A Message to Variable Annuity Contract Owners
There were significant increases in the Stock Markets in both 1995 and 1996.
In 1996, the Dow Jones Industrial Average increased 26.0% in value and the
Standard & Poor's 500 Index increased by 20.3%. Both the Dow Jones Industrial
Average and the S&P 500 are unmanaged indices.
The yield on the 30 year Treasury Bond has increased recently, so that at the
end of January, 1997 it was approximately 7%. Short term rates, as measured
by the 3 month Treasury Bill, are yielding 5.4% now, which is slightly ahead
of a year ago.
The U.S. Gross Domestic Product for 1996 increased approximately 3% while
inflation remains low with the Consumer Price Index increasing by 3.3% in
1996.
The Variable Annuity contracts which are the subject of this report are
distributed by Washington Square Securities, Inc. ("WSSI"), 20 Washington
Avenue South, Minneapolis, Minnesota 55401, (612) 372-5507. WSSI, a
registered broker-dealer, is an affiliated company of ReliaStar Bankers
Security Life Insurance Company, the issuer of your insurance contract.
The Outlook. For 1997, we expect economic growth to continue near the trend
rate and continuing moderate inflation with interest rates remaining near
current levels. At the time of this report, macroeconomic indicators are
showing mixed signs. While the business expansion has been underway for
almost six years, it is likely to be sustained throughout 1997. Nevertheless,
profits are expected to grow albeit at a slower rate than in the past few
years.
Name Change. Please note that on July 1, 1996, Bankers Security Life
Insurance Society changed its name to ReliaStar Bankers Security Life
Insurance Company. ReliaStar Bankers Security is part of a group of companies
owned by ReliaStar Financial Corp.
Respectfully,
James G. Cochran
Executive Vice President
ReliaStar Bankers Security Life Insurance Company
<PAGE>
<TABLE>
RELIASTAR BANKERS SECURITY VARIABLE ANNUITY FUNDS 121, 122, 123,
124, 125 AND 126
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1996
Oppenheimer Eaton Vance Oppenheimer
------------ ------------ -------------------------
Income Fund
of Boston Money Market Asset Allocation
ASSETS Fund 121 Fund 122 Fund 123 Fund 124
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investments.......................................$ 2,378,085 $ 522,381 $ 1,858,837 $ 12,995,755
Net receivable from ReliaStar Bankers............. 73,699 - - 419,417
------------ ------------ ------------ ------------
2,451,784 522,381 1,858,837 13,415,172
LIABILITIES
Net payable to ReliaStar Bankers................ - 982 78,231 -
------------ ------------ ------------ ------------
Net Assets $ 2,451,784 $ 521,399 $ 1,780,606 $ 13,415,172
============ ============ ============ ============
Accumulation Units Outstanding 402,763 59,884 431,185 1,626,423
============ ============ ============ ============
Accumulation Unit Value $ 5.89 $ 7.08 $ 3.77 $ 7.53
============ ============ ============ ============
Investments basis data:
Shares Owned 198,339 63,705 1,858,837 930,928
Net Asset Value $ 11.99 $ 8.20 $ 1.00 $ 13.96
Cost $ 1,916,859 $ 489,361 $ 1,858,837 $ 10,682,155
</TABLE>
<TABLE>
Oppenheimer
-------------------------
Capital
High Yield Appreciation Combined
ASSETS Fund 125 Fund 126 Total
------------ ------------ ------------
<S> <C> <C> <C>
Investments.......................................$ 8,447,890 $ 5,310,592 $ 31,513,540
Net receivable from ReliaStar Bankers............. - 65,322 558,438
------------ ------------ ------------
8,447,890 5,375,914 32,071,978
LIABILITIES
Net payable to ReliaStar Bankers................... 48,372 - 127,585
------------ ------------ ------------
Net Assets $ 8,399,518 $ 5,375,914 $ 31,944,393
============ ============ ============
Accumulation Units Outstanding 1,424,902 902,327 4,851,484
============ ============ ============
Accumulation Unit Value $ 5.28 $ 5.88
============ ============
Investments basis data:
Shares Owned 604,284 169,505
Net Asset Value $ 13.98 $ 31.33
Cost $ 7,376,759 $ 4,774,082
</TABLE>
<TABLE>
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
Year Ended December 31, 1996
Fund 121 Fund 122 Fund 123 Fund 124
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income -
Reinvested dividends..........................$ 228,172 $ 73,235 $ 100,867 $ 1,170,114
Expenses -
Mortality and expense guarantee fees........... (24,215) (5,543) (21,294) (125,983)
------------ ------------ ------------ ------------
Net investment income.............................. 203,957 67,692 79,573 1,044,131
Net realized gain.................................. 5,288 1,901 - 52,852
Net unrealized gain................................ 160,224 20,142 - 780,422
------------ ------------ ------------ ------------
Increase in net assets resulting from operations... 369,469 89,735 79,573 1,877,405
Transfer among funds, net.......................... 49,666 (102,843) (41,429) 1,000
Reserve transfers from (to) ReliaStar Bankers...... 29,959 (352) (30,046) 456,628
Payments to contract owners -
surrenders and other benefits................... (121,795) (295,396) (274,459) (1,095,296)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets.............. 327,299 (308,856) (266,361) 1,239,737
Net assets, beginning of year...................... 2,124,485 830,255 2,046,967 12,175,435
------------ ------------ ------------ ------------
Net assets, end of year...........................$ 2,451,784 $ 521,399 $ 1,780,606 $ 13,415,172
============ ============ ============ ============
</TABLE>
<TABLE>
Combined
Fund 125 Fund 126 Total
------------ ------------ ------------
<S> <C> <C> <C>
Income -
Reinvested dividends..........................$ 771,453 $ 566,525 $ 2,910,366
Expenses -
Mortality and expense guarantee fees........... (83,661) (49,790) (310,486)
------------ ------------ ------------
Net investment income.............................. 687,792 516,735 2,599,880
Net realized gain.................................. 31,982 10,045 102,068
Net unrealized gain................................ 307,733 615,783 1,884,304
------------ ------------ ------------
Increase in net assets resulting from operations... 1,027,507 1,142,563 4,586,252
Transfer among funds, net.......................... (62,283) 120,056 (35,833)
Reserve transfers from (to) ReliaStar Bankers...... 295,922 6,489 758,600
Payments to contract owners -
surrenders and other benefits................... (1,474,400) (911,352) (4,172,698)
------------ ------------ ------------
Net increase (decrease) in net assets.............. (213,254) 357,756 1,136,321
Net assets, beginning of year...................... 8,612,772 5,018,158 30,808,072
------------ ------------ ------------
Net assets, end of year...........................$ 8,399,518 $ 5,375,914 $ 31,944,393
============ ============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
RELIASTAR BANKERS SECURITY VARIABLE ANNUITY FUNDS 121, 122, 123,
124, 125 AND 126
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 ReliaStar Bankers........... 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
============ ============ ============ ============
</TABLE>
<TABLE>
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 ReliaStar Bankers........... 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>
RELIASTAR BANKERS SECURITY VARIABLE ANNUITY FUNDS 121, 122, 123,
124, 125 AND 126
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
Note 1 - Organization
ReliaStar 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 and 123), July 1977 (Fund 124), July 1978 (Fund 125) and
February 1981 (Fund 126), under the provisions of New York insurance laws by
ReliaStar Bankers Security Life Insurance Company ("ReliaStar Bankers"),
previously Bankers Security Life Insurance Society. 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
ReliaStar Bankers. 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.
On December 18, 1996, the Oppenheimer Target Fund name was changed to
Oppenheimer Capital Appreciation.
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, 1996, were:
Cost of Shares Proceeds from Cost of Shares Proceeds from
Fund Acquired Shares Sold Fund Acquired Shares Sold
121 $ 276,985 $ 155,383 124 $ 1,235,796 $ 1,177,011
122 73,235 403,841 125 7,494,347 8,175,998
123 6,822,427 7,015,036 126 694,299 1,008,774
Note 3 - Taxes
ReliaStar Bankers 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 ReliaStar Bankers, and their operations form a
part of ReliaStar Bankers, 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 ReliaStar Bankers.
Note 4 - Charges and Transfers
ReliaStar Bankers 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 ReliaStar Bankers, are offset by
transfers to, or from, ReliaStar Bankers. Included in Net receivable from
(payable to) ReliaStar Bankers are policy transactions which are unsettled as
of the reporting date.
Note 5 - Supplementary Information
Accumulation unit values for a unit of the funds outstanding at December 31,
were:
Fund 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
121 $5.89 $4.96 $4.03 $4.06 $3.57 $3.32 $2.63 $2.78 $2.27 $2.12
122 7.08 5.17 5.03 5.59 4.80 4.11 3.91 3.48 3.37 2.95
123 3.77 3.62 3.49 3.39 3.34 3.25 3.10 2.90 2.69 2.53
124 7.53 6.33 5.29 5.43 4.72 4.35 3.40 3.72 3.55 3.42
125 5.28 4.63 4.08 4.22 3.52 3.12 2.46 2.57 2.49 2.26
126 5.88 4.62 3.86 4.47 3.78 3.75 2.73 2.96 2.35 2.09
<PAGE>
INDEPENDENT AUDITORS' REPORT
To ReliaStar Bankers Security Life Insurance Company and
ReliaStar 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 ReliaStar Bankers Security Variable Annuity Funds 121, 122, 123, 124,
125 and 126 as of December 31, 1996, and the related combined statements of
operations and changes in net assets for the years ended December 31, 1996 and
1995. These financial statements are the responsibility of ReliaStar Bankers
Security Life Insurance Company management. Our responsibility is to express
an opinion on these financial statements based on our audits. The
accumulation unit values for each of the years in the eight-year period ended
December 31, 1994, were audited by other auditors whose report dated February
9, 1995, expressed an unqualified opinion on those values.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the combined funds
constituting the ReliaStar Bankers Security Variable Annuity Funds 121, 122,
123, 124, 125 and 126 as of December 31, 1996, and the combined results of
operations and changes in net assets for the years ended December 31, 1996 and
1995, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Minneapolis, MN
February 14, 1997
