A MESSAGE TO VARIABLE ANNUITY CONTRACT
OWNERS
The Stock Markets witnessed significant increases during 1995, with the
S&P 500 achieving a total return of 37.6% for the year, compared to a
total return of 1.2% for 1994. At the same time long term interest
rates have significantly declined since the beginning of the year.
At December 31, 1994, the 30 year treasury bond yielded 7.9%, compared
to a yield of 5.9% at December 31, 1995.
Short term rates are somewhat lower than a year ago, with the 3 month
Treasury Bill ending the year at 5.1% compared to 5.7% at the beginning
of the year.
The U.S. Gross Domestic Product for 1995 increased by nearly 3%.
Inflation remained low with the Consumer Price Index increasing by
approximately 2.6% this year, a slight reduction from 1994.
THE OUTLOOK. For 1996, we expect moderate economic growth and
continuing low inflation with interest rates remaining near current
levels. At the time of this report, macroeconomics indicators are
showing mixed signs. While the expansion is slowing, business profits
are expected to continue to improve, albeit at a slower rate than in
1995.
Respectfully,
Thomas Y. Moon
President
Bankers Security Life Insurance Society
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<TABLE>
BANKERS SECURITY VARIABLE ANNUITY FUNDS 121, 122, 123, 124, 125 AND 126
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1995
ASSETS Fund 121 Fund 122 Fund 123 Fund 124
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Oppenheimer Fund
(188,037 shares at net asset value of
$11.12 per share; cost $1,789,968)..............$ 2,090,971
Eaton Vance Income Fund of Boston
(104,390 shares at net asset value of
$7.96 per share; cost $818,066)................. $ 830,944
Oppenheimer Money Market Fund
(2,051,446 shares at net asset value of
$1.00 per share; cost $2,051,446)............... $ 2,051,446
Oppenheimer Asset Allocation Fund
(926,067 shares at net asset value of
$13.07 per share; cost $10,570,518)............. $ 12,103,696
Oppenheimer High Yield Fund
(655,468 shares at net asset value of
$13.41 per share; cost $8,026,428)..............
Oppenheimer Target Fund
(182,188 shares at net asset value of
$27.44 per share; cost $5,078,512)..............
Net receivable from Bankers Security for contract
charges and reserve transfers.................... 33,514 - - 71,739
------------ ------------ ------------ ------------
2,124,485 830,944 2,051,446 12,175,435
LIABILITIES
Net payable to Bankers Security for contract charges
and reserve transfers............................ - 689 4,479 -
------------ ------------ ------------ ------------
Net Assets $ 2,124,485 $ 830,255 $ 2,046,967 $ 12,175,435
============ ============ ============ ============
Accumulation Units Outstanding 408,205 160,591 508,140 1,640,339
============ ============ ============ ============
Accumulation Unit Value $ 4.96 $ 5.17 $ 3.62 $ 6.33
============ ============ ============ ============
Combined
ASSETS Fund 125 Fund 126 Total
------------ ------------ ------------
<S> <C> <C> <C>
Oppenheimer Fund
(188,037 shares at net asset value of
$11.12 per share; cost $1,789,968).............. $ 2,090,971
Eaton Vance Income Fund of Boston
(104,390 shares at net asset value of
$7.96 per share; cost $818,066)................. 830,944
Oppenheimer Money Market Fund
(2,051,446 shares at net asset value of
$1.00 per share; cost $2,051,446)............... 2,051,446
Oppenheimer Asset Allocation Fund
(926,067 shares at net asset value of
$13.07 per share; cost $10,570,518)............. 12,103,696
Oppenheimer High Yield Fund
(655,468 shares at net asset value of
$13.41 per share; cost $8,026,428)..............$ 8,789,826 8,789,826
Oppenheimer Target Fund
(182,188 shares at net asset value of
$27.44 per share; cost $5,078,512).............. $ 4,999,239 4,999,239
Net receivable from Bankers Security for contract
charges and reserve transfers................... - 18,919 124,172
------------ ------------ ------------
8,789,826 5,018,158 30,990,294
LIABILITIES
Net payable to Bankers Security for contract charges
and reserve transfers........................... 177,054 - 182,222
------------ ------------ ------------
Net Assets $ 8,612,772 $ 5,018,158 $ 30,808,072
============ ============ ============
Accumulation Units Outstanding 1,668,497 1,071,318 5,457,090
============ ============ ============
Accumulation Unit Value $ 4.63 $ 4.62
============ ============
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
Year Ended December 31, 1995
Fund 121 Fund 122 Fund 123 Fund 124
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income -
Reinvested dividends..........................$ 186,693 $ 79,441 $ 128,760 $ 924,270
Expenses -
Mortality and expense guarantee fees........... (20,427) (6,604) (22,863) (116,887)
------------ ------------ ------------ ------------
Net investment income.............................. 166,266 72,837 105,897 807,383
Net realized gain (loss)........................... 26,251 (6,176) - 56,975
Net unrealized gain (loss)......................... 223,969 33,747 - 1,356,701
------------ ------------ ------------ ------------
Increase in net assets resulting from operations... 416,486 100,408 105,897 2,221,059
Transfer among funds, net.......................... 47,608 (1,681) (2,599,240) (63,074)
Reserve transfers from Bankers Security............ 23,611 - 46,613 552,097
Payments to contract owners -
surrenders and other benefits................... (74,310) (5,000) (165,435) (902,667)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets.............. 413,395 93,727 (2,612,165) 1,807,415
Net assets, beginning of year...................... 1,711,090 736,528 4,659,132 10,368,020
------------ ------------ ------------ ------------
Net assets, end of year...........................$ 2,124,485 $ 830,255 $ 2,046,967 $ 12,175,435
============ ============ ============ ============
Combined
Fund 125 Fund 126 Total
------------ ------------ ------------
<S> <C> <C> <C>
Income -
Reinvested dividends..........................$ 877,943 $ 694,429 $ 2,891,536
Expenses -
Mortality and expense guarantee fees........... (90,251) (47,149) (304,181)
------------ ------------ ------------
Net investment income.............................. 787,692 647,280 2,587,355
Net realized gain (loss)........................... (32,319) 287,293 332,024
Net unrealized gain (loss)......................... 428,121 (76,129) 1,966,409
------------ ------------ ------------
Increase in net assets resulting from operations... 1,183,494 858,444 4,885,788
Transfer among funds, net.......................... 2,687,115 (70,055) 673
Reserve transfers from Bankers Security............ 147,422 26,755 796,498
Payments to contract owners -
surrenders and other benefits................... (1,928,745) (332,882) (3,409,039)
------------ ------------ ------------
Net increase (decrease) in net assets.............. 2,089,286 482,262 2,273,920
Net assets, beginning of year...................... 6,523,486 4,535,896 28,534,152
------------ ------------ ------------
Net assets, end of year...........................$ 8,612,772 $ 5,018,158 $ 30,808,072
============ ============ ============
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
BANKERS SECURITY VARIABLE ANNUITY FUNDS 121, 122, 123, 124, 125 AND 126
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
Year Ended December 31, 1994
Fund 121 Fund 122 Fund 123 Fund 124
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income -
Reinvested dividends..........................$ 169,166 $ 79,747 $ 133,372 $ 1,036,715
Expenses -
Mortality and expense guarantee fees........... (16,440) (7,496) (33,947) (100,386)
------------ ------------ ------------ ------------
Net investment income.............................. 152,726 72,251 99,425 936,329
Net realized gain (loss)........................... 2,053 22,839 - 12,497
Net unrealized loss ............................... (165,912) (104,383) - (1,213,467)
------------ ------------ ------------ ------------
Increase (decrease)in net assets resulting from
operations...................................... (11,133) (9,293) 99,425 (264,641)
Transfer among funds, net.......................... 80,967 (523,944) 2,743,238 113,100
Payments to contract owners -
surrenders and other benefits................... (71,621) (50,005) (686,242) (649,357)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets.............. (1,787) (583,242) 2,156,421 (800,898)
Net assets, beginning of year...................... 1,712,877 1,319,770 2,502,711 11,168,918
------------ ------------ ------------ ------------
Net assets, end of year...........................$ 1,711,090 $ 736,528 $ 4,659,132 $ 10,368,020
============ ============ ============ ============
Combined
Fund 125 Fund 126 Total
------------ ------------ ------------
<S> <C> <C> <C>
Income -
Reinvested dividends..........................$ 924,549 $ 436,485 $ 2,780,034
Expenses -
Mortality and expense guarantee fees........... (85,026) (46,775) (290,070)
------------ ------------ ------------
Net investment income.............................. 839,523 389,710 2,489,964
Net realized gain (loss)........................... (72,273) (37,673) (72,557)
Net unrealized loss ............................... (997,835) (1,094,649) (3,576,246)
------------ ------------ ------------
Increase (decrease)in net assets resulting from
operations...................................... (230,585) (742,612) (1,158,839)
Transfer among funds, net.......................... (2,298,943) (108,582) 5,836
Payments to contract owners -
surrenders and other benefits................... (1,896,191) (98,640) (3,452,056)
------------ ------------ ------------
Net increase (decrease) in net assets.............. (4,425,719) (949,834) (4,605,059)
Net assets, beginning of year...................... 10,949,205 5,485,730 33,139,211
------------ ------------ ------------
Net assets, end of year...........................$ 6,523,486 $ 4,535,896 $ 28,534,152
============ ============ ============
See accompanying notes to financial statements.
</TABLE>
BANKERS SECURITY VARIABLE ANNUITY FUNDS 121, 122, 123, 124, 125 AND 126
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 - ORGANIZATION
Bankers Security Variable Annuity Funds 121, 122, 123, 124, 125 and 126 (the
"Separate Accounts") were established as Separate Accounts in April 1975 (Funds
121, 122, 123), July 1977 (Fund 124), July 1978 (Fund 125) and February 1981
(Fund 126), under the provisions of New York insurance laws by Bankers Security
Life Insurance Society ("Bankers Security"). The Separate Accounts are
registered with the Securities and Exchange Commission as a unit investment
trust under the Investment Company Act of 1940, as amended (the "Act"), and
are used to fund certain benefits for variable annuity policies issued by
Bankers Security. The assets of the Separate Accounts are invested in open-end
diversified management investment companies which are also registered under the
Act. The Separate Accounts are closed to new contract owners and additional
payments from existing contract owners.
NOTE 2 - INVESTMENTS
Security transactions are recorded on the trade date at the purchase cost or
sales proceeds, as applicable. Investments owned are valued at closing market
quotations. The difference between the beginning of year value and current
market value of investments owned is recorded as an unrealized gain (loss) on
investments. Dividends received are generally recorded as income on the record
date and are reinvested to purchase additional mutual fund shares. The
aggregate cost of shares acquired and the aggregate proceeds from shares
sold, for the year ended December 31, 1995, were:
Cost of Shares Proceeds from Cost of Shares Proceeds from
Fund Acquired Shares Sold Fund Acquired Shares Sold
121 $ 577,378 $ 439,319 124 $ 1,002,477 $ 1,185,476
122 187,091 121,059 125 10,963,066 9,401,702
123 7,717,251 10,427,087 126 5,654,361 5,368,963
NOTE 3 - TAXES
Bankers Security is taxed as a life insurance company under the Internal Revenue
Code of 1986, as amended (the "Code"). Since the Separate Accounts are not a
separate entity from Bankers Security, and their operations form a part of
Bankers Security, they are not taxed separately as a "regulated investment
company" under Sub-chapter M of the Code. Under existing Federal income tax
law, investment income of the Separate Accounts, to the extent that it is
applied to increase reserves under a contract, is not taxed and may be
compounded through reinvestment without additional tax to Bankers Security.
NOTE 4 - CHARGES AND TRANSFERS
Bankers Security deducts a daily charge equal to an annual rate of 1.0% of the
daily asset value of the Separate Accounts for mortality and expense risks
assumed.
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 Bankers Security, are offset by transfers to, or from,
Bankers Security.
Certain reclassifications have been made to the financial statements which do
not affect the results of operations as previously reported.
NOTE 5 - SUPPLEMENTARY INFORMATION
Accumulation unit values for a unit of the funds outstanding at December 31,
were:
Fund 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
121 $4.96 $4.03 $4.06 $3.57 $3.32 $2.63 $2.78 $2.27 $2.12 $2.24
122 5.17 5.03 5.59 4.80 4.11 3.91 3.48 3.37 2.95 2.83
123 3.62 3.49 3.39 3.34 3.25 3.10 2.90 2.69 2.53 2.41
124 6.33 5.29 5.43 4.72 4.35 3.40 3.72 3.55 3.42 2.41
125 4.63 4.08 4.22 3.52 3.12 2.46 2.57 2.49 2.26 2.14
126 4.62 3.86 4.47 3.78 3.75 2.73 2.96 2.35 2.09 1.97
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INDEPENDENT AUDITORS' REPORT
To Bankers Security Life Insurance Society and
Bankers Security Variable Annuity Funds 121, 122, 123, 124, 125 and
126 Contract Owners:
We have audited the accompanying combined statement of assets and
liabilities of the Bankers Security Variable Annuity Funds 121, 122,
123, 124, 125 and 126 as of December 31, 1995, and the related combined
statements of operations and changes in net assets for the year ended
December 31, 1995. These financial statements are the responsibility of
Bankers Security Life Insurance Society management. Our responsibility
is to express an opinion on these financial statements based on our
audit. The statements of operations and changes in net assets for the
year ended December 31, 1994 and the accumulation unit values for each
of the years in the nine-year period ended December 31, 1994 were
audited by other auditors whose report dated February 9, 1995 expressed
an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our 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 the combined
funds constituting the Bankers Security Variable Annuity Funds 121, 122,
123, 124, 125 and 126 as of December 31, 1995, and the combined results
of operations and changes in net assets for the year ended December 31,
1995, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Minneapolis, MN
February 12, 1996
