value of the Portfolio (exclusive of
realized gains and losses on the sale of securities and
unrealized appreciation and depreciation) for the seven-day
period attributable to a hypothetical account having a balance of
1 Sub-Account unit.
ES = per Accumulation Unit expenses attributable to the
hypothetical account for the seven-day period.
UV = the Accumulation Unit value for the first day of the seven-day
period.
The effective yield of the sub-account for the seven day period ended
December 31, 1996 was 4.26%.
Because of the charges and deductions imposed under the Contracts, the
yield for the Money Market Sub-Account will be lower than the yield for the VIP
Money Market Portfolio.
<PAGE>
The current and effective yields on amounts held in the Money Market Sub-
Account normally will fluctuate on a daily basis. THEREFORE, THE DISCLOSED
YIELD FOR ANY GIVEN PAST PERIOD IS NOT AN INDICATION OR REPRESENTATION OF FUTURE
YIELDS OR RATES OF RETURN. The Money Market Sub-Account's actual yield is
affected by changes in interest rates on money market securities, average
portfolio maturity of the VIP Money Market Portfolio, the types and quality of
portfolio securities held by VIP Money Market Portfolio and the VIP Money
Market Portfolio's operating expenses. Yields on amounts held in the Money
Market Sub-Account may also be presented for periods other than a seven-day
period.
OTHER SUB-ACCOUNT YIELDS. From time to time, sales literature or
advertisements may quote the current annualized yield of one or more of the Sub-
Accounts (except the Money Market Sub-Account) for a Contract for 30-day or one-
month periods. The annualized yield of a Sub-Account refers to income generated
by the Sub-Account over a specific 30-day or one-month period. Because the
yield is annualized, the yield generated by a Sub-Account during a 30-day or
one-month period is assumed to be generated each period over a 12-month period.
The yield is computed by: 1) dividing the net investment income of the Fund
attributable to the Sub-Account Accumulation Units less Sub-Account expenses for
the period; by 2) the maximum offering price per Accumulation Unit on the last
day of the period times the daily average number of units outstanding for the
period; by 3) compounding that yield for a six-month period; and by 4)
multiplying that result by 2. Expenses attributable to the Sub-Account include
the Administration Charge and the Mortality and Expense Risk Charges. The yield
calculation assumes an Annual Contract Charge of $30 per year per Contract
deducted at the end of each Contract Year. For purposes of calculating the 30-
day or one-month yield, an average Annual Contract Charge per dollar of Contract
Value in the Variable Account is used to determine the amount of the charge
attributable to the Sub-Account for the 30-day or one-month period. The 30-day
or one-month yield is calculated according to the following formula:
6
Yield =2 x [(((NI - ES)/(U x UV)) + 1) - 1]
Where:
NI = net income of the Portfolio for the 30-day or one-month
period attributable to the Sub-Account's Accumulation Units.
ES = expenses of the Sub-Account for the 30-day or one-month period.
U = the average number of Accumulation Units outstanding.
UV = the Accumulation Unit value of the close (highest) of the
last day in the 30-day or one-month period.
The annualized yield for the Northstar Multi-Sector Bond Fund Sub-Account
for the month ended December 31, 1996 was 6.18%.
Because of the charges and deductions imposed under the Contract, the yield
for the Sub-Account will be lower than the yield for the corresponding Fund.
<PAGE>
The yield on the amounts held in the Sub-Accounts normally will fluctuate
over time. THEREFORE, THE DISCLOSED YIELD FOR ANY GIVEN PAST PERIOD IS NOT AN
INDICATION OR REPRESENTATION OF FUTURE YIELDS OR RATES OF RETURN. The Sub-
Account's actual yield is affected by the types and quality of portfolio
securities held by the Fund and its operating expenses.
Yield calculations do not take into account the Withdrawal Charges under
the Contracts. The Withdrawal Charge for Transfer Series Contracts is equal to
2% to 6% of Purchase Payments paid during the six years prior to the withdrawal
(including the year in which the withdrawal is made) on amounts withdrawn or
withdrawn under the Contract. The Withdrawal Charge for Flex Series Contracts
is equal to 1% to 8% of amounts withdrawn under the Contracts during the first
10 Contract Years.
AVERAGE ANNUAL TOTAL RETURNS. From time to time, sales literature or
advertisements may also quote average annual total returns for one or more of
the Sub-Accounts for various periods of time.
Average annual total returns represent the average annual compounded rates
of return that would equate an initial investment of $1,000 under a Contract to
the redemption value of that investment as of the last day of each of the
periods. The ending date for each period for which total return quotations are
provided will be for the most recent month-end practicable, considering the type
and media of the communication and will be stated in the communication.
Average annual total returns will be calculated using Sub-Account
Accumulation Unit values which the Company calculates on each Valuation Date
based on the performance of the Sub-Account's underlying Fund, the deductions
for the Mortality and Expense Risk Charges, the Administration Charge, and the
Annual Contract Charge. The calculation assumes that the Annual Contract Charge
is $30 per year per Contract deducted at the end of each Contract Year. For
purposes of calculating average annual total return, an average per dollar
Annual Contract Charge attributable to the hypothetical account for the period
is used. The calculation also assumes full withdrawal of the Contract at the
end of the period for the return quotation. Total returns will therefore
reflect a deduction of the Withdrawal Charge in the case of the Transfer
Series Contracts, for any period less than six years and in the case of the Flex
Series Contracts, for any period less than 11 years. The total return will then
be calculated according to the following formula:
1/N
TR = ((ERV/P) ) - 1
Where:
TR = The average annual total return net of Sub-Account recurring
charges.
ERV = the ending redeemable value (net of any applicable surrender
charge) of the hypothetical account at the end of the
period.
P = a hypothetical initial payment of $1,000.
N = the number of years in the period.
Such average annual return information for the Sub-Accounts is as
follows:
For the Period
Since Date of
For the 1-year inception of the
period ended Sub-Account to
Sub-Account 12/31/96 12/31/96
----------- -------------- ---------------
++T.S. F.S. T.S. F.S.
Northstar Income and Growth Fund 6.32% 3.68% 8.60% 6.18%
(Sub-Account Inception: 10/20/95)
Northstar Multi-Sector Bond Fund 5.26% 2.69% 7.24% 4.92%
(Sub-Account Inception: 10/20/95)
Northstar Growth Fund 15.54% 12.24% 15.02% 12.18%
(Sub-Account Inception: 10/20/95)
VIP Growth Portfolio 7.40% 4.68% 3.22% 1.17%
(Sub-Account Inception: 10/20/95)
VIP Equity-Income Portfolio 6.98% 4.29% 11.07% 8.49%
(Sub-Account Inception: 10/20/95)
VIP Overseas Portfolio 5.87% 3.26% 6.98% 4.68%
(Sub-Account Inception: 10/20/95)
VIP II Asset Manager Portfolio 7.29% 4.58% 9.32% 6.85%
(Sub-Account Inception:10/26/95)
VIP II Asset Manager:
Growth Portfolio 12.64% 9.54% 12.68% 9.99%
(Sub-Account Inception: 10/20/95)
VIP II Index 500 Portfolio 15.38% 12.08% 17.43% 14.42%
(Sub-Account Inception: 10/20/95)
VIP II Contrafund Portfolio 13.80% 10.62% 12.90% 10.20%
(Sub-Account Inception: 10/20/95)
Alger American Small
Capitalization Portfolio -2.95% -4.93% -5.94% -7.36%
(Sub-Account Inception: 10/20/95)
Alger American Growth Portfolio 6.07% 3.44% 4.02% 1.92%
(Sub-Account Inception: 10/20/95)
Alger American MidCap
Growth Portfolio 4.64% 2.12% 36.39% 32.12%
(Sub-Account Inception: 10/20/95)
Alger American Leveraged
AllCap Portfolio 4.78% 2.24% 4.66% 2.52%
(Sub-Account Inception: 10/20/95)
++key: T.S. = Transfer Series Contract; F.S. = Flex Series Contract. (See
""Withdrawal Change (Contingent Deferred Sales Charge)'' on page 15 of the
Prospectus.)
<PAGE>
From time to time, sales literature or advertisements may quote average
annual total returns for periods prior to the date the Sub-Accounts commenced
operations. Such performance information for the Sub-Accounts will be
calculated based on the performance of the Funds and the assumption that the
Sub-Accounts were in existence for the same periods as those indicated for the
Funds, with the level of Contract charges currently in effect.
Such average annual total return information for the Sub-Accounts is as
follows:
<TABLE>
<CAPTION>
For the 1-year For the 5-year
period ended period ended
Sub-Account 12/31/96 12/31/96
----------- --------- ----------
++T.S. F.S. T.S. F.S.
<S> <C> <C> <C> <C>
Northstar Income and Growth Fund
(Portfolio Inception: 5/6/94) 6.32% 3.68% N/A N/A
Northstar Multi-Sector Bond Fund
(Portfolio Inception: 5/6/94) 5.26% 2.69% N/A N/A
Northstar Growth Fund
(Portfolio Inception: 5/6/94) 15.54% 12.24% N/A N/A
VIP Growth Portfolio
(Portfolio Inception: 10/9/86) 7.40% 4.68% 12.81% 12.00%
VIP Equity-Income Portfolio
(Portfolio Inception: 10/9/86) 6.98% 4.29% 15.62% 14.74%
VIP Overseas Portfolio
(Portfolio Inception: 1/28/87) 5.87% 3.26% 6.78% 6.15%
VIP II Asset Manager Portfolio
(Portfolio Inception: 9/6/89) 7.29% 4.58% 8.90% 8.20%
VIP II Asset Manager: Growth Portfolio
(Portfolio Inception: 1/3/95) 12.64% 9.54% N/A N/A
VIP II Index 500 Portfolio
(Portfolio Inception: 8/27/92) 15.38% 12.08% N/A N/A
VIP II Contrafund Portfolio
(Portfolio Inception: 1/3/95) 13.80% 10.62% N/A N/A
Alger American Small Capitalization Portfolio
(Portfolio Inception: 9/21/88) -2.95% -4.93% 8.66% 7.97%
Alger American Growth Portfolio
(Portfolio Inception: 1/9/89) 6.07% 3.44% 14.27% 13.43%
Alger American MidCap Growth Portfolio
(Portfolio Inception: 5/3/93) 4.64% 2.12% N/A N/A
Alger American Leveraged AllCap Portfolio
(Portfolio Inception: 1/25/95) 4.78% 2.24% N/A N/A
<CAPTION>
For the period from
For the 10-year date of inception of
period ended Portfolio to
12/31/96 12/31/96
-------- --------
T.S. F.S. T.S. F.S.
<S> <C> <C> <C> <C>
Northstar Income and Growth Fund
(Portfolio Inception: 5/6/94) N/A N/A 10.35% 8.68%
Northstar Multi-Sector Bond Fund
(Portfolio Inception: 5/6/94) N/A N/A 7.43% 5.90%
Northstar Growth Fund
(Portfolio Inception: 5/6/94) N/A N/A 15.71% 13.78%
VIP Growth Portfolio
(Portfolio Inception: 10/9/86) N/A N/A 12.90% 12.90%
VIP Equity-Income Portfolio
(Portfolio Inception: 10/9/86) N/A N/A 11.54% 11.54%
VIP Overseas Portfolio
(Portfolio Inception: 1/28/87) N/A N/A 6.09% 6.00%
VIP II Asset Manager Portfolio
(Portfolio Inception: 9/6/89) N/A N/A 9.84% 9.43%
VIP II Asset Manager: Growth Portfolio
(Portfolio Inception: 1/3/95) N/A N/A 17.27% 15.17%
VIP II Index 500 Portfolio
(Portfolio Inception: 8/27/92) N/A N/A 14.63% 13.69%
VIP II Contrafund Portfolio
(Portfolio Inception: 1/3/95) N/A N/A 25.94% 23.36%
Alger American Small Capitalization Portfolio
(Portfolio Inception: 9/21/88) N/A N/A 18.21% 17.95%
Alger American Growth Portfolio
(Portfolio Inception: 1/9/89) N/A N/A 16.68% 16.28%
Alger American MidCap Growth Portfolio
(Portfolio Inception: 5/3/93) N/A N/A 21.31% 19.89%
Alger American Leveraged AllCap Portfolio
(Portfolio Inception: 1/25/95) N/A N/A 36.93% 33.73%
</TABLE>
++ Key: T.S. = Transfer Series Contract; F.S. = Flex Series Contract. (See
"Withdrawal Charge (Contingent Deferred Sale Charge)" on page 15 of the
Prospectus.)
<PAGE>
The Company may also disclose average annual total returns for the Funds
since their inception, including such disclosure for periods prior to the date
the Variable Account commenced operations.
Such average annual total return information for the Funds is as follows:
<TABLE>
<CAPTION>
For the period from
For the 1-year For the 5-year For the 10-year date of inception of
period ended period ended period ended Portfolio to
Portfolio 12/31/96 12/31/96 12/31/96 12/31/96
--------- -------- -------- -------- ---------
<S> <C> <C> <C> <C>
Northstar Income and Growth Fund
(Portfolio Inception: 5/6/94) 13.61% N/A N/A 13.67%
Northstar Multi-Sector Bond Fund
(Portfolio Inception: 5/6/94) 12.53% N/A N/A 10.76%
Northstar Growth Fund
(Portfolio Inception: 5/6/94) 22.99% N/A N/A 19.01%
VIP Growth Portfolio
(Portfolio Inception: 10/9/86) 14.71% 15.16% N/A 14.81%
VIP Equity-Income Portfolio
(Portfolio Inception: 10/9/86) 14.28% 17.98% N/A 13.42%
VIP Overseas Portfolio
(Portfolio Inception: 1/28/87) 13.15% 9.15% N/A 7.89%
VIP II Asset Manager Portfolio
(Portfolio Inception: 9/6/89) 14.60% 11.26% N/A 11.69%
VIP II Asset Manager: Growth Portfolio
(Portfolio Inception: 1/3/95) 20.04% N/A N/A 21.58%
VIP II Index 500 Portfolio
(Portfolio Inception: 8/27/92) 22.82% N/A N/A 17.10%
VIP II Contrafund Portfolio
Portfolio Inception: 1/3/95) 21.22% N/A N/A 30.24%
Alger American Small Capitalization Portfolio
(Portfolio Inception: 9/21/88) 4.18% 11.02% N/A 20.21%
Alger American Growth Portfolio
(Portfolio Inception: 1/9/89) 13.35% 16.63% N/A 18.65%
Alger American MidCap Growth Portfolio
(Portfolio Inception: 5/3/93) 11.90% N/A N/A 24.10%
Alger American Leveraged AllCap Portfolio
(Portfolio Inception: 1/25/95) 12.04% N/A N/A 41.35%
</TABLE>
<PAGE>
OTHER TOTAL RETURNS. From time to time, sales literature or advertisements
may quote average annual total returns that do not reflect the Withdrawal
Charge. These returns are calculated in exactly the same way as average annual
total returns described above, except that the ending redeemable value of the
hypothetical account for the period is replaced with an ending value for the
period that does not take into account any charges on amounts withdrawn.
Because the Withdrawal Charge will not be reflected in those quotations, there
is no differentiation between the Transfer Series Contracts and the Flex Series
Contracts. Such information is as follows:
<TABLE>
<CAPTION>
For the period from
For the 1-year date of inception of
period ended Portfolio to
Sub-Account 12/31/96 12/31/96
----------- -------- ---------
<S> <C> <C>
VIP Equity-Income Portfolio 12.38% 15.46%
(Sub-Account Inception: 10/20/95)
VIP Growth Portfolio 12.80% 7.67%
(Sub-Account Inception: 10/20/95)
VIP Overseas Portfolio 11.27% 11.40%
(Sub-Account Inception: 10/20/95)
VIP II Asset Manager Portfolio 12.69% 13.72%
(Sub-Account Inception: 10/20/95)
VIP II Asset Manager Growth Portfolio 18.04% 17.06%
(Sub-Account Inception: 10/20/95)
VIP II Contrafund Portfolio 19.20% 17.28%
(Sub-Account Inception: 10/20/95)
VIP II Index 600 Portfolio 20.78% 21.77%
(Sub-Account Inception: 10/20/95)
Northstar Income and Growth Fund 11.72% 13.01%
(Sub-Account Inception: 10/20/95)
Northstar Growth Fund 20.94% 19.38%
(Sub-Account Inception: 10/20/95)
Northstar Multi-Sector Bond Fund 10.66% 11.66%
(Sub-Account Inception: 10/20/95)
Alger American Small Capitalization Portfolio 2.45% -1.41%
(Sub-Account Inception: 10/20/95)
Alger American Growth Portfolio 11.47% 8.46%
(Sub-Account Inception: 10/20/95)
Alger American MidCap Growth Portfolio 10.04% 40.60%
(Sub-Account Inception: 10/20/95)
Alger American Leveraged AllCap Portfolio 10.18% 9.10%
</TABLE>
<TABLE>
<CAPTION>
For the period from
For the 1-year For the 5-year For the 10-year date of inception of
period ended period ended period ended Portfolio to
Sub-Account 12/31/96 12/31/96 12/31/96 12/31/96
----------- -------- -------- -------- ---------
<S> <C> <C> <C> <C>
Northstar Income and Growth Fund
(Portfolio Inception: 5/6/94) 11.72% N/A N/A 11.78%
Northstar Multi-Sector Bond Fund
(Portfolio Inception: 5/6/94) 10.66% N/A N/A 8.92%
Northstar Growth Fund
(Portfolio Inception: 5/6/94) 20.94% N/A N/A 17.03%
VIP Growth Portfolio
(Portfolio Inception: 10/9/86) 12.80% 13.25% N/A 12.90%
VIP Equity-Income Portfolio
(Portfolio Inception: 10/9/86) 12.38% 16.02% N/A 11.54%
VIP Overseas Portfolio
(Portfolio Inception: 1/28/87) 11.27% 7.33% N/A 6.09%
VIP II Asset Manager Portfolio
(Portfolio Inception: 9/6/89) 12.69% 9.41% N/A 9.84%
VIP II Asset Manager: Growth Portfolio
(Portfolio Inception: 1/3/95) 18.04% N/A N/A 19.56%
VIP II Index 500 Portfolio
(Portfolio Inception: 8/27/92) 20.78% N/A N/A 15.15%
VIP II Contrafund Portfolio
(Portfolio Inception: 1/3/95) 19.20% N/A N/A 28.07%
Alger American Small Capitalization Portfolio
(Portfolio Inception: 9/21/88) 2.45% 9.17% N/A 18.21%
Alger American Growth Portfolio
(Portfolio Inception: 1/9/89) 11.47% 14.69% N/A 16.68%
Alger American MidCap Growth Portfolio
(Portfolio Inception: 5/3/93) 10.04% N/A N/A 22.04%
Alger American Leveraged AllCap Portfolio
(Portfolio Inception: 1/25/95) 10.18% N/A N/A 38.99%
</TABLE>
<PAGE>
The Company may disclose Cumulative Total Returns in conjunction with the
standard formats described above. The Cumulative Total Returns will be
calculated using the following formula:
CTR = ERV/P - 1
Where:
CTR = the Cumulative Total Return net of Sub-Account
recurring charges for the period.
ERV = the ending redeemable value of the hypothetical
investment at the end of the period.
P = a hypothetical single payment of $1,000.
EFFECT OF THE ANNUAL CONTRACT CHARGE ON PERFORMANCE DATA. The Contract
provides for a $30 Annual Contract Charge to be deducted annually at the end of
each Contract Year, from the Sub-Accounts and the Fixed Accounts based on the
proportion that the value of each such account bears to the total Contract
Value. For purposes of reflecting the Annual Contract Charge in yield and total
return quotations, the annual charge is converted into a per-dollar of per-day
charge based on the Annual Contract Charges collected from the average total
assets of the Variable Account and the Fixed Accounts during the calendar year.
COMPANY HOLIDAYS
The Company is closed on the following holidays: New Year's Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. Holidays that
fall on a Saturday will be recognized on the previous Friday. Holidays that
fall on a Sunday will be recognized on the following Monday.
FINANCIAL STATEMENTS
The Statement of Additional Information contains Financial Statements for the
Variable Account as of December 31, 1996 and for the period from October 20,
1995 (the date on which the Variable Account commenced operations) to
December 31, 1995. Deloitte & Touche LLP serves as independent auditors for
the Variable Account. Although the financial statements are audited, the
period they cover is not necessarily indicative of the longer term
performance of the assets held in the Variable Account.
The financial statements of the Company, which are included in this Statement
of Additional Information should be considered only as bearing on the ability
of the Company to meet its obligations under the Contracts. They should not
be considered as bearing on the investment performance of the assets held in
the Variable Account.
The financial statements for the Company for the years ended December 31,
1996 and 1995 have been prepared on the basis of statutory accounting
principles ("STAT") rather than generally accepted accounting principles
("GAAP").
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Northern Life Insurance
Company and Contract Owners of
Separate Account One:
We have audited the accompanying statement of assets and liabilities of
Northern Life Separate Account One as of December 31, 1996 and the related
combined statements of operations and changes in Contract Owners' equity for the
year ended December 31, 1996 and the period from October 20, 1995 to December
31, 1995. These financial statements are the responsibility of the management
of Northern 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 amount and disclosures in the financial statements. Our
procedures include confirmation of the securities owned as of December 31, 1996,
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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Northern Life Separate
Account One as of December 31, 1996, and the results of its operations and
changes in Contract Owners' equity for the year ended December 31, 1996 and the
period from October 20, 1995 to December 31, 1995, in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
Minneapolis, Minnesota
February 7, 1997
<PAGE>
SEPARATE ACCOUNT ONE
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
(In Thousands, Except Share and Unit Data)
<TABLE>
<CAPTION>
NORTHSTAR NORTHSTAR NORTHSTAR FIDELITY VIPF
ASSETS: INCOME AND MULTI-SECTOR GROWTH MONEY MARKET
- ------- GROWTH FUND BOND FUND FUND PORTFOLIO
Investments in mutual funds at market value: ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
NORTHSTAR'S:
Income and Growth Fund
61,948 shares (cost $733) $726
Multi-Sector Bond Fund
115,051 shares (cost $606) $604
Growth Fund
277,320 shares (cost $3,835) $3,905
FIDELITY'S VIPF AND VIPF II:
Money Market Portfolio
1,099,035 shares (cost $1,099) $1,099
Growth Portfolio
75,095 shares (cost $2,255)
Equity-Income Portfolio
212,728 shares (cost $4,227)
Overseas Portfolio
65,366 shares ($1,170)
Asset Manager Portfolio
44,853 shares (cost $713)
Asset Manager: Growth Portfolio
54,702 shares (cost $697)
Index 500 Portfolio
33,393 shares ($2,760)
Contrafund Portfolio
233,794 shares (cost $3,573)
ALGER AMERICAN FUND:
Small Capitalization Portfolio
64,686 shares (cost $2,649)
Growth Portfolio
53,112 shares (cost $1,732)
MidCap Growth Portfolio
116,201 shares (cost $2,409)
Leveraged AllCap Portfolio
76,447 shares (cost $1,442)
------------ ----------- ------------ ------------
Total Assets $726 $604 $3,905 $1,099
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
LIABILITIES AND CONTRACT OWNERS' EQUITY:
- ----------------------------------------
Due to Northern Life Insurance Co. for contract charges $1 $1 $4 $1
Contract Owners' Equity 725 603 3,901 1,098
------------ ----------- ------------ ------------
Total Liabilities and Contract Owners' Equity $726 $604 $3,905 $1,099
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
Units Outstanding: 62,237.333 52,791.181 318,137.812 104,844.463
Net Asset Value per Unit
Northern Advantage Variable Annuity $11.651860 $11.437367 $12.260050 $10.471216
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
<TABLE>
<CAPTION>
FIDELITY VIPF FIDELITY VIPF FIDELITY VIPF FIDELITY VIPF II FIDELITY VIPF II
ASSETS: GROWTH EQUITY-INCOME OVERSEAS ASSET MANAGER ASSET MANAGER:
- ------- PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO GROWTH PORTFOLIO
------------- ------------- ------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
NORTHSTAR'S:
Income and Growth Fund
61,948 shares (cost $733)
Multi-Sector Bond Fund
115,051 shares (cost $606)
Growth Fund
277,320 shares (cost $3,835)
FIDELITY'S VIPF AND VIPF II:
Money Market Portfolio
1,099,035 shares (cost $1,099)
Growth Portfolio
75,095 shares (cost $2,255) $2,338
Equity-Income Portfolio
212,728 shares (cost $4,227) $4,474
Overseas Portfolio
65,366 shares ($1,170) $1,232
Asset Manager Portfolio
44,853 shares (cost $713) $759
Asset Manager: Growth Portfolio
54,702 shares (cost $697) $717
Index 500 Portfolio
33,393 shares ($2,760)
Contrafund Portfolio
233,794 shares (cost $3,573)
ALGER AMERICAN FUND:
Small Capitalization Portfolio
64,686 shares (cost $2,649)
Growth Portfolio
53,112 shares (cost $1,732)
MidCap Growth Portfolio
116,201 shares (cost $2,409)
Leveraged AllCap Portfolio
76,447 shares (cost $1,442)
------------ ----------- ------------ ----------- -----------
Total Assets $2,338 $4,474 $1,232 $759 $717
------------ ----------- ------------ ----------- -----------
------------ ----------- ------------ ----------- -----------
LIABILITIES AND CONTRACT OWNERS' EQUITY:
- ----------------------------------------
Due to Northern Life Insurance Co. for
contract charges $2 $5 $1 $1 $1
Contract Owners' Equity 2,336 4,469 1,231 758 716
------------ ----------- ------------ ----------- -----------
Total Liabilities and Contract
Owners' Equity $2,338 $4,474 $1,232 $759 $717
------------ ----------- ------------ ----------- -----------
------------ ----------- ------------ ----------- -----------
Units Outstanding: 210,258.492 370,036.342 106,840.466 64,182.784 58,201.338
Net Asset Value per Unit
Northern Advantage Variable Annuity $11.110374 $12.076424 $11.513477 $11.818133 $12.298185
<CAPTION>
FIDELITY VIPF II FIDELITY VIPF II
ASSETS: INDEX 500 CONTRAFUND
- ------- PORTFOLIO PORTFOLIO
---------------- ----------------
<S> <C> <C>
NORTHSTAR'S:
Income and Growth Fund
61,948 shares (cost $733)
Multi-Sector Bond Fund
115,051 shares (cost $606)
Growth Fund
277,320 shares (cost $3,835)
FIDELITY'S VIPF AND VIPF II:
Money Market Portfolio
1,099,035 shares (cost $1,099)
Growth Portfolio
75,095 shares (cost $2,255)
Equity-Income Portfolio
212,728 shares (cost $4,227)
Overseas Portfolio
65,366 shares ($1,170)
Asset Manager Portfolio
44,853 shares (cost $713)
Asset Manager: Growth Portfolio
54,702 shares (cost $697)
Index 500 Portfolio
33,393 shares ($2,760) $2,976
Contrafund Portfolio
233,794 shares (cost $3,573) $3,872
ALGER AMERICAN FUND:
Small Capitalization Portfolio
64,686 shares (cost $2,649)
Growth Portfolio
53,112 shares (cost $1,732)
MidCap Growth Portfolio
116,201 shares (cost $2,409)
Leveraged AllCap Portfolio
76,447 shares (cost $1,442)
------------ ------------
Total Assets $2,976 $3,872
------------ ------------
------------ ------------
LIABILITIES AND CONTRACT OWNERS' EQUITY:
- ----------------------------------------
Due to Northern Life Insurance Co. for
contract charges $3 $4
Contract Owners' Equity 2,973 3,868
------------ ------------
Total Liabilities and Contract
Owners' Equity $2,976 $3,872
------------ ------------
------------ ------------
Units Outstanding: 231,904.126 314,102.807
Net Asset Value per Unit
Northern Advantage Variable Annuity $12.820118 $12.311895
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
SEPARATE ACCOUNT ONE
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
December 31, 1996
(In Thousands, Except Share and Unit Data)
<TABLE>
<CAPTION>
ALGER AMERICAN ALGER AMERICAN ALGER AMERICAN ALGER AMERICAN
ASSETS: SMALL CAPITALIZATION GROWTH MIDCAP GROWTH LEVERAGED
- ------- PORTFOLIO PORTFOLIO PORTFOLIO ALLCAP PORTFOLIO TOTAL
Investments in mutual funds at market value: -------------------- -------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
NORTHSTAR'S:
Income and Growth Fund
61,948 shares (cost $733) $726
Multi-Sector Bond Fund
115,051 shares (cost $606) 604
Growth Fund
277,320 shares (cost $3,835) 3,905
FIDELITY'S VIPF AND VIPF II:
Money Market Portfolio
1,099,035 shares (cost $1,099) 1,099
Growth Portfolio
75,095 shares (cost $2,255) 2,338
Equity-Income Portfolio
212,728 shares (cost $4,227) 4,474
Overseas Portfolio
65,366 shares ($1,170) 1,232
Asset Manager Portfolio
44,853 shares (cost $713) 759
Asset Manager: Growth Portfolio
54,702 shares (cost $697) 717
Index 500 Portfolio
33,393 shares ($2,760) 2,976
Contrafund Portfolio
233,794 shares (cost $3,573) 3,872
ALGER AMERICAN FUND:
Small Capitalization Portfolio
64,686 shares (cost $2,649) $2,646 2,646
Growth Portfolio
53,112 shares (cost $1,732) $1,823 1,823
MidCap Growth Portfolio
116,201 shares (cost $2,409) $2,481 2,481
Leveraged AllCap Portfolio
76,447 shares (cost $1,442) $1,480 1,480
----------- ----------- ----------- ----------- -------------
Total Assets $2,646 $1,823 $2,481 $1,480 $31,132
----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- -------------
LIABILITIES AND CONTRACT OWNERS' EQUITY:
- ----------------------------------------
Due to Northern Life Insurance Co. for contract
charges $3 $2 $3 $2 $34
Contract Owners' Equity 2,643 1,821 2,478 1,478 31,098
----------- ----------- ----------- ----------- -------------
Total Liabilities and Contract Owners' Equity $2,646 $1,823 $2,481 $1,480 $31,132
----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- -------------
Units Outstanding: 261,902.389 162,852.097 227,029.231 130,393.355 2,675,715.216
Net Asset Value per Unit
Northern Advantage Variable Annuity $10.092908 $11.184155 $10.915641 $11.338130
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
SEPARATE ACCOUNT ONE
STATEMENT OF OPERATIONS AND
CHANGES IN CONTRACT OWNERS' EQUITY
(In Thousands)
Year ended Period from
December 31, Oct. 20, 1995 to
1996 Dec. 31, 1995
------------ ----------------
Net investment income:
Reinvested dividend income. . . . . . . . . $67 $1
Reinvested capital gains. . . . . . . . . . 122 4
Administrative expenses . . . . . . . . . . (146) -
----------- -----------
Net investment income
and capital gains. . . . . . . . . . 43 5
----------- -----------
Realized and unrealized gains:
Net realized gains on
redemptions of fund shares . . . . . . . 70 -
Increase in unrealized
appreciation of investments. . . . . . . 1,220 12
----------- -----------
Net realized and unrealized gains. . . . 1,290 12
----------- -----------
Net additions from operations. . . . . 1,333 17
----------- -----------
Contract Owners' transactions:
Net purchase payments . . . . . . . . . . . 27,327 550
Surrenders. . . . . . . . . . . . . . . . . (94) -
Policy loans. . . . . . . . . . . . . . . . (87) -
Transfers between Sub-Accounts
and Fixed Account. . . . . . . . . . . . 2,053 -
----------- -----------
Net additions for Contract
Owners' transactions . . . . . . . . 29,199 550
----------- -----------
Net additions for the year . . . 30,532 567
Contract Owners' Equity, beginning of the year 566 -
----------- -----------
Contract Owners' Equity, end of the year . . . $31,098 $567
----------- -----------
----------- -----------
The accompanying notes are an integral part of the financial statements.
<PAGE>
SEPARATE ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND CONTRACTS:
Separate Account One (the "Account") is a separate account of Northern Life
Insurance Company ("Northern Life"), an indirect, wholly-owned subsidiary of
ReliaStar Financial Corp. (formerly the NWNL Companies, Inc.). The Account
commenced operations on October 20, 1995 and is registered as a unit
investment trust under the Investment Company Act of 1940.
Payments received under the contracts are allocated to Sub-Accounts of the
Account, each of which is invested in one of the Funds listed below during
the period.
<TABLE>
<CAPTION>
Alger American Fund Fidelity's VIPF and VIPF II Northstar Funds
------------------- --------------------------- ---------------
<S> <C> <C>
Small Capitalization Portfolio Money Market Portfolio Income and Growth Fund
Growth Portfolio Equity-Income Portfolio Growth Fund
MidCap Growth Portfolio Growth Portfolio Multi-Sector Bond Fund
Leveraged AllCap Portfolio Overseas Portfolio
Asset Manager Portfolio
Asset Manager: Growth Portfolio
Index 500 Portfolio
Contrafund Portfolio
</TABLE>
Fred Alger Management, Inc. is the investment adviser for the four 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 advisor for Fidelity's Variable Insurance Products Fund (VIPF)
and Variable Insurance Products Fund II (VIPF II) and is paid for its
services by the VIPF and VIPF II Portfolios. Northstar Investment
Management Corporation, an affiliate of Northern Life, is the investment
adviser for the three Northstar Funds and is paid for its services by the
Northstar Funds.
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 period.
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.
VARIABLE ANNUITY RESERVES:
The amount of the reserves for contracts in the distribution period is
determined by actuarial assumptions which meet statutory requirements.
Gains or losses resulting from actual mortality experience, the full
responsibility for which is assumed by Northern Life, are offset by
transfers to, or from Northern Life.
2. 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 Northern Life.
3. CONTRACT CHARGES:
No deduction is made for a sales charge from the purchase payments made for
the contracts. However, on certain surrenders, Northern Life will deduct
from the contract value a surrender charge as set forth in the contract.
Certain charges are made by Northern Life to Contract Owners' Variable
Account Contract Value in accordance with the terms of the Contracts. These
charges may include: an annual contract charge of $30 from each contract on
the anniversary date or at the time of surrender, if surrender is at a time
other than the anniversary date; a daily administrative charge; and a daily
charge for mortality and expense risk assumed by Northern Life.
Various states and other governmental units levy a premium tax on annuity
contracts issued by insurance companies. If the owner of a contract lives
in a state which levies such a tax, Northern Life may deduct the amount of
the tax from the purchase payments received or the Contract Value
immediately before it is applied to an Annuity Payout.
<PAGE>
SEPARATE ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. INVESTMENTS:
The net realized gains on redemptions of fund shares for the year ended
December 31, 1996, and the period from October 20, 1995 (date operations
commenced) to December 31, 1995, were as follows (in thousands):
<TABLE>
<CAPTION>
NORTHSTAR'S NORTHSTAR'S
INCOME AND MULTI-SECTOR
TOTAL GROWTH FUND BOND FUND
--------------------------- --------------------------- ---------------------------
Year ended Period from Year ended Period from Year ended Period from
Dec. 31, Oct. 20, 1995 Dec. 31, Oct. 20, 1995 Dec. 31, Oct. 20, 1995
1996 to Dec. 31, 1995 1996 to Dec. 31, 1995 1996 to Dec. 31, 1995
---------- ---------------- ---------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Proceeds from redemptions. . . $1,998 $- $52 $- $95 $-
Cost . . . . . . . . . . . . . 1,928 - 49 - 93 -
---------- ---------------- ---------- ---------------- ---------- ----------------
Net realized gains on
redemptions of fund shares . $70 $- $3 $- $2 $-
---------- ---------------- ---------- ---------------- ---------- ----------------
---------- ---------------- ---------- ---------------- ---------- ----------------
<CAPTION>
FIDELITY'S VIPF FIDELITY'S VIPF FIDELITY'S VIPF II
EQUITY-INCOME OVERSEAS ASSET MANAGER
PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------- --------------------------- ---------------------------
Year ended Period from Year ended Period from Year ended Period from
Dec. 31, Oct. 20, 1995 Dec. 31, Oct. 20, 1995 Dec. 31, Oct. 20, 1995
1996 to Dec. 31, 1995 1996 to Dec. 31, 1995 1996 to Dec. 31, 1995
---------- ---------------- ---------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Proceeds from redemptions. . . $149 $- $62 $- $109 $-
Cost . . . . . . . . . . . . . 145 - 60 - 105 -
---------- ---------------- ---------- ---------------- ---------- ----------------
Net realized gains on
redemptions of fund shares . $4 $- $2 $- $4 $-
---------- ---------------- ---------- ---------------- ---------- ----------------
---------- ---------------- ---------- ---------------- ---------- ----------------
<CAPTION>
ALGER AMERICAN ALGER AMERICAN ALGER AMERICAN
SMALL CAPITALIZATION GROWTH MIDCAP GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------- --------------------------- ---------------------------
Year ended Period from Year ended Period from Year ended Period from
Dec. 31, Oct. 20, 1995 Dec. 31, Oct. 20, 1995 Dec. 31, Oct. 20, 1995
1996 to Dec. 31, 1995 1996 to Dec. 31, 1995 1996 to Dec. 31, 1995
---------- ---------------- ---------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Proceeds from redemptions. . . $308 $- $248 $- $51 $-
Cost . . . . . . . . . . . . . 297 - 240 - 48 -
---------- ---------------- ---------- ---------------- ---------- ----------------
Net realized gains on
redemptions of fund shares . $11 $- $8 $- $3 $-
---------- ---------------- ---------- ---------------- ---------- ----------------
---------- ---------------- ---------- ---------------- ---------- ----------------
</TABLE>
<PAGE>
SEPARATE ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
NORTHSTAR'S FIDELITY'S VIPF FIDELITY'S VIPF
GROWTH MONEY MARKET GROWTH
FUND PORTFOLIO PORTFOLIO
--------------------------- --------------------------- ---------------------------
Year ended Period from Year ended Period from Year ended Period from
Dec. 31, Oct. 20, 1995 Dec. 31, Oct. 20, 1995 Dec. 31, Oct. 20, 1995
1996 to Dec. 31, 1995 1996 to Dec. 31, 1995 1996 to Dec. 31, 1995
---------- ---------------- ---------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Proceeds from redemptions. . . $283 $- $206 $- $90 $-
Cost . . . . . . . . . . . . . 272 - 206 - 88 -
---------- ---------------- ---------- ---------------- ---------- ----------------
Net realized gains on
redemptions of fund shares . $11 $- $- $- $2 $-
---------- ---------------- ---------- ---------------- ---------- ----------------
---------- ---------------- ---------- ---------------- ---------- ----------------
<CAPTION>
FIDELITY'S VIPF II FIDELITY'S VIPF II FIDELITY'S VIPF II
ASSET MANAGER: INDEX 500 CONTRAFUND
GROWTH PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------- --------------------------- ---------------------------
Year ended Period from Year ended Period from Year ended Period from
Dec. 31, Oct. 20, 1995 Dec. 31, Oct. 20, 1995 Dec. 31, Oct. 20, 1995
1996 to Dec. 31, 1995 1996 to Dec. 31, 1995 1996 to Dec. 31, 1995
---------- ---------------- ---------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Proceeds from redemptions. . . $30 $- $138 $- $110 $-
Cost . . . . . . . . . . . . . 27 - 134 - 100 -
---------- ---------------- ---------- ---------------- ---------- ----------------
Net realized gains on
redemptions of fund shares . $3 $- $4 $- $10 $-
---------- ---------------- ---------- ---------------- ---------- ----------------
---------- ---------------- ---------- ---------------- ---------- ----------------
<CAPTION>
ALGER AMERICAN
LEVERAGED ALLCAP
PORTFOLIO
---------------------------
Year ended Period from
Dec. 31, Oct. 20, 1995
1996 to Dec. 31, 1995
---------- ----------------
<S> <C> <C>
Proceeds from redemptions. . . $67 $-
Cost . . . . . . . . . . . . . 64 -
---------- ----------------
Net realized gains on
redemptions of fund shares . $3 $-
---------- ----------------
---------- ----------------
</TABLE>
<PAGE>
SEPARATE ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. CONTRACT OWNERS' TRANSACTIONS:
Unit transactions in each Sub-Account for the year ended December 31, 1996
and the period from October 20, 1995 (date operations commenced) to
December 31, 1995, were as follows:
<TABLE>
<CAPTION>
NORTHSTAR'S NORTHSTAR'S
INCOME AND MULTI-SECTOR
TOTAL GROWTH FUND BOND FUND
------------------------------- ----------------------------- -----------------------------
Year ended Period from Year ended Period from Year ended Period from
Dec. 31, Oct. 20, 1995 Dec. 31, Oct. 20, 1995 Dec. 31, Oct. 20, 1995,
1996 to Dec. 31, 1995 1996 to Dec. 31, 1995 1996 to Dec. 31, 1995
------------- ---------------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding,
beginning of the year. . . . 55,709.004 - 2,292.052 - 1,937.476 -
Units purchased. . . . . . . . 2,494,947.871 55,795.772 47,182.364 2,304.328 53,616,245 1,949.911
Units redeemed . . . . . . . . (12,394.481) (86.768) - (12.276) (26.734) (12.435)
Units transferred between
Sub-Accounts and/or
Fixed Account. . . . . . . . 137,452.822 - 12,762.917 - (2,734.806) -
------------- ---------------- ----------- ---------------- ----------- ----------------
Units outstanding, end of the
year . . . . . . . . . . . . 2,675,715.216 55,709.004 62,237.333 2,292.052 52,792.181 1,937.476
------------- ---------------- ----------- ---------------- ----------- ----------------
------------- ---------------- ----------- ---------------- ----------- ----------------
<CAPTION>
FIDELITY'S VIPF FIDELITY'S VIPF FIDELITY'S VIPF II
EQUITY INCOME PORTFOLIO OVERSEAS PORTFOLIO ASSET MANAGER PORTFOLIO
------------------------------- ----------------------------- -----------------------------
Year ended Period from Year ended Period from Year ended Period from
Dec. 31, Oct. 20, 1995 Dec. 31, Oct. 20, 1995 Dec. 31, Oct. 20, 1995,
1996 to Dec. 31, 1995 1996 to Dec. 31, 1995 1996 to Dec. 31, 1995
------------- ---------------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding,
beginning of the year. . . . 3,922.397 - 1,765.385 - 1,959.639 -
Units purchased. . . . . . . . 310,038.397 3,934.538 108,755.881 1,767.901 59,932.805 1,972.128
Units redeemed . . . . . . . . (727.820) (12.141) (106.480) (2.516) (87.797) (12.489)
Units transferred between
Sub-Accounts and/or
Fixed Account. . . . . . . . 56,803.368 - (3,574.320) - 2,378.137 -
------------- ---------------- ----------- ---------------- ----------- ----------------
Units outstanding, end of the
year . . . . . . . . . . . . 370,036.342 3,922.397 106,840.466 1,765.385 64,182.784 1,959.639
------------- ---------------- ----------- ---------------- ----------- ----------------
------------- ---------------- ----------- ---------------- ----------- ----------------
<CAPTION>
ALGER AMERICAN SMALL ALGER AMERICAN ALGER AMERICAN
CAPITALIZATION PORTFOLIO GROWTH PORTFOLIO MIDCAP GROWTH PORTFOLIO
------------------------------- ----------------------------- -----------------------------
Year ended Period from Year ended Period from Year ended Period from
Dec. 31, Oct. 20, 1995 Dec. 31, Oct. 20, 1995 Dec. 31, Oct. 20, 1995,
1996 to Dec. 31, 1995 1996 to Dec. 31, 1995 1996 to Dec. 31, 1995
------------- ---------------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding,
beginning of the year. . . . 9,498.434 - 7,530.562 - 2,208.390 -
Units purchased. . . . . . . . 261,796.643 9,504.716 165,135.641 7,350.562 194,904.338 2,212.160
Units redeemed . . . . . . . . (1,831.359) (6.282) (1,018.026) - (622.342) (3.770)
Units transferred between
Sub-Accounts and/or
Fixed Account. . . . . . . . (7,561.329) - (8,796.080) - (30,538.845) -
------------- ---------------- ----------- ---------------- ----------- ----------------
Units outstanding, end of the
year . . . . . . . . . . . . 261,902.389 9,498.434 162,852.097 7,530.562 227,029.231 2,208.390
------------- ---------------- ----------- ---------------- ----------- ----------------
------------- ---------------- ----------- ---------------- ----------- ----------------
</TABLE>
<PAGE>
SEPARATE ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
NORTHSTAR'S FIDELITY'S VIPF FIDELITY'S VIPF
GROWTH FUND MONEY MARKET PORTFOLIO GROWTH PORTFOLIO
------------------------------- ----------------------------- -----------------------------
Year ended Period from Year ended Period from Year ended Period from
Dec. 31, Oct. 20, 1995 Dec. 31, Oct. 20, 1995 Dec. 31, Oct. 20, 1995
1996 to Dec. 31, 1995 1996 to Dec. 31, 1995 1996 to Dec. 31, 1995
------------- ---------------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding,
beginning of the year. . . . 1,068.330 - - - 5,111.723 -
Units purchased. . . . . . . . 311,051.414 1,072.056 119,347.280 - 189,045.320 5,111.723
Units redeemed . . . . . . . . (1,754.714) (3.726) (2,153.819) - (1,648.307) -
Units transferred between
Sub-Accounts and/or
Fixed Account. . . . . . . . 7,772.782 - (12,348.998) - 17,749.756 -
------------- ---------------- ----------- ---------------- ----------- ----------------
Units outstanding, end of the
year . . . . . . . . . . . . 318,137.812 1,068.330 104,844.463 - 210,258.492 5,111.723
------------- ---------------- ----------- ---------------- ----------- ----------------
------------- ---------------- ----------- ---------------- ----------- ----------------
<CAPTION>
FIDELITY'S VIPF II FIDELITY'S VIPF II FIDELITY'S VIPF II
ASSET MANAGER: INDEX 500 CONTRAFUND
GROWTH PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------- ----------------------------- -----------------------------
Year ended Period from Year ended Period from Year ended Period from
Dec. 31, Oct. 20, 1995 Dec. 31, Oct. 20, 1995 Dec. 31, Oct. 20, 1995
1996 to Dec. 31, 1995 1996 to Dec. 31, 1995 1996 to Dec. 31, 1995
------------- ---------------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding,
beginning of the year. . . . 6,432.006 - 702.335 - 7,416.671 -
Units purchased. . . . . . . . 52,849.666 6,444.530 222,299.511 707.189 271,007.709 7,416.671
Units redeemed . . . . . . . . - (12.524) (257.679) (4.854) (851.926) -
Units transferred between
Sub-Accounts and/or
Fixed Account. . . . . . . . (1,080.334) - 9,159.959 - 36,530.353 -
------------- ---------------- ----------- ---------------- ----------- ----------------
Units outstanding, end of the
year . . . . . . . . . . . . 58,201.338 6,432.006 231,904.126 702.335 314,102.807 7,416.671
------------- ---------------- ----------- ---------------- ----------- ----------------
------------- ---------------- ----------- ---------------- ----------- ----------------
<CAPTION>
ALGER AMERICAN
LEVERAGED ALLCAP PORTFOLIO
------------------------------
Year ended Period from
Dec. 31, Oct. 20, 1995
1996 to Dec. 31, 1995
------------- ----------------
<S> <C> <C>
Units outstanding,
beginning of the year. . . . 3,863.604 -
Units purchased. . . . . . . . 127,984.657 3,867.359
Units redeemed . . . . . . . . (1,307.478) (3.755)
Units transferred between
Sub-Accounts and/or
Fixed Account. . . . . . . . (147.428) -
------------- ----------------
Units outstanding, end of the
year . . . . . . . . . . . . 130,393.355 3,863.604
------------- ----------------
------------- ----------------
</TABLE>
<PAGE>
SEPARATE ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. COMBINING STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY:
Operations and changes in Contract Owners' equity for the year ended
December 31, 1996 were as follows (in thousands):
<TABLE>
<CAPTION>
NORTHSTAR'S NORTHSTAR'S NORTHSTAR'S FIDELITY'S VIPF
INCOME AND MULTI-SECTOR GROWTH MONEY MARKET
TOTAL GROWTH FUND BOND FUND FUND PORTFOLIO
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net investment income:
Reinvested dividend income. . . $ 67 $ 15 $ 14 $ 7 $ 15
Reinvested capital gains. . . . 122 46 10 11 -
Administrative expenses . . . . (146) (4) (3) (17) (4)
------- ------- ------- ------- -------
Net investment income (loss)
and capital gains. . . . . . 43 57 21 1 11
------- ------- ------- ------- -------
Realized and unrealized gains:
Net realized gains on
redemptions of fund shares . . 70 3 2 11 -
Increase (decrease) in unrealized
appreciation of investments. . 1,220 (7) (2) 70 -
------- ------- ------- ------- -------
Net realized and unrealized
gains (losses). . . . . . . . 1,290 (4) - 81 -
------- ------- ------- ------- -------
Net additions
from operations . . . . . . 1,333 53 21 82 11
------- ------- ------- ------- -------
Contract Owners' transactions:
Net purchase payments . . . . . 27,327 507 593 3,699 1,181
Surrenders. . . . . . . . . . . (94) (1) (1) (9) -
Policy Loans. . . . . . . . . . (87) - - (16) (22)
Transfers between Sub-Accounts
and/or Fixed Account . . . . . 2,053 142 (30) 134 (72)
------- ------- ------- ------- -------
Net additions for
Contract Owners' transactions 29,199 648 562 3,808 1,087
------- ------- ------- ------- -------
Net additions
for the year. . . . . . . . 30,532 701 583 3,890 1,098
Contract Owners' Equity,
beginning of the year . . . . . 566 24 20 11 -
------- ------- ------- ------- -------
Contract Owners' Equity,
end of the year . . . . . . . . $31,098 $725 $603 $3,901 $1,098
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
<PAGE>
SEPARATE ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
FIDELITY'S
FIDELITY'S VIPF II FIDELITY'S
FIDELITY'S FIDELITY'S FIDELITY'S VIPF II ASSET VIPF II FIDELITY'S
VIPF VIPF VIPF ASSET MANAGER: INDEX VIPF II
GROWTH EQUITY-INCOME OVERSEAS MANAGER GROWTH 500 CONTRAFUND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net investment income:
Reinvested dividend income. . . . $1 $- $1 $2 $11 $1 $-
Reinvested capital gains. . . . . 5 3 1 2 21 2 1
Administrative expenses . . . . . (11) (19) (6) (5) (4) (13) (17)
-------- -------- -------- ------ ------ -------- --------
Net investment income (loss)
and capital gains. . . . . . . (5) (16) (4) (1) 28 (10) (16)
-------- -------- -------- ------ ------ -------- --------
Realized and unrealized gains:
Net realized gains on
redemptions of fund shares . . . 2 4 2 4 3 4 10
Increase (decrease) in unrealized
appreciation of investments. . . 83 246 62 45 21 216 298
-------- -------- -------- ------ ------ -------- --------
Net realized and unrealized
gains (losses). . . . . . . . . 85 250 64 49 24 220 308
-------- -------- -------- ------ ------- -------- --------
Net additions
from operations . . . . . . . 80 234 60 48 52 210 292
-------- -------- -------- ------ ------ -------- --------
Contract Owners' transactions:
Net purchase payments . . . . . . 1,996 3,514 1,162 662 584 2,607 3,027
Surrenders. . . . . . . . . . . . (7) (12) (4) (2) (2) (7) (12)
Policy Loans. . . . . . . . . . . (14) (2) (1) - - (1) (2)
Transfers between Sub-Accounts
and/or Fixed Account . . . . . . 231 693 (4) 29 15 157 486
-------- -------- -------- ------ ------ -------- --------
Net additions for
Contract Owners' transactions . 2,206 4,193 1,153 689 597 2,756 3,499
-------- -------- -------- ------ ------ -------- --------
Net additions
for the year. . . . . . . . . 2,286 4,427 1,213 737 649 2,966 3,791
Contract Owners' Equity,
beginning of the year . . . . . . 50 42 18 21 67 7 77
-------- -------- -------- ------ ------ -------- --------
Contract Owners' Equity,
end of the year . . . . . . . . . $2,336 $4,469 $1,231 $758 $716 $2,973 $3,868
-------- -------- -------- ------ ------ -------- --------
-------- -------- -------- ------ ------ -------- --------
</TABLE>
<PAGE>
SEPARATE ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. COMBINING STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
(CONTINUED):
Operations and changes in Contract Owners' equity for the year ended December
31, 1996 were as follows (in thousands):
<TABLE>
<CAPTION>
ALGER AMERICAN ALGER AMERICAN ALGER AMERICAN ALGER AMERICAN
SMALL CAPITALIZATION GROWTH MIDCAP LEVERAGED ALLCAP
PORTFOLIO PORTFOLIO GROWTH PORTFOLIO PORTFOLIO
-------------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net investment income:
Reinvested dividend income . . . . . . . $- $- $- $-
Reinvested capital gains . . . . . . . . 2 11 5 2
Administrative expenses. . . . . . . . . (15) (11) (10) (7)
-------- -------- -------- --------
Net investment income
and capital gains. . . . . . . . . . . (13) - (5) (5)
-------- -------- -------- --------
Realized and unrealized gains:
Net realized gains on
redemptions of fund shares . . . . . . 11 8 3 3
Increase (decrease) in unrealized
appreciation of investments. . . . . . (7) 88 71 36
-------- -------- -------- --------
Net realized and unrealized
gains. . . . . . . . . . . . . . . . 4 96 74 39
-------- -------- -------- --------
Net additions (reductions)
from operations. . . . . . . . . . (9) 96 69 34
-------- -------- -------- --------
Contract Owners' transactions:
Net purchase payments. . . . . . . . . . 2,623 1,738 2,034 1,400
Surrenders . . . . . . . . . . . . . . . (13) (5) (8) (11)
Policy Loans . . . . . . . . . . . . . . (9) (10) (3) (7)
Transfers between Sub-Accounts
and/or Fixed Account. . . . . . . . . . (42) (73) 364 23
-------- -------- -------- --------
Net additions for
Contract Owners' transactions. . . . . 2,559 1,650 2,387 1,405
-------- -------- -------- --------
Net additions
for the year . . . . . . . . . . . 2,550 1,746 2,456 1,439
Contract Owners' Equity,
beginning of the year. . . . . . . . . . 93 75 22 39
-------- -------- -------- --------
Contract Owners' Equity,
end of the year. . . . . . . . . . . . . $2,643 $1,821 $2,478 $1,478
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
<PAGE>
[LETTERHEAD]
[LOGO]
INDEPENDENT AUDITORS' REPORT
Board of Directors
Northern Life Insurance Company
Seattle, Washington
We have audited the accompanying statutory-basis statements of assets,
liabilities, surplus and other funds of Northern Life Insurance Company (a
wholly owned subsidiary of ReliaStar Life Insurance Company) (the Company) as of
December 31, 1996 and 1995, and the related statutory-basis statements of
operations, changes in capital and surplus, and cash flows for the years then
ended. 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 audits 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.
As described more fully in Note 1 to the financial statements, the Company
prepared these financial statements using accounting practices prescribed or
permitted by the Insurance Department of the State of Washington, which
practices differ from generally accepted accounting principles. The effects on
the financial statements of the variances between the statutory basis of
accounting and generally accepted accounting principles are described in
Note 11.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the financial statements do not present fairly, in accordance with
generally accepted accounting principles, the financial position of the Company
as of December 31, 1996 and 1995, or the results of its operations or its cash
flows for the years then ended.
In our opinion, such statutory-basis financial statements present fairly, in all
material respects, the assets, liabilities, and surplus and other funds of the
Company as of December 31, 1996 and 1995, and the results of its operations and
its cash flows for the years then ended, on the basis of accounting described in
Note 1.
/s/ Deloitte & Touche LLP
February 9, 1997
[LOGO]
<PAGE>
NORTHERN LIFE INSURANCE COMPANY
(A Wholly Owned Subsidiary of ReliaStar Life Insurance Company)
Statutory-Basis Statements of Assets, Liabilities, Surplus and Other Funds
(In Thousands)
<TABLE>
<CAPTION>
December 31,
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Bonds, at NAIC Value (Market: 1996, $4,066,788; 1995, $3,814,979) $ 3,979,814 $ 3,627,971
Stocks, at NAIC Value (Cost: 1996, $12,563; 1995, $18,390) 13,161 16,489
Mortgage Loans on Real Estate - Commercial 529,432 461,345
Mortgage Loans on Real Estate - Residential 230,678 212,083
Real Estate 2,046 4,483
Policy Loans 289,844 250,717
Cash on Hand and on Deposit 11,579 8,354
Short-Term Investments 31,495 23,924
Aggregate Write-ins for Invested Assets 105 (7,062)
Other Invested Assets 37,748 25,177
TOTAL CASH AND INVESTMENTS 5,125,902 4,623,481
Reinsurance Recoverable 1,252 361
Premiums and Annuity Considerations Deferred
and Uncollected 6,448 5,735
Investment Income Due and Accrued 66,930 65,535
Other Assets 7,333 6,494
From Separate Account Statement 37,864 6,825
------------ ------------
TOTAL ASSETS $ 5,245,729 $ 4,708,431
------------ ------------
------------ ------------
LIABILITIES, SURPLUS AND OTHER FUNDS
Aggregate Reserves for Policies and Contracts $ 4,807,270 $ 4,364,176
Policy and Contract Claims 3,463 2,205
Policyholders' Dividends 10,709 10,559
Unearned Premiums 48 37
Liability for Premiums and Other Deposit Funds 1,169 1,143
Other Policy and Contract Liabilities 6,991 6,949
General Expenses Due or Accrued 4,550 5,141
Taxes, Licenses, and Fees Due or Accrued, Excluding
Federal Income Taxes 1,057 608
Federal Income Tax Due or Accrued 409 (2,740)
Unearned Investment Income 1,637 1,643
Asset Valuation Reserve 58,077 44,201
Other Liabilities 36,570 16,773
From Separate Account Statement 37,864 6,825
------------ ------------
TOTAL LIABILITIES 4,969,814 4,457,520
------------ ------------
SURPLUS AND OTHER FUNDS
Common Capital Stock 1,500 1,500
Gross Paid-In and Contributed Surplus 126,500 126,500
Unassigned Surplus 147,915 122,911
------------ ------------
TOTAL SURPLUS AND OTHER FUNDS 275,915 250,911
------------ ------------
TOTAL LIABILITIES, SURPLUS AND OTHER FUNDS $ 5,245,729 $ 4,708,431
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
<PAGE>
NORTHERN LIFE INSURANCE COMPANY
(A Wholly Owned Subsidiary of ReliaStar Life Insurance Company)
Statutory-Basis Statements of Operations
(In Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------
1996 1995
--------- ---------
<S> <C> <C>
REVENUES
Premiums and Annuity Considerations $ 74,224 $ 58,714
Deposit-Type Funds 597,217 575,080
Considerations for Supplementary Contracts 3,457 431
Net Investment Income 382,086 338,534
Amortization of Interest Maintenance Reserve 1,702 1,504
Other Income 1,405 1,456
--------- ---------
TOTAL REVENUES 1,060,091 975,719
--------- ---------
BENEFITS AND EXPENSES
Death Benefits 12,129 10,836
Matured Endowments 266 305
Annuity Benefits 29,788 23,456
Disability Benefits 154 195
Surrender Benefits and Other Fund Withdrawals 376,166 246,336
Interest on Policy or Contract Funds 270 112
Payments on Supplementary Contracts 2,970 1,197
Increase in Reserve For Policies and Contracts 442,007 551,379
Increase (Decrease) in Liability for Premium and Other Deposit Funds 1 (6,595)
Increase (Decrease) in Reserve for Supplementary Contracts 1,260 (41)
--------- ---------
TOTAL BENEFITS 865,011 827,180
Commissions 65,961 50,595
General Insurance Expenses 43,536 39,501
Insurance Taxes, Licenses and Fees, Excluding Federal Income Taxes 4,441 4,712
Net Transfers to Separate Accounts 29,052 549
--------- ---------
TOTAL BENEFITS AND EXPENSES 1,008,001 922,537
--------- ---------
Net Gain from Operations before Dividends to Policyholders
and Federal Income Taxes 52,090 53,182
Dividends to Policyholders 565 584
--------- ---------
Net Gain from Operations before Federal Income Taxes 51,525 52,598
Federal Income Taxes (Excluding Tax on Capital Gains) 17,631 16,462
--------- ---------
Net Gains from Operations before Realized Capital Gains 33,894 36,136
Net Realized Capital Gains (Net of Tax: 1996, 3,618;
1995, $1,741), (Net of IMR Transfers: 1996, 2,358; 1995, $965) 1,549 1,107
--------- ---------
NET INCOME $ 35,443 $ 37,243
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
<PAGE>
NORTHERN LIFE INSURANCE COMPANY
(A Wholly Owned Subsidiary of ReliaStar Life Insurance Company)
Statutory-Basis Statements of Changes in Capital and Surplus
(In Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
CAPITAL AND SURPLUS, BEGINNING OF YEAR $ 250,911 $ 226,612
Net Income 35,443 37,243
Change in Net Unrealized Capital Gains or (Losses) 3,050 (1,643)
Change in Non-Admitted Assets and Related Items 387 (2,415)
Increase in Asset Valuation Reserve (13,876) (8,886)
---------- ----------
CAPITAL AND SURPLUS, END OF YEAR $ 275,915 $ 250,911
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
<PAGE>
NORTHERN LIFE INSURANCE COMPANY
(A Wholly Owned Subsidiary of ReliaStar Life Insurance Company)
Statutory-Basis Statements of Cash Flows
(In Thousands)
<TABLE>
<CAPTION>
December 31,
------------------------
1996 1995
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Premiums and Annuity Considerations $ 73,403 $ 59,657
Deposit-Type Funds 597,257 575,040
Other Premiums, Considerations and Deposits 3,457 431
Allowances and Reserve Adjustments Received on Reinsurance Ceded 205 205
Investment Income Received 384,470 333,856
Other Income Received 1,182 1,251
Life and Accident and Health Claims Paid (12,177) (11,768)
Surrender Benefits and Other Fund Withdrawals Paid (376,459) (246,048)
Other Benefits to Policyholders Paid (33,009) (24,726)
Commissions, Other Expenses and Taxes Paid (109,428) (93,507)
Net Transfers to Separate Accounts (29,089) (547)
Dividends to Policyholders Paid (589) (614)
Federal Income Taxes Paid (18,100) (20,641)
Net Increase in Policy Loans and Premium Notes (39,127) (48,690)
Other Operating Expenses Paid (73) (159)
--------- ---------
Net Cash from Operations 441,923 523,740
--------- ---------
PROCEEDS FROM INVESTMENTS SOLD, MATURED OR REPAID
Bonds 519,514 348,706
Stocks 9,575 16,075
Mortgage Loans 158,378 97,813
Real Estate 6,167 10,032
Other Invested Assets 9,266 12,445
--------- ---------
Total Investment Proceeds 702,900 485,071
--------- ---------
OTHER CASH PROVIDED
Other Sources 15,872 13,557
--------- ---------
Total Other Cash Provided 15,872 13,557
--------- ---------
COST OF INVESTMENTS ACQUIRED
Bonds 872,594 696,550
Stocks 3,217 7,986
Mortgage Loans 249,260 274,027
Other Invested Assets 16,336 6,909
--------- ---------
Total Investments Acquired 1,141,407 985,472
--------- ---------
OTHER CASH APPLIED
Other Applications (Net) 8,492 8,687
--------- ---------
Total Other Cash Applied 8,492 8,687
--------- ---------
Net Change in Cash and Short-Term Investments 10,796 28,209
Cash and Short-Term Investments at Beginning of Year 32,278 4,069
--------- ---------
Cash and Short-Term Investments at End of Year $ 43,074 $ 32,278
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
<PAGE>
NORTHERN LIFE INSURANCE COMPANY
(A Wholly Owned Subsidiary of ReliaStar Life Insurance Company)
Notes to Statutory-Basis Financial Statements
Years Ended December 31, 1996 and 1995
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
NATURE OF OPERATIONS
The Company is principally engaged in the business of providing annuities and
life insurance. The Company operates primarily in the United States and is
authorized to do business in all states except New York.
BASIS OF PRESENTATION
The amounts in these financial statements pertain to the entire Company
business including, as appropriate, its Separate Accounts business.
All outstanding shares of the Company are owned by ReliaStar Life Insurance
Company, a Minnesota domiciled insurance company. ReliaStar Life Insurance
Company is in turn a wholly owned subsidiary of ReliaStar Financial Corp.
(ReliaStar) a holding and management company domiciled in Delaware.
The accompanying financial statements of Northern Life Insurance Company (the
Company) have been prepared in conformity with accounting practices prescribed
or permitted by the National Association of Insurance Commissioners (NAIC) and
the State of Washington. Such statutory insurance accounting practices differ
in certain respects from generally accepted accounting principles. The most
significant differences are:
Commissions and other acquisition costs relating to the issuance of new
policies are charged to expense as incurred except to the extent allowed
for in the calculation of the provision for policy benefit reserves.
Reserves for future policy benefits are based on statutory mortality,
morbidity, and interest requirements without consideration of withdrawals,
rather than on estimates reflecting historical experience.
Statutory accounting requires the calculation of an Asset Valuation Reserve
(AVR). The AVR is reported as a liability and changes in this liability
are recorded directly in surplus. Statutory accounting also requires the
calculation of an Interest Maintenance Reserve (IMR). Capital gains and
losses on sales of securities which are realized due to changes in interest
rates are deferred and recorded in the IMR on the statements of assets,
liabilities, surplus and other funds. The IMR is amortized into income
over the remaining maturity of the securities sold.
The provision for income taxes is based upon income that is estimated to be
currently taxable.
Certain assets, principally agents' balances and prepaid expenses, are
classified as nonadmitted and are excluded from the statement of assets,
liabilities, surplus and other funds. Changes in nonadmitted assets are
recorded directly in surplus.
Investments are carried at values established by the NAIC.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting practices
prescribed or permitted by the NAIC and the State of Washington 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.
<PAGE>
INVESTMENTS
Security investments are valued in accordance with the requirements of the NAIC,
as follows:
Bonds not backed by other loans are valued at amortized cost using the
interest method; loan-backed bonds and structured securities are valued at
amortized cost using the interest method including anticipated prepayments
at the date of purchase; significant changes in estimated cash flows from
the original purchase assumptions are accounted for using the interest
method. Prepayment assumptions for loan-backed bonds and structured
securities were obtained from broker-dealer survey values or internal
estimates. These assumptions are consistent with the current interest rate
and economic environment. The retrospective adjustment method is used to
value all securities.
Derivative instruments are valued in accordance with the NAIC Accounting
Practices and Procedures manual and the Purposes and Procedures manual of
the Securities Valuation Office. All derivative instruments are valued
consistently with the hedged items.
Preferred stocks in good standing are valued at cost, which approximates
market.
All other security investments are presented at values prescribed by or
deemed acceptable to the NAIC, generally market value.
Mortgage loans are valued at amortized cost. Real estate acquired in
satisfaction of debt is stated at the lower of appraised value of the asset
foreclosed or book value of the mortgage at the date of foreclosure.
The Company uses straight-line depreciation for all of its depreciable assets
with useful lives varying depending on the asset.
Policy loans are valued at the aggregate unpaid balance.
Short-term investments are carried at amortized cost which approximates market.
Realized investment gains and losses on sales of securities are included in the
determination of net income and are determined on the specific identification
method. Unrealized investment gains and losses are accounted for as direct
increases or decreases in unassigned surplus. Income tax effects of unrealized
gains and losses are not recognized.
Due and accrued income was excluded from investment income on mortgage loans and
bonds where interest is past due more than 90 days. The total amount excluded
was $1,138,000 and $1,411,000 for 1996 and 1995, respectively. The Company
recognizes investment income on derivative instruments in accordance with the
NAIC Accounting Practices and Procedures manual.
Other invested assets are carried on the cost or equity basis.
SEPARATE ACCOUNTS
The Company administers two separate accounts. The assets (principally
investments) and liabilities (principally to contract holders) of the accounts
are clearly identifiable and distinguishable from other assets and liabilities
of the Company. Assets are valued at market.
PREMIUM REVENUE AND BENEFITS TO POLICYHOLDERS
Premiums on life insurance contracts are generally recognized as revenue over
the life of the contract on the anniversary date. Contract benefits are
associated with premium revenue over the life of the contract by providing for
liabilities for future policy and contract benefits.
<PAGE>
POLICY ACQUISITION COSTS
Costs of acquiring new business are charged to operating expenses in the year
incurred.
AGGREGATE RESERVES FOR POLICIES AND CONTRACTS
Liabilities for future policy and contract benefits for life insurance are
computed by the net level premium and preliminary term and other modified
reserve methods on the basis of interest rates (primarily 2 1/4% to 5 1/2%) and
mortality assumptions (American Experience, 1941 CSO, 1958 CSO, and 1980 CSO
Tables) prescribed by state regulatory authorities. Annuity liabilities are
computed using interest rates (primarily 21/2% to 13 1/4%) and mortality
assumptions where needed (primarily 1971 IAM, 1971 GAM, 1983 IAM, and 1983 GAM
Tables) as prescribed by state regulatory authorities. Liabilities for waiver
of premium reserves were primarily based on the 1952 Disability Study (Period 2)
combined with 1958 CSO using 3% interest.
The Company waives deduction of deferred fractional premiums upon the death of
the insured. Surrender values are not promised in excess of the legally
computed reserves.
Extra premiums in addition to the basic gross premium are charged for
substandard lives. Mean reserves are determined by computing the regular mean
reserves and holding in addition the unearned portion of the extra premium
charge for the year.
As of December 31, 1996, the Company had insurance in force for which the gross
premiums were less than the net premium according to the standard valuation set
by the State of Washington as follows:
Insurance in Force $ 84,167,000
Related Reserves 1,103,000
<PAGE>
NOTE 2: INVESTMENTS
Investment income summarized by type
of investment was as follows Year Ended December 31,
------------------------
(in thousands): 1996 1995
--------- ---------
Bonds $ 293,214 $ 268,026
Preferred Stocks 400 516
Common Stocks 1,401 525
Mortgage Loans on Real Estate 59,619 49,124
Real Estate 1,009 1,429
Policy Loans 15,438 13,308
Short-Term Investments 3,065 2,283
Derivative Instruments 10,049 7,967
Other 5,338 3,148
--------- ---------
Gross Investment Income 389,533 346,326
Investment Expenses 7,447 7,792
--------- ---------
Net Investment Income $ 382,086 $ 338,534
--------- ---------
--------- ---------
Net realized capital gains (losses)
were as follows (in thousands): Year Ended December 31,
------------------------
1996 1995
--------- ---------
Bonds $ 2,033 $ 193
Preferred Stocks (409) 40
Common Stocks 940 3,918
Mortgage Loans on Real Estate (338) (676)
Real Estate (201) (903)
Other 5,500 1,241
--------- ---------
Pretax Realized Capital Gain 7,525 3,813
Income Tax Expense (3,618) (1,741)
Net Pretax Realized Capital Gains Transferred to
Interest Maintenance Reserve (IMR) (3,628) (1,485)
Income Tax Expense Transferred to IMR 1,270 520
--------- ---------
Realized Capital Loss (Net of Tax) $ 1,549 $ 1,107
--------- ---------
--------- ---------
Gross realized investment gains of $5,515,000 and $2,005,000 and gross realized
investment losses of $3,482,000 and $1,812,000 were recognized on sales of
investments in bonds during the years ended December 31, 1996 and 1995,
respectively. Gross realized investment gains of $1,597,000 and $4,723,000 and
gross realized investment losses of $657,000 and $805,000 were recognized on
sales of investments in common stocks during the years ended December 31, 1996
and 1995, respectively.
<PAGE>
The statement value and estimated market value of investments in long term bonds
by types of investment were as follows (in thousands):
<TABLE>
<CAPTION>
December 31, 1996
-------------------------------------------------------
Gross Unrealized
Statement ------------------------- Estimated
Value Gains (Losses) Market Value
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
United States Government and
Governmental Agencies and
Authorities $ 3,806 $ 167 $ (8) $ 3,965
States, Municipalities and
Political Subdivisions 26,924 1,150 (151) 27,923
Foreign Governments 35,125 1,752 0 36,877
Public Utilities 283,626 7,607 (2,202) 289,031
Corporate Securities 2,469,348 78,298 (14,131) 2,533,514
Mortgage-Backed Securities 1,160,985 20,300 (5,808) 1,175,478
---------- ---------- ---------- ----------
Total $3,979,814 $ 109,274 $ (22,300) $4,066,788
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
-------------------------------------------------------
Gross Unrealized
Statement ------------------------- Estimated
Value Gains (Losses) Market Value
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
United States Government and
Governmental Agencies and
Authorities $ 3,759 $ 332 $ (3) $ 4,088
States, Municipalities and
Political Subdivisions 25,642 1,607 (69) 27,180
Foreign Governments 39,506 3,270 (208) 42,568
Public Utilities 282,711 15,937 (676) 297,972
Corporate Securities 2,229,339 146,277 (9,233) 2,366,383
Mortgage-Backed Securities 1,047,014 31,201 (1,427) 1,076,788
---------- ---------- ---------- ----------
Total $3,627,971 $ 198,624 $ (11,616) $3,814,979
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
The statement value and estimated market value of bonds, by contractual
maturity, are shown below (in thousands). 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>
December 31, 1996 December 31, 1995
------------------------- -------------------------
Statement Estimated Statement Estimated
Value Market Value Value Market Value
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Due in One Year or Less $ 59,572 $ 60,127 $ 38,257 $ 38,727
Due After One Year Through Five Years 1,073,107 1,097,961 939,150 982,368
Due After Five Years Through Ten Years 1,170,081 1,198,058 1,156,158 1,228,746
Due After Ten Years 516,069 535,164 447,392 488,350
Mortgage-Backed Securities 1,160,985 1,175,478 1,047,014 1,076,788
---------- ---------- ---------- ----------
Total $3,979,814 $4,066,788 $3,627,971 $3,814,979
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
The estimated market values for the marketable bonds are determined based upon
the quoted market prices for bonds actively traded. The estimated market values
for marketable bonds without an active market are obtained through several
commercial pricing services. Estimated market values of privately placed bonds
are determined utilizing a commercially available pricing model. The model
considers the current level of risk-free interest rates, current corporate
spreads, the credit quality of the issuer and cash flow characteristics of the
security. Utilizing these data, the model generates estimated market values
which the Company considers reflective of the market value of each privately
placed bond.
<PAGE>
At December 31, 1996, the largest industry concentration of the private
placement portfolio was in the consumer non-cyclical industry where 18.9 % of
the portfolio was invested. The largest industry concentration of the
marketable bond portfolio was in mortgage backed securities where 43.5% of the
portfolio was invested. At December 31, 1996, the largest geographic
concentration of commercial mortgage loans was in the Midwest region of the
United States where approximately 37.0% of the commercial mortgage loan
portfolio was invested.
At December 31, 1996 and 1995, respectively, gross unrealized appreciation of
unaffiliated stocks was $1,287,652 and $339,000 and gross unrealized
depreciation was $668,126 and $2,220,000.
As of December 31, 1996 and 1995, the Company had $4,119,000 and $4,100,000,
respectively, of investments in which the original repayment terms had been
modified to less favorable terms as a result of financial difficulties of the
debtor. The expected gross interest income that would have been recorded had
the loans been current in accordance with the original terms and the actual
interest income recorded were as follows (in thousands):
Year Ended December 31,
------------------------
1996 1995
----- -----
Expected $ 402 $ 410
Actual $ 392 $ 410
During 1996 the Company did not reduce the interest rates of any outstanding
mortgage loans.
The maximum and minimum lending rates for all mortgage loans issued during 1996
were 9.63% and 5.25%.
The maximum percentage of any one loan to the value of security at the time of
the loan was 80%. Fire insurance is required on all properties covered by
mortgage loans at least equal to the excess of the loan over the maximum loan
which would be permitted by law on the land without buildings. As of year-end,
the Company held no mortgages with interest more than one year overdue.
NOTE 3: DERIVATIVE INSTRUMENTS
The Company has an established program prescribing the use of derivatives in its
asset/liability management activity. The investment policy of the Company
expressly precludes the use of such instruments for speculative purposes. The
policy details permissible uses and instruments and contains accounting and
management controls designed to assure compliance with these policies. The
Company is not a party to leveraged derivatives.
The insurance liabilities of the Company are sensitive to changes in market
interest rates. The Company has established procedures for evaluating these
liabilities and structures its investment asset portfolio with compatible
characteristics. Investment assets are selected which provide yield, cash flow
and interest rate sensitivities appropriate to support the insurance products.
The Company uses interest rate swaps and interest rate futures as part of this
asset/liability management program. The Company has acquired a significant
amount of certain shorter duration investments, such as floating rate or
adjustable rate investments. Acquisition of these assets shortens the duration
of an asset portfolio. The Company uses interest rate swaps to extend the
duration of these portfolios as an alternative to purchasing longer duration
investments.
The Company is exposed to credit-related losses in the event of nonperformance
by counterparties to financial instruments, but it does not expect any
counterparties to fail to meet their obligations given their high credit
ratings. In addition, the Company has established an issuer holder limitation
program whereby the maximum credit exposure to a single issuer is established
based upon the credit rating of the issuer and the structure of the investment.
The positive market value of swap positions are included in the computation of
the maximum issuer limitation.
<PAGE>
NOTE 4: INCOME TAXES
The Company's federal income tax return is consolidated with the following
entities: ReliaStar Financial Corp., ReliaStar Life Insurance Company, ReliaStar
Bankers Security Life Insurance Company of America, North Atlantic Life Agency,
Inc., ReliaStar Mortgage Corporation, Washington Square Advisers, Inc., James
Mortgage Company, Washington Square Securities, Inc., Norlic, Inc., Nova, Inc.,
ReliaStar Investment Research, Inc., NWNL Health Management Corporation, NWNL
Benefits Corporation, NWNL Northstar Inc., Northstar Investment Management
Corporation, Northstar Administrators Corporation, NWNL Northstar Distributors,
Inc., Banker Centennial Management Corp., IB Holdings, Inc., International Risks
Inc., Northeastern Corporation, IB Resolution, Inc., ReliaStar Financial
Marketing Corporation, and Successful Money Management Seminars, Inc.,
Successful Money Management Software, Inc., PrimeVest Mortgage, Inc., PrimeVest
Financial Services, Inc., PrimeVest Insurance Agency of Alabama, Inc., PrimeVest
Insurance Agency of New Mexico, Inc., Branson Insurance Agency, Inc. and Granite
Investment Services, Inc.
The method by which the total consolidated federal income tax for each entity
is allocated to each of these companies is subject to a written agreement
approved by the Company's Board of Directors. Allocation is based on separate
return calculations 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.
The difference between the amount of tax at the U.S. federal income tax rate and
the tax provision rate is summarized as follows:
Year Ended December 31,
-------------------------
1996 1995
---- ----
Statutory Tax Rate 35.0% 35.0%
Accrual of Market Discount on Bonds (4.8) (4.5)
Prior Year Provision True-up 2.0 0.6
Deferred Acquisition Cost Tax 0.9 0.8
Reserve Adjustments (0.3) (1.6)
Other, Net 1.4 1.6
---- ----
Provision for Federal Income Taxes 34.2% 31.3%
---- ----
---- ----
Federal income tax regulations allowed certain special deductions for 1983 and
prior years which are accumulated in a memorandum tax account designated as
"policyholders' surplus." Generally, this policyholders' surplus account will
become subject to tax at the then current rates only if the accumulated balance
exceeds certain maximum limitations or if certain cash distributions are deemed
to be paid out of the account. At December 31, 1996, the Company had
accumulated approximately $5,470,000 in its separate policyholders' surplus
account for which no taxes have been provided.
<PAGE>
NOTE 5: EMPLOYEE BENEFIT PLANS
PENSION PLAN
The Company's parent, ReliaStar Life Insurance Company, sponsors a
non-contributory defined benefit pension plan covering substantially all
employees. The benefits are based on years of service and the employee's
average compensation during the last five years of employment. The plan is
funded through a trust established by the Parent Company. Annual pension
expense for the total plan is equal to the cash contribution for the plan year
which is determined under the projected unit credit of such actuarial cost
method, including amortization of prior service costs and considering ERISA
minimum and maximum funding requirements. Each subsidiary is charged its
allocable share of such contributions based on a percentage of payroll. Pension
cost allocated to the Company amounted to $625,567 in the current year and
$491,567 in the prior year. The amount of the plan accumulated benefit
obligation/present value of accrued benefits and vested benefits was
$142,715,000 and $139,187,000 respectively, at January 1, 1996 the date of the
most recent actuarial valuation. The accumulated benefit obligation of the
total plan was calculated based upon an assumed 8.5 percent interest rate. The
fair value of the assets of the plan was $172,256,000 at January 1, 1996.
DEFERRED COMPENSATION PLANS
In 1990, ReliaStar Financial Corp., the Company's ultimate parent, established a
benefit plan called the Success Sharing Plan and ESOP (Success Sharing Plan)
designed to increase employee ownership and reward employees when certain
performance objectives are met. Essentially all employees of the Company are
eligible to participate in the Success Sharing Plan. The Success Sharing Plan
has both qualified and nonqualifed components. The nonqualifed component is
equal to 25% of the annual payout and is paid in cash to employees. The
qualified component is equal to 75% of the annual award with 25% contributed to
a deferred investment account and the remaining 50% contributed to the ESOP
portion of the Success Sharing Plan in the form of ReliaStar stock. Costs
charged to operations for the Success Sharing Plan were $1,076,000 and $979,000
in 1996 and 1995, respectively. The Company also participates in ReliaStar Life
Insurance Company's management incentive compensation plan for certain officers
and key employees which provides that participants may elect to receive payment
of incentive awards on a deferred basis.
POSTRETIREMENT BENEFIT PLAN
The Company provides certain health care and life insurance benefits to retired
employees (and their eligible dependents). Substantially all of the Company's
employees will become eligible for those benefits if they meet specified age and
service requirements and reach retirement age while working for the Company
unless plans are terminated or amended. During 1996, the plan sponsor amended
the plan to reduce the level of benefits provided. The plan amendment resulted
in a reduction of the unamortized transition obligation, the accumulated
postretirement benefit obligation and the annual expense.
The unamortized transition obligation was $223,000 and $838,000 at December 31,
1996 and 1995, respectively. The unamortized transition obligation is being
amortized over 20 years.
Net postretirement benefit costs for the years ended December 31, 1996 and 1995
were $68,000 and $219,000 respectively, and includes the expected cost of such
benefits for newly eligible or vested employees, interest cost and amortization
of the transition obligation.
The unfunded post retirement benefit obligation for retirees and other fully
eligible or vested plan participants was $435,000 and $419,000 at December 31,
1996 and 1995, respectively. The estimated cost of the benefit obligation for
active non-vested employees was $141,000 at December 31, 1996.
<PAGE>
The discount rate used in determining the accumulated postretirement benefit
obligation at December 31, 1996 was 7.5% and the health care cost trend rate was
7.0% decreasing gradually to 5.0% in the year 1999. The discount rate used in
determining the accumulated postretirement benefit obligation at December 31,
1995 was 7.25% and the health care cost trend rate was 10.0% decreasing
gradually to 5.0% in the year 2010. The health care cost trend rate assumption
has a significant effect on the amounts reported. To illustrate, increasing the
assumed health care cost trend rate by one percentage point in each year would
increase the postretirement benefit obligation as of December 31, 1996, by
$25,000 and the estimated eligibility cost and interest cost components of net
periodic postretirement benefit cost for 1996 by $5,000.
NOTE 6: INTERCOMPANY ACCOUNTS AND RELATED PARTY TRANSACTIONS
The Company maintains intercompany loan agreements with its parent company.
There were no loans taken from or made to the parent company during 1996 and
1995. In addition, there were no intercompany loans outstanding at December 31,
1996 or 1995.
The Company, affiliates of the Company, and ReliaStar Life Insurance Company
have entered into agreements whereby certain management, administrative, legal
and other services are provided to each other. The net amounts expensed
resulted in the Company making payments of $9,751,000 and $9,097,000 to its
parent company and other affiliated companies in 1996 and 1995, respectively.
As of December 31, 1996, the Company has made no guarantee or other agreements
for the benefit of its parent company or any other affiliated entity which
results in a material contingent exposure of the Company's assets.
NOTE 7: CAPITAL AND SURPLUS
The ability of the Company to pay cash dividends to its parent is restricted by
law or subject to approval of the insurance regulatory authorities of
Washington. These authorities recognize only statutory accounting practices for
the ability of an insurer to pay dividends to its shareholders.
Under the laws of the state of Washington, the Company can pay dividends to
shareholders only from earned statutory surplus, and the distribution in any one
year is limited, by law, to the larger of the prior year's net income or 10% of
prior year end statutory surplus.
Dividends are paid as determined by the Board of Directors. Dividends were not
paid in 1996 or 1995.
Total unassigned surplus was $147,915,000 and $122,911,000 at December 31, 1996
and 1995, respectively and has no restrictions, except as described above.
NOTE 8: REINSURANCE
The Company cedes the excess of life, waiver of premium, and accidental death
insurance over retention limits. The Company's regular retention limit is
$135,000 per life for individual coverage for most plans of insurance. As of
December 31, 1996, $619,062,000 of life insurance in force was ceded to other
companies, of which $50,594,000 was ceded to NWNL. A contingent liability
exists with respect to amounts reinsured in the event reinsuring companies are
unable to meet their obligations. The Company has assumed $1,422,041,000 of
life insurance in force as of December 31, 1996, of which $645,623,000 was
assumed from NWNL. Premiums assumed from unaffiliated companies were $766,000
and $751,000 in 1996 and 1995, respectively.
<PAGE>
NOTE 9: COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company is a defendant in various lawsuits in connection with the normal
conduct of its insurance operations. In the opinion of management, the ultimate
resolution of such litigation will not result in any significant liability to
the Company.
GUARANTY ASSOCIATIONS
The Company is subject to state guaranty association assessments in all states
in which it is admitted. Generally these associations guarantee specified
amounts (commonly $100,000 of surrender values or $300,000 of other benefits)
payable to residents of the state under policies of insolvent insurers. Most
state laws permit assessments or some portion thereof to be credited against
future premium taxes. However, several states, including Washington, do not
permit such a credit. Guaranty association assessments reduced after tax income
by approximately $2,430,000 and $2,551,000 in 1996 and 1995, respectively. The
Company expects further charges to income will be required in the future but it
cannot presently reasonably estimate those amounts.
FINANCIAL INSTRUMENTS
The Company is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet its financing needs and to reduce its
exposure to fluctuations in interest rates. These financial instruments include
commitments to extend credit and interest rate swaps. The instruments involve,
to varying degrees, elements of credit, interest rate, or liquidity risk in
excess of the amount recognized in the Statutory-Basis Statements of Assets,
Liabilities, Surplus and Other Funds.
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
credit worthiness on a case-by-case basis. The Company's exposure to credit
loss in the event of nonperformance by the other party to the financial
instrument for commitments to extend credit is represented by the contractual
amount of the instrument. The contractual amount of commitments to extend
credit at December 31, 1996, and 1995 was $118,358,000 and $48,439,000
respectively. The Company uses the same credit policies in making commitments
and conditional obligations as it does for on-balance-sheet instruments.
The Company also enters into interest rate swap agreements to manage interest
rate exposure. The primary reason for the interest rate swap agreements is to
extend the duration of adjustable rate investments. Interest rate swap
transactions generally involve the exchange of fixed and floating rate interest
rate 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. 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 notional amounts of
interest rate swaps outstanding at December 31, 1996 and 1995, was $606,000,000
and $631,000,000 respectively.
LEASES
At the end of 1991 the Company completed a sale/leaseback transaction involving
its home office building. Rent expenses of $1,988,000 and $2,007,000 were
incurred in connection with this lease during 1996 and 1995, respectively.
Future rental commitments in connection with this lease are as follows (in
thousands):
1997 - $2,053 1998 - $2,248
<PAGE>
NOTE 10: FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures are made in accordance with 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 cannot be substantiated by comparison
to independent markets and, in many cases, could not be realized in immediate
settlement of the instrument.
SFAS No. 107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. Accordingly, the aggregate fair
value amounts presented do not represent the underlying value of the Company.
The fair value estimates presented herein are based on pertinent information
available to management as of December 31, 1996 and 1995. Although management
is not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these financial statements since that date; therefore, current estimates of
fair value may differ significantly from the amounts presented herein.
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
BONDS
The estimated market value disclosures for bonds satisfies the fair value
disclosure requirements of SFAS No. 107 (see Investments Note).
STOCKS
Fair value equals carrying value for common stock as these securities are
carried at NAIC value which approximates quoted market value. Preferred stocks
are carried primarily at cost. Fair value for these preferred stocks is
determined by quoted market values. The Company's investment in the stock of
its subsidiaries is specifically excluded from the disclosure requirements of
SFAS No. 107.
MORTGAGE LOANS ON REAL ESTATE
The fair values for mortgage loans on real estate are estimated using discounted
cash flow analyses, using interest rates currently being offered in the
marketplace for similar loans to borrowers with similar credit ratings. Loans
with similar characteristics are aggregated for purposes of the calculations.
CASH AND SHORT-TERM INVESTMENTS AND POLICY LOANS
The carrying amounts reported in the balance sheet for these assets approximate
the assets' fair values.
OTHER FINANCIAL INSTRUMENTS REPORTED AS ASSETS
The carrying amounts reported in the balance sheet for these financial
instruments (primarily premiums and other accounts receivable and accrued
investment income) approximate those assets' fair values.
INVESTMENT CONTRACT LIABILITIES
The fair values for deferred annuities were 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.
<PAGE>
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.
OTHER FINANCIAL INSTRUMENTS REPORTED AS LIABILITIES
The carrying amounts reported in the balance sheet for other financial
instruments (primarily payables of a short-term nature) approximate those
liabilities' fair values.
INTEREST RATE SWAPS
The fair value of interest rate swaps was estimated using discounted cash flow
analyses. The discount rate was based upon rates currently being offered for
similar interest rate swaps available from similar counter parties.
The carrying amounts and estimated fair values of the Company's financial
instruments are as follows (in thousands):
<TABLE>
<CAPTION>
December 31
----------------
1996 1995
----- -----
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Financial Instruments Recorded as Assets:
Bonds $ 3,979,814 $ 4,066,788 $ 3,627,971 $ 3,814,979
Stocks 13,082 12,852 16,410 16,094
Mortgage Loans on Real Estate
Commercial 529,432 541,688 461,345 485,569
Residential 230,678 234,889 212,083 216,608
Policy Loans 289,844 289,844 250,717 250,717
Cash and Short-Term Investments 43,074 43,074 32,278 32,278
Other Financial Instruments Recorded as Assets 77,862 77,862 67,555 67,555
Financial Instruments Recorded as Liabilities:
Investment Contracts
Deferred Annuities (4,305,125) (4,273,677) (3,883,469) (3,856,234)
Supplementary Contracts and Immediate Annuities (75,863) (76,113) (56,544) (58,093)
Other Investment Contracts (1,169) (1,169) (1,143) (1,143)
Other Financial Instruments Recorded as Liabilities (28,611) (28,611) (10,979) (10,979)
Off-Balance Sheet Financial Instruments
Interest Rate Swaps -- 7,535 -- 24,415
</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 judgement 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.
<PAGE>
NOTE 11: PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company, which is domiciled in the State of Washington, prepares its
statutory-basis financial statements in accordance with accounting principles
and practices prescribed or permitted by the Washington State Insurance
Department. Prescribed statutory practices include state laws, regulations and
general administrative rules, as well as a variety of publications of the NAIC.
Permitted statutory accounting practices encompass all accounting practices that
are not prescribed; such practices differ from state to state and may differ
from company to company within a state and may change in the future.
Furthermore, the NAIC has a project to codify statutory accounting practices,
the result of which is expected to constitute the only source of "prescribed"
statutory accounting practices. Accordingly, that project, which is expected to
be completed in the near future, will likely change the definitions of what
comprises prescribed statutory practices and may result in changes to the
accounting policies the insurance enterprises use to prepare their
statutory-basis financial statements.
NOTE 12: RECONCILIATION OF STATUTORY NET INCOME AND EQUITY TO GAAP NET
INCOME AND EQUITY (IN THOUSANDS)
Year Ended December 31,
------------------------------
1996 1995
--------- ---------
Statutory Net Income as Reported $ 35,443 $ 37,243
Adjustments Concerning:
Deferred Acquisition Costs 43,151 41,667
Deferred Federal Income Taxes (13,919) (8,938)
Reserves for Future Benefits (12,279) (27,921)
Net Adjustments to Investments 9,767 3,604
Capitalization of Software Costs 1,813 2,500
Nonadmitted Assets (115) (348)
Interest Maintenance Reserve (1,702) (1,504)
Other (3,472) 848
--------- ---------
Net Income in Conformity with Generally
Accepted Accounting Principles $ 58,687 $ 47,151
--------- ---------
--------- ---------
Year Ended December 31,
------------------------------
1996 1995
--------- ---------
Statutory Capital
and Surplus as Reported $ 275,915 $ 250,911
Adjustments Concerning:
Deferred Acquisition Costs 444,808 373,166
Deferred Federal Income Taxes (47,445) (61,936)
Reserves for Future Benefits (317,240) (304,299)
Net Adjustments to Investments 83,137 182,685
Capitalization of Software Costs 4,313 2,500
Pension Plan Agreements 1,273 1,273
Nonadmitted Assets 11,240 11,742
Asset Valuation Reserve 58,077 44,201
Interest Maintenance Reserve 6,991 6,335
Other (7,203) (5,280)
---------- -----------
Shareholder's Equity in
conformity with Generally
Accepted Accounting Principles $ 513,866 $ 501,298
---------- -----------
---------- -----------
<PAGE>
NORTHERN LIFE INSURANCE COMPANY
- -------------------------------
(a wholly owned subsidiary of ReliaStar Life Insurance Company)
INDEPENDENT AUDITORS' REPORT ON
SUPPLEMENTAL SCHEDULE OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Our audits were conducted for the purpose of forming an opinion on the basic
statutory-basis financial statements taken as a whole. The supplemental
schedule of selected financial data for the year ended December 31, 1996, is
presented for complying with the National Association of Insurance
Commissioners' instructions to Annual Audited Financial Reports and is not a
required part of the basic statutory-basis financial statements. This
additional information is the responsibility of the Company's management. Such
information has been subjected to the auditing procedures applied in our audit
of the basic statutory-basis financial statements and, in our opinion, is fairly
stated in all material respects when considered in relation to the basic
financial statements taken as a whole.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Seattle, Washington
February 9, 1997
<PAGE>
NORTHERN LIFE INSURANCE COMPANY
(A Wholly Owned Subsidiary of ReliaStar Life Insurance Company)
Supplemental Schedule of Selected Financial Data
Year Ended December 31, 1996
(In Thousands)
Investment Income Earned:
Government Bonds $ 305
Other bonds (unaffiliated) 292,909
Bonds of affiliates 0
Preferred stocks (unaffiliated) 400
Preferred stocks of affiliates 0
Common stocks (unaffiliated) 1,401
Common stocks of affiliates 0
Mortgage loans 59,619
Real estate 1,009
Premium notes, policy loans and liens 15,438
Collateral loans 0
Cash on hand and on deposit 0
Short-term investments 3,065
Other invested assets 5,206
Derivative instruments 10,049
Aggregate write-ins for investment income 132
----------
Gross investment income $ 389,533
----------
----------
Real Estate Owned - Book Value Less Encumbrances $ 2,046
----------
----------
Mortgage Loans - Book Value:
Farm mortgages $ 0
Residential mortgages 230,678
Commercial mortgages 529,432
----------
Total mortgage loans $ 760,110
----------
----------
<PAGE>
Mortgage Loans By Standing - Book Value
Good standing $ 757,609
---------
---------
Good standing with restructured terms $ 1,883
---------
---------
Interest overdue more than three months,
not in foreclosure $ 0
---------
---------
Foreclosure in process $ 618
---------
---------
Other Long Term Assets - Statement Value $ 37,748
---------
---------
Collateral Loans $ 0
---------
---------
Bonds and Stocks of Parents and Affiliates - Book Value:
Bonds $ 0
---------
---------
Preferred Stocks $ 0
---------
---------
Common Stocks $ 100
---------
---------
Bonds and Short-Term Investments by Class and Maturity:
Bonds by Maturity - Statement Value
Due within one year or less $ 280,468
Over 1 year through 5 years 1,334,225
Over 5 years through 10 years 1,919,797
Over 10 years through 20 years 382,466
Over 20 years 94,353
---------
Total by Maturity $ 4,011,309
---------
---------
Bonds by Class - Statement Value
Class 1 $ 2,411,524
Class 2 1,362,677
Class 3 191,477
Class 4 33,000
Class 5 11,992
Class 6 639
---------
Total by Class $ 4,011,309
---------
---------
Total Bonds Publicly Traded $ 2,583,966
---------
---------
Total Bonds Privately Traded $ 1,427,343
---------
---------
Preferred Stocks - Statement Value $ 5,510
---------
---------
Common Stocks - Market Value $ 7,651
---------
---------
<PAGE>
Short Term Investments - Book Value $ 31,495
---------
---------
Financial Options Owned - Statement Value $ 0
---------
---------
Financial Options Written and In Force - Statement Value $ 0
---------
---------
Financial Futures Contracts Open - Current Price $ 7,535
---------
---------
Cash on Deposit $ 11,579
---------
---------
Life Insurance In Force:
Industrial $ 0
---------
---------
Ordinary $ 2,895,840
---------
---------
Credit Life $ 0
---------
---------
Group Life $ 943,378
---------
---------
Amount of Accidental Death Insurance
In Force Under Ordinary Policies $ 61,304
---------
---------
Life Insurance Policies with Disability Provisions In Force:
Industrial $ 0
---------
---------
Ordinary $ 320,051
---------
---------
Credit Life $ 0
---------
---------
Group Life $ 0
---------
---------
Supplementary Contracts In Force:
Ordinary - Not Involving Life Contingencies
Amount on Deposit $ 1,398
---------
---------
Income Payable $ 24
---------
---------
Ordinary - Involving Life Contingencies
Income Payable $ 90
---------
---------
Group - Not Involving Life Contingencies
Amount on Deposit $ 0
---------
---------
Income Payable $ 0
---------
---------
Group - Involving Life Contingencies
Income Payable $ 0
---------
---------
<PAGE>
Annuities:
Ordinary
Immediate - Amount of Income Payable $ 20,072
---------
---------
Deferred - Fully Paid Account Balance $ 10,424
---------
---------
Deferred - Not Fully Paid - Account Balance $ 2,498,530
---------
---------
Group
Amount of Income Payable $ 8,629
---------
---------
Fully Paid Account Balance $ 0
---------
---------
Not Fully Paid - Account Balance $ 2,098,142
---------
---------
Accident and Health Insurance - Premiums in Force:
Ordinary $ 13
---------
---------
Group $ 0
---------
---------
Credit $ 0
---------
---------
Deposit Funds and Dividend Accumulations:
Deposit Funds - Account Balance $ 175
---------
---------
Dividend Accumulations $ 10,133
---------
---------
Claim Payments 1996:
Group Accident and Health Year - Ended December 31, 1996
1996 $ 0
---------
---------
1995 $ 0
---------
---------
1994 $ 0
---------
---------
Other Accident and Health
1996 $ 0
---------
---------
1995 $ 0
---------
---------
1994 $ 0
---------
---------
Other Coverages that use developmental methods to calculate claims reserves
1996 $ 0
---------
---------
1995 $ 0
---------
---------
1994 $ 0
---------
---------
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Part A: None
Part B: Separate Account One
--------------------
Independent Auditors' Report
Statement of Assets and Liabilities, December 31, 1996
Combined Statements of Operations and Changes in Contract
Owner's Equity, Year Ended December 31, 1996 and Period
from October 20, 1995 to December 31, 1995
Notes to Financial Statements
Northern Life Insurance Company
-------------------------------
Independent Auditors' Report
Statutory-Basis Balance Sheets, Years Ended December 31,
1996 and 1995
Statutory-Basis Statements of Operations, Years Ended
December 31, 1996 and 1995
Statutory-Basis Statements of Changes in Capital and
Surplus, Years Ended December 31, 1996 and 1995
Statutory-Basis Statement of Cash Flows, Years Ended
December 31, 1996 and 1995
Notes to Statutory-Basis Financial Statements
Independent Auditors' Report on Supplemental Schedule
of Assets and Liabilities
Supplemental Schedule of Assets and Liabilities, Year
Ended December 31, 1996
(b) Exhibits:
1. Resolution of the Executive Committee of the Board of Directors of
Northern Life Insurance Company ("Depositor") authorizing the
establishment of Separate Account One ("Registrant"). (Filed with
registration statement on Form N-4 on March 20, 1995.)
2. Not Applicable.
3. (a) Form of Distribution and Administrative Services Agreement
between Washington Square Securities, Inc. and Depositor. (Filed
with registration statement on Form N-4 on March 20, 1995.)
(b) Form of selling group (or distribution) agreement between
Washington Square Securities, Inc. and selling group members.
(Filed with registration statement on Form N-4 on March 20,
1995.)
4. (a) Individual Deferred Tax Sheltered Annuity Contract (Transfer
Series). (Filed with registration statement on Form N-4 on March
20, 1995.)
(b) Individual Deferred Annuity Contract (Transfer Series) for use
with non-qualified plans. (Filed with registration statement on
Form N-4 on March 20, 1995.)
C-1
<PAGE>
(c) Individual Deferred Retirement Annuity Contract (Transfer
Series). (Filed with registration statement on Form N-4 on March
20, 1995.)
(d) Flexible Premium Individual Deferred Tax-Sheltered Annuity
Contract. (Filed with registration statement on Form N-4 on
March 20, 1995.)
(e) Flexible Premium Individual Deferred Retirement Annuity Contract.
(Filed with registration statement on Form N-4 on March 20,
1995.)
(f) ERISA Endorsement. (Filed with Securities Act of 1933 Post-
Effective Amendment No. 1)
(g) TSA Endorsement.
5. Contract Application Form. (Filed with registration statement on Form
N-4 on March 20, 1995.)
6. (a) Articles of Incorporation of Depositor. (Filed with registration
statement on Form N-4 on March 20, 1995.)
(b) Bylaws of Depositor. (Filed with registration statement on Form
N-4 on March 20, 1995.)
7. Not Applicable.
8. (a) Participation Agreement with Fidelity's Variable Insurance
Products Fund and Fidelity Distributors Corporation. (Filed with
registration statement on Form N-4 on March 20, 1995.)
(b) Participation Agreement with Fidelity's Variable Insurance
Products Fund II and Fidelity Distributors Corporation. (Filed
with registration statement on Form N-4 on March 20, 1995.)
(c) Participation Agreement with The Alger American Fund and Fred
Alger and Company. (Filed with Securities Act of 1933 Pre-
Effective Amendment No. 1.)
(d) Form of Service Agreement between Fidelity Investments
Institutional Operations Company, Inc. and ReliaStar Life
Insurance Company.
(e) Form of Service Contract with Fidelity Distributors
Corporation.
9. Consent and Opinion of Kristen K. Lindberg as to the legality of the
securities being registered.
10. Consent of Independent Auditors.
11. No financial statements are omitted from Item 23.
12. Not Applicable.
13. Schedule of computation of performance data.
14. Financial Data Schedule, filed hereto electronically as Exhibit 27
pursuant to Rule 401 of Regulation S-T.
15. Powers of Attorney for Michael J. Dubes, John H. Flittie, Wayne R.
Huneke, Craig R. Rodby, Robert C. Salipante, John G. Turner and Steven
W. Wishart. (Filed with registration statement on Form N-4 on March
20, 1995.) Power of Attorney for
C-2
<PAGE>
Richard R. Crowl. (Filed with Securities Act of 1933 Post-Effective
Amendment No. 1.)
C-3
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
DIRECTORS
Name and Principal
Principal Business Address Positions and Offices with Depositor
- -------------------------- ------------------------------------
Michael J. Dubes Director; President and Chief Executive
P.O. Box 12530 Officer.
Seattle, Washington 98111
Richard R. Crowl Director; Senior Vice President,
20 Washington Avenue South General Counsel and Assistant Secretary.
Minneapolis, Minnesota 55401
John H. Flittie Director; Vice Chairman.
20 Washington Avenue South
Minneapolis, Minnesota 55401
C-4
<PAGE>
Wayne R. Huneke Director; Assistant Treasurer.
20 Washington Avenue South
Minneapolis, Minnesota 55401
Kenneth U. Kuk Director; Assistant Treasurer.
20 Washington Avenue South
Minneapolis, Minnesota 55401
Robert C. Salipante Director.
20 Washington Avenue South
Minneapolis, Minnesota 55401
John G. Turner Director; Chairman.
20 Washington Avenue South
Minneapolis, Minnesota 55401
Steven W. Wishart Director; Assistant Treasurer.
20 Washington Avenue South
Minneapolis, Minnesota 55401
C-5
<PAGE>
EXECUTIVE OFFICERS
Name Positions and Offices with Depositor
----- ------------------------------------
Michael J. Dubes President and Chief Executive Officer
James R. Miller Executive Vice President and Chief Operating
Officer
Richard R. Crowl Senior Vice President, General Counsel and
Assistant Secretary
Paul R. Beeghly Vice President
Garth A. Bernard Vice President and Chief Actuary
Richard Contreras Vice President, Marketing
Douglas R. Kaufman Vice President, Chief Financial Officer and
Treasurer
Jerome A. Mills Vice President, Advance Marketing
Eric M. Onderdonk Vice President and Chief Information Officer
Brad J. Corbin Vice President, Sales
Elizabeth R. Bennett Vice President, Medical Director
The principal business address of each of the foregoing executive officers is
1110 Third Avenue, Seattle, Washington 98101, with the exception of Mr. Crowl
and Ms. Bennett whose principal business address is 20 Washington Avenue South,
Minneapolis, Minnesota 55401.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
Registrant is a separate account of Depositor. Depositor is an indirect,
wholly-owned subsidiary of ReliaStar Financial Corp., formerly known as The NWNL
Companies, Inc., a Delaware Corporation.
The following chart identifies the subsidiaries of ReliaStar Financial
Corp. and their relationship to one another, all of which, except where
indicated, are either directly or indirectly wholly-owned by ReliaStar Financial
Corp. except for directors qualifying shares.
C-6
<PAGE>
<TABLE>
<CAPTION>
Owner and State of
Company Percentage Incorporation
-------- ---------- ------------
<S> <C> <C>
ReliaStar Financial Corp. Delaware
ReliaStar Life Insurance Company ("RLIC") RLR-100% Minnesota
Northern Life Insurance Company ("NLIC") RLIC-100% Washington
Norlic, Inc. NLIC-100% Washington
Nova, Inc. NLIC-100% Washington
ReliaStar United Services Life Insurance Company ("RUSL") RLIC-100% Virginia
ReliaStar Bankers Security Life Insurance Company ("RBSL") RUSL-100% New York
North Atlantic Life Agency, Inc. RBSL-100% New York
Delaware Administrators, Inc. RUSL-100% Ohio
USL Services, Inc. RUSL-100% Virginia
NWNL Benefits Corporation ("NBC") RLIC-100% Minnesota
NWNL Health Management Corp. NBC-100% Minnesota
Select Care Health Network, Inc. NBC-50% California
ReliaStar Mortgage Corporation ("RMC") RLIC-100% Iowa
James Mortgage Company RMC-100% Iowa
Washington Square Advisers, Inc. RLR-100% Minnesota
ReliaStar Investment Research, Inc. RLR-100% Minnesota
Washington Square Securities, Inc. RLR-100% Minnesota
ReliaStar Financial Marketing Corporation RLR-100% Delaware
NWNL Northstar, Inc. ("NNI") RLR-80% Delaware
Northstar Investment Management Corp. NNI-80% Delaware
NWNL Northstar Distributors, Inc. NNI-80% Minnesota
Northstar Administrators Corporation NNI-80% Delaware
Bankers Centennial Management Corp. RLR-100% Virginia
IB Holdings, Inc. ("IB") RLR-100% Virginia
International Risks, Inc. IB-100% Delaware
Northeaster Corporation IB-100% Connecticut
The New Providence Insurance Company, Limited IB-100% Cayman Islands
IB Resolution, Inc. IB-100% Virginia
Successful Money Management Seminars, Inc. ("SMMS") RLR-100% Oregon
Successful Money Management Software, Inc. SMMS-100% Oregon
<CAPTION>
Owner and State of
Company Percentage Incorporation
------- ---------- ------------
<S> <C> <C> <C>
PrimeVest Financial Services, Inc.("PVF") RLR-100% Minnesota
PrimeVest Mortgage, Inc. PVF-100% Minnesota
PrimeVest Insurance Agency of Alabama, Inc. PVF-100% Alabama
PrimeVest Insurance Agency of New Mexico, Inc. PVF-100% New Mexico
PrimeVest Insurance Agency of Oklahoma, Inc. Kevin Kluesner-100% Oklahoma
PrimeVest Insurance Agency of Texas, Inc. Kevin Kluesner-100% Texas
PrimeVest Insurance Agency of Ohio, Inc. Class A Robert Chapman-100% Ohio
Class B PVF-100%
Branson Insurance Agency, Inc. PVF-100% Massachusetts
Granite Investment Services, Inc. PVF-100% Minnesota
</TABLE>
C-7
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of January 31, 1997, there were 3801 owners of the Contracts, 3531 of
which were owners of qualified Contracts.
ITEM 28. INDEMNIFICATION
Reference is hereby made to Article VII, Section 6 of Depositor's Bylaws,
filed as an Exhibit to the registration statement filed on Form N-4 on March 20,
1995. The Bylaws of Depositor mandate indemnification by Depositor of its
directors, officers and certain others, and permit indemnification of directors,
officers, employees and agents of Washington Square Securities, Inc. ("WSSI")
under certain conditions. Section 4.01 of the Bylaws of WSSI mandates
indemnification by WSSI of its directors and officers under certain conditions.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
Depositor or WSSI, pursuant to the foregoing provisions or otherwise, Depositor
and WSSI have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Depositor of expenses
incurred or paid by a director or officer or controlling person of Depositor or
WSSI in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person of Depositor or WSSI in connection
with the securities being registered, Depositor or WSSI, as the case may be,
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether or not such indemnification by it is against public policy
as expressed in the Act and will be governed by the final adjudication of such
issue.
An insurance company blanket bond is maintained providing $25,000,000
coverage for Depositor and the General Distributor, subject to a $500,000
deductible.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) WSSI, an affiliate of the Company, is the principal underwriter of the
Contracts. WSSI also acts as the principal underwriter for variable annuity
Contracts issued by ReliaStar Life Insurance Company ("ReliaStar Life"), an
affiliate of the Depositor, through the ReliaStar Life Select Variable Account
and variable life insurance policies issued by ReliaStar Life through the
Select*Life Variable Account. Both of these variable accounts are separate
accounts of ReliaStar Life and are registered as unit investment trusts under
the Investment Company Act of 1940. WSSI also distributes, but is not the
principal underwriter of, variable annuity Contracts issued by ReliaStar Life
through the MFS/ReliaStar Variable Account and the Northstar/ReliaStar Variable
Account, each of which is a separate account and is registered as a unit
investment trust under the Investment Company Act of 1940.
C-8
<PAGE>
(b) The directors and officers of WSSI are as follows:
DIRECTORS
Name Principal Occupation
----- --------------------
John H. Flittie Vice Chairman, President and Chief Operating
Officer of ReliaStar Financial Corp. and
ReliaStar Life Insurance Company
Roger W. Arnold Vice President, Individual Sales of ReliaStar
Life Insurance Company
Michael J. Dubes President and Chief Executive Officer of
Depositor
Robert C. Salipante Senior Vice President
of Personal Financial Services of ReliaStar
Financial Corp.
Steven W. Wishart Senior Vice President and Chief Investment
Officer of ReliaStar
Financial Corp. and ReliaStar Life Insurance
Company
EXECUTIVE OFFICERS
Name Positions and Offices with WSSI
---- -------------------------------
John H. Flittie Chairman of the Board
James R. Gelder President
Michael R. Fanning Executive Vice President and Chief
Marketing Officer
Jeffery A. Montgomery Executive Vice President and Chief
Operating Officer
Robert B. Saginaw Vice President
Susan M. Bergen Secretary
David Braun Assistant Vice President
David P. Wilken Treasurer
Julie A. Cooney Assistant Treasurer
Daniel S. Kuntz Assistant Treasurer
David Cox Assistant Secretary
Allen L. Kidd Assistant Secretary
Loralee A. Renelt Assistant Secretary
The principal business address of each of the foregoing Directors and
executive officers is 20 Washington Avenue South, Minneapolis, Minnesota
55401, except for the following individuals whose principal addresses are
listed after their respective names: Julie A. Cooney, 80 Tuscany Way,
Danville, California 94506; Michael J. Dubes, 1110 3rd Avenue,
Seattle, Washington 98101; and Allen L. Kidd, 222 North Arch Road,
Richmond, Virginia 23236.
(c) For the year ended December 31, 1996 WSSI received $641,620.59 in
fees, including gross concessions, in connection with distribution
of the Contracts.
ITEMS 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts and records of Registrant are located at the offices of
Depositor at 1110 Third Avenue, Seattle, Washington 98101.
ITEM 31. MANAGEMENT SERVICES
C-9
<PAGE>
Not applicable.
C-10
<PAGE>
ITEM 32. UNDERTAKINGS
Registrant will file a post-effective amendment to this Registration
Statement as frequently as is necessary to ensure that the audited financial
statements in this Registration Statement are never more than 16 months old for
so long as payments under the Contracts may be accepted.
Registrant will include either (1) as part of any application to purchase a
Contract offered by the Prospectus, a space that an applicant can check to
request a Statement of Additional Information, or (2) a postcard or similar
written communication affixed to or included in the Prospectus that the
applicant can remove to send for a Statement of Additional Information.
Registrant will deliver any Statement of Additional Information and any
financial statements required to be made available under this form promptly upon
written or oral request.
The Company and the Variable Account rely on a no-action letter issued by
the Division of Investment Management to the American Council of Life Insurance
on November 28, 1988 and represent that the conditions enumerated therein have
been or will be complied with.
The Company represents that the fees and charges deducted under the
Advantage series variable annuity contracts, in the aggregate, are reasonable
in relation to the services rendered, the expenses expected to be incurred,
and the risks assumed by the Company.
With regard to restricted distributions to plan participants in accordance
with the requirements of IRC Section 403(b)(11), the Registrant, in respect to a
no-action letter issued by the Division of Investment Management (No. IP-6-88,
November 28, 1988), undertakes to:
(a) Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in each registration statement,
including the prospectus, used in connection with the offer of the
contract;
(b) Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in any sales literature used in
connection with the offer of the contract;
(c) Instruct sales representatives who solicit participants to purchase
the contract specifically to bring the redemption restrictions imposed
by Section 403(b)(11) to the attention of the potential participants;
(d) Obtain from each plan participant who purchases a Section 403(b)
annuity contract, prior to or at the time of such purchase, a signed
statement acknowledging the participant's understanding of (1) the
restrictions on redemption imposed by Section 403(b)(11), and (2) the
investment alternatives available under the employer's Section 403(b)
arrangement, to which the participant may elect to transfer his
contract value;
(e) The Registrant represents that this said no-action letter is being
relied upon and that the provisions of paragraphs (a) - (d) above have
been complied with.
C-11
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, Registrant has caused this Amendment to the Registration Statement to be
signed on its behalf, in the City of Seattle and State of Washington, on this
25th day of April 1997.
SEPARATE ACCOUNT ONE
(Registrant)
By NORTHERN LIFE INSURANCE COMPANY
(Depositor)
By /s/ Michael J. Dubes
----------------------------------------
Michael J. Dubes
President and Chief Executive Officer
As required by the Securities Act of 1933 and the Investment Company Act of
1940, Depositor has caused the Registration Statement to be signed on its
behalf, in the City of Seattle and State of Washington, on this 25th day of
April, 1997.
NORTHERN LIFE INSURANCE COMPANY
By /s/ Michael J. Dubes
----------------------------------------
Michael J. Dubes
President and Chief Executive Officer
As required by the Securities Act of 1933, the Registration Statement has been
signed on this 25th day of April, 1997 by the following directors and
officers of Depositor in the capacities indicated:
/s/Michael J. Dubes President and Chief Executive Officer
- ---------------------------
Michael J. Dubes
/s/James R. Miller Executive Vice President and Chief Operating
- --------------------------- Officer
James R. Miller
/s/Douglas R. Kaufman Vice President, Chief Financial Officer, Treasurer
- --------------------------- and Comptroller
Douglas R. Kaufman
Richard R. Crowl Wayne R. Huneke
Michael J. Dubes Kenneth U. Kuk John G. Turner
John H. Flittie Robert C. Salipante Steven W. Wishart
A majority of the Board of Directors.
James E. Nelson, by signing his name hereto, does hereby sign this document on
behalf of each of the above-named directors of Northern Life Insurance Company
pursuant to powers of attorney duly executed by such persons.
/s/James E. Nelson
---------------------------------
James E. Nelson, Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
(b) Exhibits:
99.4.(g) TSA Endorsement.
99.8.(d) Form of Service Agreement between Fidelity Investments
Institutional Operations Company, Inc. and ReliaStar Life
Insurance Company.
99.8.(e) Form of Service Contract with Fidelity Distributors Corporation.
99.9. Consent and Opinion of Kristen K. Lindberg as to the legality of the
securities being registered.
99.10. Consent of Independent Auditors.
99.13. Schedule of Computation of Performance Data.
99.27. Financial Data Schedule.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NORTHERN'S
SEPARATE ACCOUNT ONE ANNUAL REPORT FOR THE YEAR ENDED 12-31-96, ANNUAL REPORT
(FORM N-SAR) FILING PURSUANT TO SECTION 15(d) OF THE 1934 ACT AND SECTION 30(b)
OF THE 1940 ACT, FORM 24F-2 ANNUAL NOTICE OF SECURITIES SOLD PURSUANT TO RULE
24F-2 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 29,900
<INVESTMENTS-AT-VALUE> 31,132
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 31,132
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 34
<TOTAL-LIABILITIES> 34
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29,900
<SHARES-COMMON-STOCK> 2,675,715
<SHARES-COMMON-PRIOR> 55,709
<ACCUMULATED-NII-CURRENT> 43
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 70
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,232
<NET-ASSETS> 31,132
<DIVIDEND-INCOME> 67
<INTEREST-INCOME> 0
<OTHER-INCOME> 122
<EXPENSES-NET> 146
<NET-INVESTMENT-INCOME> 43
<REALIZED-GAINS-CURRENT> 70
<APPREC-INCREASE-CURRENT> 1,220
<NET-CHANGE-FROM-OPS> 1,333
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,632,401
<NUMBER-OF-SHARES-REDEEMED> 12,395
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 30,565
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
[Logo]
NORTHERN LIFE INSURANCE COMPANY
P.O. Box 12530, Seattle, Washington 98111-4530
"We" or "Us" are the Northern Life Insurance Company. "You" are the Owner of
this policy according to our records.
This Endorsement is a part of the Policy to which it is attached by us.
The following new information is added to your Policy.
Elective deferrals made under this policy may not exceed the annual
limit on elective deferrals as provided in the Internal Revenue Code of
1986, as amended, and applicable regulations.
All other terms and conditions of this Policy remain unchanged.
The Effective Date of this Endorsement is the Issue Date of the Policy or the
date it is made part of the Policy, if later.
/s/ Susan M. Bergen
Secretary
PENSION SIMPLIFICATION ENDORSEMENT
FOR VARIABLE DEFERRED TAX SHELTERED ANNUITIES
Form No. 15491 10-96
<PAGE>
SERVICE AGREEMENT
This Agreement is entered into and effective as of the 1st day of January,
1997, by and between FIDELITY INVESTMENTS INSTITUTIONAL OPERATIONS COMPANY, INC.
("FIIOC") and RELIASTAR LIFE INSURANCE COMPANY, ("Company").
WHEREAS, FIIOC provides transfer agency and other services to Fidelity's
Variable Insurance Products Fund, Variable Insurance Products Fund II and
Variable Insurance Products Fund III (collectively "Funds"); and
WHEREAS, the services provided by FIIOC on behalf of the Funds include
responding to inquiries about the Funds, including the provision of
information about the Funds' investment objectives, investment policies,
portfolio holdings, etc.; and
WHEREAS, Company, ReliaStar Bankers Security Life Insurance Company and
Northern Life Insurance Company (together "Affiliates") hold shares of the Funds
in order to fund certain variable annuity contracts, group annuity contracts,
and/or variable life insurance policies, the beneficial interests in which are
held by individuals, plan trustees, or others who look to Affiliates to provide
information about the Funds similar to the information provided by FIIOC; and
WHEREAS, Affiliates and one or more of the Funds have entered into one or
more Participation Agreements, under which Affiliates agree not to provide
information about the Funds except for information provided by the Funds or
their designees; and
WHEREAS, FIIOC desires that Company shall cause Affiliates to be able to
respond to inquiries about the Funds from individual variable annuity owners,
participants in group annuity contracts issued by Affiliates and owners and
participant under variable life insurance policies issued by Affiliates, and
prospective customers for any of the above; and
WHEREAS, FIIOC and Company recognize that Affiliates' efforts in responding
to customer inquiries will reduce the burden that such inquiries would place on
FIIOC should such inquiries be directed to FIIOC; and
WHEREAS, FIIOC and Company have previously entered into a similar agreement
and are desirous of replacing said agreement with a new agreement.
NOW, THEREFORE, the parties do agree as follows:
1. INFORMATION TO BE PROVIDED TO AFFILIATES. FIIOC agrees to provide to
Affiliates, on a periodic basis, directly or through a designee, information
about the Funds' investment objectives, investment policies, portfolio holdings,
performance, etc. The content and format of such information shall be as FIIOC,
in its sole discretion, shall choose. FIIOC may change the format and/or
content of such informational reports, and the frequency with which such
information is provided. For purposes of Section 4.2 of each of Affiliates'
Participation Agreement(s) with the Funds, FIIOC represents that it is the
designee of the Funds, and Affiliates may therefore use the information provided
by FIIOC without seeking additional permission from the Funds.
<PAGE>
2. USE OF INFORMATION BY AFFILIATES. Affiliates may use the information
provided by FIIOC in communications to individuals, plan trustees, or others who
have legal title or beneficial interest in the annuity or life insurance
products issued by Affiliates, and to prospective purchasers of such products or
beneficial interests thereunder. If such information is contained as part of
larger pieces of sales literature, advertising, etc., such pieces shall be
furnished for review to the Funds in accordance with the terms of Affiliates'
Participation Agreements with the Funds. Nothing herein shall give Affiliates
the right to expand upon, reformat or otherwise alter the information provided
by FIIOC. Affiliates acknowledge that the information, provided them by FIIOC
may need to be supplemented with additional qualifying information, regulatory
disclaimers, or other information before it may be conveyed to persons outside
Affiliates.
3. COMPENSATION TO COMPANY. In recognition of the fact that Company will
cause Affiliates to respond to inquiries that otherwise would be handled by
FIIOC, FIIOC agrees to pay the Affiliates, in proportion to their Fund holdings,
a quarterly fee computed as follows:
At the close of each calendar quarter, FIIOC will determine the Average
Daily Assets held in the Funds by Affiliates. Average Daily Assets shall be the
sum of the daily assets for each calendar day in the quarter divided by the
number of calendar days in the quarter. The Average Daily Assets shall be
multiplied by 0.0004 (4 basis points) and that sum shall be divided by four.
The resulting number shall be the quarterly fee for that quarter, which shall
be paid to Company during the following month.
Should any Participation Agreement(s) between an Affiliate and any Fund(s)
be terminated effective before the last day of a quarter, Company shall be
entitled to a fee for that portion of the quarter during which the Participation
Agreement was still in effect, unless such termination is due to misconduct on
the part of the Affiliate. For such a stub quarter, Average Daily Assets shall
be the sum of the daily assets for each calendar day in the quarter through and
including the date of termination of the Participation Agreement(s), divided by
the number of calendar days in that quarter for which the Participation
Agreement was in effect. Such Average Daily Assets shall be multiplied by
0.0004 (4 basis points) and that number shall be multiplied by the number of
days in such quarter that the Participation Agreement was in effect, then
divided by three hundred sixty-five. The resulting number shall be the
quarterly fee for the stub quarter, which shall be paid to Company during the
following month.
Notwithstanding the foregoing, compensation for each calendar quarter will
not exceed one million dollars ($1,000,000).
4. TERMINATION. This Agreement may be terminated by Company at any time
upon written notice to FIIOC. FIIOC may terminate this Agreement at any time
upon ninety (90) days' written notice to Company. FIIOC may terminate this
Agreement immediately upon written notice to Company (1) if required by any
applicable law or regulation, (2) if so required by action of the Fund(s)
Board of Trustees, (3) if Company engages in any material breach of this
Agreement or (4) if an Affiliate engages in any conduct which would constitute a
material breach of this Agreement were the Affiliate a
<PAGE>
party to the Agreement. This Agreement shall terminate immediately and
automatically with respect to an Affiliate upon the termination of that
Affiliate's Participation Agreement(s) with the Funds, and in such event no
notice need be given hereunder.
5. INDEMNIFICATION. Company agrees to indemnify and hold harmless FIIOC
for any misuse by any Affiliate, their agents and/or brokers, and any persons
controlling Company, under common control with Company, or controlled by
Company, of the information provided by FIIOC under this Agreement.
6. APPLICABLE LAW. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
7. ASSIGNMENT. This Agreement may not be assigned, except that it shall
be assigned automatically to any successor to FIIOC as the Funds' transfer
agent, and any such successor shall be bound by the terms of this Agreement.
8. TERMINATION OF EARLIER AGREEMENT. Company and FIIOC agree that the
previous Service Agreement between the parties, dated November 1, 1995, be, and
it hereby is, terminated as of the date of this Agreement.
IN WITNESS WHEREOF, the parties have set their hands as of the date first
written above.
FIDELITY INVESTMENTS INSTITUTIONAL OPERATIONS COMPANY, INC.
By: _________________________
Thomas J. Fryer
Vice President
RELIASTAR LIFE INSURANCE COMPANY
By: _________________________
Name: ________________________
Title: _______________________
<PAGE>
FEE SCHEDULE FOR QUALIFIED RECIPIENTS OF
Variable Insurance Products Fund - High Income Portfolio
Variable Insurance Products Fund - Equity-Income Portfolio
Variable Insurance Products Fund - Growth Portfolio
Variable Insurance Products Fund - Overseas Portfolio
Variable Insurance Products Fund II - Investment Grade Bond Portfolio
Variable Insurance Products Fund II - Asset Manager Portfolio
Variable Insurance Products Fund II - Contrafund Portfolio
Variable Insurance Products Fund II - Asset Manager, Growth Portfolio
Variable Insurance Products Fund III - Growth Opportunities Portfolio
Variable Insurance Products Fund III - Balanced Portfolio
Variable Insurance Products Fund III - Growth & Income Portfolio
(1) Those who have signed the Service Agreement, who meet the requirements
of paragraph (4) below, and who render distribution, administrative support and
recordkeeping services as described therein, will hereafter be referred to as
"Qualified Recipients."
(2) Qualified Recipients who perform distribution services for their
clients including, without limitations, sale of Portfolio shares, answering
routine client inquiries about the Portfolio(s), completing Portfolio
applications for the client, and producing Portfolio sales brochures or other
marketing materials, will earn a quarterly fee at an annualized rate of 0.06%
(six basis points) of the average aggregate net assets of their clients invested
in the Portfolios.
(3) The fees paid to each Qualified Recipient will be calculated and paid
quarterly. Checks will be mailed to each Qualified Recipient by the 30th of the
following month.
(4) In order to be assured of receiving payment under this Agreement for a
given calendar quarter, a Qualified Recipient must have insurance company
clients with a minimum of $100 million of average net assets in the aggregate in
the mutual fund portfolios shown below. For any calendar quarter during which
assets in these portfolios are in the aggregate less than $100 million, the
amount of qualifying assets may be considered to be zero for the purpose of
computing the payments due.
Variable Insurance Products Fund - Equity-Income Portfolio
Variable Insurance Products Fund - Growth Portfolio
Variable Insurance Products Fund - Overseas Portfolio
Variable Insurance Products Fund II - Asset Manager Portfolio
Variable Insurance Products Fund II - Contrafund Portfolio
Variable Insurance Products Fund II - Asset Manager, Growth Portfolio
Variable Insurance Products Fund III - Growth Opportunities Portfolio
Variable Insurance Products Fund III - Balanced Portfolio
Variable Insurance Products Fund III - Growth & Income Portfolio
<PAGE>
Exhibit 99.8.(e)
SERVICE CONTRACT
WITH RESPECT TO SHARES OF:
( ) Variable Insurance Products Fund - High Income Portfolio
( ) Variable Insurance Products Fund - Equity-Income Portfolio
( ) Variable Insurance Products Fund - Growth Portfolio
( ) Variable Insurance Products Fund - Overseas Portfolio
( ) Variable Insurance Products Fund II - Investment Grade Bond Portfolio
( ) Variable Insurance Products Fund II - Asset Manager Portfolio
( ) Variable Insurance Products Fund II - Contrafund Portfolio
( ) Variable Insurance Products Fund II - Asset Manager: Growth Portfolio
( ) Variable Insurance Products Fund III - Growth Opportunities Portfolio
( ) Variable Insurance Products Fund III - Balanced Portfolio
( ) Variable Insurance Products Fund III - Growth & Income Portfolio
To Fidelity Distributors Corporation:
We desire to enter into a Contract with you for activities in connection with
the distribution of shares and the servicing of shareholders of the Fund noted
above (the "Fund") of which you are the principal underwriter as defined in the
Investment Company Act of 1940 (the "Act") and for which you are the agent for
the continuous distribution of shares.
THE TERMS AND CONDITIONS OF THIS CONTRACT ARE AS FOLLOWS:
1. We shall provide distribution and certain shareholder services for our
clients who own Fund shares ("clients"), which services may include, without
limitations: sale of shares of the Fund; answering client inquiries regarding
the Fund; assistance to clients in changing dividend options, account
designations and addresses; performance of subaccounting; processing purchase
and redemption transactions, including automatic investment and redemption of
client account cash balances; providing periodic statements showing a client's
account balance and the integration of such statements with other transactions;
arranging for bank wires; and providing such other information and services as
you reasonably may request.
2. We shall provide such office space and equipment, telephone facilities and
personnel (which may be all or any part of the space, equipment and facilities
currently used in our business, or all or any personnel employed by us) as is
necessary or beneficial for providing information and services to shareholders
of the Fund, and to assist you in servicing accounts of clients.
3. We agree to indemnify and hold you, the Fund, and the Fund's adviser and
transfer agent harmless from any and all direct or indirect liabilities or
losses
<PAGE>
resulting from requests, directions, actions or inactions, of or by us or our
officers, employees or agents regarding the purchase, redemption, transfer or
registration of shares for our clients. Such indemnification shall survive the
termination of this Contract.
Neither we nor any of our officers, employees or agents are authorized to
make any representation concerning Fund shares except those contained in the
then current Fund Prospectus, copies of which will be supplied by you to us; and
we shall have no authority to act as agent for the Fund or for you.
4. In consideration of the services and facilities described herein, we shall
be entitled to receive, and you shall cause to be paid to us by yourself or by
Fidelity Management & Research Company, investment adviser of the Fund, such
fees as are set forth in the accompanying "Fee Schedule for Qualified
Recipients." We understand that the payment of such fees has been authorized
pursuant to a Service Plan approved by the Board of Trustees of the Fund, and
those Trustees who are not "interested persons" of the Fund (as defined in the
Act) and who have no direct or indirect financial interest in the operation of
the Service Plan or in any agreements related to the Service Plan (hereinafter
referred to as "Qualified Trustees"), and shareholders of the Fund, that such
fees will be paid out of the fees paid to the Fund's investment adviser, said
adviser's past profits or any other source available to said adviser; that the
cost of the Fund for such fees shall not exceed the amount of the advisory and
service fee; and that such fees are subject to change during the term of this
Contract and shall be paid only so long as this Contract is in effect.
5. We agree to conduct our activities in accordance with any applicable
federal or state laws, including securities laws and any obligation thereunder
to disclose to our clients the receipt of fees in connection with their
investment in the Fund.
6. You reserve the right, at your discretion and without notice, to suspend
the sale of shares or withdraw the sale of shares of the Fund.
7. This Contract shall continue in force for one year from the effective
date (see below), and thereafter shall continue automatically for successive
annual periods, provided such continuance is specifically subject to
termination without penalty at any time if a majority of the Fund's Qualified
Trustees vote to terminate or not to continue the Service Plan. This
Contract is also terminable without penalty at any time the Service Plan is
terminated by vote of a majority of the Fund's outstanding voting securities
upon 60 days' written notice thereof to us. This Contract may also be
terminated by us, for any reason, upon 15 days' written notice to you.
Notwithstanding anything contained herein, in the event that the Service Plan
shall terminate or we shall fail to perform the distribution and shareholder
servicing functions contemplated by this Contract, such
<PAGE>
determination to be made in good faith by the Fund or you, this Contract is
terminable effective upon receipt of notice thereof by us. This Contract will
also terminate automatically in the event of its assignment (as defined in the
Act).
8. All communications to you shall be sent to you at your office, 82
Devonshire Street, Boston, MA 02109. Any notice to us shall be duly given if
mailed or telegraphed to us at the address shown in this Contract.
9. This Contract shall be construed in accordance with the laws of the
Commonwealth of Massachusetts.
Very truly yours,
- --------------------------------------------------------------------------------
Name of Qualified Recipient (Please Print or Type)
- --------------------------------------------------------------------------------
Street City State Zip Code
By:
-----------------------------------------------------------------------------
Authorized Signature
Date:
-------------------------
NOTE: Please return two signed copies of this Service Contract to Fidelity
Distributors Corporation. Upon acceptance, one countersigned copy will be
returned to you.
FOR INTERNAL USE ONLY:
EFFECTIVE DATE: JANUARY 1, 1997
<PAGE>
April 25, 1997
Northern Life Insurance Company
1110 Third Avenue
Seattle, WA 98101
Madam/Sir:
In connection with the proposed registration under the Securities Act of 1933,
as amended, of individual variable annuity contracts (the "Contracts") and
interest in Separate Account One (the "Separate Account"), I have examined
documents relating to the establishment of the Separate Account by the Board of
Directors of Northern Life Insurance Company (the "Company") as a separate
account for assets applicable to variable annuity contracts, pursuant to RCW
48.18A.010 et seq., as amended , and the Registration Statement, on Form N-4, as
amended by Post-Effective Amendment No. 3 thereto, File Number 33-90474 (the
"Registration Statement"), and I have examined such other documents and have
reviewed such matters of law as I deemed necessary for this opinion, and I
advise you that in my opinion:
1. The Separate Account is a separate account of the Company duly created
and validly existing pursuant to the laws of the State of Washington.
2. The contracts, when issued in accordance with the Prospectus
constituting a part of the Registration Statement and upon compliance with
applicable local law, will be legal and binding obligations of the Company in
accordance with their respective terms.
3. The portion of the assets held in the Separate Account equal to
reserves and other contract liabilities with respect to the Separate Account are
not chargeable with liabilities arising out of any other business the Company
may conduct.
I consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of my name under the heading "Legal Opinions" in the
Prospectus constituting a part of the Registration Statement and to the
references to me wherever appearing therein.
Very truly yours,
/s/ Kristen Lindberg
Kristen Lindberg
Associate Counsel
<PAGE>
INDEPENDENT AUDITOR'S CONSENT
Board of Directors and Contract Holders
Separate Account One
We consent to the use in this Post-Effective Amendment No. 3 and No. 4 to
Registration Statement on Form N-4 (File No. 33-90474) of Separate Account
One filed under the Securities Act of 1933 and the Investment Company Act of
1940, respectively, of our report dated February 7, 1997 on the audit of the
statement of assets and liabilities of Separate Account One as of December
31, 1996 and the related combined statements of operations and changes in
Contract Owners' equity for the year ended December 31, 1996 and the period
from October 20, 1995 to December 31, 1995, and our report dated February 9,
1997, on the audit of the statutory-basis statements of assets, liabilities,
surplus and other funds as of December 31, 1996 and 1995, and the related
statutory-basis statements of operations, changes in capital and surplus, and
cash flows for the years then ended of Northern Life Insurance Company,
appearing in the Statement of Additional Information of such Registration
Statement and to the references to us under the heading "Financial Statements
and Experts" appearing in the Prospectus and under the headings "Independent
Auditors" and "Financial Statements" appearing in the Statement of Additional
Information, all of which are part of such Registration Statement.
/s/Deloitte & Touche LLP
Minneapolis, Minnesota
April 23, 1997
<PAGE>
Exhibit 99.13
NORTHERN LIFE ADVANTAGE CALCULATION OF FUND YIELDS
CURRENT & EFFECTIVE YIELD (NET OF ALL CONTRACT FEES) DECEMBER, 1996
<TABLE>
<CAPTION>
UNIT VALUE UNIT VALUE NET 7 DAY CURRENT EFFECTIVE
FUND 12/23/96 12/31/96 CHANGE RETURN YIELD YIELD
<S> <C> <C> <C> <C> <C> <C>
FMM $10.462308 $10.471216 ($0.008373) -0.1000% 4.17% 4.26%
</TABLE>
Note: Net Change = 12/31 Unit Value - 12/23 Unit Value - Hypothetical Weekly Fee
Current Yield = 7 Day Return x 365/7
Effective Yield = [(7 Day Return + 1)^(365/7)] - 1
CALCULATION OF AVERAGE WEEKLY CONTRACT FEE PER MONEY MARKET UNIT DECEMBER, 1996
ANNUAL FEE STATED AS UNIT VALUE
AS PERCENT OF A WEEKLY 12/23/96 HYPOTHETICAL
AVG INVESTED $ FEE (INVESTED $) WEEKLY FEE
0.267% 0.0051% $10.462308 $0.000535
<PAGE>
NORTHERN LIFE ADVANTAGE CALCULATION OF FUND YIELDS
STANDARDIZED YIELD FOR BOND FUNDS (NET OF ALL FEES) DECEMBER, 1996
<TABLE>
<CAPTION>
STANDARDIZED
FUND "a" "b" "c" "d" YIELD
<S> <C> <C> <C> <C> <C>
NMS $3,567.28 $786.50 47,788.851 $11.437367 6.18%
</TABLE>
Note: Yield = 2 x [(Y + 1)^6 - 1] where Y = (a - b)/(c x d)
"a" is the net investment income per share (provided by Northstar) multiplied
by the number of NL shares invested in the Fund as of 12/31/96
"b" is the accrued expenses, i.e. December's mortality and expense charges plus
a hypothetical fee representing the effect of the Annual Contract Fee (see
below)
"c" is the average number of accumulation units (see below)
"d" is the 12/31/96 Unit Value
TAKING INTO ACCOUNT THE EFFECT OF THE $30 ANNUAL CONTRACT FEE BY CALCULATING A
HYPOTHETICAL DECEMBER FEE (INCLUDED IN "b" ABOVE)
ANNUAL FEE STATED AS AVG DOLLARS HYPOTHETICAL
AS PERCENT OF A MONTHLY INVESTED IN DECEMBER
AVG INVESTED $ FEE DECEMBER FEE
NMS 0.267% 0.0222% $545,332 $121.13
CALCULATION OF AVERAGE # UNITS OUTSTANDING FOR DECEMBER, 1996 ("c" ABOVE)
11/29/96 12/31/96 AVERAGE
FUND # UNITS # UNITS # UNITS O/S
NMS 42,785.520 52,792.181 47,788.851
Note: Average # Units Outstanding = (Ending # Units O/S + Beginning # Units
O/S) / 2
UNIT VALUE UNIT VALUE
FUND 11/29/96 12/31/96
NMS 11.379087 11.437367
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FUND: FEI VIPF EQUITY INCOME PORTFOLIO
ASSUMPTIONS:
Contract Fee $30
Avg Contract Fee per $ 0.27%
M&E and Admin Charge 1.40%
SINCE SUB-ACCOUNT INCEPTION:
Total Return of Fund 21.24%
Total Return incl M&E 19.20% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 18.82% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
20-Oct-95 $1,000 10.00 100.00 $1,192.04 $1,188.23 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,188.23 $1,134.23 $1,102.67
Total Return Inception 21.24% 18.82% 13.42% 10.27%
Average Annual Return 17.41% 15.46% 11.07% 8.49%
--------------------------------------------------------------------------------
OVER 1 YEAR:
Total Return of Fund 14.28%
Total Return incl M&E 12.68%
Total Return incl M&E and Cont Fee 12.38%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,126.80 $1,123.80 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,123.80 $1,069.80 $1,042.88
Total Return 1 Year 14.28% 12.38% 6.98% 4.29%
Average Annual Return 14.28% 12.38% 6.98% 4.29%
--------------------------------------------------------------------------------
SINCE FUND INCEPTION:
Total Return of Fund 171.02%
Total Return incl M&E 120.10% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 111.59% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Apr-82 $1,000 10.00 100.00 $2,200.97 $2,115.94 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $2,115.94 $2,115.94 $2,115.94
Total Return Inception 171.02% 111.59% 111.59% 111.59%
Average Annual Return 6.99% 5.21% 5.21% 5.21%
--------------------------------------------------------------------------------
<PAGE>
OVER 10 YEARS:
Total Return of Fund 78.38%
Total Return incl M&E 54.92%
Total Return incl M&E and Cont Fee 50.84%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-87 $1,000 10.00 100.00 $1,549.23 $1,508.43 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,508.43 $1,508.43 $1,494.85
Total Return 10 Years 78.38% 50.84% 50.84% 49.48%
Average Annual Return 5.96% 4.20% 4.20% 4.10%
--------------------------------------------------------------------------------
OVER 5 YEARS:
Total Return of Fund 24.78%
Total Return incl M&E 16.29%
Total Return incl M&E and Cont Fee 14.75%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-92 $1,000 10.00 100.00 $1,162.87 $1,147.45 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,147.45 $1,111.45 $1,085.49
Total Return 5 Years 24.78% 14.75% 11.15% 8.55%
Average Annual Return 4.53% 2.79% 2.14% 1.65%
--------------------------------------------------------------------------------
OVER 3 YEARS:
Total Return of Fund 16.34%
Total Return incl M&E 11.52%
Total Return incl M&E and Cont Fee 10.63%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-94 $1,000 10.00 100.00 $1,115.22 $1,106.32 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,106.32 $1,061.32 $1,026.67
Total Return 5 Years 16.34% 10.63% 6.13% 2.67%
Average Annual Return 5.17% 3.43% 2.00% 0.88%
--------------------------------------------------------------------------------
<PAGE>
OVER 1 YEAR:
Total Return of Fund 5.41%
Total Return incl M&E 3.93%
Total Return incl M&E and Cont Fee 3.66%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,039.34 $1,036.57 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,036.57 $982.57 $961.94
Total Return 1 Year 5.41% 3.66% -1.74% -3.81%
Average Annual Return 5.41% 3.66% -1.74% -3.81%
--------------------------------------------------------------------------------
YEAR TO DATE:
Total Return of Fund NA
Total Return incl M&E NA [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee NA [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return Yr to Date NA NA NA NA
--------------------------------------------------------------------------------
<PAGE>
FUND: FGP VIPF GROWTH PORTFOLIO
ASSUMPTIONS:
Contract Fee $30
Avg Contract Fee per $ 0.27%
M&E and Admin Charge 1.40%
SINCE SUB-ACCOUNT INCEPTION:
Total Return of Fund 11.50%
Total Return incl M&E 9.63% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 9.27% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
20-Oct-95 $1,000 10.00 100.00 $1,096.25 $1,092.75 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,092.75 $1,038.75 $1,014.07
Total Return Inception 11.50% 9.27% 3.87% 1.41%
Average Annual Return 9.49% 7.67% 3.22% 1.17%
--------------------------------------------------------------------------------
OVER 1 YEAR:
Total Return of Fund 14.71%
Total Return incl M&E 13.10%
Total Return incl M&E and Cont Fee 12.80%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,131.04 $1,128.03 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,128.03 $1,074.03 $1,046.81
Total Return 1 Year 14.71% 12.80% 7.40% 4.68%
Average Annual Return 14.71% 12.80% 7.40% 4.68%
--------------------------------------------------------------------------------
SINCE FUND INCEPTION:
Total Return of Fund 263.01%
Total Return incl M&E 214.23% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 205.76% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
9-Oct-86 $1,000 10.00 100.00 $3,142.28 $3,057.60 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $3,057.60 $3,057.60 $3,057.60
Total Return Inception 263.01% 205.76% 205.76% 205.76%
Average Annual Return 13.42% 11.54% 11.54% 11.54%
--------------------------------------------------------------------------------
<PAGE>
OVER 10 YEARS:
Total Return of Fund 262.28%
Total Return incl M&E 214.64%
Total Return incl M&E and Cont Fee 206.35%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-87 $1,000 10.00 100.00 $3,146.40 $3,063.53 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $3,063.53 $3,063.53 $3,035.96
Total Return 10 Years 262.28% 206.35% 206.35% 203.60%
Average Annual Return 13.74% 11.85% 11.85% 11.75%
--------------------------------------------------------------------------------
OVER 5 YEARS:
Total Return of Fund 128.56%
Total Return incl M&E 113.00%
Total Return incl M&E and Cont Fee 110.18%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-92 $1,000 10.00 100.00 $2,130.03 $2,101.79 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $2,101.79 $2,065.79 $1,988.29
Total Return 5 Years 128.56% 110.18% 106.58% 98.83%
Average Annual Return 17.98% 16.02% 15.62% 14.74%
--------------------------------------------------------------------------------
OVER 3 YEARS:
Total Return of Fund 65.30%
Total Return incl M&E 58.45%
Total Return incl M&E and Cont Fee 57.19%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-94 $1,000 10.00 100.00 $1,584.54 $1,571.90 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,571.90 $1,526.90 $1,458.73
Total Return 5 Years 65.30% 57.19% 52.69% 45.87%
Average Annual Return 18.24% 16.27% 15.15% 13.41%
--------------------------------------------------------------------------------
<PAGE>
OVER 1 YEAR:
Total Return of Fund 14.28%
Total Return incl M&E 12.68%
Total Return incl M&E and Cont Fee 12.38%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,126.80 $1,123.80 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,123.80 $1,069.80 $1,042.88
Total Return 1 Year 14.28% 12.38% 6.98% 4.29%
Average Annual Return 14.28% 12.38% 6.98% 4.29%
--------------------------------------------------------------------------------
YEAR TO DATE:
Total Return of Fund 14.28%
Total Return incl M&E 12.68% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 12.38% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,126.80 $1,123.80 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,123.80 $1,069.80 $1,042.88
Total Return Yr to Date 14.28% 12.38% 6.98% 4.29%
--------------------------------------------------------------------------------
<PAGE>
FUND: FOS VIPF OVERSEAS PORTFOLIO
ASSUMPTIONS:
Contract Fee $30
Avg Contract Fee per $ 0.27%
M&E and Admin Charge 1.40%
SINCE SUB-ACCOUNT INCEPTION:
Total Return of Fund 16.15%
Total Return incl M&E 14.20% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 13.83% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
20-Oct-95 $1,000 10.00 100.00 $1,142.00 $1,138.35 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,138.35 $1,084.35 $1,056.39
Total Return Inception 16.15% 13.83% 8.43% 5.64%
Average Annual Return 13.29% 11.40% 6.98% 4.68%
--------------------------------------------------------------------------------
OVER 1 YEAR:
Total Return of Fund 13.15%
Total Return incl M&E 11.57%
Total Return incl M&E and Cont Fee 11.27%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,115.66 $1,112.69 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,112.69 $1,058.69 $1,032.57
Total Return 1 Year 13.15% 11.27% 5.87% 3.26%
Average Annual Return 13.15% 11.27% 5.87% 3.26%
--------------------------------------------------------------------------------
SINCE FUND INCEPTION:
Total Return of Fund 311.23%
Total Return incl M&E 255.97% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 246.38% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
9-Oct-86 $1,000 10.00 100.00 $3,559.68 $3,463.75 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $3,463.75 $3,463.75 $3,463.75
Total Return Inception 311.23% 246.38% 246.38% 246.38%
Average Annual Return 14.81% 12.90% 12.90% 12.90%
--------------------------------------------------------------------------------
<PAGE>
OVER 10 YEARS:
Total Return of Fund 310.00%
Total Return incl M&E 256.08%
Total Return incl M&E and Cont Fee 246.71%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-87 $1,000 10.00 100.00 $3,560.84 $3,467.06 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $3,467.06 $3,467.06 $3,435.86
Total Return 10 Years 310.00% 246.71% 246.71% 243.59%
Average Annual Return 15.15% 13.24% 13.24% 13.14%
--------------------------------------------------------------------------------
OVER 5 YEARS:
Total Return of Fund 102.58%
Total Return incl M&E 88.79%
Total Return incl M&E and Cont Fee 86.29%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-92 $1,000 10.00 100.00 $1,887.91 $1,862.88 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,862.88 $1,826.88 $1,762.29
Total Return 5 Years 102.58% 86.29% 82.69% 76.23%
Average Annual Return 15.16% 13.25% 12.81% 12.00%
--------------------------------------------------------------------------------
OVER 3 YEARS:
Total Return of Fund 55.24%
Total Return incl M&E 48.81%
Total Return incl M&E and Cont Fee 47.62%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-94 $1,000 10.00 100.00 $1,488.11 $1,476.24 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,476.24 $1,431.24 $1,369.95
Total Return 5 Years 55.24% 47.62% 43.12% 37.00%
Average Annual Return 15.79% 13.86% 12.69% 11.06%
--------------------------------------------------------------------------------
<PAGE>
OVER 1 YEAR:
Total Return of Fund 14.71%
Total Return incl M&E 13.10%
Total Return incl M&E and Cont Fee 12.80%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,131.04 $1,128.03 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,128.03 $1,074.03 $1,046.81
Total Return 1 Year 14.71% 12.80% 7.40% 4.68%
Average Annual Return 14.71% 12.80% 7.40% 4.68%
--------------------------------------------------------------------------------
YEAR TO DATE:
Total Return of Fund 14.71%
Total Return incl M&E 13.10% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 12.80% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,131.04 $1,128.03 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,128.03 $1,074.03 $1,046.81
Total Return Yr to Date 14.71% 12.80% 7.40% 4.68%
--------------------------------------------------------------------------------
<PAGE>
FUND: FAM VIPF II ASSET MANAGER PORTFOLIO
ASSUMPTIONS:
Contract Fee $30
Avg Contract Fee per $ 0.27%
M&E and Admin Charge 1.40%
SINCE SUB-ACCOUNT INCEPTION:
Total Return of Fund 19.05%
Total Return incl M&E 17.05% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 16.68% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
20-Oct-95 $1,000 10.00 100.00 $1,170.55 $1,166.80 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,166.80 $1,112.80 $1,082.79
Total Return Inception 19.05% 16.68% 11.28% 8.28%
Average Annual Return 15.64% 13.72% 9.32% 6.85%
--------------------------------------------------------------------------------
OVER 1 YEAR:
Total Return of Fund 14.60%
Total Return incl M&E 13.00%
Total Return incl M&E and Cont Fee 12.69%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,129.96 $1,126.94 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,126.94 $1,072.94 $1,045.80
Total Return 1 Year 14.60% 12.69% 7.29% 4.58%
Average Annual Return 14.60% 12.69% 7.29% 4.58%
--------------------------------------------------------------------------------
SINCE FUND INCEPTION:
Total Return of Fund 112.54%
Total Return incl M&E 84.77% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 79.94% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
28-Jan-87 $1,000 10.00 100.00 $1,847.69 $1,799.36 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,799.36 $1,799.36 $1,783.16
Total Return Inception 112.54% 79.94% 79.94% 78.32%
Average Annual Return 7.89% 6.09% 6.09% 6.00%
--------------------------------------------------------------------------------
<PAGE>
OVER 10 YEARS:
Total Return of Fund NA
Total Return incl M&E NA
Total Return incl M&E and Cont Fee NA
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-87 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return 10 Years NA NA NA NA
Average Annual Return NA NA NA NA
--------------------------------------------------------------------------------
OVER 5 YEARS:
Total Return of Fund 54.89%
Total Return incl M&E 44.35%
Total Return incl M&E and Cont Fee 42.43%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-92 $1,000 10.00 100.00 $1,443.47 $1,424.34 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,424.34 $1,388.34 $1,347.42
Total Return 5 Years 54.89% 42.43% 38.83% 34.74%
Average Annual Return 9.15% 7.33% 6.78% 6.15%
--------------------------------------------------------------------------------
OVER 3 YEARS:
Total Return of Fund 26.31%
Total Return incl M&E 21.08%
Total Return incl M&E and Cont Fee 20.11%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-94 $1,000 10.00 100.00 $1,210.79 $1,201.13 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,201.13 $1,156.13 $1,114.65
Total Return 5 Years 26.31% 20.11% 15.61% 11.47%
Average Annual Return 8.10% 6.30% 4.95% 3.68%
--------------------------------------------------------------------------------
<PAGE>
OVER 1 YEAR:
Total Return of Fund 13.15%
Total Return incl M&E 11.57%
Total Return incl M&E and Cont Fee 11.27%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,115.66 $1,112.69 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,112.69 $1,058.69 $1,032.57
Total Return 1 Year 13.15% 11.27% 5.87% 3.26%
Average Annual Return 13.15% 11.27% 5.87% 3.26%
--------------------------------------------------------------------------------
YEAR TO DATE:
Total Return of Fund 13.15%
Total Return incl M&E 11.57% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 11.27% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,115.66 $1,112.69 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,112.69 $1,058.69 $1,032.57
Total Return Yr to Date 13.15% 11.27% 5.87% 3.26%
--------------------------------------------------------------------------------
<PAGE>
FUND: FMG VIPF II ASSET MANAGER: GROWTH PORTFOLIO
ASSUMPTIONS:
Contract Fee $30
Avg Contract Fee per $ 0.27%
M&E and Admin Charge 1.40%
SINCE SUB-ACCOUNT INCEPTION:
Total Return of Fund 23.26%
Total Return incl M&E 21.20% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 20.81% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
20-Oct-95 $1,000 10.00 100.00 $1,211.96 $1,208.08 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,208.08 $1,154.08 $1,121.10
Total Return Inception 23.26% 20.81% 15.41% 12.11%
Average Annual Return 19.04% 17.06% 12.68% 9.99%
--------------------------------------------------------------------------------
OVER 1 YEAR:
Total Return of Fund 20.04%
Total Return incl M&E 18.36%
Total Return incl M&E and Cont Fee 18.04%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,183.59 $1,180.44 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,180.44 $1,126.44 $1,095.45
Total Return 1 Year 20.04% 18.04% 12.64% 9.54%
Average Annual Return 20.04% 18.04% 12.64% 9.54%
--------------------------------------------------------------------------------
SINCE FUND INCEPTION:
Total Return of Fund 124.77%
Total Return incl M&E 102.72% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 98.80% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
6-Sep-89 $1,000 10.00 100.00 $2,027.20 $1,987.96 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,987.96 $1,987.96 $1,934.29
Total Return Inception 124.77% 98.80% 98.80% 93.43%
Average Annual Return 11.69% 9.84% 9.84% 9.43%
--------------------------------------------------------------------------------
<PAGE>
OVER 10 YEARS:
Total Return of Fund NA
Total Return incl M&E NA
Total Return incl M&E and Cont Fee NA
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-87 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return 10 Years NA NA NA NA
Average Annual Return NA NA NA NA
--------------------------------------------------------------------------------
OVER 5 YEARS:
Total Return of Fund 70.47%
Total Return incl M&E 58.87%
Total Return incl M&E and Cont Fee 56.76%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-92 $1,000 10.00 100.00 $1,588.67 $1,567.61 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,567.61 $1,531.61 $1,482.95
Total Return 5 Years 70.47% 56.76% 53.16% 48.30%
Average Annual Return 11.26% 9.41% 8.90% 8.20%
--------------------------------------------------------------------------------
OVER 3 YEARS:
Total Return of Fund 25.87%
Total Return incl M&E 20.66%
Total Return incl M&E and Cont Fee 19.69%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-94 $1,000 10.00 100.00 $1,206.57 $1,196.95 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,196.95 $1,151.95 $1,110.77
Total Return 5 Years 25.87% 19.69% 15.19% 11.08%
Average Annual Return 7.97% 6.18% 4.83% 3.56%
--------------------------------------------------------------------------------
<PAGE>
OVER 1 YEAR:
Total Return of Fund 14.60%
Total Return incl M&E 13.00%
Total Return incl M&E and Cont Fee 12.69%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,129.96 $1,126.94 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- --------
Ending Value NA $1,126.94 $1,072.94 $1,045.80
Total Return 1 Year 14.60% 12.69% 7.29% 4.58%
Average Annual Return 14.60% 12.69% 7.29% 4.58%
--------------------------------------------------------------------------------
YEAR TO DATE:
Total Return of Fund 14.60%
Total Return incl M&E 13.00% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 12.69% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,129.96 $1,126.94 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,126.94 $1,072.94 $1,045.80
Total Return Yr to Date 14.60% 12.69% 7.29% 4.58%
--------------------------------------------------------------------------------
<PAGE>
FUND: FCF VIPF II CONTRAFUND PORTFOLIO
ASSUMPTIONS:
Contract Fee $30
Avg Contract Fee per $ 0.27%
M&E and Admin Charge 1.40%
SINCE SUB-ACCOUNT INCEPTION:
Total Return of Fund 23.54%
Total Return incl M&E 21.47% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 21.08% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
20-Oct-95 $1,000 10.00 100.00 $1,214.65 $1,210.77 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,210.77 $1,156.77 $1,123.59
Total Return Inception 23.54% 21.08% 15.68% 12.36%
Average Annual Return 19.26% 17.28% 12.90% 10.20%
--------------------------------------------------------------------------------
OVER 1 YEAR:
Total Return of Fund 21.22%
Total Return incl M&E 19.52%
Total Return incl M&E and Cont Fee 19.20%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,195.23 $1,192.04 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,192.04 $1,138.04 $1,106.22
Total Return 1 Year 21.22% 19.20% 13.80% 10.62%
Average Annual Return 21.22% 19.20% 13.80% 10.62%
--------------------------------------------------------------------------------
SINCE FUND INCEPTION:
Total Return of Fund 47.67%
Total Return incl M&E 43.58% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 42.81% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
3-Jan-95 $1,000 10.00 100.00 $1,435.75 $1,428.13 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,428.13 $1,374.13 $1,325.30
Total Return Inception 47.67% 42.81% 37.41% 32.53%
Average Annual Return 21.58% 19.56% 17.27% 15.17%
--------------------------------------------------------------------------------
<PAGE>
OVER 10 YEARS:
Total Return of Fund NA
Total Return incl M&E NA
Total Return incl M&E and Cont Fee NA
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-87 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return 10 Years NA NA NA NA
Average Annual Return NA NA NA NA
--------------------------------------------------------------------------------
OVER 5 YEARS:
Total Return of Fund NA
Total Return incl M&E NA
Total Return incl M&E and Cont Fee NA
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-92 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return 5 Years NA NA NA NA
Average Annual Return NA NA NA NA
--------------------------------------------------------------------------------
OVER 3 YEARS:
Total Return of Fund NA
Total Return incl M&E NA
Total Return incl M&E and Cont Fee NA
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-94 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return 5 Years NA NA NA NA
Average Annual Return NA NA NA NA
--------------------------------------------------------------------------------
<PAGE>
OVER 1 YEAR:
Total Return of Fund 20.04%
Total Return incl M&E 18.36%
Total Return incl M&E and Cont Fee 18.04%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,183.59 $1,180.44 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,180.44 $1,126.44 $1,095.45
Total Return 1 Year 20.04% 18.04% 12.64% 9.54%
Average Annual Return 20.04% 18.04% 12.64% 9.54%
--------------------------------------------------------------------------------
YEAR TO DATE:
Total Return of Fund 20.04%
Total Return incl M&E 18.36% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 18.04% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,183.59 $1,180.44 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,180.44 $1,126.44 $1,095.45
Total Return Yr t 20.04% 18.04% 12.64% 9.54%
--------------------------------------------------------------------------------
<PAGE>
FUND: FIN VIPF II INDEX 500 PORTFOLIO
ASSUMPTIONS:
Contract Fee $30
Avg Contract Fee per $ 0.27%
M&E and Admin Charge 1.40%
SINCE SUB-ACCOUNT INCEPTION:
Total Return of Fund 29.24%
Total Return incl M&E 27.07% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 26.67% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
20-Oct-95 $1,000 10.00 100.00 $1,270.74 $1,266.68 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,266.68 $1,212.68 $1,175.48
Total Return Inception 29.24% 26.67% 21.27% 17.55%
Average Annual Return 23.83% 21.77% 17.43% 14.42%
--------------------------------------------------------------------------------
OVER 1 YEAR:
Total Return of Fund 22.82%
Total Return incl M&E 21.10%
Total Return incl M&E and Cont Fee 20.78%
BEGINNING CONTRACT
LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,211.01 1,207.78 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,207.78 $1,153.78 $1,120.82
Total Return 1 Year 22.82% 20.78% 15.38% 12.08%
Average Annual Return 22.82% 20.78% 15.38% 12.08%
--------------------------------------------------------------------------------
SINCE FUND INCEPTION:
Total Return of Fund 69.37%
Total Return incl M&E 64.67% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 63.80% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
3-Jan-95 $1,000 10.00 100.00 $1,646.74 $1,637.99 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,637.99 $1,583.99 $1,520.06
Total Return Inception 69.37% 63.80% 58.40% 52.01%
Average Annual Return 30.24% 28.07% 25.94% 23.36%
--------------------------------------------------------------------------------
<PAGE>
OVER 10 YEARS:
Total Return of Fund NA
Total Return incl M&E NA
Total Return incl M&E and Cont Fee NA
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-87 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return 10 Years NA NA NA NA
Average Annual Return NA NA NA NA
--------------------------------------------------------------------------------
OVER 5 YEARS:
Total Return of Fund NA
Total Return incl M&E NA
Total Return incl M&E and Cont Fee NA
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-92 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return 5 Years NA NA NA NA
Average Annual Return NA NA NA NA
--------------------------------------------------------------------------------
OVER 3 YEARS:
Total Return of Fund NA
Total Return incl M&E NA
Total Return incl M&E and Cont Fee NA
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-94 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return 5 Years NA NA NA NA
Average Annual Return NA NA NA NA
--------------------------------------------------------------------------------
<PAGE>
OVER 1 YEAR:
Total Return of Fund 21.22%
Total Return incl M&E 19.52%
Total Return incl M&E and Cont Fee 19.20%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,195.23 $1,192.04 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,192.04 $1,138.04 $1,106.22
Total Return 1 Year 21.22% 19.20% 13.80% 10.62%
Average Annual Return 21.22% 19.20% 13.80% 10.62%
--------------------------------------------------------------------------------
YEAR TO DATE:
Total Return of Fund 21.22%
Total Return incl M&E 19.52% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 19.20% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,195.23 $1,192.04 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,192.04 $1,138.04 $1,106.22
Total Return Yr to Date 21.22% 19.20% 3.80% 10.62%
--------------------------------------------------------------------------------
<PAGE>
FUND: NIG NORTHSTAR INCOME AND GROWTH FUND
ASSUMPTIONS:
Contract Fee $30
Avg Contract Fee per $ 0.27%
M&E and Admin Charge 1.40%
SINCE FUND INCEPTION:
Total Return of Fund 18.16%
Total Return incl M&E 16.18% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 15.81% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
20-Oct-95 $1,000 10.00 100.00 $1,161.77 $1,158.05 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,158.05 $1,104.05 $1,074.67
Total Return Inception 18.16% 15.81% 10.41% 7.47%
Average Annual Return 14.92% 13.01% 8.60% 6.18%
--------------------------------------------------------------------------------
OVER 1 YEAR:
Total Return of Fund 13.61%
Total Return incl M&E 12.02%
Total Return incl M&E and Cont Fee 11.72%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,120.19 $1,117.21 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,117.21 $1,063.21 $1,036.77
Total Return 1 Year 13.61% 11.72% 6.32% 3.68%
Average Annual Return 13.61% 11.72% 6.32% 3.68%
--------------------------------------------------------------------------------
SINCE FUND INCEPTION:
Total Return of Fund 98.62%
Total Return incl M&E 86.81% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 84.65% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
27-Aug-92 $1,000 10.00 100.00 $1,868.10 $1,846.55 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,846.55 $1,810.55 $1,746.83
Total Return Inception 98.62% 84.65% 81.05% 74.68%
Average Annual Return 17.10% 15.15% 14.63% 13.69%
--------------------------------------------------------------------------------
<PAGE>
OVER 10 YEARS:
Total Return of Fund NA
Total Return incl M&E NA
Total Return incl M&E and Cont Fee NA
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-87 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return 10 Years NA NA NA NA
Average Annual Return NA NA NA NA
--------------------------------------------------------------------------------
OVER 5 YEARS:
Total Return of Fund NA
Total Return incl M&E NA
Total Return incl M&E and Cont Fee NA
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-92 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return 5 Years NA NA NA NA
Average Annual Return NA NA NA NA
--------------------------------------------------------------------------------
OVER 3 YEARS:
Total Return of Fund 70.25%
Total Return incl M&E 63.20%
Total Return incl M&E and Cont Fee 61.90%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-94 $1,000 10.00 100.00 $1,631.99 $1,618.98 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,618.98 $1,573.98 $1,502.41
Total Return 5 Years 70.25% 61.90% 57.40% 50.24%
Average Annual Return 19.41% 17.42% 16.32% 14.53%
--------------------------------------------------------------------------------
<PAGE>
OVER 1 YEAR:
Total Return of Fund 22.82%
Total Return incl M&E 21.10%
Total Return incl M&E and Cont Fee 20.78%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,211.01 $1,207.78 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,207.78 $1,153.78 $1,120.82
Total Return 1 Year 22.82% 20.78% 15.38% 12.08%
Average Annual Return 22.82% 20.78% 15.38% 12.08%
--------------------------------------------------------------------------------
YEAR TO DATE:
Total Return of Fund 22.82%
Total Return incl M&E 21.10% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 20.78% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,211.01 $1,207.78 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,207.78 $1,153.78 $1,120.82
Total Return Yr to Date 22.82% 20.78% 15.38% 12.08%
--------------------------------------------------------------------------------
<PAGE>
FUND: NGF NORTHSTAR GROWTH PORTFOLIO
ASSUMPTIONS:
Contract Fee $30
Avg Contract Fee per $ 0.27%
M&E and Admin Charge 1.40%
SINCE SUB-ACCOUNT INCEPTION:
Total Return of Fund 26.20%
Total Return incl M&E 24.09% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 23.69% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
20-Oct-95 $1,000 10.00 100.00 $1,240.87 $1,236.90 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,236.90 $1,182.90 $1,147.84
Total Return Inception 26.20% 23.69% 18.29% 14.78%
Average Annual Return 21.40% 19.38% 15.02% 12.18%
--------------------------------------------------------------------------------
OVER 1 YEAR:
Total Return of Fund 22.99%
Total Return incl M&E 21.27%
Total Return incl M&E and Cont Fee 20.94%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,212.68 $1,209.45 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,209.45 $1,155.45 $1,122.37
Total Return 1 Year 22.99% 20.94% 15.54% 12.24%
Average Annual Return 22.99% 20.94% 15.54% 12.24%
--------------------------------------------------------------------------------
SINCE FUND INCEPTION:
Total Return of Fund 40.55%
Total Return incl M&E 35.38% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 34.42% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
6-May-94 $1,000 10.00 100.00 $1,353.81 $1,344.24 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,344.24 $1,299.24 $1,247.46
Total Return Inception 40.55% 34.42% 29.92% 24.75%
Average Annual Return 13.67% 11.78% 10.35% 8.68%
--------------------------------------------------------------------------------
<PAGE>
OVER 10 YEARS:
Total Return of Fund NA
Total Return incl M&E NA
Total Return incl M&E and Cont Fee NA
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-87 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return 10 Years NA NA NA NA
Average Annual Return NA NA NA NA
--------------------------------------------------------------------------------
OVER 5 YEARS:
Total Return of Fund NA
Total Return incl M&E NA
Total Return incl M&E and Cont Fee NA
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-92 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return 5 Years NA NA NA NA
Average Annual Return NA NA NA NA
--------------------------------------------------------------------------------
OVER 3 YEARS:
Total Return of Fund NA
Total Return incl M&E NA
Total Return incl M&E and Cont Fee NA
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-94 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return 5 Years NA NA NA NA
Average Annual Return NA NA NA NA
--------------------------------------------------------------------------------
<PAGE>
OVER 1 YEAR:
Total Return of Fund 13.61%
Total Return incl M&E 12.02%
Total Return incl M&E and Cont Fee 11.72%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,120.19 $1,117.21 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,117.21 $1,063.21 $1,036.77
Total Return 1 Year 13.61% 11.72% 6.32% 3.68%
Average Annual Return 13.61% 11.72% 6.32% 3.68%
--------------------------------------------------------------------------------
YEAR TO DATE:
Total Return of Fund 13.61%
Total Return incl M&E 12.02% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 11.72% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,120.19 $1,117.21 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,117.21 $1,063.21 $1,036.77
Total Return Yr to Date 13.61% 11.72% 6.32% 3.68%
--------------------------------------------------------------------------------
<PAGE>
FUND: NMS NORTHSTAR MULTI-SECTOR BOND PORTFOLIO
ASSUMPTIONS:
Contract Fee $30
Avg Contract Fee per $ 0.27%
M&E and Admin Charge 1.40%
SINCE SUB-ACCOUNT INCEPTION:
Total Return of Fund 16.47%
Total Return incl M&E 14.51% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 14.15% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
20-Oct-95 $1,000 10.00 100.00 $1,145.13 $1,141.47 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,141.47 $1,087.47 $1,059.28
Total Return Inception 16.47% 14.15% 8.75% 5.93%
Average Annual Return 13.55% 11.66% 7.24% 4.92%
--------------------------------------------------------------------------------
OVER 1 YEAR:
Total Return of Fund 12.53%
Total Return incl M&E 10.95%
Total Return incl M&E and Cont Fee 10.66%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,109.55 $1,106.59 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,106.59 $1,052.59 $1,026.91
Total Return 1 Year 12.53% 10.66% 5.26% 2.69%
Average Annual Return 12.53% 10.66% 5.26% 2.69%
--------------------------------------------------------------------------------
SINCE FUND INCEPTION:
Total Return of Fund 58.79%
Total Return incl M&E 52.95% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 51.87% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
6-May-94 $1,000 10.00 100.00 $1,529.50 $1,518.69 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,518.69 $1,473.69 $1,409.35
Total Return Inception 58.79% 51.87% 47.37% 40.93%
Average Annual Return 19.01% 17.03% 15.71% 13.78%
--------------------------------------------------------------------------------
<PAGE>
OVER 10 YEARS:
Total Return of Fund NA
Total Return incl M&E NA
Total Return incl M&E and Cont Fee NA
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-87 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return 10 Years NA NA NA NA
Average Annual Return NA NA NA NA
--------------------------------------------------------------------------------
OVER 5 YEARS:
Total Return of Fund NA
Total Return incl M&E NA
Total Return incl M&E and Cont Fee NA
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-92 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return 5 Years NA NA NA NA
Average Annual Return NA NA NA NA
--------------------------------------------------------------------------------
OVER 3 YEARS:
Total Return of Fund NA
Total Return incl M&E NA
Total Return incl M&E and Cont Fee NA
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-94 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return 5 Years NA NA NA NA
Average Annual Return NA NA NA NA
--------------------------------------------------------------------------------
<PAGE>
OVER 1 YEAR:
Total Return of Fund 22.99%
Total Return incl M&E 21.27%
Total Return incl M&E and Cont Fee 20.94%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,212.68 $1,209.45 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,209.45 $1,155.45 $1,122.37
Total Return 1 Year 22.99% 20.94% 15.54% 12.24%
Average Annual Return 22.99% 20.94% 15.54% 12.24%
--------------------------------------------------------------------------------
YEAR TO DATE:
Total Return of Fund 22.99%
Total Return incl M&E 21.27% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 20.94% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,212.68 $1,209.45 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,209.45 $1,155.45 $1,122.37
Total Return Yr to Date 22.99% 20.94% 15.54% 12.24%
--------------------------------------------------------------------------------
<PAGE>
FUND: ASC ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
ASSUMPTIONS:
Contract Fee $30
Avg Contract Fee per $ 0.27%
M&E and Admin Charge 1.40%
SINCE SUB-ACCOUNT INCEPTION:
Total Return of Fund .31%
Total Return incl M&E -1.37% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee -1.68% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
20-Oct-95 $1,000 10.00 100.00 $986.32 $983.16 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $983.16 $929.16 $912.38
Total Return Inception 0.31% -1.68% -7.08% -8.76%
Average Annual Return 0.26% -1.41% -5.94% -7.36%
--------------------------------------------------------------------------------
OVER 1 YEAR:
Total Return of Fund 4.18%
Total Return incl M&E 2.72%
Total Return incl M&E and Cont Fee 2.45%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,027.21 $1,024.48 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,024.48 $970.48 $950.71
Total Return 1 Year 4.18% 2.45% -2.95% -4.93%
Average Annual Return 4.18% 2.45% -2.95% -4.93%
--------------------------------------------------------------------------------
SINCE FUND INCEPTION:
Total Return of Fund 31.20%
Total Return incl M&E 26.38% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 25.48% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
6-May-94 $1,000 10.00 100.00 $1,263.75 $1,254.82 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,254.82 $1,209.82 $1,164.47
Total Return Inception 31.20% 25.48% 20.98% 16.45%
Average Annual Return 10.76% 8.92% 7.43% 5.90%
--------------------------------------------------------------------------------
<PAGE>
OVER 10 YEARS:
Total Return of Fund NA
Total Return incl M&E NA
Total Return incl M&E and Cont Fee NA
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-87 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return 10 Years NA NA NA NA
Average Annual Return NA NA NA NA
--------------------------------------------------------------------------------
OVER 5 YEARS:
Total Return of Fund NA
Total Return incl M&E NA
Total Return incl M&E and Cont Fee NA
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-92 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return 5 Years NA NA NA NA
Average Annual Return NA NA NA NA
--------------------------------------------------------------------------------
OVER 3 YEARS:
Total Return of Fund NA
Total Return incl M&E NA
Total Return incl M&E and Cont Fee NA
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-94 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return 5 Years NA NA NA NA
Average Annual Return NA NA NA NA
--------------------------------------------------------------------------------
<PAGE>
OVER 1 YEAR:
Total Return of Fund 12.53%
Total Return incl M&E 10.95%
Total Return incl M&E and Cont Fee 10.66%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,109.55 $1,106.59 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,106.59 $1,052.59 $1,026.91
Total Return 1 Year 12.53% 10.66% 5.26% 2.69%
Average Annual Return 12.53% 10.66% 5.26% 2.69%
--------------------------------------------------------------------------------
YEAR TO DATE:
Total Return of Fund 12.53%
Total Return incl M&E 10.95% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 10.66% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,109.55 $1,106.59 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,106.59 $1,052.59 $1,026.91
Total Return Yr to Date 12.53% 10.66% 5.26% 2.69%
--------------------------------------------------------------------------------
<PAGE>
FUND: AGR ALGER AMERICAN GROWTH PORTFOLIO
ASSUMPTIONS:
Contract Fee $30
Avg Contract Fee per $ 0.27%
M&E and Admin Charge 1.40%
SINCE SUB-ACCOUNT INCEPTION:
Total Return of Fund 12.48%
Total Return incl M&E 10.60% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 10.24% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
20-Oct-95 $1,000 10.00 100.00 $1,105.96 $1,102.42 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,102.42 $1,048.42 $1,023.05
Total Return Inception 12.48% 10.24% 4.84% 2.30%
Average Annual Return 10.30% 8.46% 4.02% 1.92%
--------------------------------------------------------------------------------
OVER 1 YEAR:
Total Return of Fund 13.35%
Total Return incl M&E 11.76%
Total Return incl M&E and Cont Fee 11.47%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,117.63 $1,114.65 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,114.65 $1,060.65 $1,034.40
Total Return 1 Year 13.35% 11.47% 6.07% 3.44%
Average Annual Return 13.35% 11.47% 6.07% 3.44%
--------------------------------------------------------------------------------
SINCE FUND INCEPTION:
Total Return of Fund 359.16%
Total Return incl M&E 308.56% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 299.62% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
21-Sep-88 $1,000 10.00 100.00 $4,085.56 $3,996.24 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $3,996.24 $3,996.24 $3,924.30
Total Return Inception 359.16% 299.62% 299.62% 292.43%
Average Annual Return 20.21% 18.21% 18.21% 17.95%
--------------------------------------------------------------------------------
<PAGE>
OVER 10 YEARS:
Total Return of Fund NA
Total Return incl M&E NA
Total Return incl M&E and Cont Fee NA
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-87 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return 10 Years NA NA NA NA
Average Annual Return NA NA NA NA
--------------------------------------------------------------------------------
OVER 5 YEARS:
Total Return of Fund 68.64%
Total Return incl M&E 57.16%
Total Return incl M&E and Cont Fee 55.08%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-92 $1,000 10.00 100.00 $1,571.61 $1,550.78 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,550.78 $1,514.78 $1,467.04
Total Return 5 Years 68.64% 55.08% 51.48% 46.70%
Average Annual Return 11.02% 9.17% 8.66% 7.97%
--------------------------------------------------------------------------------
OVER 3 YEARS:
Total Return of Fund 43.76%
Total Return incl M&E 37.81%
Total Return incl M&E and Cont Fee 36.71%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-94 $1,000 10.00 100.00 $1,378.06 $1,367.07 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,367.07 $1,322.07 $1,268.64
Total Return 5 Years 43.76% 36.71% 32.21% 26.86%
Average Annual Return 12.86% 10.98% 9.75% 8.25%
--------------------------------------------------------------------------------
<PAGE>
OVER 1 YEAR:
Total Return of Fund 4.18%
Total Return incl M&E 2.72%
Total Return incl M&E and Cont Fee 2.45%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,027.21 $1,024.48 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,024.48 $970.48 950.71
Total Return 1 Year 4.18% 2.45% -2.95% -4.93%
Average Annual Return 4.18% 2.45% -2.95% -4.93%
--------------------------------------------------------------------------------
YEAR TO DATE:
Total Return of Fund 4.18%
Total Return incl M&E 2.72% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 2.45% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,027.21 $1,024.48 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,024.48 $970.48 $950.71
Total Return Yr to Date 4.18% 2.45% -2.95% -4.93%
--------------------------------------------------------------------------------
<PAGE>
FUND: AMG ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
ASSUMPTIONS:
Contract Fee $30
Avg Contract Fee per $ 0.27%
M&E and Admin Charge 1.40%
SINCE SUB-ACCOUNT INCEPTION:
Total Return of Fund 53.58%
Total Return incl M&E 51.00% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 50.52% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
20-Oct-95 $1,000 10.00 100.00 $1,510.04 $1,505.21 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,505.21 $1,451.21 $1,396.84
Total Return Inception 53.58% 50.52% 45.12% 39.68%
Average Annual Return 42.98% 40.60% 36.39% 32.12%
--------------------------------------------------------------------------------
OVER 1 YEAR:
Total Return of Fund 11.90%
Total Return incl M&E 10.33%
Total Return incl M&E and Cont Fee 10.04%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,103.33 $1,100.39 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,100.39 $1,046.39 $1,021.16
Total Return 1 Year 11.90% 10.04% 4.64% 2.12%
Average Annual Return 11.90% 10.04% 4.64% 2.12%
--------------------------------------------------------------------------------
SINCE FUND INCEPTION:
Total Return of Fund 291.53%
Total Return incl M&E 249.86% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 242.49% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
9-Jan-89 $1,000 10.00 100.00 $3,498.63 $3,424.89 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $3,424.89 $3,424.89 $3,332.42
Total Return Inception 291.53% 242.49% 242.49% 233.24%
Average Annual Return 18.65% 16.68% 16.68% 16.28%
--------------------------------------------------------------------------------
<PAGE>
OVER 10 YEARS:
Total Return of Fund NA
Total Return incl M&E NA
Total Return incl M&E and Cont Fee NA
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
-Jan-87 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return 10 Years NA NA NA NA
Average Annual Return NA NA NA NA
--------------------------------------------------------------------------------
OVER 5 YEARS:
Total Return of Fund 115.81%
Total Return incl M&E 101.12%
Total Return incl M&E and Cont Fee 98.45%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-92 $1,000 10.00 100.00 $2,011.20 $1,984.54 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,984.54 $1,948.54 $1,877.38
Total Return 5 Years 115.81% 98.45% 94.85% 87.74%
Average Annual Return 16.63% 14.69% 14.27% 13.43%
--------------------------------------------------------------------------------
OVER 3 YEARS:
Total Return of Fund 56.81%
Total Return incl M&E 50.32%
Total Return incl M&E and Cont Fee 49.12%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-94 $1,000 10.00 100.00 $1,503.16 $1,491.17 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,491.17 $1,446.17 $1,383.81
Total Return 5 Years 56.81% 49.12% 44.62% 38.38%
Average Annual Return 16.18% 14.25% 13.09% 11.44%
--------------------------------------------------------------------------------
<PAGE>
OVER 1 YEAR:
Total Return of Fund 13.35%
Total Return incl M&E 11.76%
Total Return incl M&E and Cont Fee 11.47%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,117.63 $1,114.65 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,114.65 $1,060.65 $1,034.40
Total Return 1 Year 13.35% 11.47% 6.07% 3.44%
Average Annual Return 13.35% 11.47% 6.07% 3.44%
--------------------------------------------------------------------------------
YEAR TO DATE:
Total Return of Fund 13.35%
Total Return incl M&E 11.76% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 11.47% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,117.63 $1,114.65 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,114.65 $1,060.65 $1,034.40
Total Return Yr to Date 13.35% 11.47% 6.07% 3.44%
--------------------------------------------------------------------------------
<PAGE>
FUND: ALA ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
ASSUMPTIONS:
Contract Fee $30
Avg Contract Fee per $ 0.27%
M&E and Admin Charge 1.40%
SINCE SUB-ACCOUNT INCEPTION:
Total Return of Fund 13.28%
Total Return incl M&E 11.38% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 11.02% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
20-Oct-95 $1,000 10.00 100.00 $1,113.77 $1,110.21 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,110.21 $1,056.21 $1,030.27
Total Return Inception 13.28% 11.02% 5.62% 3.03%
Average Annual Return 10.95% 9.10% 4.66% 2.52%
--------------------------------------------------------------------------------
OVER 1 YEAR:
Total Return of Fund 12.04%
Total Return incl M&E 10.47%
Total Return incl M&E and Cont Fee 10.18%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,104.71 $1,101.77 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,101.77 $1,047.77 $1,022.44
Total Return 1 Year 12.04% 10.18% 4.78% 2.24%
Average Annual Return 12.04% 10.18% 4.78% 2.24%
--------------------------------------------------------------------------------
SINCE FUND INCEPTION:
Total Return of Fund 120.68%
Total Return incl M&E 109.56% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 07.52% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
3-May-93 $1,000 10.00 100.00 $2,095.64 $2,075.24 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $2,075.24 $2,030.24 $1,944.50
Total Return Inception 120.68% 107.52% 103.02% 94.45%
Average Annual Return 24.10% 22.04% 21.31% 19.89%
--------------------------------------------------------------------------------
<PAGE>
OVER 10 YEARS:
Total Return of Fund NA
Total Return incl M&E NA
Total Return incl M&E and Cont Fee NA
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-87 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return 10 Years NA NA NA NA
Average Annual Return NA NA NA NA
--------------------------------------------------------------------------------
OVER 5 YEARS:
Total Return of Fund NA
Total Return incl M&E NA
Total Return incl M&E and Cont Fee NA
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-92 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return 5 Years NA NA NA NA
Average Annual Return NA NA NA NA
--------------------------------------------------------------------------------
OVER 3 YEARS:
Total Return of Fund 59.14%
Total Return incl M&E 52.55%
Total Return incl M&E and Cont Fee 51.33%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-94 $1,000 10.00 100.00 $1,525.49 $1,513.33 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,513.33 $1,468.33 $1,404.37
Total Return 5 Years 59.14% 51.33% 46.83% 40.44%
Average Annual Return 16.75% 14.81% 13.66% 11.99%
--------------------------------------------------------------------------------
<PAGE>
OVER 1 YEAR:
Total Return of Fund 11.90%
Total Return incl M&E 10.33%
Total Return incl M&E and Cont Fee 0.04%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,103.33 $1,100.39 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,100.39 $1,046.39 $1,021.16
Total Return 1 Year 11.90% 10.04% 4.64% 2.12%
Average Annual Return 11.90% 10.04% 4.64% 2.12%
--------------------------------------------------------------------------------
YEAR TO DATE:
Total Return of Fund 11.90%
Total Return incl M&E 10.33% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 0.04% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,103.33 $1,100.39 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,100.39 $1,046.39 $1,021.16
Total Return Yr to Date 11.90% 10.04% 4.64% 2.12%
--------------------------------------------------------------------------------
<PAGE>
SINCE FUND INCEPTION:
Total Return of Fund 95.29%
Total Return incl M&E 90.04% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 89.06% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
25-Jan-95 $1,000 10.00 100.00 $1,900.36 $1,890.58 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,890.58 $1,836.58 $1,754.46
Total Return Inception 95.29% 89.06% 83.66% 75.45%
Average Annual Return 41.35% 38.99% 36.93% 33.73%
--------------------------------------------------------------------------------
<PAGE>
OVER 10 YEARS:
Total Return of Fund NA
Total Return incl M&E NA
Total Return incl M&E and Cont Fee NA
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-87 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return 10 Years NA NA NA NA
Average Annual Return NA NA NA NA
--------------------------------------------------------------------------------
OVER 5 YEARS:
Total Return of Fund NA
Total Return incl M&E NA
Total Return incl M&E and Cont Fee NA
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-92 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return 5 Years NA NA NA NA
Average Annual Return NA NA NA NA
--------------------------------------------------------------------------------
OVER 3 YEARS:
Total Return of Fund NA
Total Return incl M&E NA
Total Return incl M&E and Cont Fee NA
BEGINNING CONTRACT
LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-94 $1,000 10.00 100.00 NA NA 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA NA NA NA
Total Return 5 Years NA NA NA NA
Average Annual Return NA NA NA NA
--------------------------------------------------------------------------------
<PAGE>
OVER 1 YEAR:
Total Return of Fund 12.04%
Total Return incl M&E 10.47%
Total Return incl M&E and Cont Fee 0.18%
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,104.71 $1,101.77 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,101.77 $1,047.77 $1,022.44
Total Return 1 Year 12.04% 10.18% 4.78% 2.24%
Average Annual Return 12.04% 10.18% 4.78% 2.24%
--------------------------------------------------------------------------------
YEAR TO DATE:
Total Return of Fund 12.04%
Total Return incl M&E 10.47% [(1+TOTAL RETURN)*((1-M&E)^(# days/365))]-1
Total Return incl M&E and Cont Fee 10.18% [(1+TOTAL RETURN incl M&E)*((1-Cont fee per $)^(# days/365))]-1
BEGINNING CONTRACT LESS "AVG" YEAREND ENDING
DATE DEPOSIT NQ UV # UNITS VALUE CONT FEE UNITS DATE
1-Jan-96 $1,000 10.00 100.00 $1,104.71 $1,101.77 100.00 31-Dec-96
---------------------------
Less Surrender Charge
--------------------------------------------------------------------------------
Fund Contract Value T.S. F.S.
------ -------------- --------- ---------
Ending Value NA $1,101.77 $1,047.77 $1,022.44
Total Return Yr to Date 12.04% 10.18% 4.78% 2.24%
--------------------------------------------------------------------------------
</TABLE>
