UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-K

              Annual Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

For the fiscal year ended December 31, 2004
                          -----------------

Commission file number: 333-57212, 333-104539, 333-104546,
                        333-104547, 333-104548, and 333-116137
                        --------------------------------------

                   ING USA Annuity and Life Insurance Company
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

Iowa                                                                 41-0991508
--------------------------------------------------------------------------------
(State or other jurisdiction                                   (IRS employer
 of incorporation or organization)                           identification no.)


1475 Dunwoody Drive, West Chester, Pennsylvania                       19380-1478
--------------------------------------------------------------------------------
(Address of principal executive offices)                              (Zip code)

Registrant's telephone number, including area code (610) 425-3400
                                                   --------------

--------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report

Securities registered pursuant to Section 12(b) of Act: None
Securities registered pursuant to Section 12(g) of Act: None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [ X ] No [ ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this form 10-K or any amendment to this
Form 10-K. Yes [ X ] No [ ]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest  practicable date: 250,000 shares of Common Stock
as of March 17,  2005,  all of which  were  directly  owned by Lion  Connecticut
Holdings Inc.

NOTE:  WHEREAS ING USA ANNUITY AND LIFE  INSURANCE  COMPANY MEETS THE CONDITIONS
SET FORTH IN GENERAL  INSTRUCTION  I(1)(a)  AND (b) OF FORM  10-K,  THIS FORM IS
BEING FILED WITH THE REDUCED  DISCLOSURE FORMAT PURSUANT TO GENERAL  INSTRUCTION
I(2).


<PAGE>
                   ING USA Annuity and Life Insurance Company,
          (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
                           Annual Report on Form 10-K
                      For the Year Ended December 31, 2004


                                TABLE OF CONTENTS

<TABLE>
<S>                 <C>                                                                                    <C>

Form 10-K
 Item No.                                                                                                  Page
---------                                                                                                  ----
                    PART I

Item 1.             Business**                                                                                3
Item 2.             Properties**                                                                             16
Item 3.             Legal Proceedings                                                                        16
Item 4.             Submission of Matters to a Vote of Security Holders*                                     16

                    PART II

Item 5.             Market for Registrant's Common Equity and Related
                      Stockholder Matters                                                                    17
Item 6.             Selected Financial Data***                                                               18
Item 7.             Management's Narrative Analysis of the Results of Operations and Financial Condition**   19
Item 7A.            Quantitative and Qualitative Disclosures About Market Risk                               45
Item 8.             Financial Statements and Supplementary Data                                              49
Item 9.             Changes in and Disagreements with Accountants on Accounting and Financial Disclosure    100
Item 9A.            Controls and Procedures                                                                 100
Item 9B             Other Information                                                                       100

                    PART III

Item 10.            Directors and Executive Officers of the Registrant*                                     101
Item 11.            Executive Compensation*                                                                 101
Item 12.            Security Ownership of Certain Beneficial Owners and Management*                         101
Item 13.            Certain Relationships and Related Transactions*                                         101
Item 14.            Principal Accountant Fees and Services                                                  101

                    PART IV

Item 15.            Exhibits and Financial Statement Schedules                                              104
                    Index on Financial Statement Schedules                                                  110
                    Signatures                                                                              114

</TABLE>

*    Item omitted pursuant to General  Instruction I(2) of Form 10-K,  except as
     to Part III, Item 10 with respect to  compliance  with Sections 406 and 407
     of the Sarbanes Oxley Act of 2002.
**   Item prepared in accordance with General Instruction I(2) of Form 10-K.
***  Although item may be omitted pursuant to Georgia Instruction I(2) of Form
     10-K, the Company has provided certain disclosure under this Item.

<PAGE>

                                     PART I

Item 1.   Business (Dollar amounts in millions, unless otherwise stated)

          Organization of Business

          ING  USA  Annuity  and  Life  Insurance  Company  ("ING  USA"  or  the
          "Company"),  a wholly-owned  subsidiary of Lion  Connecticut  Holdings
          Inc. ("Lion" or "Parent"), is a stock life insurance company organized
          under the laws of the State of Iowa.

          Lion  is an  indirect,  wholly-owned  subsidiary  of  ING  Groep  N.V.
          ("ING"),  a global  financial  services  holding  company based in The
          Netherlands,  with American  Depository  Shares listed on the New York
          Stock  Exchange  under the  symbol  "ING".  ING USA is  authorized  to
          conduct its  insurance  business in the  District of Columbia  and all
          states  except New York.  ING USA was  domiciled  as a life  insurance
          company  under the laws of the State of Delaware  until  December  31,
          2003 and has been domiciled in Iowa since January 1, 2004.

          On January 1, 2004 (the  "Merger  Date"),  the Company  simultaneously
          redomesticated  from  Delaware  to Iowa,  changed its name from Golden
          American Life Insurance Company ("Golden American") to ING USA Annuity
          and Life Insurance Company,  and merged the following  affiliates into
          the Company:  Equitable  Life  Insurance  Company of Iowa  ("Equitable
          Life"), USG Annuity & Life Company ("USG"),  and United Life & Annuity
          Insurance  Company  ("ULA")  (collectively,  the "Merger  Companies").
          Prior to the Merger Date, the Company was a wholly-owned subsidiary of
          Equitable  Life.  Equitable Life merged its affiliate,  Ameribest Life
          Insurance  Company  ("AMB"),  a life  insurance  company  domiciled in
          Georgia, into its operations on January 1, 2003.

          Description of Business

          ING's  U.S.-based  operations  offer a broad range of life  insurance,
          annuities,  mutual  funds,  employee  benefit,  defined  contribution,
          guaranteed  investment contracts and funding agreements.  For the year
          ended December 31, 2004, ING's U.S.-based operations were ranked sixth
          in  sales  of  variable  annuities  according  to  data  published  by
          Morningstar  and sixth in sales of fixed  annuities  according to data
          published by LIMRA International Inc. ("LIMRA"). The Company serves as
          one of the primary vehicles through which ING's U.S.-based  operations
          write this fixed and variable annuity  business.  According to LIMRA's
          fourth quarter 2004 sales report on Stable Value and Funding Agreement
          products,  ING's  U.S.-based  operations  were ranked  fifth in market
          share for  funding  agreement  contracts,  and  tenth for  traditional
          general account  guaranteed  investment  contracts,  in terms of total
          assets.

          The Company offers various insurance products including  immediate and
          deferred variable and fixed annuities.  The Company's annuity products
          are distributed by national  wirehouses,  regional  securities  firms,
          independent National Association of Securities Dealers,  Inc. ("NASD")
          firms with licensed registered representatives,  banks, life insurance
          companies  with captive  agency sales  forces,  independent  insurance
          agents, independent marketing organizations, and the ING broker-dealer
          network. The Company's primary annuity customers are retail consumers.

                                       3

<PAGE>

          The Company also offers  guaranteed  investment  contracts and funding
          agreements primarily to institutional  investors and corporate benefit
          plans.  These  products are directly sold by home office  personnel or
          through specialty insurance brokers to institutional purchasers.

          The Company previously  provided  interest-sensitive,  traditional and
          variable life insurance, and health insurance products. The Company no
          longer  issues  these  products.  The life  insurance  business  is in
          run-off  and the  Company  has  ceded to  other  insurers  all  health
          insurance.

          See "Reserves"  for a discussion of the Company's  reserves by product
          type.

          The Company has one operating  segment,  ING U.S.  Financial  Services
          ("USFS") which offers the products described below.

          Products and Services

          The Company  offers a portfolio  of immediate  and deferred  fixed and
          variable   annuities   designed   to   address   customer   needs  for
          tax-advantaged   savings,   retirement  needs,  and  wealth-protection
          concerns.

          The  fixed  annuities  offered  by the  Company  are  General  Account
          products and include single premium immediate,  multi-year guaranteed,
          annual reset,  and equity index annuities.  For these  contracts,  the
          principal amount is guaranteed,  and for a specified time period,  the
          Company credits interest to the customer's account at a fixed interest
          rate. The Company's major source of income from fixed annuities is the
          spread between the investment income earned on the underlying  General
          Account assets and the interest rate credited to customers'  accounts.
          The  Company  bears the  investment  risk  because,  while the Company
          credits  customers'  accounts with a stated interest rate, the Company
          cannot be certain the investment  income earned on the General Account
          assets will exceed that rate. With respect to indexed  annuities,  the
          Company  hedges the equity  risk  exposure  by  purchasing  derivative
          instruments on the relevant equity index.

          The variable  annuities offered by the Company are savings vehicles in
          which contract owner deposits are recorded and primarily maintained in
          Separate Accounts  established for the Company and registered with the
          Securities and Exchange Commission ("SEC") as a unit investment trust.
          Separate  Account assets and  liabilities  generally  represent  funds
          maintained to meet specific  investment  objectives of  contractowners
          who bear the investment  risk,  subject,  in limited cases, to certain
          minimum guarantees.  Investment income and investment gains and losses
          generally accrue directly to such  contractowners.  The assets of each
          account  are  legally  segregated  and are not  subject to claims that
          arise out of any  other  business  of the  Company.  Separate  Account
          assets  supporting  variable options under variable annuity  contracts
          are invested,  as designated by the contractowner or participant under
          a contract, in shares of mutual funds which are managed by the Company
          or its  affiliates,  or in other selected  mutual funds not managed by
          the Company or its affiliates. Variable annuity deposits are allocated
          to various subaccounts  established within the Separate Account.  Each
          subaccount  represents  a different  investment  option into which the

                                       4

<PAGE>

          contractowner may allocate deposits.  The account value of a variable
          annuity  contract is equal to the aggregate  value of the  subaccounts
          selected by the  contractowner  (including the value  allocated to any
          fixed account) less fees and expenses.  The Company offers  investment
          options for its variable annuities covering a wide range of investment
          styles,  including  large,  mid and small cap equity funds, as well as
          fixed income  alternatives.  Unlike fixed annuities,  variable annuity
          contract  owners  bear  the  risk  of  investment   gains  and  losses
          associated  with the  selected  investment  allocation.  The  Company,
          however,   offers  certain   guaranteed   death  and  living  benefits
          (described  below) under which it bears specific risks associated with
          these products.  Many of the variable  annuities issued by ING USA are
          combination  variable and fixed deferred annuity contracts under which
          some or all of the deposits may be allocated by the contract  owner to
          a fixed  account  available  under the contract.  The Company's  major
          source  of  income  from  variable  annuities  is  the  base  contract
          mortality fee and expense fees and guaranteed living and death benefit
          rider fees charged to the customer, less the cost of administering the
          product,  as well as the cost of providing for the  guaranteed  living
          and death benefits.

          The Company sells variable annuity contracts that offer one or more of
          the following guaranteed death benefits and living benefits:

          Guaranteed  Minimum Death Benefits  ("GMDB"):  The Company has offered
          the following guaranteed death benefits:

          -    Standard - This  guarantees  that upon the death of the annuitant
               the death  benefit will be no less than the premiums  paid by the
               contractowner net of any contract  withdrawals.
          -    Ratchet - This  guarantees  that upon the death of the  annuitant
               the  death  benefit  will  be no less  than  the  greater  of (1)
               Standard or (2) the maximum  anniversary (or quarterly)  value of
               the  variable  annuity.
          -    Rollup  (7% or 5.5%  Solution)  - This  guarantees  that upon the
               death of the annuitant the death benefit will be no less than the
               aggregate premiums paid by the contractowner accruing interest at
               7% or 5.5% per  annum,  subject to a maximum  cap on the  account
               value.  (The Company has discontinued this option for new sales.)
          -    Combo  (Max 7) - This  guarantees  that  upon  the  death  of the
               annuitant  the death  benefit will be no less than the greater of
               (1) Ratchet or (2) Rollup.

          At December 31, 2004, the guaranteed  value of these death benefits in
          excess of account  values was  estimated  to be $2.5  billion,  before
          reinsurance, which was a $0.4 billion decrease from the estimated $2.9
          billion at December 31, 2003. The decrease was primarily driven by the
          improved equity markets in 2004. For contracts issued prior to January
          1, 2000,  most contracts with enhanced death benefit  guarantees  were
          reinsured to third party  reinsurers  to mitigate the risk produced by
          such guaranteed  death benefits.  For contracts  issued after December
          31, 1999, the Company has instituted an equity hedging program in lieu
          of reinsurance,  to mitigate the risk produced by the guaranteed death
          benefits.  The equity hedging program is based on the Company entering
          into derivative  positions to offset  exposures to guaranteed  minimum
          death  benefits  due to  adverse  changes in the  equity  markets.  At
          December 31, 2004, the guaranteed  value of minimum  guaranteed  death
          benefits  in  excess  of  account  values,  net  of  reinsurance,  was
          estimated  to be $1.4  billion,  of which  $748.7 is  projected  to be
          covered by the Company's equity hedging  program,  consistent with the

                                        5

<PAGE>

          Company's  exposure as of December 31, 2003.  As of December 31, 2004,
          the Company has  recorded a liability  of $66.9,  net of  reinsurance,
          representing  the estimated net present value of the Company's  future
          obligation for guaranteed  minimum death benefits in excess of account
          values. The liability  increased $0.5 from $66.5 at December 31, 2003,
          mainly due to the increase in fee income collected from customers used
          to fund the reserve exceeding the decrease in the reserve,  due to the
          improved  equity  markets  during 2004.  The  liability is recorded in
          accordance with the provisions of the Financial  Accounting  Standards
          Board ("FASB")  Statement of Position 03-1,  "Accounting and Reporting
          by  Insurance  Enterprises  for Certain  Nontraditional  Long-Duration
          Contracts and for Separate Accounts" ("SOP 03-1").

          Guaranteed   Living   Benefits:   The  Company  offers  the  following
          guaranteed living benefits:

          -    Guaranteed  Minimum Income Benefit  ("GMIB") - This  guarantees a
               minimum income payout,  exercisable each contract  anniversary on
               or after the 10th rider anniversary.  This type of living benefit
               is the  predominant  selection in the Company's sales of variable
               annuities.
          -    Guaranteed  Minimum Withdrawal Benefit ("GMWB") - This guarantees
               that annual  withdrawals of up to 7% of eligible  premiums may be
               made until eligible premiums previously paid by the contractowner
               are returned,  regardless of account value  performance.  The new
               2004 GMWB rider (ING Principal  Guard) provides reset and step-up
               features,  which provide, in certain instances,  for increases in
               the  amount  available  for  withdrawal.
          -    Guaranteed  Minimum  Accumulation  Benefit  ("GMAB") - Guarantees
               that the account value will be at least 100% of the premiums paid
               by the  contractowner  after 10 years  (GMAB10)  or 200% after 20
               years (GMAB20).

          At December 31, 2004, the guaranteed value of these living benefits in
          excess of  account  values  was  estimated  to be  $269.7,  which is a
          decrease of $38.5 from an estimated  $308.2 at December 31, 2003.  The
          decrease was primarily  driven by the improved  equity  markets during
          2004. All living benefits are covered by the Company's  equity hedging
          program. As of December 31, 2004, the Company has recorded a liability
          of $40.3  representing  the  estimated net present value of its future
          obligation  for  living  benefits  in excess of  account  values.  The
          liability  increased $26.4 from $13.9 at December 31, 2003, mainly due
          to the increase in fee income  collected  from  customers used to fund
          the reserve exceeding the decrease in the reserve, due to the improved
          equity  market  during 2004.  For GMIBs,  the liability is recorded in
          accordance  with the provisions of SOP 03-1. For GMABs and GMWBs,  the
          liability  is held at fair  value  in  accordance  with  Statement  of
          Financial  Accounting  Standards  ("FAS")  No.  133,  "Accounting  for
          Derivative Instruments and Hedging Activities".

          Variable  annuity  contracts  containing  guaranteed  death and living
          benefits  expose the Company to equity risk.  An increase in the value
          of  the  equity  markets  will  increase   account  values  for  these
          contracts,  thereby  decreasing the Company's risk associated with the
          MGDBs, GMIBs, GMWBs, and GMABs. A decrease in the equity markets, that
          causes a decrease in the account values, will increase the possibility
          that the Company may be  required to pay amounts to  customers  due to
          guaranteed death and living benefits.


                                       6

<PAGE>

          The Company also is a provider of institutional  investment  products,
          primarily  guaranteed  investment  contracts  and funding  agreements,
          collectively  referred to as "GICs," issued to the stable value market
          and other institutional  customers.  The Company intends to issue GICs
          to  one  or  more  special  purpose  vehicles,  which  sell  notes  to
          institutional  and retail  investors  in order to fund the purchase of
          those  GICs.  The  Company  profits  from the sale of GICs by  earning
          income in excess of the amount credited to the customer  accounts less
          the cost of administering the product.

          Historically, the Company has provided interest-sensitive, traditional
          and  variable  life  insurance,   and  health  insurance.  All  health
          insurance  has been ceded to other  insurers  and new  policies are no
          longer  written.  The Company  ceased the  issuance of life  insurance
          policies in 2001,  and all life  insurance  business is  currently  in
          run-off.  A certain  portion of the assets held in the general account
          are dedicated to funding this block of business.

          Strategy, Method of Distribution, and Principal Markets

          The Company believes longer life  expectancies,  an aging  population,
          and growing concern over the stability and  availability of the Social
          Security  system  have made  retirement  planning a priority  for many
          Americans.  The target  market for the Company's  annuity  products is
          primarily  individuals,  while the target market for GICs is primarily
          institutional investors and corporate benefit plans.

          The  principal  distribution  channels of the  Company's  variable and
          fixed  annuities  include  national  wirehouses,  regional  securities
          firms,    independent    NASD   firms   with    licensed    registered
          representatives,  banks, life insurance  companies with captive agency
          sales forces,  independent  insurance  agents,  independent  marketing
          organizations, and the ING broker-dealer network. GICs are distributed
          primarily to  institutional  investors  and  corporate  benefit  plans
          through  direct sales by home office  personnel  or through  specialty
          insurance brokers.

          The Company markets its variable annuities primarily on the underlying
          guarantee features,  positioning the product line as a risk management
          tool  for  clients  and  advisors.   Indexed  annuities  are  marketed
          primarily  based  on  underlying   guarantee   features  coupled  with
          consumer-friendly  product  designs  offering the potential for equity
          market  upside  potential.  The Company  also offers  fixed  annuities
          offering a guaranteed  interest rate or annuity  payment  suitable for
          clients seeking a stable return.

          The  Company  also  utilizes   sales   inducements   as  part  of  its
          distribution  strategy  for  annuities.  Sales  inducements  represent
          benefits  paid to  contractowners  for a  specified  period  that  are
          incremental  to the amounts the Company  credits on similar  contracts
          and are higher than the contract's  expected  ongoing  crediting rates
          for periods after the inducement.

The Company continued to expand  distribution  systems during 2004 and 2003. The
Company believes that broad-based  distribution  networks are key to realizing a
growing  share of the wealth  accumulation  marketplace.  The  Company  plans to
establish new  relationships  and implement  strategies to increase  penetration
with key  distributors  in existing  channels.  Other than Morgan  Stanley which
produced  approximately 6% of annuity sales and ING Advisors Network (a group of
broker-dealers  affiliated with the Company) which produced approxmiately 13% of



                                       7

<PAGE>

          annuity sales,  no other broker or agency firm accounted for more than
          5% of sales of the Company's annuity products in 2004.

          The Company is not  dependent  upon any single  customer and no single
          customer accounted for 10% or more of revenue in 2004.

          Assets Under Management

          A  substantial  portion of the  Company's  fees or other  charges  and
          margins are based on assets under management.  Assets under management
          are principally  affected by net deposits (i.e.,  annuity premiums and
          GIC deposits less surrenders),  investment performance (i.e., interest
          credited to customer accounts for fixed options or market  performance
          for variable options), and customer retention.  The Company's customer
          assets under  management,  that support fixed and variable  annuities,
          were as follows:

          <TABLE>
          <S>                              <C>                 <C>

                                                         December 31,
                                                  2004                2003
                                           -----------------   -----------------
           Variable annuities                 $ 25,847.0          $ 19,448.0
           Fixed annuities                      17,160.2            15,625.0
           GICs                                  1,797.4               425.4
                                           -----------------   -----------------
           Total                              $ 44,804.6          $ 35,498.4
                                           =================   =================
          </TABLE>

          Competition

          The annuity  competitive  environment remains intense and is dominated
          by a number of large,  highly-rated  insurance  companies.  Increasing
          competition  within the retirement  savings  business from traditional
          insurance carriers, as well as banks and mutual fund companies, offers
          consumers many choices.  The Company's annuity products compete in the
          annuity  market  principally  on the basis of investment  performance,
          product  design,   brand  recognition,   financial  strength  ratings,
          distribution  capabilities,  levels of  charges  and  credited  rates,
          reputation, and customer service.

          The Company  competes in the GIC market  primarily on the basis of its
          capital markets,  product structuring,  and risk management expertise,
          as well as its brand recognition and financial strength ratings. Other
          competitors in this market include other life insurance companies,  as
          well as banks and other financial institutions.

          Reserves

          The Company  records as  liabilities  actuarially-determined  reserves
          that are calculated to meet the Company's future obligations under its
          variable  annuity,  fixed annuity,  GIC products,  and other insurance
          products.

          Reserves for  deferred  annuity  investment  contracts  and  immediate
          annuity without life  contingent  payouts equal  cumulative  deposits,
          less charges and withdrawals,  plus credited interest thereon (reserve
          interest  rates vary by product up to 10.0% for the years 2004,  2003,
          and 2002).

          Reserves for immediate  annuities with life contingent payout benefits
          are  computed  on  the  basis  of  assumed  interest  discount  rates,
          mortality,  and expenses,  including a margin for adverse  deviations.
          Such  assumptions  generally vary by plan,  year of issue,  and policy

                                       8

<PAGE>

          duration.  For the years 2004, 2003, and 2002,  reserve interest rates
          ranged from 3.0% to 8.0%.  Mortality and withdrawal  rate  assumptions
          are based on relevant Company experience and are periodically reviewed
          against both industry standards and experience.

          As discussed  above under  "Products  and  Services,"  the Company has
          established  reserves  for the  guaranteed  death and living  benefits
          included in variable annuities.

          Reserves for GICs are calculated  using the amount  deposited with the
          Company,  less  withdrawals,  plus  interest  accrued  to  the  ending
          valuation   date.   Interest  on  these  contracts  is  accrued  by  a
          predetermined  index  plus a spread or a fixed  rate,  established  at
          contract issuance.

          Reserves for universal life products are equal to cumulative  deposits
          less  withdrawals  and charges  plus  credited  interest  thereon.  In
          addition,  the Company  holds  reserves  as required  for SOP 03-1 for
          certain  products with anticipated  losses in later policy  durations.
          Reserves  for  traditional  life  insurance  contracts  represent  the
          present  value  of  future  benefits  to be  paid to or on  behalf  of
          contractowners  and related  expenses less the present value of future
          net premiums.

          As of  December  31,  2004,  ING USA's  $47,707.7  of life and annuity
          insurance  reserves (general and separate  account),  and deposit-type
          funds were comprised of each type of the following products:

          <TABLE>
          <S>                              <C>                 <C>

                                               Reserves           % of Total
                                           -----------------   -----------------
          Variable and Fixed Annuity          $ 43,271.9               90.7%
          GICs                                   3,060.1                6.4%
          Other                                  1,375.7                2.9%
                                           =================   =================
          Total                               $ 47,707.7              100.0%
                                           =================   =================
          </TABLE>

          The Other  category  primarily  consists of  relatively  small  closed
          blocks of health insurance products and interest-sensitive, universal,
          and traditional life insurance products.

          Reinsurance Arrangements

          The Company utilizes  indemnity  reinsurance  agreements to reduce its
          exposure  to  large  losses  from  its  life  and  annuity   insurance
          businesses.  Reinsurance  permits  recovery  of a portion  of  losses,
          although it does not discharge  the Company's  liability as the direct
          insurer of the risks.  Reinsurance  treaties are  structured as yearly
          renewable term, coinsurance, or modified coinsurance. All treaties are
          closed for new business, including variable annuity guarantees and the
          life business in force under those  treaties is in run-off.  Thus, the
          Company is currently not selecting new reinsurers. If in a position to
          select a reinsurer,  the Company would primarily base its selection on
          the financial strength of the reinsurer.  The Company currently has no
          significant  concentration  with  reinsurers.  The  Company  has  $1.3
          billion of reinsurance  related to GICs with its  affiliate,  Security
          Life of Denver Insurance Company  ("Security Life"), and has a minimal
          level of other affiliate reinsurance.

          One of the main  risks  reinsured  by the  Company  is the GMDB on its
          variable  annuity  policies  issued  prior to  January  1,  2000.  For
          contracts  issued  after  December 31,  1999,  the Company  hedges its

                                       9

<PAGE>
          exposure due to these products.  Other reinsurance  contracts coinsure
          life,  accident  and  health,  and  annuity  businesses.  The  Company
          continually  monitors and evaluates the financial  strength and credit
          ratings of its reinsurers. Only those reinsurance recoverable balances
          deemed  probable of recovery are  reflected as assets on the Company's
          Balance Sheets.

          Investment Overview and Strategy

          The Company's  investment  strategy involves  diversification by asset
          class,  and seeks to add  economic  diversification  and to reduce the
          risks of  credit,  liquidity,  and  embedded  options  within  certain
          investment  products,  such as  prepayment  options and interest  rate
          options  embedded  in  collateralized  mortgage  obligations  and call
          options  embedded  in  corporate  bonds.  The  investment   management
          function is centralized  under ING Investment  Management LLC ("IIM"),
          an  affiliate  of the  Company,  pursuant  to an  investment  advisory
          agreement.  Separate  portfolios are established for each general type
          of product within the Company.

          The Company's  general  account  invests  primarily in fixed  maturity
          investments,  including  publicly issued bonds  (including  government
          bonds), privately placed notes and bonds,  mortgage-backed securities,
          and asset-backed  securities.  The primary  investment  strategy is to
          optimize the  risk-adjusted  return through  superior asset  selection
          predicated on a developed relative value approach, credit research and
          monitoring,  superior  management  of interest  rate risk,  and active
          exploration into new investment product opportunities. Investments are
          purchased when market  returns,  adjusted for risk, and expenses,  are
          sufficient to  profitably  support  growth of the  liability  block of
          business.  In  addition,  assets  and  liabilities  are  analyzed  and
          reported for internal management purposes on an option-adjusted basis.
          The  level of  required  capital  of given  transactions  is a primary
          factor in determining  relative value among  different  investment and
          liability  alternatives,  within  the  scope  of each  product  type's
          objective.  An active review of existing holdings  identifies specific
          assets  that  could be  effectively  traded  in order to  enhance  the
          risk-adjusted  returns of the portfolio,  while minimizing adverse tax
          and accounting  impacts.  The Company  strives to maintain a portfolio
          average asset  quality  rating of A,  excluding  mortgage  loans,  but
          including mortgage-backed  securities,  which are reported with bonds,
          based on Standard & Poor's ratings classifications.

          The Company's use of derivatives is limited mainly to hedging purposes
          to reduce the Company's  exposure to cash flow  variability  of assets
          and  liabilities,  interest rate risk, and market risk. See "Liquidity
          and Capital  Resources -  Derivatives"  for further  discussion of the
          Company's use of derivatives.

          Ratings

          On  December  15,  2004,  Standard  & Poor's  reaffirmed  its AA (Very
          Strong)  counterparty  credit and financial  strength  rating of ING's
          primary U.S. insurance operating companies ("ING U.S."), including the
          Company.  Standard & Poor's  also on this date  revised the outlook on
          the core  insurance  operating  companies  from  negative  to  stable,
          reflecting ING's commercial  position and  diversification,  financial
          flexibility, reduced capital leverage, and improved profitability. The
          outlook  revisions  recognize ING's progress in setting a more focused
          and decisive  strategic  direction and  implementing  more  integrated
          financial  management  across  banking and  insurance.  On February 9,

                                       10

<PAGE>
          2005,  Standard & Poor's  assigned  its A-1+  short-term  counterparty
          credit rating to the Company. Standard & Poor's noted that the ratings
          are based on the Company's status as a core member of ING U.S.

          On December 17, 2004, Moody's  Investor's  Service,  Inc.  ("Moody's")
          issued a credit opinion affirming the financial strength rating of ING
          U.S., including the Company, of Aa3 (Excellent) with a stable outlook.
          The  rating is based on the  strong  implicit  support  and  financial
          strength of the parent company, ING.  Furthermore,  Moody's noted that
          ING U.S. has built a leading  market share in the domestic  individual
          life  insurance,  annuity,  and retirement plan  businesses.  ING U.S.
          enjoys product diversity, further enhancing its credit profile through
          the use of these multiple distribution channels.

          On December 22, 2004, A.M. Best Company, Inc. ("A.M. Best") reaffirmed
          the financial strength rating of A+ (Superior) of ING U.S.,  including
          the Company, while maintaining its negative outlook for ING U.S. These
          rating actions follow ING's announcement of its intention to sell Life
          Insurance  Company of Georgia  ("LOG"),  as well as the  conclusion of
          A.M.  Best's  review  of  ING's  plan  to  exit  the  U.S.  individual
          reinsurance  business.  ING  closed the  transaction  to exit the U.S.
          individual life reinsurance business on December 31, 2004 and the sale
          of LOG is expected to be completed  during the second quarter of 2005,
          subject to regulatory approval. Neither of these transactions directly
          impact the Company.

          Regulation

          The  Company's  operations  are  subject to  comprehensive  regulation
          throughout  the United States.  The laws of the various  jurisdictions
          establish   supervisory   agencies,   including  the  state  insurance
          departments,  with  broad  authority  to grant  licenses  to  transact
          business  and  regulate  many  aspects of the  products  and  services
          offered by the Company, as well as solvency and reserve adequacy. Many
          agencies  also  regulate  the   investment   activities  of  insurance
          companies  on  the  basis  of  quality,  diversification,   and  other
          quantitative  criteria.  The  Company's  operations  and  accounts are
          subject  to  examination  at  regular  intervals  by  certain of these
          regulators.

          ING USA is subject to the  insurance  laws of the state in which it is
          organized  and  of the  other  jurisdictions  in  which  it  transacts
          business.  The primary regulator of the Company's insurance operations
          is the  Division  of  Insurance  for the  State of Iowa.  Among  other
          matters,  these agencies may regulate premium rates,  trade practices,
          agent  licensing,  policy forms,  underwriting  and claims  practices,
          minimum  interest  rate  to be  credited  to  fixed  annuity  customer
          accounts, and the maximum interest rates that can be charged on policy
          loans.

          The SEC, NASD and, to a lesser extent, the states,  regulate sales and
          investment  management  activities  and  operations  of  the  Company.
          Generally,  the Company's variable annuity products and certain of its
          fixed annuities are registered as securities with the SEC. Regulations
          of the SEC,  Department of Labor ("DOL") and Internal  Revenue Service
          also impact  certain of the Company's  annuity,  life  insurance,  and
          other  investment  products.   These  products  may  involve  separate
          accounts and mutual funds registered under the Investment  Company Act
          of 1940.

                                       11

<PAGE>

          Insurance Holding Company Laws

          A number of states regulate  affiliated groups of insurers such as the
          Company  under  holding  company  statutes.  These  laws,  among other
          things,  place certain restrictions on transactions between affiliates
          such as  dividends  and  other  distributions  that may be paid to the
          Company's parent corporation.

          Insurance Company Guaranty Fund Assessments

          Insurance companies are assessed the costs of funding the insolvencies
          of  other   insurance   companies  by  the  various   state   guaranty
          associations,  generally  based on the  amount of  premiums  companies
          collect in that state.

          The Company accrues the cost of future guaranty fund assessments based
          on  estimates  of  insurance  company  insolvencies  provided  by  the
          National   Organization   of  Life  and  Health   Insurance   Guaranty
          Associations  (NOLHGA)  and the  amount of  premiums  written  in each
          state.  The Company has estimated this liability to be $13.8 and $18.4
          as of December  31,  2004 and 2003,  respectively  and has  recorded a
          reserve. The Company has also recorded an asset of $3.7 and $0.6 as of
          December  31,  2004 and 2003,  respectively,  for  future  credits  to
          premium taxes for assessments already paid.

          For information  regarding certain other potential  regulatory changes
          relating to the Company's  businesses,  see "Risk Factors" in Item 1 -
          Business.

          Employees

          The Company had 1,204  employees as of December  31,  2004,  primarily
          focused on managing  the  product  distribution,  marketing,  customer
          service,  and  product  and  financial  management  of the Company and
          certain  of its  affiliates.  The  Company  also  makes  use of  other
          services provided by ING North America Insurance Corporation and other
          affiliates.  These  services  include  underwriting  and new  business
          processing,  actuarial, risk management,  human resources,  investment
          management,  finance, information technology, and legal and compliance
          services.  The  affiliated  companies are reimbursed for the Company's
          use of various services and facilities under a variety of intercompany
          agreements.

          Risk Factors

          In addition to the normal risks of business, the Company is subject to
          significant  risks  and  uncertainties,   including  those  which  are
          discussed below.

               The  Company's  efforts  to reduce the  impact of  interest  rate
               changes on its profitability  and financial  condition may not be
               effective

          The Company attempts to reduce the impact of changes in interest rates
          on the  profitability  and  financial  condition of its fixed  annuity
          operations.  The Company  accomplishes  this  reduction  primarily  by
          managing  the  duration of its assets  relative to the duration of its
          liabilities.  During  a  period  of  rising  interest  rates,  annuity
          contract  surrenders and withdrawals may increase as customers seek to
          achieve higher returns through other financial  products.  Despite its
          efforts to reduce the impact of rising interest rates, the Company may
          be required to sell assets to raise the cash  necessary  to respond to

                                       12

<PAGE>

          such surrenders and withdrawals,  thereby  realizing capital losses on
          the assets sold. An increase in policy  surrenders and withdrawals may
          also  require  the  Company  to  accelerate   amortization  of  policy
          acquisition  costs  relating to these  contracts,  which would further
          reduce its net income.

          During periods of declining  interest  rates,  borrowers may prepay or
          redeem mortgages and bonds that the Company owns, which would force it
          to reinvest  the  proceeds at lower  interest  rates.  For some of its
          products,   such  as  guaranteed   investment  contracts  and  funding
          agreements,  the  Company  is unable to lower the rate it  credits  to
          customers  in  response  to the  lower  return  it  will  earn  on its
          investments.  In addition,  certain of its products  provide a minimum
          rate which the Company must credit to its customers. Therefore, it may
          be more  difficult  for the  Company to maintain  its  desired  spread
          between the investment  income it earns and the interest it credits to
          its customers, thereby reducing its profitability.

               Equity market  volatility could  negatively  impact the Company's
               profitability and financial condition

          The  sales and  profitability  of  certain  of the  Company's  annuity
          products  which provide  returns  based on equities or equity  indices
          could be impacted by declines in the equity markets.  Generally, sales
          of  equity-linked  annuity  products,  including  variable  annuities,
          decrease when equity markets  decline over an extended period of time.
          The  amount  of fees the  Company  receives  on its  variable  annuity
          products is based on the account values of the separate accounts which
          support such variable  earnings.  A decline in the equity markets will
          likely  result in a decrease in such  account  values and  therefore a
          decrease in the fees the Company  receives on its variable  annuities.
          In addition,  certain of its  products  provide  guarantees  which are
          related  to the  equity  markets.  A  sustained  decline in the equity
          markets will increase the Company's exposure to such guarantees, while
          at the same time it is  receiving  less fees from such  products.  The
          Company  tries to minimize  its exposure to these  guarantees  through
          reinsurance  and  other  risk  management  strategies,  including  the
          Company's hedging program.  The Company's future  profitability may be
          negatively  impacted by its  failure to  successfully  minimize  these
          risks,  which could  result from a number of  efforts,  including  the
          failure of a reinsurer or other  counterparty  to make payments due to
          the  Company,   the  unavailability  or  increase  in  costs  of  such
          reinsurance  or other risk  management  strategies,  and the Company's
          inability to implement an effective risk management  strategy.  To the
          extent  that the  actual  performance  of the equity  markets  and the
          Company's  expectations  of future  performance  decrease  its  future
          profit  expectations,  the Company may be required to  accelerate  the
          amount of deferred  policy  acquisition  cost  amortization in a given
          period, potentially negatively impacting its net income in a period.

                                       13

<PAGE>

               A downgrade  in any of the  Company's  ratings  may,  among other
               things,  increase policy  surrenders and withdrawals,  reduce new
               sales and terminate relationships with distributors, any of which
               could adversely affect its profitability and financial condition

          Ratings are important factors in establishing the competitive position
          of insurance  companies.  A  downgrade,  or the  potential  for such a
          downgrade, of any of the Company's ratings could, among other things:

          |X|  Materially increase the number of annuity contract surrenders and
               withdrawals;

          |X|  Result in the termination of relationships  with  broker-dealers,
               banks,  agents,  wholesalers,   and  other  distributors  of  the
               Company's products and services; and

          |X|  Reduce new sales of certain products  including  annuities,  GICs
               and other investment products.

          Any  of  these  consequences  could  adversely  affect  the  Company's
          profitability and financial condition.

          Rating organizations assign ratings based upon several factors.  While
          most of the factors relate to the rated  company,  some of the factors
          relate  to the  views of the  rating  organization,  general  economic
          conditions,  and circumstances outside the rated company's control. In
          addition,   rating  organizations  may  employ  different  models  and
          formulas to assess  financial  strength of a rated  company,  and from
          time to time rating  organizations have, in their discretion,  altered
          the models.  Changes to the models,  general economic  conditions,  or
          circumstances  outside the  Company's  control  could  impact a rating
          organizations'  judgment  of its rating and the  subsequent  rating it
          assigns the Company.  The Company  cannot  predict what actions rating
          organizations  may take, or what actions it may be required to take in
          response to the actions of rating organizations, which could adversely
          affect the Company.

               The  Company's  ability  to grow  depends  in large part upon the
               continued availability of capital

          Lion has recently  contributed  significant  amounts of capital to the
          Company to support  its sales  activities.  The  Company has also used
          capital  primarily  to support  sales  growth  and also to  strengthen
          reserves  associated  with its annuity  products.  Although the equity
          markets have had positive performance recently, deterioration in these
          markets  could lead to further  capital  consumption  from  guaranteed
          benefits related to policy liabilities.  There is no formal obligation
          or  requirement  for  Lion  to  contribute  capital  to  the  Company.
          Therefore,  although the Company believes it has sufficient capital to
          fund its  immediate  growth and capital  needs,  the amount of capital
          required and the amount of capital  available  can vary from period to
          period due to a variety of  circumstances,  some of which are  neither
          predictable nor  foreseeable,  nor necessarily  within its control.  A
          lack of sufficient capital could hinder the Company's ability to grow.

                                       14

<PAGE>

               The  Company's  investment  portfolio is subject to several risks
               that may diminish the value of its invested  assets and adversely
               affect  its  sales,  profitability  and  the  investment  returns
               credited to certain of its customers

          The  Company's  investment  portfolio  is subject  to  several  risks,
          including, among other things:

          |X|  The Company may experience an increase in defaults or delinquency
               in the investment  portfolios,  including the commercial mortgage
               loan portfolio.
          |X|  The Company may have greater  difficulty selling privately placed
               fixed maturity  securities,  commercial  mortgage loans, and real
               estate  investments at attractive  prices, in a timely manner, or
               both, because they are less liquid than its publicly traded fixed
               maturity securities.
          |X|  During periods of declining interest rates,  borrowers may prepay
               or redeem  prior to  maturity  (i)  mortgages  that back  certain
               mortgage  backed  securities  and (ii) bonds with  embedded  call
               options  that the  Company  owns which would force it to reinvest
               the proceeds  received at lower interest rates.
          |X|  Environmental  liability  exposure may result from the  Company's
               commercial  mortgage loan portfolio and real estate  investments.
          |X|  The Company may experience losses in its commercial mortgage loan
               portfolio   as  a  result  of   economic   downturns   or  losses
               attributable to natural disasters in certain regions.
          |X|  The Company may  experience  volatility of earnings to the extent
               that the derivative  positions entered into by the Company do not
               qualify for hedge accounting under GAAP.

          Any of these  consequences  may  diminish  the value of the  Company's
          invested assets and adversely affect its sales, profitability,  or the
          investment returns credited to its customers.

               Changes  in  regulation  in the  United  States  may  reduce  the
               Company's profitability

          The  Company's   insurance   business  is  subject  to   comprehensive
          regulation and supervision  throughout the United States by both state
          and federal regulators. The primary purpose of state regulation of the
          insurance business is to protect  contractowners,  and not necessarily
          to protect other constituencies such as creditors or investors.  State
          insurance   regulators,   state   attorneys   general,   the  National
          Association  of  Insurance  Commissioners,   the  SEC,  and  the  NASD
          continually  reexamine  existing laws and  regulations  and may impose
          changes  in  the   future.   Changes  in   federal   legislation   and
          administrative  policies  in  areas  such  as  employee  benefit  plan
          regulation,  financial services regulation, and federal taxation could
          lessen the advantages of certain of the Company's products as compared
          to competing  products,  or possibly  result in the  surrender of some
          existing  contracts and policies or reduced sales of new products and,
          therefore, could reduce the Company's profitability.

          The  insurance  industry  has  recently  become  the focus of  greater
          regulatory scrutiny due to questionable business practices relating to
          trading  and  pricing  within the  mutual  fund and  variable  annuity
          industries,   allegations   related  to  improper  special   payments,
          price-fixing, conflicts of interest and improper accounting practices,
          and  other  misconduct  alleged  by and  initiatives  of the New  York
          Attorney  General,  state  insurance   departments,   and  in  related
          litigation.  As a  result,  a large  number  of  insurance  companies,


                                       15

<PAGE>

          including certain ING  affiliatesand the Company,  have been requested
          to provide information to regulatory  authorities.  In some cases this
          regulatory  scrutiny  has led to new proposed  legislation  regulating
          insurance companies,  regulatory penalties, and related litigation. At
          this time,  the  Company  does not  believe  that any such  regulatory
          scrutiny  will  materially  impact it;  however,  the  Company  cannot
          guarantee that new laws, regulations, or other regulatory action aimed
          at the business  practices  under scrutiny would not adversely  affect
          its  business.  The adoption of new laws or  regulations,  enforcement
          action or  litigation,  whether or not  involving  the Company,  could
          influence the manner in which it distributes  its insurance  products,
          which could adversely impact the Company.

Item 2.   Properties

          The Company's principal office is located at 1475 Dunwoody Drive, West
          Chester,  Pennsylvania,  19380-1478.  The Company's annuity operations
          and  customer  service  center are located at 909 Locust  Street,  Des
          Moines, Iowa 50309. All Company office space is leased or subleased by
          the Company or its other  affiliates.  The Company pays  substantially
          all  expenses   associated  with  its  leased  and  subleased   office
          properties.  Affiliates  within  ING's  U.S.  operations  provide  the
          Company with various management,  finance,  investment management, and
          other administrative  services, from facilities located at 5780 Powers
          Ferry  Road,  N.W.,  Atlanta,   Georgia  30327-4390.   The  affiliated
          companies are  reimbursed  for the Company's use of these services and
          facilities under a variety of intercompany agreements.

Item 3.   Legal Proceedings

          The Company is a party to threatened or pending  lawsuits/arbitrations
          arising  from the normal  conduct of  business.  Due to the climate in
          insurance  and  business  litigation/arbitration,  suits  against  the
          Company  sometimes   include  claims  for  substantial   compensatory,
          consequential or punitive damages and other types of relief. Moreover,
          certain claims are asserted as class actions,  purporting to represent
          a group of similarly situated individuals. While it is not possible to
          forecast  the  outcome  of such  lawsuits/arbitrations,  in  light  of
          existing insurance,  reinsurance and established  reserves,  it is the
          opinion    of    management    that    the    disposition    of   such
          lawsuits/arbitrations will not have a materially adverse effect on the
          Company's operations or financial position.

Item 4.   Submission of Matters to a Vote of Security Holders

          Omitted pursuant to General Instruction I(2)(c) of Form 10-K.

                                       16

<PAGE>

                                     PART II

Item 5.   Market for Registrant's  Common Equity and Related  Stockholder
          Matters
          (Dollar amounts in millions, unless otherwise stated)

          There is no public trading market for the Company's  common stock.  As
          of January 1, 2004, all of the Company's  outstanding common stock was
          owned by its  parent,  Lion,  as a  result  of the  affiliate  mergers
          described  in Part I, Item 1. All of the  outstanding  common stock of
          Lion is owned by ING AIH, whose ultimate parent is ING. As of December
          31, 2003,  prior to the merger,  all of the Company's common stock was
          owned by Equitable Life, a wholly owned subsidiary of Lion.

          The Company's ability to pay dividends to its parent is subject to the
          prior  approval of the Iowa  Division of Insurance  for payment of any
          dividend,  which,  when combined with other  dividends paid within the
          preceding twelve months,  exceeds the greater of (1) ten percent (10%)
          of the  Company's  statutory  surplus at the prior year end or (2) the
          Company's prior year statutory net gain from  operations.  The Company
          did not pay any  dividends  on its common  stock  during 2004 or 2002.
          During  2003,  the Company paid $12.4 in dividends on its common stock
          to its Parent.

          During 2004, 2003, and 2002, ING USA received capital contributions of
          $230.0, $88.7, and $456.3, respectively,  from Lion. Lion has recently
          contributed  significant  amounts of capital to the Company to support
          its sales  activities.  The Company has also used capital primarily to
          support sales growth and also to strengthen  reserves  associated with
          its annuity products.


                                       17

<PAGE>

Item 6.   Selected  Financial Data
          (Dollar  amounts in millions  unless  otherwise stated)

                   ING USA ANNUITY AND LIFE INSURANCE COMPANY
                    3-YEAR SUMMARY OF SELECTED FINANCIAL DATA

          <TABLE>
          <S>                                                    <C>          <C>           <C>

                                                                       2004         2003*         2002*
                                                                 -----------------------------------------
          OPERATING RESULTS
          Net investment income                                    $ 1,023.9       $ 974.6       $ 989.3
          Fee income                                                   566.7         397.7         295.7
          Premiums                                                      22.8          26.0          36.8
          Net realized capital gains (losses)                           57.6         106.9        (196.5)
          Total revenue                                              1,673.8       1,509.0       1,141.6
          Interest credited and other benefits to
            contractowners                                           1,134.0         925.7         848.0
          Amortization of deferred policy acquisition
            costs and value of business acquired                       186.8         347.9         302.0
          Income (loss) before cumulative effect of
            change in accounting principle                              92.9          57.3        (116.1)
          Cumulative effect of change in accounting
            principle, net of tax                                       (1.0)            -      (1,298.4)
          Net income (loss)                                             91.9          57.3      (1,414.5)

          FINANCIAL POSITION
          Total investments                                       $ 22,882.7    $ 19,844.6    $ 18,413.4
          Assets held in separate accounts                          24,746.7      18,220.1      12,052.4
          Total assets                                              52,417.6      41,097.4      33,460.1
          Future policy benefits and claims reserves                22,961.0      19,400.5      18,404.9
          Liabilities related to separate accounts                  24,746.7      18,220.1      12,052.4
          Notes to affiliates                                          435.0          85.0          85.0
          Total shareholder's equity                                 2,774.5       2,528.0       2,339.5

          </TABLE>

          *    These  amounts have been restated due to the merger that occurred
               on January 1, 2004,  which was accounted for in a manner  similar
               to a pooling-of-interests.


                                       18

<PAGE>

Item 7.   Management's Narrative Analysis of the Results of Operations and
          Financial Condition
          (Dollar amounts in millions, unless otherwise stated)

          Overview

          The following narrative analysis of the results of operations presents
          a review of ING USA Annuity and Life  Insurance  Company ("ING USA" or
          "the  Company")  for each of the three years ended  December 31, 2004,
          2003, and 2002 and financial  condition as of December 31, 2004 versus
          December  31,  2003.  This item should be read in its  entirety and in
          conjunction with the selected financial data, financial statements and
          related  notes and other  supplemental  data which can be found  under
          Part II, Item 6 and Item 8 contained herein.

          Forward-Looking Information/Risk Factors

          In  connection  with  the  "safe  harbor"  provisions  of the  Private
          Securities Litigation Reform Act of 1995, the Company cautions readers
          regarding certain forward-looking  statements contained in this report
          and in any other  statements  made by, or on behalf of,  the  Company,
          whether or not in future  filings  with the  Securities  and  Exchange
          Commission  ("SEC").  Forward-looking  statements  are  statements not
          based on historical information and which relate to future operations,
          strategies, financial results, or other developments. Statements using
          verbs such as  "expect,"  "anticipate,"  "believe" or words of similar
          import generally involve forward-looking statements.  Without limiting
          the foregoing,  forward-looking  statements  include  statements which
          represent the Company's beliefs  concerning future levels of sales and
          redemptions of the Company's products,  investment spreads and yields,
          or the earnings and profitability of the Company's activities.

          Forward-looking  statements  are  necessarily  based on estimates  and
          assumptions  that are  inherently  subject  to  significant  business,
          economic,  and competitive  uncertainties and  contingencies,  many of
          which are beyond the  Company's  control and many of which are subject
          to change.  These  uncertainties and contingencies  could cause actual
          results   to  differ   materially   from   those   expressed   in  any
          forward-looking  statements  made by, or on behalf  of,  the  Company.
          Whether or not actual results differ  materially from  forward-looking
          statements  may  depend  on  numerous  foreseeable  and  unforeseeable
          developments.  Some may be national in scope, such as general economic
          conditions, changes in tax law and changes in interest rates. Some may
          be  related  to the  insurance  industry  generally,  such as  pricing
          competition,  regulatory  developments,  and  industry  consolidation.
          Others may relate to the  Company  specifically,  such as  litigation,
          regulatory action, and risks associated with the Company's  investment
          portfolio,  such as changes in credit  quality,  price  volatility and
          liquidity.  Investors  are also  directed to consider  other risks and
          uncertainties  discussed in "Risk Factors" in Item 1 contained  herein
          and in other  documents  filed by the Company with the SEC.  Except as
          may be required by the federal  securities laws, the Company disclaims
          any obligation to update forward-looking information.

                                       19

<PAGE>

          Basis of Presentation

          ING  USA  Annuity  and  Life  Insurance  Company  ("ING  USA"  or  the
          "Company"),  a wholly-owned  subsidiary of Lion  Connecticut  Holdings
          Inc. ("Lion" or "Parent"), is a stock life insurance company organized
          under the laws of the State of Iowa.

          Lion  is an  indirect,  wholly-owned  subsidiary  of  ING  Groep  N.V.
          ("ING"),  a global  financial  services  holding  company based in The
          Netherlands,  with  American  Depository  Shares on the New York Stock
          Exchange under the symbol "ING".  ING USA is authorized to do business
          in the  District of Columbia and all states  except New York.  ING USA
          was domiciled as a life insurance  company under the laws of the State
          of Delaware  until December 31, 2003 and has been domiciled as such in
          Iowa since January 1, 2004.

          On January 1, 2004 (the  "Merger  Date"),  the Company  simultaneously
          redomesticated  from  Delaware  to Iowa,  changed its name from Golden
          American Life Insurance  Company to ING USA Annuity and Life Insurance
          Company,  and  merged  the  following  affiliates  into  the  Company:
          Equitable  Life  Insurance  Company of Iowa  ("Equitable  Life"),  USG
          Annuity & Life Company  ("USG"),  and United Life & Annuity  Insurance
          Company ("ULA") (collectively,  the "Merger Companies").  Prior to the
          merger date, ING USA was a wholly-owned  subsidiary of Equitable Life.
          Equitable Life merged its affiliate,  Ameribest Life Insurance Company
          ("AMB"),  a life  insurance  company  domiciled  in Georgia,  into its
          operations on January 1, 2003.

          Statement of Financial Accounting Standards ("FAS") No. 141, "Business
          Combinations", excludes transfers of net assets or exchanges of shares
          between  entities  under  common  control,   and  notes  that  certain
          provisions under  Accounting  Principles Board ("APB") Opinion No. 16,
          "Business  Combinations",  provide  a  source  of  guidance  for  such
          transactions.  In  accordance  with  APB  Opinion  No.  16,  financial
          information of the combined entity is presented as if the entities had
          been  combined  for  the  full  year,  and all  comparative  financial
          statements   are  restated  and  presented  as  if  the  entities  had
          previously    been    combined,    in   a   manner    similar   to   a
          pooling-of-interests.  The Balance Sheets and Statements of Operations
          give effect to the consolidation  transactions as if they had occurred
          on December 31, 2003 and January 1, 2002, respectively.

          Critical Accounting Policies

          General

          The preparation of financial  statements in conformity with accounting
          principles  generally  accepted in the United States ("GAAP") requires
          the use of estimates and  assumptions  in certain  circumstances  that
          affect amounts reported in the accompanying  financial  statements and
          related footnotes. These estimates and assumptions are evaluated on an
          on-going basis based on historical  developments,  market  conditions,
          industry  trends,  and other  information that is reasonable under the
          circumstances.  There can be no  assurance  that actual  results  will
          conform to estimates and  assumptions,  and that  reported  results of
          operations  will not be materially  adversely  affected by the need to
          make  future  accounting  adjustments  to  reflect  changes  in  these
          estimates and assumptions from time to time.

                                       20

<PAGE>

          The Company has identified the following estimates as critical in that
          they  involve  a  higher  degree  of  judgment  and are  subject  to a
          significant  degree  of  variability:  reserves,  other-than-temporary
          impairment testing,  amortization of deferred policy acquisition costs
          and  value  of  business   acquired,   and  valuation  of  derivatives
          instruments.   In  developing   these   estimates,   management  makes
          subjective and complex  judgments  that are  inherently  uncertain and
          subject  to  material  changes  as facts  and  circumstances  develop.
          Although  variability  is  inherent  in  these  estimates,  management
          believes  the amounts  provided are  appropriate  based upon the facts
          available upon compilation of the financial statements.

          Reserves

          The Company  establishes and carries  actuarially  determined reserves
          which are  calculated  to meet its future  obligations.  Reserves  are
          calculated  using mortality and withdrawal rate  assumptions  based on
          relevant Company experience and are periodically reviewed against both
          industry  standards and experience.  Changes in or deviations from the
          assumptions used can significantly affect the Company's reserve levels
          and related future operations.

          Future  policy  benefits  and claims  reserves  include  reserves  for
          universal  life  insurance   contracts,   traditional  life  insurance
          contracts,  immediate  and  deferred  annuities  with life  contingent
          payouts, and guaranteed investment contracts ("GICs").

          Reserves for  deferred  annuity  investment  contracts  and  immediate
          annuity  without  life  contingent  payouts  are  equal to  cumulative
          deposits less charges and withdrawals,  plus credited interest thereon
          (reserve  interest  rates vary by product up to 10.0% for 2004,  2003,
          and 2002).

          Reserves for immediate  annuities with life contingent payout benefits
          are  computed  on  the  basis  of  assumed  interest  discount  rates,
          mortality,  and expenses,  including a margin for adverse  deviations.
          Such  assumptions  generally vary by annuity plan type, year of issue,
          and policy duration.  For 2004, 2003, and 2002, reserve interest rates
          ranged from 3.0% to 8.0%.

          Certain  variable  annuity  contracts offer  guaranteed  minimum death
          benefits ("GMDB"), as well as guaranteed living benefits.  The GMDB is
          provided in the event the  customer's  account value at death is below
          the guaranteed  value.  Guaranteed  living  benefits  offered  include
          guaranteed  minimum income  benefits,  guaranteed  minimum  withdrawal
          benefits,  and guaranteed minimum accumulation  benefits.  See Item I,
          Business, "Products and Services", for a description of the guaranteed
          living   benefits.   Although  the  Company   reinsures  or  hedges  a
          significant  portion  of  the  death  and  living  benefit  guarantees
          associated with its in force  business,  declines in the equity market
          may  increase  the  Company's  net  exposure  to the death and  living
          benefits under these contracts.

          Reserves for GICs are calculated  using the amount  deposited with the
          Company,  less  withdrawals,  plus  interest  accrued  to  the  ending
          valuation   date.   Interest  on  these  contracts  is  accrued  by  a
          predetermined index plus a spread or a fixed rate,  established at the
          issue date of the contract.

                                       21

<PAGE>

          Reserves for universal life products are equal to cumulative  deposits
          less  withdrawals  and charges  plus  credited  interest  thereon.  In
          addition,  the Company  holds  reserves as required  for  Statement of
          Position   ("SOP")  03-1,   "Accounting  and  Reporting  by  Insurance
          Enterprises  for  Certain  Long-Duration  Contracts  and for  Separate
          Accounts",  for  certain  products  with  anticipated  losses in later
          policy  durations.  Reserves for traditional life insurance  contracts
          represent  the  present  value of future  benefits to be paid to or on
          behalf of  contractowners  and related expenses less the present value
          of future net premiums.

          Other-Than-Temporary Impairment Testing

          The Company's  accounting  policy requires that a decline in the value
          of an  investment  below  its  amortized  cost  basis be  assessed  to
          determine  if  the  decline  is   other-than-temporary.   If  so,  the
          investment  is deemed  to be  other-than-temporarily  impaired,  and a
          charge  is  recorded  in net  realized  capital  losses  equal  to the
          difference  between  fair  value and the  amortized  cost basis of the
          investment.  The  fair  value of the  other-than-temporarily  impaired
          investment becomes its new cost basis.

          In addition,  the Company  invests in structured  securities that meet
          the criteria of Emerging  Issues Task Force  ("EITF") Issue No. 99-20,
          "Recognition  of  Interest  Income and  Impairment  on  Purchased  and
          Retained Beneficial Interests in Securitized  Financial Assets." Under
          EITF Issue No. 99-20, a  determination  of the required  impairment is
          based on credit risk and the  possibility  of  significant  prepayment
          risk that restricts the Company's  ability to recover the  investment.
          An  impairment is recognized if the fair value of the security is less
          than  amortized cost and there has been an adverse change in cash flow
          since  the  remeasurement  date.  When a  decline  in  fair  value  is
          determined  to be  other-than-temporary,  the  individual  security is
          written down to fair value and the loss is accounted for as a realized
          loss.

          The  evaluation of  other-than-temporary  impairments  included in the
          Company's  general account is a quantitative and qualitative  process,
          which is  subject  to  risks  and  uncertainties  and is  intended  to
          determine whether declines in the fair value of investments  should be
          recognized in current  period  earnings.  The risks and  uncertainties
          include the length of time and extent to which the fair value has been
          less than amortized cost, changes in general economic conditions,  the
          issuer's financial condition or near-term recovery prospects,  and the
          effects of changes in interest rates.

          Amortization  of  Deferred  Policy  Acquisition  Costs  and  Value  of
          Business Acquired

          Deferred policy acquisition costs ("DAC") represent policy acquisition
          costs that have been capitalized and are subject to amortization. Such
          costs  consist  principally  of  certain  commissions,   underwriting,
          contract issuance,  and agency expenses,  related to the production of
          new and renewal business.

          Value of business acquired  ("VOBA")  represents the outstanding value
          of in force business  capitalized and amortized in purchase accounting
          when the Company was acquired. The value is based on the present value
          of estimated net cash flows embedded in the Company's contracts.

                                       22

<PAGE>

          The  amortization  methodology used for DAC and VOBA varies by product
          type.  Statement of  Financial  Accounting  Standards  ("FAS") No. 60,
          "Accounting  and  Reporting  by  Insurance  Enterprises,"  applies  to
          traditional  life insurance  products,  primarily  whole life and term
          life insurance contracts. Under FAS No. 60, DAC and VOBA are amortized
          over the premium payment period,  in proportion to the premium revenue
          recognized.

          FAS No. 97,  "Accounting  and Reporting by Insurance  Enterprises  for
          Certain Long-Duration Contracts and for Realized Gains and Losses from
          the Sale of Investments" applies to universal life and investment-type
          products, such as fixed and variable deferred annuities. Under FAS No.
          97, DAC and VOBA are amortized,  with  interest,  over the life of the
          related contracts  (usually 25 years) in relation to the present value
          of estimated  future gross  profits from  investment,  mortality,  and
          expense  margins;   asset-based  fees,  policy   administration,   and
          surrender charges;  less policy  maintenance fees and  non-capitalized
          commissions, as well as realized gains and losses on investments.  DAC
          related to guaranteed investment contracts,  however, are amortized on
          a straight-line basis over the life of the contract.

          Changes in assumptions  can have a significant  impact on DAC and VOBA
          balances and amortization  rates.  Several  assumptions are considered
          significant in the estimation of future gross profits  associated with
          variable universal life and variable deferred annuity products. One of
          the most significant  assumptions involved in the estimation of future
          gross  profits is the  assumed  return  associated  with the  variable
          account performance.  To reflect the volatility in the equity markets,
          this assumption  involves a combination of near-term  expectations and
          long-term assumptions regarding market performance. The overall return
          on the variable  account is dependent on multiple  factors,  including
          the relative mix of the underlying  sub-accounts  among bond funds and
          equity funds, as well as equity sector  weightings.  Other significant
          assumptions  include  surrender  and lapse rates,  estimated  interest
          spread, and estimated mortality.

          Due  to  the  relative  size  and  sensitivity  to  minor  changes  in
          underlying  assumptions of DAC and VOBA balances, the Company performs
          a  quarterly  and annual  analysis of DAC and VOBA for the annuity and
          life businesses, respectively. The DAC and VOBA balances are evaluated
          for recoverability and are reduced to the extent that estimated future
          gross profits are inadequate to recover the asset.

          At  each  evaluation  date,   actual   historical  gross  profits  are
          reflected,  and estimated future gross profits and related assumptions
          are  evaluated  for  continued   reasonableness.   Any  adjustment  in
          estimated  profit  requires  that  the  amortization  rate be  revised
          ("unlocking"),  retroactively  to the date of the  policy or  contract
          issuance.  The  cumulative  unlocking is  recognized as a component of
          current  period  amortization.  In general,  increases in  investment,
          mortality,  and expense  margins,  and thus estimated  future profits,
          lower the rate of  amortization.  However,  decreases  in  investment,
          mortality,  and expense  margins,  and thus estimated  future profits,
          increase the rate of amortization.

                                       23

<PAGE>

          Analysis of DAC/VOBA-Annuity

          The variance in amortization  expense in 2004 versus 2003 was impacted
          by SOP 03-1. In prior years,  amortization of inducements was included
          in amortization of DAC and VOBA.  Beginning in 2004,  sales inducement
          amortization  is  included  as  a  component  of  benefit  expense  in
          accordance with SOP 03-1.  Therefore,  the decrease in amortization of
          DAC  and  VOBA  is   partially   related  to  2004  sales   inducement
          amortization   being   included  in  interest   credited   instead  of
          amortization of DAC and VOBA. Also contributing to the decrease is the
          improved   market   performance   during  2003,   which   lowered  the
          amortization  rate for 2004.  Amortization  expense in 2003 was higher
          than 2002 due in part to the poor equity market  performance  in 2002,
          which  increased  the  amortization  rate in  2003,  as well as to the
          amortization of acquisition  costs related to increased sales of fixed
          annuities  during 2002.  2003 was the first full year of  amortization
          for this block of acquisition  costs.  Also impacting  amortization of
          DAC and VOBA are unlocking adjustments discussed below.

          The actual  separate  account market return  exhibited by the variable
          deposits  invested  in  mutual  funds  associated  with the  Company's
          liabilities  in  2004  exceeded  the  long-term  assumption,   thereby
          producing  deceleration of DAC/VOBA  amortization of $6.6, before tax.
          As a part of the regular analysis of DAC/VOBA, at the end of the first
          quarter of 2004, the Company  modified its  assumptions  regarding the
          future rate of spread income on some of its fixed annuity liabilities.
          The  assumption  modification  was in the  direction  of lower  spread
          income, and produced an acceleration of DAC/VOBA amortization of $5.0,
          before  tax.  Similar  regular  analysis of DAC/VOBA at the end of the
          third quarter of 2004 included unlocking of the Company's  assumptions
          regarding  contractowner  withdrawal  behavior.  Based  on  experience
          studies,  assumed rates of full  surrender for both fixed and variable
          annuities  and rates of  partial  withdrawal  of account  balance  for
          variable   annuities   were  all   modified   downward,   producing  a
          deceleration  of  DAC/VOBA  amortization  of  $4.2,  before  tax.  The
          combined  effect of the three  factors of actual  variable  return for
          2004 exceeding  long-term  assumptions,  modification of future spread
          income expectations, and modification of expectations regarding future
          withdrawal  behavior  was  a  deceleration  of  DAC/VOBA  amortization
          totaling $5.8,  before tax, or $3.8, net of $2.0 of federal income tax
          expense.

          The  Company  reset  long-term  return  assumptions  for the  separate
          account  to 8.5% from 9.0%  (gross  before  fund  management  fees and
          mortality  and expense and other  policy  charges) as of December  31,
          2003,  reflecting a blended  return of equity and other  sub-accounts.
          The largest  component of the 2003  unlocking  adjustment  comprised a
          deceleration of DAC/VOBA amortization totaling $41.3, before tax. This
          component was primarily  driven by improved  market  performance.  The
          Company also  unlocked  assumptions  regarding  future lapse rates for
          fixed annuities during the analysis at the end of the third quarter of
          2003,  resulting in an acceleration of DAC/VOBA  amortization of $6.0,
          before tax. In each of the regular  analyses of DAC/VOBA at the end of
          the third and fourth quarters of 2003,  expectations  regarding yields
          on assets  backing fixed annuity  liabilities  were revised  downward,
          resulting  in  respective   accelerations  of  DAC/VOBA   amortization
          measuring $2.1,  before tax and $6.0,  before tax. The combined effect
          of all unlocking in 2003 was a deceleration  of DAC/VOBA  amortization
          totaling  $27.2,  before tax, or $17.7,  net of $9.5 of federal income
          tax expense.

                                       24

<PAGE>

          As part of the  regular  analysis  of  DAC/VOBA,  at the end of  third
          quarter of 2002,  the Company  unlocked its  long-term  rate of return
          assumptions.  The Company reset long-term assumptions for the separate
          account  return  to 9.0%  (gross  before  fund  management  fees,  and
          mortality  and expense and other policy  charges),  as of December 31,
          2002,  reflecting a blended  return of equity and other  sub-accounts.
          The largest  component of the 2002 unlocking  adjustment  comprised an
          acceleration of DAC/VOBA amortization totaling $91.5, before tax. This
          component was primarily driven by the sustained downturn in the equity
          markets and revised  expectations for future returns. The Company also
          unlocked  assumptions  regarding  future lapse and partial  withdrawal
          rates for fixed annuities  during the analysis at the end of the third
          quarter of 2002, resulting in an acceleration of DAC/VOBA amortization
          measuring $2.0,  before tax. During the regular analysis at the end of
          the fourth quarter of 2002,  expectations regarding the assets backing
          the  fixed  annuity   liabilities   were  revised  to  reflect  higher
          anticipated  default rates. This fourth quarter adjustment resulted in
          an  acceleration  of DAC/VOBA  amortization  of $8.0,  before tax. The
          combined   effect  of  all  unlocking   adjustments  in  2002  was  an
          acceleration of DAC/VOBA  amortization  totaling $101.5 before tax, or
          $66.0, net of $35.5 of federal income tax benefit.

          Analysis DAC/VOBA - Life

          As part of the regular  analysis of  DAC/VOBA  for the life  insurance
          block, at the end of each of the years ended December 31, 2004,  2003,
          and 2002,  the Company  unlocked  due to  assumption  changes  related
          primarily to mortality,  lapse,  expense,  and interest  amounts.  The
          impact of unlocking on the  amortization of DAC/VOBA was a decrease of
          $1.2 in 2004, an increase of $6.0 in 2003,  and an increase of $5.2 in
          2002.

          Valuation of Derivative Instruments

          Derivative  instruments  are  reported at fair value and are  obtained
          internally from the derivative accounting system.  Embedded derivative
          instruments   are  reported  at  fair  value  based  upon   internally
          established  valuations  that are consistent  with external  valuation
          models or market quotations.  Guaranteed minimum withdrawals  benefits
          ("GMWBs")  and  guaranteed  minimum  accumulation  benefits  ("GMABs")
          represent an embedded  derivative  liability  in the variable  annuity
          contract  that are  required to be reported  separately  from the host
          variable annuity  contract.  GMWBs and GMABs are carried at fair value
          based on  actuarial  assumptions  related  to  projected  cash  flows,
          including benefits and related contract charges, over the lives of the
          contracts,   incorporating   expectations   concerning   contractowner
          behavior.  Estimating  cash  flows  involves  numerous  estimates  and
          subjective  judgments  including those regarding expected market rates
          of return,  market  volatility,  correlations of market  returns,  and
          discount rates.

          Results of Operations

          Year ended December 31, 2004 compared to year ended December 31, 2003

          Net Income: Net income increased by $34.6 to $91.9 for 2004 from $57.3
          for 2003. The increase in income is primarily the result of higher fee
          income and lower  amortization  of DAC and VOBA,  partially  offset by
          higher benefits to contractowners, operating expenses, and taxes.

                                       25

<PAGE>

          Net  Investment  Income:  Net investment  income from general  account
          assets  increased  by $49.3 to $1,023.9 for 2004 from $974.6 for 2003.
          The increase in net investment income is partially due to higher fixed
          assets  under  management  due to higher  net cash  flows  into  fixed
          products.  Also  contributing  to the increase was a rise in income on
          derivatives, specifically interest rates swaps and call options, which
          are used to manage interest rate and equity risk. Partially offsetting
          the  increase in income is a rise in  investment  management  fees and
          decline in yields.

          Fee  Income:  Fee income  increased  by $169.0 to $566.7 for 2004 from
          $397.7 for 2003.  The  increase  is  primarily  due to a $6.2  billion
          increase in the average  variable  annuity assets under  management by
          the Company  resulting from  continued  growth in sales related to the
          Company's variable annuity product lines and equity market performance
          in 2003 and 2004. Also contributing to the increase in fee income were
          sales of products with higher charges for living benefits during 2004.

          Premiums:  Premiums,  primarily  related to traditional life insurance
          products,  decreased  by $3.2 to $22.8 for 2004  from  $26.0 for 2003.
          This decrease in premium is primarily related to this line of business
          being in run-off since 2001.

          Net  Realized  Capital  Gains  (Losses):  Net realized  capital  gains
          decreased  by $49.3 to  $57.6  for 2004  from  $106.9  for  2003.  The
          decrease in gains is primarily  due to rising  interest  rates in 2004
          and a decline in  other-than-temporary  impairments.  In an increasing
          rate  environment,  the  market  value  of  fixed  maturities  in  the
          portfolios  decreases,  which in turn, results in lower realized gains
          upon sale.

          Interest  Credited  and Other  Benefits  to  Contractowners:  Interest
          credited and other benefits to  contractowners  increased by $208.3 to
          $1,134.0  for 2004 from $925.7 for 2003.  The  increase  is  primarily
          related to: (i) an increase in the cost of guaranteed  benefits mainly
          due to an increase in average  variable  assets  under  management  in
          2004;  (ii) higher fixed annuity  deposits and GICs which  resulted in
          higher  interest  credited to  contractowner  accounts;  and (iii) the
          amortization  of deferred sales  inducements are included in this line
          item in 2004 in  accordance  with  SOP  03-1.  In 2003 and  2002,  the
          amortization  of  deferred  sales   inducements  is  included  in  the
          amortization of DAC and VOBA.

          Amortization  of DAC and VOBA:  Amortization of DAC and VOBA decreased
          by $161.1 to $186.8  for 2004 from  $347.9 for 2003.  In prior  years,
          amortization of deferred sales inducements is included in amortization
          of  DAC  and  VOBA.  Beginning  in  2004,  deferred  sales  inducement
          amortization is included as a component of interest credited and other
          benefits  in  accordance  with SOP 03-1.  Therefore,  the  decrease in
          amortization  of DAC and VOBA is  partially  related to 2004  deferred
          sales  inducement  amortization  of $65  being  included  in  interest
          credited and other benefits  instead of  amortization of DAC and VOBA.
          Also  contributing to the decrease is the improved market  performance
          during 2003, which lowered the amortization rate for 2004.

          Income Tax Expense (Benefit): Income tax expense increased by $81.5 to
          $80.7 for 2004 from a benefit  of $(0.8)  for 2003.  The  increase  is
          primarily  due to the  increase  in  pre-tax  income  in 2004  and the
          establishment of a valuation allowance due to clarifying tax guidance.
          Also  contributing  to the  increase  is a  decrease  in the  dividend
          received deduction.

                                       26

<PAGE>

          Year ended December 31, 2003 compared to year ended December 31, 2002

          Net Income  (Loss):  Net income (loss)  increased by $1,471.8 to $57.3
          for  2003  from a loss  of  $(1,414.5)  for  2002.  This  increase  is
          primarily  due to the 2003  cumulative  effect of change in accounting
          principle,  an increase in fee income and net realized  capital gains,
          partially  offset  by an  increase  in  interest  credited  and  other
          benefits to contractowners,  amortization of DAC/VOBA,  and a decrease
          in the income tax benefit.

          Net  Investment  Income:  Net investment  income from general  account
          assets  decreased  by $14.7 to $974.6  for 2003 from  $989.3 for 2002.
          This decrease was primarily due to a rise in losses on derivatives due
          to a loss on futures  trading in 2003 to  mitigate  exposure  to GICs.
          Partially  offsetting  this  decrease is a rise in  investment  income
          driven by increased assets under management, and a reduction in losses
          related  to  other  derivatives.  Other  derivative  losses  decreased
          primarily due to an increase in gains on derivative  products  hedging
          the  Company's  exposure  in its  indexed  annuities,  reflecting  the
          improved market environment in 2003 over 2002.

          Fee  Income:  Fee income  increased  by $102.0 to $397.7 for 2003 from
          $295.7 for 2002. The increase is mainly due to a $3.0 billion increase
          in average  variable  annuity assets under  management by the Company,
          resulting  from the growth in sales related to the Company's  variable
          annuity  product  lines,  and growth in the  percentage  of  customers
          choosing products with higher charges for living benefits.

          Premiums: Premiums decreased by $10.8 to $26.0 for 2003 from $36.8 for
          2002. This decrease is related to the lapse,  surrender,  or pay-up of
          policies in the closed block of participating life business, which was
          closed to new sales during 2001.

          Net  Realized  Capital  Gains  (Losses):  Net realized  capital  gains
          increased  by $303.4 to $106.9  for 2003 from a loss of  $(196.5)  for
          2002. The increase is primarily due to the declining interest rates in
          2003.  In a  declining  rate  environment,  the market  value of fixed
          maturities  in the  portfolios  increases,  which in turn,  results in
          higher realized gains upon sale. Also  contributing to the increase is
          a rise in realized gains on derivatives due to changes in the value of
          open derivative contracts.

          Interest  Credited  and Other  Benefits  to  Contractowners:  Interest
          credited  and other  benefits  to  contractowners  increased  $77.7 to
          $925.7 for 2003 from $848.0 for 2002.  This  increase is primarily due
          to an increase in interest  credited on higher  average  fixed annuity
          assets  under  management  due to  increased  sales of  fixed  annuity
          products during 2002 and 2003.

          Amortization  of DAC  and  VOBA:  The  amortization  of DAC  and  VOBA
          increased  by $45.9 to $347.9  for 2003  from  $302.0  for 2002.  This
          increase is due in part to the poor equity market performance in 2002,
          which  increased  the  amortization  rate in  2003,  as well as to the
          amortization of acquisition  costs related to increased sales of fixed
          annuities  during 2002.  2003 was the first full year of  amortization
          for this block of acquisition costs.

                                       27

<PAGE>

          Cumulative  Effect  of  Change  in  Accounting  Principle:   The  2002
          cumulative effect of the change in accounting  principle  reflects the
          Company's  adoption of Financial  Accounting  Standards Board ("FASB")
          Statement of Financial Accounting Standards ("FAS") No. 142, "Goodwill
          and Other Intangible  Assets".  The adoption of this standard resulted
          in a goodwill  impairment  loss of  $1,298.4,  net of $699.1 of income
          taxes, related to prior acquisitions. This impairment loss represented
          the  entire   carrying   amount  of  goodwill,   net  of   accumulated
          amortization.

          Income Tax Expense  (Benefit):  Income tax benefit  decreased $59.4 to
          $(0.8) for 2003 from  $(60.2) for 2002.  This  decrease  is  primarily
          driven by the change in pre-tax  income and  utilization of operations
          and capital loss carryforwards in 2003.  Offsetting those decreases is
          an increase in the dividend  received  deduction and a benefit related
          to  refinement  of the Company's  method of  calculating  deferred tax
          inventories.

          Financial Condition

          Investments

          Investment Strategy

          The Company's  investment strategy for its general account investments
          involves  diversification  by asset  class,  and seeks to add economic
          diversification  and to reduce  the risks of  credit,  liquidity,  and
          embedded options within certain investment products, such as convexity
          risk on  collateralized  mortgage  obligations  and call options.  The
          investment  management  function is  centralized  under ING Investment
          Management  LLC ("IIM"),  an affiliate  of the  Companypursuant  to an
          investment advisory agreement. Separate portfolios are established for
          each general type of product within the Company.

          The Company  invests its general  account  primarily in fixed maturity
          investments,  including  publicly issued bonds  (including  government
          bonds), privately placed notes and bonds,  mortgage-backed securities,
          and asset-backed  securities.  The primary  investment  strategy is to
          optimize the  risk-adjusted  return through  superior asset  selection
          predicated on a developed relative value approach, credit research and
          monitoring,  superior  management  of interest  rate risk,  and active
          exploration into new investment product opportunities. Investments are
          purchased when market  returns,  adjusted for risk, and expenses,  are
          sufficient to  profitably  support  growth of the  liability  block of
          business.  In  addition,  assets  and  liabilities  are  analyzed  and
          reported for internal management purposes on an option-adjusted basis.
          The  level of  required  capital  of given  transactions  is a primary
          factor in determining  relative value among  different  investment and
          liability  alternatives,  within  the  scope  of each  product  type's
          objective.  An active review of existing holdings  identifies specific
          assets  that  could be  effectively  traded  in order to  enhance  the
          risk-adjusted  returns of the portfolio,  while minimizing adverse tax
          and accounting  impacts.  The Company  strives to maintain a portfolio
          average asset  quality  rating of A,  excluding  mortgage  loans,  but
          including  mortgage-backed  securities  that are reported  with bonds,
          based on Standard & Poor's ratings classifications.

          For a discussion of the Company's use of  derivatives,  see "Liquidity
          and Capital Resources - Derivatives."

                                       28

<PAGE>

          Portfolio Composition

          The following table presents the investment  portfolio at December 31,
          2004 and 2003.

          <TABLE>
          <S>                                    <C>                            <C>

                                                              2004                           2003
                                                 ----------------------------   ----------------------------
                                                    Fair Value         %           Fair Value         %
                                                 -----------------  ---------   -----------------  ---------
          Fixed maturities, including
            securities pledged                      $ 18,597.8        81.3%       $ 16,097.8          81.1%
          Equity securities                               35.3         0.2%            120.2           0.6%
          Mortgage loans on real estate                3,851.8        16.8%          3,388.7          17.1%
          Real estate                                      1.8         0.0%              4.5           0.0%
          Policy loans                                   169.0         0.7%            177.1           0.9%
          Short-term investments                           6.9         0.0%              0.3           0.0%
          Other investments                              220.1         1.0%             56.0           0.3%
                                                 -----------------  ---------   -----------------  ---------
                                                    $ 22,882.7       100.0%       $ 19,844.6         100.0%
                                                 =================  =========   =================  =========
          </TABLE>

          Fixed Maturities

          Fixed  maturities  available-for-sale  as of December 31, 2004 were as
          follows:

          <TABLE>
          <S>                                            <C>          <C>              <C>             <C>

                                                                           Gross            Gross
                                                         Amortized       Unrealized       Unrealized          Fair
                                                           Cost            Gains            Losses            Value
                                                     ---------------  --------------   --------------  ---------------
          Fixed maturities:
          U.S. government and government
            agencies and authorities                      $ 464.0           $ 1.8            $ 1.1          $ 464.7
          State, municipalities and political
            subdivisions                                     20.7               -              0.8             19.9
          U.S. corporate securities:
            Public utilities                              1,796.9            78.4              8.9          1,866.4
            Other corporate securities                    6,292.4           243.5             22.7          6,513.2
                                                     ---------------  --------------   --------------  ---------------
          Total U.S. corporate securities                 8,089.3           321.9             31.6          8,379.6
                                                     ---------------  --------------   --------------  ---------------
          Foreign securities:
            Government                                      518.9            24.2              2.2            540.9
            Other                                         2,571.2            97.7             11.5          2,657.4
                                                     ---------------  --------------   --------------  ----------------
          Total foreign securities                        3,090.1           121.9             13.7          3,198.3
                                                     ---------------  --------------   --------------  ----------------

          Residential mortgage-backed securities          3,440.3            43.9             22.4          3,461.8
          Commercial mortgaged-backed securities          1,107.8            34.9              3.0          1,139.7
          Other asset-backed securities                   1,934.2            14.3             14.7          1,933.8
                                                     ---------------  --------------   --------------  ----------------
          Total fixed maturities, including fixed
            maturities pledged                           18,146.4           538.7             87.3         18,597.8
          Less: fixed maturities pledged                  1,100.5             9.8              1.7          1,108.6
                                                     ---------------  --------------   --------------  ----------------
          Fixed maturities                             $ 17,045.9         $ 528.9           $ 85.6       $ 17,489.2
                                                     ===============  ==============   ==============  ================

          </TABLE>

                                       29

<PAGE>

          Fixed  maturities  available-for-sale  as of December 31, 2003 were as
          follows:

          <TABLE>
          <S>                                            <C>          <C>              <C>             <C>

                                                                           Gross            Gross
                                                         Amortized       Unrealized       Unrealized        Fair
                                                           Cost            Gains            Losses          Value
                                                     ---------------  --------------   --------------  ---------------
          Fixed maturities:
          U.S. government and government
            agencies and authorities                  $    195.5          $   2.0          $   0.1      $    197.4
          State, municipalities and political
            subdivisions                                    31.7                -              2.5            29.2

          U.S. corporate securities:
            Public utilities                             1,341.2             84.3              8.0         1,417.5
            Other corporate securities                   6,246.4            300.9             33.7         6,513.6
                                                     ---------------  --------------   --------------  ----------------
          Total U.S. corporate securities                7,587.6            385.2             41.7         7,931.1
                                                     ---------------  --------------   --------------  ----------------

          Foreign securities:
            Government                                     487.1             21.7              3.9           504.9
            Other                                        1,984.4             96.0             24.1         2,056.3
                                                     ---------------  --------------   --------------  ----------------
          Total foreign securities                       2,471.5            117.7             28.0         2,561.2
                                                     ---------------  --------------   --------------  ----------------

          Residential mortgage-backed securities         3,247.0             66.7             21.8         3,291.9
          Commercial mortgaged-backed securities           774.2             45.8              2.1           817.9
          Other asset-backed securities                  1,273.0             17.2             21.1         1,269.1

          Total fixed maturities, including fixed
            maturities pledged                          15,580.5            634.6            117.3        16,097.8
          Less: fixed maturities pledged                   555.5              6.4              2.8           559.1
                                                     ---------------  --------------   --------------  ----------------
          Total fixed maturities                      $ 15,025.0          $ 628.2          $ 114.5      $ 15,538.7
                                                     ===============  ==============   ==============  ================

          </TABLE>

          It is management's objective that the portfolio of fixed maturities be
          of high quality and be well  diversified by market  sector.  The fixed
          maturities in the Company's  portfolio are generally rated by external
          rating agencies and, if not externally rated, are rated by the Company
          on a basis believed to be similar to that used by the rating agencies.
          The average quality rating of the Company's fixed maturities portfolio
          was A+ at  December  31,  2004 and  December  31,  2003.  Ratings  are
          calculated using a rating hierarchy that considers S&P,  Moody's,  and
          internal ratings.

          Total fixed  maturities by quality rating  category,  including  fixed
          maturities pledged to creditors,  were as follows at December 31, 2004
          and 2003:

          <TABLE>
          <S>          <C>                           <C>

                         2004                         2003
                       ---------------------------   ---------------------------
                           Fair          % of           Fair           % of
                          Value          Total          Value         Total
                       ---------------  ----------   --------------  -----------
          AAA              $ 6,542.5       35.2%        $ 5,690.2        35.3%
          AA                   865.3        4.7%            760.8         4.7%
          A                  4,035.7       21.7%          3,427.4        21.3%
          BBB                6,325.2       34.0%          5,369.8        33.4%
          BB                   710.7        3.8%            642.4         4.0%
          B and below          118.4        0.6%            207.2         1.3%
                       ---------------  ----------   --------------  -----------
          Total           $ 18,597.8      100.0%       $ 16,097.8       100.0%
                       ===============  ==========   ==============  ===========

          </TABLE>
                                       30

<PAGE>

          95.6% and 94.7% of the fixed  maturities  were  invested in securities
          rated BBB and above (Investment  Grade) at December 31, 2004 and 2003,
          respectively.

          Fixed maturities rated BB and below (Below  Investment Grade) may have
          speculative  characteristics,  and changes in economic  conditions  or
          other  circumstances are more likely to lead to a weakened capacity of
          the issuer to make  principal  and interest  payments than is the case
          with higher rated fixed maturities.

          Total fixed  maturities by market sector,  including fixed  maturities
          pledged to creditors, were as follows at December 31, 2004 and 2003:

          <TABLE>
          <S>                                         <C>                           <C>

                                                                  2004                         2003
                                                      ---------------------------   ---------------------------
                                                          Fair          % of           Fair           % of
                                                          Value         Total          Value          Total
                                                      ---------------  ----------   --------------  -----------
          U.S. Corporate                               $   8,399.5       45.2%        $ 7,960.3        49.5%
          Residential mortgage-backed                      3,461.8       18.6%          3,291.9        20.5%
          Commercial/multifamily mortgage-backed           1,139.7        6.1%            817.9         5.0%
          Foreign(1)                                       3,198.3       17.2%          2,561.2        15.9%
          U.S. Treasuries/Agencies                           464.7        2.5%            197.4         1.2%
          Asset-backed                                     1,933.8       10.4%          1,269.1         7.9%
                                                      ---------------  ----------   --------------  -----------
          Total                                        $  18,597.8      100.0%       $ 16,097.8       100.0%
                                                      ===============  ==========   ==============  ===========
          (1)Primarily U.S. dollar denominated

          </TABLE>

          The amortized  cost and fair value of fixed  maturities as of December
          31, 2004 are shown below by contractual  maturity.  Actual  maturities
          may differ  from  contractual  maturities  because  securities  may be
          restructured, called, or prepaid.

          <TABLE>
          <S>                                  <C>              <C>

                                                  Amortized          Fair
                                                     Cost            Value
                                               ---------------  ---------------
          Due to mature:
           One year or less                     $    336.8       $    341.5
           After one year through five years       4,066.3          4,151.2
           After five years through ten years      4,209.5          4,403.0
           After ten years                         3,051.6          3,166.9
           Mortgage-backed securities              4,548.0          4,601.4
           Other asset-backed securities           1,934.2          1,933.8
          Less: fixed maturities pledged           1,100.5          1,108.6
                                               ---------------  ----------------
          Fixed maturities, excluding
            fixed maturities pledged            $ 17,045.9       $ 17,489.2
                                               ===============  ================
          </TABLE>

          The Company did not have any  investments  in a single  issuer,  other
          than  obligations  of the U.S.  government,  with a carrying  value in
          excess of 10% of the  Company's  shareholder's  equity at December 31,
          2004.

          At December 31, 2004 and 2003,  fixed  maturities  with fair values of
          $11.9  and  $20.1,  respectively,  were  on  deposit  as  required  by
          regulatory authorities.

                                       31

<PAGE>

          The  Company is a member of the  Federal  Home Loan Bank of Des Moines
          ("FHLB") and is required to maintain a  collateral  deposit that backs
          funding  agreements issued to the FHLB. At December 31, 2004 and 2003,
          respectively, the Company had $376.3 and $125.3 in non-putable funding
          agreements   issued  to  FHLB.   At   December   31,  2004  and  2003,
          respectively, assets with a carrying value of approximately $422.0 and
          $148.2  collateralized  the  funding  agreements  issued  to the FHLB.
          Collateralized  assets are included in fixed maturities in the Balance
          Sheets.

          Mortgage Loans

          Mortgage loans,  primarily commercial mortgage loans, totaled $3,851.8
          at December 31, 2004 and  $3,388.7 at December  31, 2003.  These loans
          are  reported at amortized  cost less  impairment  writedowns.  If the
          value of any mortgage loan is determined to be impaired (i.e., when it
          is probable  that the Company will be unable to collect on all amounts
          due according to the  contractual  terms of the loan  agreement),  the
          carrying  value of the mortgage  loan is reduced to either the present
          value of expected cash flows,  cash flows from the loan (discounted at
          the loan's effective  interest rate), or fair value of the collateral.
          If the loan is in  foreclosure,  the carrying  value is reduced to the
          fair value of the  underlying  collateral,  net of estimated  costs to
          obtain and sell.  The carrying  value of the impaired loans is reduced
          by  establishing  a permanent  write down charged to realized loss. At
          December 31, 2004 and 2003,  the Company had no allowance for mortgage
          loan credit losses.

          Unrealized Losses

          Fixed maturities,  including securities pledged to creditors, comprise
          81.3%  and  81.1%  of the  Company's  total  investment  portfolio  at
          December 31, 2004 and 2003, respectively. Unrealized losses related to
          fixed maturities are analyzed in detail in the following tables.

          Fixed  maturities,  including  securities  pledged  to  creditors,  in
          unrealized  loss  positions  for  Investment  Grade  ("IG")  and Below
          Investment  Grade  ("BIG")  securities  by duration were as follows at
          December 31, 2004 and 2003:

          <TABLE>
          <S>                                <C>                                       <C>

                                                              2004                                      2003
                                             ----------------------------------------  ----------------------------------------
                                                       % of IG              % of IG              % of IG              % of IG
                                                IG      and BIG      BIG     and BIG       IG     and BIG     BIG      and BIG
                                             --------- ---------  --------- ---------  --------- --------- ---------  ---------
          Less than six months below
            amortized cost                    $ 26.6     30.5%      $ 0.6      0.7%     $ 24.9     21.2%     $ 1.3       1.1%
          More than six months
            and less than twelve months
            below amortized cost                28.0     32.0%        1.9      2.2%       64.1     54.7%       5.3       4.5%
          More than twelve months
            below amortized cost                26.1     29.9%        4.1      4.7%       10.1      8.6%      11.6       9.9%
                                             --------- ---------  --------- ---------  --------- --------- ---------  ---------
          Total unrealized loss               $ 80.7     92.4%      $ 6.6      7.6%     $ 99.1     84.5%    $ 18.2      15.5%
                                             ========= =========  ========= =========  ========= ========= =========  =========

</TABLE>

          Of the  unrealized  losses  less than 6 months in  duration  of $27.2,
          there were $12.3 in unrealized  losses that are  primarily  related to
          interest   rate   movement   or  spread   widening   for  other   than
          credit-related reasons. The remaining unrealized losses of $14.9 as of
          December 31, 2004, relates to securities under the guidance prescribed
          by EITF Issue No. 99-20. This category includes U.S. government-backed

                                       32

<PAGE>

          securities, principal protected securities, and structured securities,
          which  did not have an  adverse  change  in cash  flows  for which the
          carrying amount was $1,560.4.

          Of the unrealized losses more than 6 months and less than 12 months in
          duration  of $29.9,  there were $16.9 in  unrealized  losses  that are
          primarily  related to interest  rate  movement or spread  widening for
          other than credit-related  reasons. The remaining unrealized losses of
          $13.0 as of  December  31,  2004,  relates  to  securities  under  the
          guidance  prescribed in EITF Issue No. 99-20.  This category  includes
          U.S. government-backed securities, principal protected securities, and
          structured  securities,  which did not have an adverse  change in cash
          flows for which the carrying amount was $768.8.

          Of the  unrealized  losses  more than 12 months in  duration of $30.2,
          there were $18.0, in unrealized  losses that are primarily  related to
          interest   rate   movement   or  spread   widening   for  other   than
          credit-related reasons. The remaining unrealized losses of $12.2 as of
          December 31, 2004, relates to securities under the guidance prescribed
          by EITF Issue No. 99-20. This category includes U.S. government-backed
          securities, principal protected securities, and structured securities,
          which  did not have an  adverse  change  in cash  flows  for which the
          carrying amount was $222.8.

          Fixed  maturities,  including  securities  pledged  to  creditors,  in
          unrealized  loss  positions  by market  sector  and  duration  were as
          follows at December 31, 2004:

          <TABLE>
          <S>                                 <C>           <C>            <C>           <C>       <C>         <C>       <C>

                                                                            Commercial/
                                                            Residential    Multi-family               U.S.
                                                   U.S.      Mortgage-       Mortgage-             Treasuries/   Asset-
                                                Corporate     Backed          Backed      Foreign   Agencies     Backed     Total
                                              ------------  ------------  -------------  --------- ----------  --------- -----------
          Less than six months below
            amortized cost                      $  8.7        $ 11.4         $ 1.3         $ 2.6     $ 1.0       $ 2.2     $ 27.2
          More than six month and less than
            twelve months below
            amortized cost                        15.4           6.8           1.4           1.5         -         4.8       29.9
          More than twelve months
            below amortized cost                   8.3           4.1           0.3           9.6       0.1         7.8       30.2
                                              ------------  ------------  -------------  --------- ----------  --------- -----------
          Total unrealized loss                 $ 32.4        $ 22.3         $ 3.0        $ 13.7     $ 1.1      $ 14.8     $ 87.3
                                              ============  ============  =============  ========= ==========  ========= ===========

          </TABLE>

          Other-Than-Temporary Impairments

          The Company  analyzes  the general  account  investments  to determine
          whether there has been an  other-than-temporary  decline in fair value
          below  amortized  cost basis.  Management  considers the length of the
          time and the extent to which the market value has been less than cost;
          the financial condition and near term prospects of the issuer;  future
          economic conditions and market forecasts; and the Company's intent and
          ability to retain the  investment  for a period of time  sufficient to
          allow for recovery in market value. If it is probable that all amounts
          due according to the  contractual  terms of an investment  will not be
          collected,  an  other-than-temporary  impairment is considered to have
          occurred.

          In addition,  the Company  invests in structured  securities that meet
          the  criteria  of EITF  Issue  No.  99-20 as  described  in  "Critical
          Accounting Policies - Other-Than-Temporary  Impairment Testing". Under
          EITF Issue No. 99-20, a  determination  of the required  impairment is

                                       33

<PAGE>

          based on credit risk and the  possibility  of  significant  prepayment
          risk that restricts the Company's  ability to recover the  investment.
          An  impairment is recognized if the fair value of the security is less
          than  amortized cost and there has been an adverse change in cash flow
          since the last remeasurement date.

          When a decline in fair value is determined to be other-than-temporary,
          the individual  security is written down to fair value and the loss is
          accounted for as a realized loss.

          The following  table  identifies  the  Company's  other-than-temporary
          impairments by type as of December 31:

          <TABLE>
          <S>                                  <C>                          <C>                          <C>

                                                            2004                         2003                        2002
                                               ---------------------------- ---------------------------- ---------------------------
                                                                  No. of                       No. of                      No. of
                                                  Impairment    Securities     Impairment    Securities    Impairment    Securities
                                               --------------- ------------ --------------- ------------ -------------- ------------
          U.S. Corporate                         $     -            -          $   23.7           16       $    0.1            1
          Residential mortgage-backed                9.1           88              81.3          173           81.3          125
          Foreign                                    8.5            4              11.5            2            8.5            3
          Asset-backed                              11.5            6               5.8            7           31.1           14
          Equity                                       -            -                 -            -              -            1
          Limited partnerships                       2.2            1                 -            -              -            -
                                               --------------- ------------ --------------- ------------ -------------- ------------
          Total                                  $  31.3           99          $  122.3          198       $  121.0          144
                                               =============== ============ =============== ============ ============== ============

          </TABLE>

          Net Realized Capital Gains and Losses

          Net realized  capital gains  (losses) are comprised of the  difference
          between the carrying  value of  investments  and  proceeds  from sale,
          maturity,  and  redemption,  as well  as  losses  incurred  due to the
          impairment of  investments.  Net realized  capital  gains  (losses) on
          investments were as follows:

          <TABLE>
          <S>                                                   <C>
                                                                                Year ended December 31,
                                                                       2004               2003                2002
                                                                -----------------  ------------------  -----------------
          Fixed maturities                                           $ 44.0             $ 108.7           $ (105.9)
          Equity securities                                             6.4                 0.2                0.1
          Derivatives                                                   9.3                 1.7              (92.0)
          Real estate                                                     -                (3.4)               1.7
          Other                                                        (2.1)               (0.3)              (0.4)
                                                                -----------------  ------------------  -----------------
          Pretax net realized capital gains (losses)                 $ 57.6             $ 106.9           $ (196.5)
                                                                =================  ==================  =================
          After-tax net realized capital gains (losses)              $ 37.4             $  69.5           $ (127.7)
                                                                =================  ==================  =================

          </TABLE>

          Liquidity and Capital Resources

          Liquidity  is the ability of the Company to generate  sufficient  cash
          flows to meet the  cash  requirements  of  operating,  investing,  and
          financing activities.

          Sources and Uses of Liquidity

          The Company's  principal sources of liquidity are annuity premiums and
          product charges,  GIC deposits,  investment income,  proceeds from the
          maturing and sale of  investments,  proceeds from debt  issuance,  and
          capital  contributions.  Primary  uses of these funds are  payments of
          commissions  and  operating  expenses,  interest and premium  credits,
          payments  under  guaranteed  death  and  living  benefits,  investment

                                       34

<PAGE>

          purchases,   repayment  of  debt,  as  well  as  contract  maturities,
          withdrawals and surrenders.

          The Company's  liquidity  position is managed by maintaining  adequate
          levels  of  liquid  assets,  such  as cash  or  cash  equivalents  and
          short-term   investments.   For  a   description   of  the   Company's
          asset/liability management, see Item 7A, "Quantitative and Qualitative
          Disclosures About Market Risk."

          Additional  sources of liquidity include borrowing  facilities to meet
          short-term cash requirements.  The Company maintains a reciprocal loan
          agreement with ING America Insurance Holding Company, Inc. ("ING AIH")
          whereby  either  party  can  borrow  from  the  other  up to 3% of the
          Company's total admitted  assets,  a $100 revolving note facility with
          Bank of New York,  and a $125  revolving  note  facility with SunTrust
          Bank,  which expires on July 30, 2005.  The Company has no outstanding
          balance  under any of these  facilities  as of  December  31, 2004 and
          2003. Management believes that these sources of liquidity are adequate
          to meet the Company's short-term cash obligations.

          The  Company  is a member of the FHLB and is  required  to  maintain a
          collateral  deposit that backs funding  agreements issued to the FHLB.
          At December  31, 2004 and 2003,  respectively,  the Company had $376.3
          and  $125.3 in  non-putable  funding  agreements  issued  to FHLB.  At
          December 31, 2004 and 2003, respectively, assets with a carrying value
          of  approximately   $422.0  and  $148.2   collateralized  the  funding
          agreements issued to the FHLB. Assets pledged to the FHLB are included
          in fixed maturities in the Balance Sheets.

          Capital Contributions

          During 2004, 2003 and 2002, ING USA received capital  contributions of
          $230.0, $88.7, and $456.3, respectively. Lion has recently contributed
          significant  amounts of capital  to the  Company to support  its sales
          activities.  The Company has also used  capital  primarily  to support
          sales  growth  and also to  strengthen  reserves  associated  with its
          annuity products.

          Separate Accounts

          Separate  Account assets and  liabilities  generally  represent  funds
          maintained to meet specific  investment  objectives of  contractowners
          who bear the investment  risk,  subject,  in limited cases, to certain
          minimum guarantees.  Investment income and investment gains and losses
          generally accrue directly to such  contractowners.  The assets of each
          account  are  legally  segregated  and are not  subject to claims that
          arise out of any  other  business  of the  Company.  Separate  Account
          assets  supporting  variable options under variable annuity  contracts
          are invested,  as designated by the  contractowner or participant (who
          bears the  investment  risk  subject,  in  limited  cases,  to minimum
          guaranteed  rates)  under a contract,  in shares of mutual funds which
          are managed by the  Company or its  affiliates,  or in other  selected
          mutual  funds not managed by the Company or its  affiliates.  Variable
          annuity  premiums  are  allocated to various  subaccounts  established
          within the separate  account.  Each subaccount  represents a different
          investment option into which the contract owner may allocate premiums.
          The  account  value of a  variable  annuity  contract  is equal to the
          aggregate  value of the  subaccounts  selected by the  contract  owner
          (including the value allocated to any fixed account) less fees and

                                       35

<PAGE>

          expenses.  The Company  offers  investment  options  for its  variable
          annuities covering a wide range of investment styles, including large,
          mid and small cap equity funds, as well as fixed income  alternatives.
          Therefore,   unlike  fixed   annuities,   under   variable   annuities
          contractowners bear the risk of investment gains and losses associated
          with the selected investment allocation.  The Company, however, offers
          certain  guaranteed death and living benefits  (described below) under
          which it bears specific risks associated with these products.  Many of
          the variable annuities issued by ING USA are combination  variable and
          fixed  deferred  annuity  contracts  under  which  some  or all of the
          premiums  may be  allocated by the  contractowner  to a fixed  account
          available  under the contract.  The  Company's  major source of income
          from variable annuities is the base contract mortality fee and expense
          fees and guaranteed living and death benefit rider fees charged to the
          customer,  less the cost of  administering  the product as well as the
          cost of providing for the guaranteed living and death benefits.

          Minimum Guarantees

          The Company sells variable annuity contracts that offer one or more of
          the following guaranteed death benefits and living benefits:

          Guaranteed  Minimum Death Benefits  ("GMDB"):  The Company has offered
          the following guaranteed death benefits:

          -    Standard - This  guarantees  that upon the death of the annuitant
               the death  benefit will be no less than the premiums  paid by the
               contractowner net of any contract  withdrawals.
          -    Ratchet - This  guarantees  that upon the death of the  annuitant
               the  death  benefit  will  be no less  than  the  greater  of (1)
               Standard or (2) the maximum  anniversary (or quarterly)  value of
               the  variable  annuity.
          -    Rollup  (7% or 5.5%  Solution)  - This  guarantees  that upon the
               death of the annuitant the death benefit will be no less than the
               aggregate premiums paid by the contractowner accruing interest at
               7% or 5.5% per  annum,  subject to a maximum  cap on the  account
               value.  (The Company has discontinued this option for new sales.)
          -    Combo  (Max 7) - This  guarantees  that  upon  the  death  of the
               annuitant  the death  benefit will be no less than the greater of
               (1) Ratchet or (2) Rollup.

          At December 31, 2004, the guaranteed  value of these death benefits in
          excess of  account  values was  estimated  to be $2.5  billion  before
          reinsurance, which was a $0.4 billion decrease from the estimated $2.9
          billion at December 31, 2003. The decrease was primarily driven by the
          improved equity markets in 2004. For contracts issued prior to January
          1, 2000,  most contracts with enhanced death benefit  guarantees  were
          reinsured to third party  reinsurers  to mitigate the risk produced by
          such guaranteed  death benefits.  For contracts  issued after December
          31, 1999, the Company has instituted an equity hedging program in lieu
          of reinsurance,  to mitigate the risk produced by the guaranteed death
          benefits.  The equity hedging program is based on the Company entering
          into derivative  positions to offset  exposures to guaranteed  minimum
          death  benefits  due to  adverse  changes in the  equity  markets.  At
          December 31, 2004, the guaranteed  value of minimum  guaranteed  death
          benefits  in  excess  of  account  values,  net  of  reinsurance,  was
          estimated  to be $1.4  billion,  of which  $748.7 is  projected  to be

                                       36

<PAGE>

          covered by the Company's  equity  hedging  program.  These amounts are
          consistent  with  December  31, 2003.  As of December  31,  2004,  the
          Company  has  recorded  a  liability  of  $66.9,  net of  reinsurance,
          representing  the estimated net present value of the Company's  future
          obligation for guaranteed  minimum death benefits in excess of account
          values. The liability  increased $0.5 from $66.5 at December 31, 2003,
          mainly due to the increase in fees used to fund the reserve  exceeding
          the decrease in the reserve, due to the improved equity markets during
          2004.  The liability is recorded in accordance  with the provisions of
          SOP 03-1.

          Guaranteed   Living   Benefits:   The  Company  offers  the  following
          guaranteed living benefits:

          -    Guaranteed  Minimum Income Benefit  ("GMIB") - This  guarantees a
               minimum income payout,  exercisable each contract  anniversary on
               or after the 10th rider anniversary.  This type of living benefit
               is the  predominant  selection in the Company's sales of variable
               annuities.
          -    Guaranteed  Minimum  Withdrawal  Benefit - This  guarantees  that
               annual  withdrawals of up to 7% of eligible  premiums may be made
               until eligible premiums  previously paid by the contractowner are
               returned,  regardless of account value performance.  The new 2004
               GMWB rider  (ING  Principal  Guard)  provides  reset and  step-up
               features,  which provide, in certain instances,  for increases in
               the  amount  available  for  withdrawal.
          -    Guaranteed  Minimum  Accumulation  Benefit - Guarantees  that the
               account  value will be at least 100% of the premiums  paid by the
               contractowner  after 10  years  (GMAB10)  or 200%  after 20 years
               (GMAB20).

          At December 31, 2004, the guaranteed value of these living benefits in
          excess of  account  values  was  estimated  to be  $269.7,  which is a
          decrease of $38.5 from an estimated  $308.2 at December 31, 2003.  The
          decrease was primarily  driven by the improved  equity  markets during
          2004. All living benefits are covered by the Company's  equity hedging
          program. As of December 31, 2004, the Company has recorded a liability
          of $40.3  representing  the  estimated net present value of its future
          obligation  for  living  benefits  in excess of  account  values.  The
          liability  increased $26.4 from $13.9 at December 31, 2003, mainly due
          to the  increase  in fees  used  to fund  the  reserve  exceeding  the
          decrease in the reserve,  due to the improved  equity  market in 2004.
          For GMIBs, the liability is recorded in accordance with the provisions
          of SOP 03-1. For GMABs and GMWBs,  the liability is held at fair value
          in accordance with FAS No. 133, "Accounting for Derivative Instruments
          and Hedging Activities".

          Variable  annuity  contracts  containing  guaranteed  death and living
          benefits  expose the Company to equity risk.  An increase in the value
          of  the  equity  markets  will  increase   account  values  for  these
          contracts,  thereby  decreasing the Company's risk associated with the
          GMDBs, GMIBs, GMWBs, and GMABs. A decrease in the equity markets, that
          causes a decrease in the account values, will increase the possibility
          that the Company may be  required to pay amounts to  customers  due to
          guaranteed death or living benefits.

                                       37

<PAGE>

          Derivatives

          The Company's use of derivatives is limited mainly to hedging purposes
          to reduce the Company's  exposure to cash flow  variability  of assets
          and   liabilities,   interest  rate  risk,  and  market  risk.   These
          derivatives  are not  accounted for using hedge  accounting  treatment
          under FAS No.  133,  as the  Company  does not seek  hedge  accounting
          treatment.   The  Company  enters  into  interest  rate  and  currency
          contracts,  including swaps, caps, floors,  options,  and futures,  to
          reduce and  manage  risks  associated  with  changes in value,  yield,
          price,  cash flow, or exchange rates of assets or liabilities  held or
          intended to be held.  The  Company  also  purchases  options on equity
          indexes to reduce and manage risks  associated  with its  equity-index
          annuity  products.  Changes  in the  fair  value  of  open  derivative
          contracts  are  recorded  in net  realized  capital  gains and losses.
          Derivatives are included in other investments on the Balance Sheets.

          The Company also had investments in certain fixed maturity instruments
          and  retail  annuity  products  that  contain  embedded   derivatives,
          including  those whose market value is at least  partially  determined
          by,  among  other  things,  levels of or  changes in  domestic  and/or
          foreign   interest  rates  (short-  or  long-term),   exchange  rates,
          prepayment rates, equity markets or, credit  ratings/spreads.  Changes
          in the fair value of embedded derivatives are recorded in net realized
          capital  gains  (losses) in the  Statements  of  Operations.  Embedded
          derivatives  within securities are included in fixed maturities on the
          Balance Sheets.  Embedded  derivatives  within retail annuity products
          are  included in future  policy  benefits  and claims  reserves on the
          Balance Sheets.

          Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

          Through  the  normal  course of  investment  operations,  the  Company
          commits to either  purchase or sell  securities,  commercial  mortgage
          loans, or money market instruments at a specified future date and at a
          specified  price or yield.  The inability of  counterparties  to honor
          these  commitments may result in either a higher or lower  replacement
          cost.  Also,  there  is  likely  to be a  change  in the  value of the
          securities underlying the commitments.  At December 31, 2004 and 2003,
          the Company had off-balance sheet commitments to purchase  investments
          equal to their fair value of $175.3 and $154.0, respectively.

          As  of  December  31,  2004,  the  Company  had  certain   contractual
          obligations  due over a period of time as  summarized in the following
          table:

          <TABLE>
          <S>                                    <C>           <C>           <C>             <C>           <C>

                                                                         Payments due by Period
                                                 ----------------------------------------------------------------------
                                                                 Less than                                   More than
          Contractual Obligations                    Total        1 Year        1-3 Years      3-5 Years      5 Years
          -------------------------------------  ------------  ------------  --------------  ------------  ------------
          Long-Term Debt                           $ 1,266.4      $   28.2      $     56.3     $    56.4     $ 1,125.5
          Operating Lease Obligations                   77.6           7.8            15.4          15.0          39.4
          Purchase Obligations                         175.3         175.3               -             -             -
          Reserves for Insurance Obligations        55,581.9       6,332.4        10,978.8      10,201.3      28,069.4
                                                 ------------  ------------  --------------  ------------  ------------
          Total                                    $57,101.2      $6,543.7      $ 11,050.5     $10,272.7     $29,234.3
                                                 ============  ============  ==============  ============  ============

          </TABLE>

                                       38

<PAGE>



          The Company's  long-term  debt,  including  interest,  consists of the
          following:

          |X|  A surplus note in the  principal  amount of $35.0 and the related
               interest  payable,  to its  affiliate,  Security  Life of  Denver
               Insurance  Company.  As of December  31,  2004,  the  outstanding
               principal,  interest  rate, and maturity date of the surplus note
               are $35.0, 7.98%, and December 7, 2029, respectively.

          |X|  Surplus notes in the aggregate principal amount of $400.0 and the
               related  interest  payable to its affiliates,  ING Life Insurance
               and Annuity Company ("ILIAC"),  ReliaStar Life, and Security Life
               of Denver  International  Limited  ("SLDI").  As of December  31,
               2004,  the aggregate  amount of outstanding  principal,  interest
               rate, and maturity date of these surplus notes are $400.0, 6.26%,
               and December 29, 2034, respectively.

          Operating lease obligations relate to the rental of office space under
          various non-cancelable  operating lease agreements that expire through
          May 2017.

          Purchase  obligations  consist  primarily of  commitments  to purchase
          investments during 2005.

          Reserves for insurance  obligations consist of actuarially  determined
          amounts required for the Company to meet its future  obligations under
          its  variable  annuity,   fixed  annuity,  GIC,  and  other  insurance
          products.

          Reinsurance Recoverable

          The  reinsurance  recoverable  increased by $736.2 to $1,388.1 for the
          year ended December 31, 2004,  from $651.9 for the year ended December
          31, 2003.  The increase is primarily due to increased  reinsurance  of
          GICs  to an  affiliate  company,  Security  Life of  Denver  Insurance
          Company, of approximately $762.2.

          Repurchase Agreements

          The Company engages in dollar repurchase  agreements  ("dollar rolls")
          and repurchase  agreements to increase its return on  investments  and
          improve liquidity. These transactions involve a sale of securities and
          an agreement to repurchase  substantially the same securities as those
          sold.  Company  policies require a minimum of 95% of the fair value of
          securities  pledged  under  dollar  rolls  and  repurchase   agreement
          transactions to be maintained as collateral.  Cash collateral received
          is  invested  in  fixed  maturities  and  the  offsetting   collateral
          liability  is  included in borrowed  money on the Balance  Sheets.  At
          December  31,  2004 and 2003,  the  carrying  value of the  securities
          pledged in dollar  rolls and  repurchase  agreement  transactions  was
          $715.9 and $536.8, respectively.  The carrying value of the securities
          pledged  in dollar  rolls and  repurchase  agreement  transactions  is
          included in pledged  securities on the Balance Sheets.  The repurchase
          obligation  related to dollar rolls and repurchase  agreements totaled
          $713.4 and $534.2 at  December  31, 2004 and 2003,  respectively.  The
          repurchase   obligation   related  to  dollar  rolls  and   repurchase
          agreements is included in borrowed money on the Balance Sheets.

                                       39

<PAGE>

          The primary risk associated with short-term  collateralized borrowings
          is that the counterparty  will be unable to perform under the terms of
          the contract.  The Company's  exposure is limited to the excess of the
          net  replacement  cost  of  the  securities  over  the  value  of  the
          short-term  investments,  an amount that was not  material at December
          31, 2004. The Company believes the  counterparties  to the dollar roll
          and reverse repurchase agreements are financially responsible and that
          the counterparty risk is immaterial.

          Securities Lending

          The Company engages in securities  lending whereby certain  securities
          from its portfolio are loaned to other  institutions for short periods
          of time. Initial collateral,  primarily cash, is required at a rate of
          102% of the  market  value  of the  loaned  domestic  securities.  The
          collateral  is  deposited  by the  borrower  with a lending  agent and
          retained and invested by the lending agent  according to the Company's
          guidelines  to generate  additional  income.  The market  value of the
          loaned  securities  is  monitored  on a daily  basis  with  additional
          collateral  obtained  or  refunded  as the market  value of the loaned
          securities fluctuates.

          Risk-Based Capital

          The  National   Association   of  Insurance   Commissioners   ("NAIC")
          risk-based  capital   requirements   require  insurance  companies  to
          calculate and report  information under a risk-based  capital formula.
          These  requirements  are  intended to allow  insurance  regulators  to
          monitor the capitalization of insurance  companies based upon the type
          and mixture of risks inherent in a Company's  operations.  The formula
          includes  components  for asset risk,  liability  risk,  interest rate
          exposure,  and other factors. The Company has complied with the NAIC's
          risk-based capital reporting  requirements.  Amounts reported indicate
          that, as of December 31, 2004, the Company has total adjusted  capital
          above all required capital levels.

          Recently Adopted Accounting Standards

          (See the  Significant  Accounting  Policies  Footnote to the Financial
          Statements for further information.)

          Accounting  and  Reporting  by  Insurance   Enterprises   for  Certain
          Nontraditional Long-Duration Contracts and for Separate Accounts

          The Company adopted  Statement of Position  ("SOP") 03-1,  "Accounting
          and  Reporting by  Insurance  Enterprises  for Certain  Nontraditional
          Long-Duration  Contracts  and for  Separate  Accounts,"  on January 1,
          2004.  SOP 03-1  establishes  several new  accounting  and  disclosure
          requirements for certain  nontraditional  long-duration  contracts and
          for separate  accounts  including,  among other things,  a requirement
          that assets and liabilities of separate account  arrangements  that do
          not meet certain  criteria be accounted for as general  account assets
          and  liabilities,  and that the revenue and  expenses  related to such
          arrangements  be  consolidated  with the respective  line items in the
          Statements of  Operations.  In addition,  the SOP requires  additional
          liabilities be established for certain  guaranteed  death benefits and
          for products with certain  patterns of cost of insurance  charges.  In
          addition,   sales  inducements  provided  to  contractowners  must  be

                                       40

<PAGE>

          recognized  on the  balance  sheet  separately  from  deferred  policy
          acquisition  costs and  amortized as a component  of benefits  expense
          using  methodologies  and  assumptions  consistent with those used for
          amortization of deferred policy acquisition costs.

          The Company evaluated all requirements of SOP 03-1 and determined that
          it is  affected  by the SOP's  requirements  to  establish  additional
          liabilities for certain guaranteed benefits and products with patterns
          of cost of  insurance  charges  resulting  in losses  in later  policy
          durations from the insurance benefit function and to defer,  amortize,
          and recognize  separately,  sales inducements to contractowners.  Upon
          adoption  of SOP 03-1 on January 1, 2004,  the  Company  recognized  a
          cumulative  effect  of a change in  accounting  principle  of  $(3.6),
          before tax or $(2.3),  net of $1.3 of income taxes.  Requirements  for
          certain separate account arrangements that do not meet the established
          criteria for separate asset and liability  recognition  are applicable
          to the Company,  however,  the Company's  policies on separate account
          assets and liabilities have historically  been, and continue to be, in
          conformity with the requirements newly established.

          In the fourth quarter of 2004,  the  cumulative  effect of a change in
          accounting  principle was revised due to the Company's  implementation
          of  Technical  Practice  Aid  6300.05-6300.08  "Q&As  Related  to  the
          Implementation  of SOP 03-1,  `Accounting  and  Reporting by Insurance
          Enterprises for Certain Nontraditional Long-Duration Contracts and for
          Separate Accounts"' (the "TPA").

          The TPA,  which was approved in September  2004,  provides  additional
          guidance  regarding  certain implicit  assessments that may be used in
          the  testing of the base  mortality  function on  contracts,  which is
          performed to determine whether additional  liabilities are required in
          conjunction  with SOP 03-1. In addition,  the TPA provides  additional
          guidance  surrounding  the allowed level of  aggregation of additional
          liabilities  determined  under SOP 03-1. While the TPA was implemented
          during  the  fourth  quarter of 2004,  the TPA is  retroactive  to the
          original  implementation  date of SOP  03-1,  January  1,  2004 and is
          reported as an adjustment to SOP 03-1's  cumulative effect of a change
          in accounting principle. The adoption of the TPA reduced the Company's
          cumulative effect of a change in accounting  principle by $2.0, before
          tax and decreased quarterly 2004 net income approximately $0.6 in each
          quarter, for a total decrease of $2.3.

          The  implementation  of SOP 03-1 also raised  questions  regarding the
          interpretation  of the  requirements  of FAS No.  97  "Accounting  and
          Reporting by Insurance Enterprises for Certain Long-Duration Contracts
          and for  Realized  Gains  and  Losses  from the Sale of  Investments,"
          concerning  when it is  appropriate  to  record  an  unearned  revenue
          liability related to the insurance  benefit  function.  To clarify its
          position,  the Financial  Accounting  Standards  Board ("FASB") issued
          FASB Staff  Position  No. FAS 97-1 ("FSP FAS  97-1"),  "Situations  in
          Which  Paragraphs  17(b) and 20 of FASB Statement No. 97,  `Accounting
          and  Reporting  by  Insurance  Enterprises  for Certain  Long-Duration
          Contracts  and  for  Realized  Gains  and  Losses  from  the  Sale  of
          Investments,'  Permit  or  Require  Accrual  of  an  Unearned  Revenue
          Liability,"  effective for fiscal periods beginning  subsequent to the
          date the guidance was issued,  June 18, 2004. The Company  adopted FSP
          FAS 97-1 on July 1, 2004. The adoption of FSP FAS 97-1 did not have an
          impact on the Company's financial  position,  results of operations or
          cash flows.

                                       41

<PAGE>

          New Accounting Pronouncements

          In  December  2004,  the  FASB  issued  FAS No.  123  (revised  2004),
          "Shared-Based  Payment" ("FAS 123R"),  which requires all  share-based
          payments to employees be recognized in the financial  statements based
          upon the fair value.  FAS 123R is  effective  at the  beginning of the
          first interim or annual period beginning after June 15, 2005.  Earlier
          adoption is  encouraged.  FAS 123R  provides two  transition  methods,
          modified-prospective and modified-retrospective.

          The  modified-prospective  method recognizes the grant-date fair value
          of  compensation  for new awards  granted after the effective date and
          unvested   awards   beginning  in  the  fiscal  period  in  which  the
          recognition  provision  are  first  applied.  Prior  periods  are  not
          restated.  The  modified-retrospective   method  permits  entities  to
          restate prior periods by recognizing  the  compensation  cost based on
          amounts  previously  reported in the pro forma footnote  disclosure as
          required under FAS No. 123, "Accounting for Stock-Based Compensation".

          The  Company  intends  to early  adopt the  provisions  of FAS 123R on
          January 1, 2005,  using the  modified-prospective  method.  Due to the
          Company's  few number of  employees,  the  adoption of FAS 123R is not
          expected  to  have  a  material  impact  on  the  Company's  financial
          position, results of operations, or cash flows. Prior to January 2005,
          the Company applied the intrinsic value-based  provisions set forth in
          Accounting  Principles  Board  Opinion No. 25,  "Accounting  for Stock
          Issued to Employees".  Under the intrinsic value method,  compensation
          expense is determined on the measurement date, which is the first date
          on which both the number of shares the employee is entitled to receive
          and the exercise  price are known.  Compensation  expense,  if any, is
          measured based on the award's intrinsic value,  which is the excess of
          the  market  price  of  the  stock  over  the  exercise  price  on the
          measurement date.

          Legislative Initiatives

          Certain elements of the Jobs and Growth Tax Relief  Reconciliation Act
          of 2003, in particular the reduction in tax rates on long-term capital
          gains   and   corporate    dividends   could   impact   the   relative
          competitiveness  of  the  Company's   products,   especially  variable
          annuities.  While  sales of the  products  do not  appear to have been
          reduced to date,  the  long-term  effect of the Jobs and Growth Act of
          2003 on the  Company's  financial  condition or results of  operations
          cannot be reasonably estimated at this time.

          The American Jobs Creation Act of 2004 allows  tax-free  distributions
          to be made from the Company's  Policyholders'  Surplus Account in 2005
          and 2006.  Under  prior law,  the  Company  was  allowed to defer from
          taxation a portion of statutory  income under  certain  circumstances.
          The deferred  income was  accumulated  in the  Policyholders'  Surplus
          Account and is taxable only under conditions that management considers
          to be remote. Therefore, no federal income taxes have been provided on
          the  accumulated  balance of $14.4 as of December 31,  2004.  Based on
          currently available information,  the Company anticipates that the new
          law will  permanently  eliminate any potential tax on the  accumulated
          balance of $14.4.

                                       42

<PAGE>

          Other legislative  proposals under consideration include repealing the
          estate tax,  reducing the taxation on annuity  benefits,  changing the
          taxation of products,  and changing life insurance  company  taxation.
          Some of these proposals,  if enacted,  could have a material effect on
          life insurance,  annuity,  and other retirement savings product sales.
          The impact on the Company's products cannot be predicted.  Legislation
          to restructure  the Social  Security System and expand private pension
          plan  incentives  also may be considered.  Prospects for enactment and
          the ultimate effect of these proposals are uncertain.

          Other Regulatory Matters

          Regulatory Matters

          As  with  many  financial  services  companies,  the  Company  and its
          affiliates have received  informal and formal requests for information
          from   various   state   and   federal   governmental   agencies   and
          self-regulatory   organizations   in  connection  with  inquiries  and
          investigations of the products and practices of the financial services
          industry.  In each case, the Company and its affiliates  have been and
          are providing full cooperation.

          Fund Regulatory Issues

          Since  2002,  there has been  increased  governmental  and  regulatory
          activity  relating to mutual  funds and variable  insurance  products.
          This activity has primarily  focused on inappropriate  trading of fund
          shares,  revenue sharing and directed brokerage,  compensation,  sales
          practices  and  suitability,   arrangements  with  service  providers,
          pricing, compliance and controls, and adequacy of disclosure.

          In addition to responding to governmental  and regulatory  requests on
          fund  regulatory  issues,  ING  management,  on  its  own  initiative,
          conducted,  through special counsel and a national accounting firm, an
          extensive  internal  review of mutual fund  trading in ING  insurance,
          retirement,  and mutual fund products.  The goal of this review was to
          identify any instances of  inappropriate  trading in those products by
          third  parties  or by  ING  investment  professionals  and  other  ING
          personnel.

          The internal review identified several isolated  arrangements allowing
          third parties to engage in frequent trading of mutual funds within the
          variable  insurance  and mutual fund  products of ING, and  identified
          other  circumstances  where frequent trading occurred despite measures
          taken  by  ING  intended  to  combat  market   timing.   Each  of  the
          arrangements  has been terminated and disclosed to regulators,  to the
          independent  trustees  of ING  Funds  (U.S.)  and in  Company  reports
          previously filed with the SEC pursuant to the Securities  Exchange Act
          of 1934, as amended.

          An affiliate of the Company,  ING Funds Distributors,  LLC ("IFD") has
          received  notice  from  the  staff  of  the  National  Association  of
          Securities  Dealers  ("NASD")  that the staff  has made a  preliminary
          determination to recommend that disciplinary action be brought against
          IFD and one of its  registered  persons  for  violations  of the  NASD
          Conduct Rules and federal  securities laws in connection with frequent
          trading arrangements.

                                       43

<PAGE>

          Other regulators, including the SEC and the New York Attorney General,
          are also  likely to take some  action  with  respect to the Company or
          certain  affiliates  before  concluding  their  investigation  of  ING
          relating  to fund  trading.  The  potential  outcome of such action is
          difficult  to  predict  but  could  subject  the  Company  or  certain
          affiliates  to adverse  consequences,  including,  but not limited to,
          settlement payments,  penalties,  and other financial liability. It is
          not currently  anticipated,  however,  that the actual outcome of such
          action will have a material  adverse effect on ING or ING's U.S.-based
          operations, including the Company.

          ING has agreed to indemnify  and hold  harmless the ING Funds from all
          damages  resulting  from  wrongful  conduct by ING or its employees or
          from ING's internal investigation, any investigations conducted by any
          governmental or self-regulatory  agencies,  litigation or other formal
          proceedings,  including any proceedings by the Securities and Exchange
          Commission  ("SEC").  Management  reported to the ING Funds Board that
          ING management  believes that the total amount of any  indemnification
          obligations   will  not  be  material  to  ING  or  ING's   U.S.-based
          operations, including the Company.

          Other Regulatory Matters

          The New York Attorney General and other regulators are also conducting
          broad inquiries and investigations  involving the insurance  industry.
          These initiatives currently focus on, among other things, compensation
          and other sales incentives, potential conflicts of interest, potential
          anti-competitive  activity,  marketing  practices,  certain  financial
          reinsurance arrangements,  and disclosure. It is likely that the scope
          of these investigations will further broaden before the investigations
          are  concluded.  U.S.  affiliates  of ING  have  received  formal  and
          informal  requests in  connection  with such  investigations,  and are
          cooperating fully with each request for information.

          These  initiatives  may result in new  legislation and regulation that
          could significantly affect the financial services industry,  including
          businesses in which the Company is engaged.

          In light of these  and other  developments,  U.S.  affiliates  of ING,
          including the Company,  periodically  review whether  modifications to
          our business practices are appropriate.

          For further discussion of the Company's  regulatory matters, see "Risk
          Factors" in Part I, Item 1 "Business".


                                       44

<PAGE>

Item 7A.  Quantitative  and  Qualitative  Disclosures  About Market Risk
          (Dollar amounts in millions, unless otherwise stated)

          Asset/liability  management  is  integrated  into many  aspects of the
          Company's   operations,   including  investment   decisions,   product
          development, and determination of crediting rates. As part of the risk
          management   process,   different   economic  scenarios  are  modeled,
          including  cash  flow  testing   required  for  insurance   regulatory
          purposes,  to  determine  that  existing  assets are  adequate to meet
          projected  liability cash flows. Key variables in the modeling process
          include  interest  rates,  anticipated   contractowner  behavior,  and
          variable  separate  account   performance.   Contractowners  bear  the
          investment risk related to variable annuity  products,  subject to the
          minimum  guaranteed  death  and  living  benefits  included  in  these
          contracts.

          The fixed  account  liabilities  are  supported  by a general  account
          portfolio principally composed of fixed rate investments with matching
          duration  characteristics that can generate predictable,  steady rates
          of return.  The  portfolio  management  strategy for the fixed account
          considers the assets  available-for-sale.  This enables the Company to
          respond to changes in market interest rates, prepayment risk, relative
          values of asset sectors and individual  securities  and loans,  credit
          quality  outlook,   and  other  relevant  factors.  The  objective  of
          portfolio  management  is to maximize  returns,  taking  into  account
          interest rate and credit risk,  as well as other risks.  The Company's
          asset/liability  management discipline includes strategies to minimize
          exposure to loss as interest rates and economic and market  conditions
          change.

          On the basis of these analyses, management believes there is currently
          no material solvency risk to the Company.

          Interest Rate Risk

          The Company defines Interest Rate Risk as the risk of an economic loss
          due to adverse  changes in interest  rates.  This risk arises from the
          Company's primary activity of investing fixed annuity premiums and GIC
          deposits  received in  interest-sensitive  assets and  carrying  these
          funds as  interest-sensitive  liabilities.  The  Company  manages  the
          interest rate risk in its assets relative to the interest rate risk in
          its  liabilities.  A key  measure  used to quantify  this  exposure is
          duration.   Duration  measures  the  sensitivity  of  the  assets  and
          liabilities to changes in interest rates.

          To calculate duration related to annuities, the Company projects asset
          and liability cash flows under stochastic arbitrage free interest rate
          scenarios and calculates their net present value using LIBOR/swap spot
          rates.  Duration is calculated  by revaluing  these cash flows given a
          small change in interest rates and determining  the percentage  change
          in the fair value. The cash flows used in this calculation include the
          expected  coupon and principal  payments on the assets and all benefit
          cash  flows on the  interest-sensitive  liabilities.  The  projections
          include assumptions that reflect the effect of changing interest rates
          on  the  prepayment,   lapse,  leverage,  and/or  option  features  of
          instruments,  where applicable.  Such assumptions  relate primarily to
          mortgage-backed   securities,   collateralized  mortgage  obligations,
          callable corporate obligations,  and fixed rate deferred and immediate
          annuities.

                                       45

<PAGE>

          Duration  calculations  related to  annuities  as of December 31, 2004
          indicate that the Company is well matched.  The asset duration was 4.3
          and the liability  duration was 4.2.  Given the duration  match and an
          $18.5 billion  general account  annuity  portfolio,  a 100 basis point
          immediate  parallel increase in interest rates as of December 31, 2004
          would   decrease   the  market   values  of  the  annuity   assets  by
          approximately  $0.8  billion and would  decrease  the  liabilities  by
          approximately  $0.8  billion.  Similarly,  a 100 basis point  parallel
          decrease in interest  rates as of December 31, 2004 would increase the
          market value of the general  account  annuity assets by  approximately
          $0.8 billion and would increase the liabilities by approximately  $0.8
          billion.

          To calculate duration related to GICs, the Company projects and values
          asset and  liability  cash flows using  arbitrage  free  interest rate
          scenarios  based on the swap curve's  implied  forward rates.  Ten key
          points on the curve are then  increased by 10 basis points,  arbitrage
          free interest rate  scenarios are  regenerated  based on the increased
          implied  forward rates for each  increased  point,  and cash flows are
          reprojected  and re-valued.  The Company's net duration for a key rate
          increase of 10 basis points is 0.18.

          Further,  market  value  changes are also  calculated  after  applying
          parallel and  increases  and  decreases of 100 basis points to all ten
          key points on the curve.  Arbitrage  free interest rate  scenarios are
          regenerated  based on the increased  implied  forward rates,  and cash
          flows are  re-projected  and revalued.  The Company's $1.8 billion GIC
          portfolio at December 31,  2004,  would  decrease by $4.8 due to a 100
          basis point increase in interest rates,  and decrease by $1.0 due to a
          100 basis point decrease in interest rates.

          For further discussion of the Company's interest rate risks, see "Risk
          Factors" in Part 1, Item 1 "Business".

          Market Risk

          The Company's  operations are  significantly  influenced by changes in
          the equity markets. The Company's profitability depends largely on the
          amount of assets under  management,  which is primarily  driven by the
          level of sales, equity market  appreciation and depreciation,  and the
          persistency  of  the  in  force  block  of  business.   Prolonged  and
          precipitous  declines  in the equity  markets  can have a  significant
          impact on the  Company's  operations.  As a result,  sales of variable
          products may decline and surrender activity may increase,  as customer
          sentiment towards the equity market turns negative. Lower assets under
          management  will have a  negative  impact on the  Company's  financial
          results,  primarily  due to lower fee income on  variable  and indexed
          annuities.  Furthermore,  the Company may  experience  a reduction  in
          profit  margins if a  significant  portion  of the assets  held in the
          variable  annuity separate account move to the general account and the
          Company   is  unable  to  earn  an   acceptable   investment   spread,
          particularly  in light of the low interest  rate  environment  and the
          presence of contractually guaranteed interest credited rates.

          In addition, prolonged declines in the equity market may also decrease
          the Company's expectations of future gross profits, which are utilized
          to  determine  the  amount  of  DAC/VOBA  to be  amortized  in a given
          financial  statement  period. A significant  decrease in the Company's


                                       46

<PAGE>

          estimated  gross profits  would require the Company to accelerate  the
          amount of DAC/VOBA amortization in a given period, potentially causing
          a material adverse  deviation in the period's net income.  Although an
          acceleration of DAC  amortization  would have a negative impact on the
          Company's  earnings,  it would not affect the  Company's  cash flow or
          liquidity position. For further discussion, see "Risk Factors" in Part
          1, Item 1, "Business".

          Hedging of Minimum Guarantees

          The  Company  sells  variable  annuity  contracts  that offer  various
          guaranteed death and living benefits including GMDBs, GMIBs, GMWBs and
          GMABs. See discussion above, "Minimum Guarantees".

          The  liability   associated  with  GMDBs  and  GMIBs  is  recorded  in
          accordance  with SOP 03-1.  The GMWBs and GMABs  represent an embedded
          derivative liability in the variable annuity contract that is required
          to be reported separately from the host variable annuity contract.  It
          is carried at fair value in accordance  with FAS No. 133,  "Accounting
          for Derivative  Instruments and Hedging Activities" and is reported in
          future policy benefits and claims reserves in the Balance Sheets.  The
          fair value of the GMWB and GMAB  obligations  are calculated  based on
          actuarial  assumptions  related to  projected  cash  flows,  including
          benefits  and  related  contract  charges,   over  the  lives  of  the
          contracts,    incorporating   expectations   concerning   policyholder
          behavior.  Estimating  cash  flows  involves  numerous  estimates  and
          subjective  judgments  including those regarding expected market rates
          of return,  market  volatility,  correlations of market  returns,  and
          discount rates.  The liability  assumptions,  such as lapses,  partial
          withdrawals  and  mortality,  used by the Company to estimate the risk
          exposures to GMDB are based on company  experience  and are consistent
          with those used for DAC/VOBA, SOP 03-1 reserves.

          Declines in the equity  market may increase the Company's net exposure
          to the various death  benefit and living  benefit  guarantees  offered
          under  these  contracts.  For a portion of the GMDBs  issued  prior to
          2000, the Company mitigates market exposure with reinsurance. For most
          other pre-2000  GMDBs,  and for all death benefit and living  benefits
          guarantees issued after 1999, the Company mitigates equity market risk
          with a Capital Market Hedging Program ("Hedging Program"). The Hedging
          Program  primarily  uses exchange  traded index  futures  contracts to
          mitigate equity market fluctuations.  In addition, the Hedging Program
          uses interest rate swaps to mitigate  certain  interest rate exposures
          associated  with  these  guarantees.   The  change  in  value  of  the
          derivatives  used in the Hedging  Program is recorded in net  realized
          capital gains (losses) in the Statement of Operations.

                                       47

<PAGE>

          Hedging of Indexed Annuity  Guarantees

          The crediting  mechanism  for Indexed  Annuities  ("IAs")  exposes the
          company to  increases in the equity  market  ("S&P 500").  The Company
          mitigates this exposure by purchasing over-the-counter ("OTC") S&P 500
          call  options  from   broker-dealer   derivative   counterparties  who
          generally  have a minimum  credit  rating of Aa3 from  Moody's and AA-
          from  Standard  & Poor's.  For each  broker-dealer  counterparty,  the
          Company's  derivative exposure to that counterparty is aggregated with
          any fixed income exposure to the same  counterparty  and is maintained
          within  applicable state  requirements  and NAIC insurance  regulatory
          guidelines.


                                       48

<PAGE>




Item 8.   Financial Statements and Supplementary Data

                          Index to Financial Statements


                                                                            Page
                                                                            ----
Report of Independent Registered Public Accounting Firm                       50

     Financial Statements:

     Statements of Operations for the years ended
         December 31, 2004, 2003 and 2002                                     51

     Balance Sheets as of December 31, 2004 and 2003                          52

     Statements of Changes in Shareholder's Equity for the years ended
         December 31, 2004, 2003 and 2002                                     54

     Statements of Cash Flows for the years ended
         December 31, 2004, 2003 and 2002                                     55

Notes to Financial Statements                                                 57

<PAGE>


             Report of Independent Registered Public Accounting Firm



The Board of Directors
ING USA Annuity and Life Insurance Company

We have  audited  the  accompanying  balance  sheets of ING USA Annuity and Life
Insurance  Company as of December 31, 2004 and 2003, and the related  statements
of operations,  statements of changes in shareholder's equity, and statements of
cash flows for each of the three years in the period  ended  December  31, 2004.
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 the standards of the Public  Company
Accounting Oversight Board (United States). 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 consideration of
internal  control  over  financial  reporting  as a basis  for  designing  audit
procedures that are appropriate in the circumstances, but not for the purpose of
an opinion on the effectiveness of the Company's internal control over financial
reporting.  Accordingly,  we express  no such  opinion.  An audit also  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial   statements,   assessing  the  accounting  principles  used  and
significant  estimates made by management,  and 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 consolidated  financial position of ING USA Annuity
and Life Insurance  Company as of December 31, 2004 and 2003, and the results of
its  operations  and its cash  flows for each of the three  years in the  period
ended December 31, 2004, in conformity with U.S. generally  accepted  accounting
principles.

As  discussed in Note 1 to the  financial  statements,  the Company  changed the
accounting  principle for goodwill and other intangible assets effective January
1, 2002 and changed the accounting  principle for certain  non-traditional  long
duration contracts and for separate accounts effective January 1, 2004.



                                                           /s/ Ernst & Young LLP

Atlanta, Georgia
March 18, 2005

<PAGE>


                   ING USA Annuity and Life Insurance Company
          (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

                            Statements of Operations
                                  (In millions)


<TABLE>
<S>                                                              <C>                  <C>                <C>

                                                                                  Year ended December 31,
                                                                        2004                2003               2002
                                                                  -----------------   -----------------  -----------------
Revenue:
    Net investment income                                              $ 1,023.9           $   974.6         $    989.3
    Fee income                                                             566.7               397.7              295.7
    Premiums                                                                22.8                26.0               36.8
    Net realized capital gains (losses)                                     57.6               106.9             (196.5)
    Other income                                                             2.8                 3.8               16.3
                                                                  -----------------   -----------------  -----------------
Total revenue                                                            1,673.8             1,509.0            1,141.6
                                                                  -----------------   -----------------  -----------------
Benefits and expenses:
    Interest credited and other benefits to contractowners               1,134.0               925.7              848.0
    Operating expenses                                                     162.6               162.1              155.1
    Amortization of deferred policy acquisition costs
      and value of business acquired                                       186.8               347.9              302.0
    Interest expense                                                        14.6                15.8               16.9
    Other                                                                    2.2                 1.0               (4.1)
                                                                  -----------------   -----------------  -----------------
Total benefits and expenses                                              1,500.2             1,452.5            1,317.9
                                                                  -----------------   -----------------  -----------------
Income (loss) before income taxes and cumulative effect
    of change in accounting principle                                      173.6                56.5             (176.3)
Income tax expense (benefit)                                                80.7                (0.8)             (60.2)
                                                                  -----------------   -----------------  -----------------
Income (loss) before cumulative effect of change
    in accounting principle                                                 92.9                57.3             (116.1)
Cumulative effect of change in accounting
    principle, net of tax                                                   (1.0)                  -           (1,298.4)
                                                                  -----------------   -----------------  -----------------
Net income (loss)                                                      $    91.9           $    57.3         $ (1,414.5)
                                                                  =================   =================  =================

</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       51

<PAGE>

                   ING USA Annuity and Life Insurance Company
          (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

                                 Balance Sheets
                        (In millions, except share data)


<TABLE>
<S>                                                                                      <C>                <C>

                                                                                                   As of December 31,
                                                                                               2004               2003
                                                                                         -----------------  -----------------
Assets
Investments:
    Fixed maturities, available-for-sale, at fair value (amortized cost of
      $17,045.9 at 2004 and $15,025.0 at 2003)                                             $   17,489.2       $   15,538.7
    Equity securities, available-for-sale, at fair value
      (cost of $34.8 at 2004 and $115.2 at 2003)                                                   35.3              120.2
    Mortgage loans on real estate                                                               3,851.8            3,388.7
    Policy loans                                                                                  169.0              177.1
    Other investments                                                                             228.8               60.8
    Securities pledged (amortized cost of $1,100.5 at 2004 and $555.5 at 2003)                  1,108.6              559.1
                                                                                         -----------------  -----------------
Total investments                                                                              22,882.7           19,844.6
Cash and cash equivalents                                                                         209.0               65.1
Short-term investments under securities loan agreement                                            402.8               22.9
Accrued investment income                                                                         205.8              185.7
Receivable for securities sold                                                                     38.9               11.7
Reinsurance recoverable                                                                         1,388.1              651.9
Deferred policy acquisition costs                                                               1,704.1            1,826.7
Value of business acquired                                                                        112.2              111.5
Sales inducements to contractowners                                                               514.6                  -
Due from affiliates                                                                               184.3              117.7
Deferred income taxes                                                                                 -               19.4
Other assets                                                                                       28.4               20.1
Assets held in separate accounts                                                               24,746.7           18,220.1
                                                                                         -----------------  -----------------
Total assets                                                                               $   52,417.6       $   41,097.4
                                                                                         =================  =================

</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       52

<PAGE>

                   ING USA Annuity and Life Insurance Company
          (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

                                 Balance Sheets
                        (In millions, except share data)


<TABLE>
<S>                                                                                      <C>                <C>

                                                                                                   As of December 31,
                                                                                               2004               2003
                                                                                         -----------------  -----------------
Liabilities and Shareholder's Equity
Future policy benefits and claims reserves                                                   $ 22,961.0        $ 19,400.5
Notes to affiliates                                                                               435.0              85.0
Due to affiliates                                                                                  43.6              60.7
Payables for securities purchased                                                                  35.9                 -
Payables under securities loan agreement                                                          402.8              22.9
Borrowed money                                                                                    713.4             534.2
Current income taxes                                                                               15.7              19.4
Deferred income taxes                                                                              12.6                 -
Other liabilities                                                                                 276.4             226.6
Liabilities related to separate accounts                                                       24,746.7          18,220.1
                                                                                         -----------------  ----------------
Total liabilities                                                                              49,643.1          38,569.4
                                                                                         -----------------  ----------------
Shareholder's equity
    Common stock (250,000 shares authorized, issued and outstanding;
      $10.00 per share value)                                                                       2.5               2.5
    Additional paid-in capital                                                                  4,041.1           3,811.1
    Accumulated other comprehensive income                                                        112.7             188.1
    Retained earnings (deficit)                                                                (1,381.8)         (1,473.7)
                                                                                         -----------------  ----------------
Total shareholder's equity                                                                      2,774.5           2,528.0
                                                                                         -----------------  ----------------
Total liabilities and shareholder's equity                                                   $ 52,417.6        $ 41,097.4
                                                                                         =================  ================

</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                       53

<PAGE>

                   ING USA Annuity and Life Insurance Company
          (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

                  Statements of Changes in Shareholder's Equity
                                  (In millions)

<TABLE>
<S>                                        <C>           <C>             <C>               <C>            <C>
                                                                           Accumulated
                                                           Additional         Other          Retained          Total
                                              Common        Paid-In       Comprehensive      Earnings      Shareholder's
                                              Stock         Capital          Income          (Deficit)        Equity
                                           ------------- --------------- ----------------  -------------- ----------------
Balance at December 31, 2001
    Excluding impact of merger                $   2.5      $    780.4       $      3.8       $    31.1       $    817.8
    Impact of merger                                -         2,493.9            (73.8)         (135.2)         2,284.9
                                           ------------- --------------- ----------------  -------------- ----------------
Balance at December 31, 2001
    Including impact of merger                    2.5         3,274.3            (70.0)         (104.1)         3,102.7
    Comprehensive loss:
      Net loss                                      -               -                -        (1,414.5)        (1,414.5)
      Other comprehensive loss
        net of tax:
           Net unrealized gain on
             securities ($202.3 pretax)             -               -            203.2               -            203.2
                                                                                                          ----------------
    Comprehensive loss                                                                                         (1,211.3)
                                                                                                          ----------------
    Contribution of capital                         -           456.3                -               -            456.3
    Other                                           -            (8.2)               -               -             (8.2)
                                           ------------- --------------- ----------------  -------------- ----------------
Balance at December 31, 2002                      2.5         3,722.4            133.2        (1,518.6)         2,339.5
    Comprehensive income:
      Net income                                    -               -                -            57.3             57.3
      Other comprehensive income
        net of tax:
           Net unrealized gain on
             securities ($82.8 pretax)              -               -             54.9               -             54.9
                                                                                                          ----------------
    Comprehensive income                                                                                          112.2
                                                                                                          ----------------
    Dividends paid                                  -               -                -           (12.4)           (12.4)
    Contribution of capital                         -            88.7                -               -             88.7
                                           ------------- --------------- ----------------  -------------- ----------------
Balance at December 31, 2003                      2.5         3,811.1            188.1        (1,473.7)         2,528.0
    Comprehensive income:
      Net income                                                                                  91.9             91.9
      Other comprehensive loss
        net of tax:
           Net unrealized loss on
             securities (($113.9) pretax)                                        (70.5)                           (70.5)
           Minimum pension liability                                              (4.9)                            (4.9)
                                                                                                          ----------------
    Comprehensive income                                                                                           16.5
                                                                                                          ----------------
    Contribution of capital                                     230.0                                             230.0
                                           ------------- --------------- ----------------  -------------- ----------------
Balance at December 31, 2004                  $   2.5      4  4,041.1       $    112.7       $(1,381.8)       $ 2,774.5
                                           ============= =============== ================  ============== ================

</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       54

<PAGE>

                   ING USA Annuity and Life Insurance Company
          (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

                            Statements of Cash Flows
                                  (In millions)

<TABLE>
<S>                                                                    <C>               <C>               <C>

                                                                                     Year ended December 31,
                                                                            2004              2003              2002
                                                                       ---------------   ---------------   ----------------
Cash Flows from Operating Activities:
    Net income (loss)                                                    $       91.9      $       57.3      $    (1,414.5)
    Adjustments to reconcile net income (loss) to net cash
      provided by operating activities:
        Capitalization of deferred policy acquisition costs                    (688.3)           (396.9)            (469.5)
        Amortization of deferred policy acquisition costs
           and value of business acquired                                       241.0             252.9              210.8
        Net accretion/decretion of discount/premium                             139.6             218.2              173.3
        Future policy benefits, claims reserves, and interest credited          916.7           1,196.8              926.6
        Impairment of goodwill                                                      -                 -            1,314.4
        Provision for deferred income taxes                                      75.5              (1.9)             (43.5)
        Net realized capital (gains) losses                                     (57.3)           (110.0)             151.5
        Depreciation                                                                -                 -                0.2
        Change in:
           Accrued investment income                                            (20.1)              9.3              (45.4)
           Accounts receivables and asset accruals                              (35.5)             (2.4)              (2.3)
           Due to/from affiliates                                               (83.7)            (68.4)              76.4
           Other payables and accruals                                           77.1              73.1             (219.8)
                                                                       ---------------   ---------------   ----------------
Net cash provided by operating activities                                       656.9           1,228.0              658.2
Cash Flows from Investing Activities:
    Proceeds from the sale, maturity, or redemption of:
      Fixed maturities, available-for-sale                                   17,903.6          20,179.8           20,419.3
      Equity securities, available-for-sale                                     106.8              45.7                0.7
      Mortgage loans on real estate originated                                  388.6             561.1              667.6
      Short-term investments                                                  2,854.0          15,364.1            8,638.3
    Acquisition of:
      Fixed maturities, available-for-sale                                  (20,553.5)        (21,223.3)         (24,532.0)
      Equity securities, available-for-sale                                     (20.2)            (16.2)            (144.1)
      Mortgage loans on real estate                                            (856.4)         (1,075.5)            (782.1)
      Short-term investments                                                 (2,860.6)        (15,362.2)          (8,580.9)
    Proceeds from sale of interest in subsidiary                                    -                 -               27.7
    Other investments                                                          (152.9)            (84.0)              74.1
    Other, net                                                                   10.8               2.7               10.8
                                                                       ---------------   ---------------   ----------------
Net cash used in investing activities                                        (3,179.8)         (1,607.8)          (4,200.6)

</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       55

<PAGE>


                   ING USA Annuity and Life Insurance Company
          (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

                            Statements of Cash Flows
                                  (In millions)

<TABLE>
<S>                                                                    <C>               <C>               <C>

                                                                                     Year ended December 31,
                                                                            2004              2003              2002
                                                                       ---------------   ---------------   ----------------
Cash Flows from Financing Activities:
    Deposits received for investment contracts                                5,474.7           1,475.3            4,826.1
    Maturities and withdrawals from investment contracts                     (2,830.9)         (1,676.5)          (1,636.3)
    Reinsurance recapture                                                           -             134.5                  -
    Change in reinsurance recoverable                                          (736.2)             25.6             (211.3)
    Net short-term loans                                                        179.2             210.6               48.6
    Intercompany dividends                                                          -             (12.4)                 -
    Intercompany loans                                                          350.0                 -                  -
    Contribution of capital from Parent                                         230.0              88.7              456.3
    Other                                                                           -                 -               (8.2)
                                                                       ---------------   ---------------   ----------------
Net cash provided by financing activities                                     2,666.8             245.8            3,475.2
                                                                       ---------------   ---------------   ----------------
Net increase (decrease) in cash and cash equivalents                            143.9            (134.0)             (67.2)
Cash and cash equivalents, beginning of year                                     65.1             199.1              266.3
                                                                       ---------------   ---------------   ----------------
Cash and cash equivalents, end of year                                   $      209.0      $       65.1      $       199.1
                                                                       ===============   ===============   ================
Supplemental cash flow information:
    Income taxes paid (received), net                                    $        8.3      $       53.0      $       (41.7)
                                                                       ===============   ===============   ================
    Interest paid                                                        $       14.2      $       10.8      $        13.5
                                                                       ===============   ===============   ================
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       56

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

1.   Organization and Significant Accounting Policies

     Basis of Presentation

     ING USA Annuity and Life  Insurance  Company ("ING USA" or the "Company" as
     appropriate),  a wholly-owned  subsidiary of Lion Connecticut Holdings Inc.
     ("Lion" or "Parent"), is a stock life insurance company organized under the
     laws of the State of Iowa.

     Lion is an indirect,  wholly-owned  subsidiary of ING Groep N.V. ("ING"), a
     global financial  services  holding company based in The Netherlands,  with
     American  Depository Shares listed on the New York Stock Exchange under the
     symbol "ING".  ING USA is  authorized to conduct its insurance  business in
     the  District  of  Columbia  and all states  except  New York.  ING USA was
     domiciled  as a life  insurance  company  under  the  laws of the  State of
     Delaware  until  December  31, 2003 and has been  domiciled as such in Iowa
     since January 1, 2004.

     On  January  1,  2004  (the  "Merger  Date"),  the  Company  simultaneously
     redomesticated from Delaware to Iowa, changed its name from Golden American
     Life Insurance Company to ING USA Annuity and Life Insurance  Company,  and
     merged the following affiliates into the Company:  Equitable Life Insurance
     Company of Iowa ("Equitable Life"), USG Annuity & Life Company ("USG"), and
     United Life & Annuity Insurance Company ("ULA") (the collectively,  "Merger
     Companies").  Prior  to  the  merger  date,  ING  USA  was  a  wholly-owned
     subsidiary  of  Equitable  Life.   Equitable  Life  merged  its  affiliate,
     Ameribest  Life  Insurance  Company  ("AMB"),   a  life  insurance  company
     domiciled in Georgia, into its operations on January 1, 2003.

     Statement  of Financial  Accounting  Standards  ("FAS") No. 141,  "Business
     Combinations",  excludes  transfers  of net assets or  exchanges  of shares
     between  entities under common control,  and notes that certain  provisions
     under  Accounting  Principles  Board  ("APB")  Opinion  No.  16,  "Business
     Combinations",  provide  a source of  guidance  for such  transactions.  In
     accordance with APB Opinion No. 16,  financial  information of the combined
     entity is presented as if the entities had been combined for the full year,
     and all comparative  financial  statements are restated and presented as if
     the  entities  had  previously  been  combined,  in a manner  similar  to a
     pooling-of-interests.  The Balance Sheets and Statements of Operations give
     effect  to the  consolidation  transactions  as if  they  had  occurred  on
     December 31, 2003 and January 1, 2002, respectively.

     As of April 1, 2002,  ING USA sold First  Golden  American  Life  Insurance
     Company of New York ("First Golden") to its sister company,  ReliaStar Life
     Insurance    Company    ("ReliaStar").    ReliaStar,    the    parent    of
     Security-Connecticut Life Insurance Company ("Security-Connecticut"), which
     in turn is the  parent of  ReliaStar  Life  Insurance  Company  of New York
     ("RLNY"),  merged  the  First  Golden  business  into RLNY  operations  and
     dissolved  First  Golden at book  value for $27.7 in cash and a  receivable


                                       57

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     totaling $0.2 from RLNY. The receivable  from RLNY was assumed by Equitable
     Life,  and  ultimately  by ING USA.  The  consideration  was based on First
     Golden's  statutory-basis  book  value.  RLNY's  payable to the Company was
     assumed by ING USA and  subsequently  forgiven.  ING USA realized a loss of
     $3.0 related to the sale of First  Golden,  which was recorded as a capital
     transaction.  Approval  for the  merger  was  obtained  from the  Insurance
     Departments of the States of New York and Delaware.  As of October 1, 2003,
     RLNY's  parent,  Security-Connecticut  merged  with and  into  its  parent,
     ReliaStar.

     In accordance with APB Opinion No. 16, RLNY presented  combined  results of
     operations  including First Golden activity as of the beginning of the year
     ended December 31, 2002. The first three months of First Golden activity is
     not reflected in the ING USA's Statement of Operations for the period ended
     December 31, 2002, as the amounts were not material.

     Description of Business

     The Company  offers  various  insurance  products  including  immediate and
     deferred  variable and fixed annuities.  The Company's annuity products are
     distributed by national wirehouses,  regional securities firms, independent
     National  Association  of  Securities  Dealers,  Inc.  ("NASD")  firms with
     licensed registered  representatives,  banks, life insurance companies with
     captive  agency sales forces,  independent  insurance  agents,  independent
     marketing organizations and the ING broker-dealer network. The Company also
     offers  guaranteed  investment  contracts  ("GICs") and funding  agreements
     marketed  by direct  sale by home  office  personnel  or through  specialty
     insurance    brokers.    Historically,    the    Company    has    provided
     interest-sensitive,  traditional  and variable life  insurance,  and health
     insurance. All health insurance is ceded to other insurers and new policies
     are no longer  written.  The Company  ceased the issuance of life insurance
     policies in 2001, and all life insurance  business is currently in run-off.
     The Company's primary customers are retail consumers and corporations.

     Recently Adopted Accounting Standards

     Accounting   and   Reporting   by   Insurance   Enterprises   for   Certain
     Nontraditional Long-Duration Contracts and for Separate Accounts

     The Company  adopted  Statement of Position  ("SOP") 03-1,  "Accounting and
     Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration
     Contracts  and for  Separate  Accounts,"  on  January  1,  2004.  SOP  03-1
     establishes several new accounting and disclosure  requirements for certain
     nontraditional long-duration contracts and for separate accounts including,
     among other things,  a requirement  that assets and liabilities of separate
     account  arrangements that do not meet certain criteria be accounted for as
     general account assets and  liabilities,  and that the revenue and expenses
     related to such  arrangements  be  consolidated  within the respective line
     items in the  Statements  of  Operations.  In  addition,  the SOP  requires


                                       58

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     additional  liabilities be  established  for certain  guaranteed  death and
     other benefits and for products with certain  patterns of cost of insurance
     charges. In addition,  sales inducements provided to contractowners must be
     recognized on the balance sheet separately from deferred policy acquisition
     costs and amortized as a component of benefits expense using  methodologies
     and  assumptions  consistent  with those used for  amortization of deferred
     policy acquisition costs.

     The Company  evaluated all  requirements of SOP 03-1 and determined that it
     is affected by the SOP's requirements to establish  additional  liabilities
     for certain  guaranteed  benefits  and  products  with  patterns of cost of
     insurance  charges  resulting in losses in later policy  durations from the
     insurance   benefit  function  and  to  defer,   amortize,   and  recognize
     separately, sales inducements to contractowners.  Upon adoption of SOP 03-1
     on January 1, 2004, the Company  recognized a cumulative effect of a change
     in  accounting  principle of $(3.6),  before tax or $(2.3),  net of $1.3 of
     income  taxes.  In  addition,  requirements  for certain  separate  account
     arrangements  that do not meet the established  criteria for separate asset
     and  liability  recognition  are  applicable to the Company,  however,  the
     Company's   policies  on  separate  account  assets  and  liabilities  have
     historically  been, and continue to be, in conformity with the requirements
     newly established.

     In the  fourth  quarter  of 2004,  the  cumulative  effect  of a change  in
     accounting  principle  was revised due to the Company's  implementation  of
     Technical   Practice   Aid  6300.05  -  6300.08,   "Q&As   Related  to  the
     Implementation  of  SOP  03-1,   `Accounting  and  Reporting  by  Insurance
     Enterprises  for Certain  Nontraditional  Long-Duration  Contracts  and for
     Separate Accounts"' (the "TPA").

     The TPA, which was approved in September 2004, provides additional guidance
     regarding  certain implicit  assessments that may be used in the testing of
     the base mortality  function on contracts,  which is performed to determine
     whether  additional  liabilities are required in conjunction with SOP 03-1.
     In addition,  the TPA provides additional guidance  surrounding the allowed
     level of aggregation of additional  liabilities  determined under SOP 03-1.
     While the TPA was implemented during the fourth quarter of 2004, the TPA is
     retroactive  to the original  implementation  date of SOP 03-1,  January 1,
     2004 and is reported as an adjustment to the SOP 03-1 cumulative  effect of
     change  in  accounting  principle.  The  adoption  of the TPA  reduced  the
     Company's  cumulative  effect of change in  accounting  principle  by $2.0,
     before tax and decreased  quarterly 2004 net income  approximately  $0.6 in
     each quarter, for a total decrease of $2.3.

     The  implementation  of  SOP  03-1  also  raised  questions  regarding  the
     interpretation  of the requirements of FAS No. 97 "Accounting and Reporting
     by  Insurance  Enterprises  for  Certain  Long-Duration  Contracts  and for
     Realized  Gains  and  Losses  from the  Sale of  Investments"  ("FAS  97"),
     concerning when it is appropriate to record an unearned  revenue  liability
     related to the insurance  benefit  function.  To clarify its position,  the


                                       59

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     Financial  Accounting  Standards  Board ("FASB") issued FASB Staff Position
     No. FAS 97-1 ("FSP FAS 97-1"), "Situations in Which Paragraphs 17(b) and 20
     of  FASB  Statement  No.  97,   `Accounting   and  Reporting  by  Insurance
     Enterprises for Certain Long-Duration  Contracts and for Realized Gains and
     Losses  from the Sale of  Investments,'  Permit or  Require  Accrual  of an
     Unearned  Revenue  Liability,"   effective  for  fiscal  periods  beginning
     subsequent to the date the guidance was issued,  June 18, 2004. The Company
     adopted FSP FAS 97-1 on July 1, 2004.

     The  Meaning of  Other-Than-Temporary  Impairment  and its  Application  to
     Certain Investments

     In March 2004,  the  Emerging  Issues Task Force  ("EITF")  reached a final
     consensus  on EITF Issue No.  03-1,  "The  Meaning of  Other-Than-Temporary
     Impairment  and  its  Application  to  Certain  Investments,"   adopting  a
     three-step impairment model for securities within its scope. The three-step
     model is applied on a security-by-security basis as follows:

     Step 1:  Determine  whether an  investment  is impaired.  An  investment is
          impaired  if the fair  value of the  investment  is less than its cost
          basis.
     Step 2: Evaluate whether an impairment is other-than-temporary.
     Step 3: If the impairment is other-than-temporary,  recognize an impairment
          loss equal to the  difference  between the  investment's  cost and its
          fair value.

     On September 30, 2004,  the FASB issued FASB Staff  Position No. EITF Issue
     03-1-1 ("FSP EITF  03-1-1"),  "Effective  Date of Paragraphs  10-20 of EITF
     Issue No. 03-1,  `The Meaning of  Other-Than-Temporary  Impairment  and Its
     Application to Certain Investments,'" which delayed the EITF Issue No. 03-1
     original  effective  date of July 1, 2004 related to steps two and three of
     the  impairment  model  introduced.  The delay is in  effect  until a final
     consensus  can be  reached  on such  guidance.  Despite  the  delay  of the
     implementation of steps two and three, other-than-temporary impairments are
     still to be recognized as required by existing guidance.

     Earlier  consensus  reached by the EITF on this issue required that certain
     quantitative and qualitative  disclosures be made for unrealized  losses on
     debt  and   equity   securities   that   have  not   been   recognized   as
     other-than-temporary  impairments.  These  disclosures  were adopted by the
     Company,  effective  December 31, 2003, and are included in the Investments
     footnote.

     Accounting for Derivative Instruments and Hedging Activities

     In 2003, the Derivative  Implementation  Group ("DIG") who was  responsible
     for issuing  guidance on behalf of the FASB for  implementation  of FAS No.
     133, "Accounting for Derivative Instruments and Hedging Activities", issued
     Statement  No. 133  Implementation  Issue No. B36,  "Embedded  Derivatives:
     Modified  Coinsurance  Arrangements  and Debt  Instruments That Incorporate


                                       60

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     Credit Risk Exposures  That Are Unrelated or Only Partially  Related to the
     Credit  Worthiness  of the Obligor  Under Those  Instruments"  ("DIG B36").
     Under this interpretation,  modified coinsurance and coinsurance with funds
     withheld  reinsurance  agreements as well as other types of receivables and
     payables  where  interest is  determined  by  reference  to a pool of fixed
     maturity  assets or a total return debt index may be  determined to contain
     embedded  derivatives  that are  required  to be  bifurcated  from the host
     instrument. The Company adopted DIG B36 on October 1, 2003 and has modified
     coinsurance  treaties that are  applicable to the guidance.  The applicable
     contracts, however, were determined to generate embedded derivatives with a
     fair value of zero. Therefore, implementation of DIG B36 did not impact the
     Company's financial position, results of operations, or cash flows.

     Variable Interest Entities

     In January 2003, the FASB issued FASB Interpretation 46,  "Consolidation of
     Variable Interest Entities, an Interpretation of ARB No. 51" ("FIN 46"). In
     December  2003,  the  FASB  modified  FIN  46  to  make  certain  technical
     corrections and address certain  implementation issues that had arisen. FIN
     46 provides a new  framework for  identifying  variable  interest  entities
     ("VIEs")  and  determining  when  a  company  should  include  the  assets,
     liabilities, noncontrolling interests and results of activities of a VIE in
     its consolidated financial statements.

     In  general,  a  VIE  is  a  corporation,  partnership,   limited-liability
     corporation, trust, or any other legal structure used to conduct activities
     or hold  assets  that  either (1) has an  insufficient  amount of equity to
     carry  out  its  principal   activities  without  additional   subordinated
     financial support, (2) has a group of equity owners that are unable to make
     significant  decisions about its  activities,  or (3) has a group of equity
     owners  that do not have the  obligation  to absorb  losses or the right to
     receive returns generated by its operations.

     FIN 46  requires a VIE to be  consolidated  if a party  with an  ownership,
     contractual  or other  financial  interest in the VIE (a variable  interest
     holder)  is  obligated  to absorb a  majority  of the risk of loss from the
     VIE's  activities,  is entitled to receive a majority of the VIE's residual
     returns (if no party  absorbs a majority of the VIE's  losses),  or both. A
     variable  interest holder that  consolidates  the VIE is called the primary
     beneficiary.  Upon consolidation,  the primary  beneficiary  generally must
     initially  record all of the VIE's assets,  liabilities and  noncontrolling
     interests at fair value and subsequently  account for the VIE as if it were
     consolidated  based  on  majority  voting  interest.  FIN 46 also  requires
     disclosures about VIEs that the variable interest holder is not required to
     consolidate but in which it has a significant variable interest.


                                       61

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     The Company holds investments in variable interest entities ("VIEs") in the
     form of private placement securities, structured securities, securitization
     transactions and limited  partnerships with an aggregate fair value of $7.0
     billion as of  December  31,  2004.  These VIEs are held by the Company for
     investment  purposes.  Consolidation of these  investments in the Company's
     financial  statements  is not  required  as the  Company is not the primary
     beneficiary  for any of these VIEs.  Book value as of December  31, 2004 of
     $6.9  billion  represents  the  maximum  exposure  to loss except for those
     structures for which the Company also receives asset management fees.

     Goodwill Impairment

     During  2002,  the  Company  adopted  FAS  No.  142,  "Goodwill  and  Other
     Intangible  Assets".   The  adoption  of  this  standard  resulted  in  the
     recognition  of an  impairment  loss of  $1,298.4,  net of $699.1 of income
     taxes,  related to a prior acquisition,  recorded  retroactive to the first
     quarter of 2002.  Prior  quarters of 2002 were restated  accordingly.  This
     impairment loss represented the entire carrying amount of goodwill,  net of
     accumulated  amortization.  This impairment  charge is shown as a change in
     accounting principle on the 2002 Statement of Operations.

     Guarantees

     In November  2002,  the FASB  issued  Interpretation  No. 45,  "Guarantor's
     Accounting and Disclosure  Requirements for Guarantees,  Including Indirect
     Guarantees of Indebtedness of Others" ("FIN 45"), to clarify accounting and
     disclosure requirements relating to a guarantor's issuance of certain types
     of guarantees,  or groups of similar guarantees,  even if the likelihood of
     the guarantor's  having to make any payments under the guarantee is remote.
     The disclosure provisions are effective for financial statements for fiscal
     years  ending  after  December  15,  2002.  For  certain  guarantees,   the
     interpretation also requires that guarantors recognize a liability equal to
     the fair value of the guarantee upon its issuance. This initial recognition
     and  measurement  provisions  are to be applied on a  prospective  basis to
     guarantees  issued or modified  after  December 31,  2002.  The Company has
     performed an  assessment  of its  guarantees  and believes  that all of its
     guarantees are excluded from the scope of this interpretation.

     New Accounting Pronouncements

     In December 2004, the FASB issued FAS No. 123 (revised 2004),  "Share-Based
     Payment" ("FAS 123R"), which requires all share-based payments to employees
     be recognized in the financial  statements  based upon the fair value.  FAS
     123R is effective at the  beginning of the first  interim or annual  period
     beginning  after June 15, 2005.  Earlier  adoption is encouraged.  FAS 123R
     provides    two    transition     methods,     modified-prospective     and
     modified-retrospective.


                                       62

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     The  modified-prospective  method  recognizes the grant-date  fair value of
     compensation  for new awards  granted after the effective date and unvested
     awards  beginning in the fiscal period in which the recognition  provisions
     are   first    applied.    Prior    periods   are   not    restated.    The
     modified-retrospective  method permits entities to restate prior periods by
     recognizing the compensation cost based on the amount  previously  reported
     in the pro forma  footnote  disclosures  as  required  under  FAS No.  123,
     "Accounting for Stock-Based Compensation".

     The Company intends to early adopt the provisions of FAS 123R on January 1,
     2005,  using the  modified-prospective  method.  Due to the  Company's  few
     number of  employees,  the  adoption of FAS 123R is not  expected to have a
     material impact on the Company's financial position, results of operations,
     or cash flows.  Prior to January  2005,  the Company  applied the intrinsic
     value-based  provisions  set forth in APB Opinion No. 25,  "Accounting  for
     Stock Issued to Employees".  Under the intrinsic value method, compensation
     expense is determined on the measurement  date,  which is the first date on
     which both the number of shares the employee is entitled to receive and the
     exercise price are known.  Compensation  expense, if any, is measured based
     on the award's intrinsic value,  which is the excess of the market price of
     the stock over the exercise price on the measurement date.

     Use of Estimates

     The  preparation  of financial  statements  in conformity  with  accounting
     principles  generally accepted in the United States requires  management to
     make  estimates  and  assumptions  that affect the amounts  reported in the
     financial  statements and accompanying  notes.  Actual results could differ
     from reported results using those estimates.

     Reclassifications

     Certain   reclassifications   have  been  made  to  prior  year   financial
     information to conform to the current year classifications.

     Cash and Cash Equivalents

     Cash and cash equivalents  include cash on hand,  money market  instruments
     and other debt issues with a maturity of 90 days or less when purchased.

     Investments

     All of the Company's  fixed  maturity and equity  securities  are currently
     designated  as   available-for-sale.   Available-for-sale   securities  are
     reported at fair value and unrealized  gains and losses on these securities
     are included directly in shareholder's equity, after adjustment for related


                                       63

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     changes in deferred  policy  acquisition  costs ("DAC"),  value of business
     acquired ("VOBA"), and deferred income taxes.

     Other-Than-Temporary-Impairments

     The Company analyzes the general account  investments to determine  whether
     there has been an  other-than-temporary  decline  in fair  value  below the
     amortized cost basis.  Management  considers the length of the time and the
     extent to which the  market  value has been less than cost;  the  financial
     condition and near-term prospects of the issuer; future economic conditions
     and market  forecasts;  and the Company's  intent and ability to retain the
     investment  in the  issuer  for a period  of time  sufficient  to allow for
     recovery in market value.  If it is probable that all amounts due according
     to the  contractual  terms of a debt  security  will not be  collected,  an
     other-than-temporary impairment is considered to have occurred.

     In addition,  the Company  invests in structured  securities  that meet the
     criteria  of EITF Issue No.  99-20,  "Recognition  of  Interest  Income and
     Impairment on Purchased and Retained  Beneficial  Interests in  Securitized
     Financial  Assets."  Under EITF Issue No.  99-20,  a  determination  of the
     required  impairment  is  based  on  credit  risk  and the  possibility  of
     significant prepayment risk that restricts the Company's ability to recover
     the  investment.  An  impairment  is  recognized  if the fair  value of the
     security is less than  amortized  cost and there has been an adverse change
     in cash flow since the remeasurement date.

     When a decline in fair value is determined to be other-than-temporary,  the
     individual security is written down to fair value and the loss is accounted
     for as a realized loss.

     Purchases and Sales

     Purchases and sales of fixed  maturities and equity  securities  (excluding
     private placements) are recorded on the trade date.  Purchases and sales of
     private placements and mortgage loans are recorded on the closing date.

     Valuation

     Fair values for fixed  maturities  are obtained  from  independent  pricing
     services or  broker-dealer  quotations.  Fair values for  privately  placed
     bonds are determined using a matrix-based  model.  The  matrix-based  model
     considers the level of risk-free interest rates, current corporate spreads,
     the credit  quality of the  issuer,  and cash flow  characteristics  of the
     security.  The fair values for actively traded equity  securities are based
     on quoted  market  prices.  For  equity  securities  not  actively  traded,
     estimated  fair values are based upon values of issues of comparable  yield
     and quality or conversion value, where applicable.


                                       64

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     Mortgage  loans  on  real  estate  are  reported  at  amortized  cost  less
     impairment  writedowns.  If the value of any mortgage loan is determined to
     be impaired  (i.e.,  when it is probable that the Company will be unable to
     collect all  amounts due  according  to the  contractual  terms of the loan
     agreement),  the carrying  value of the mortgage  loan is reduced to either
     the present value of expected cash flows from the loan  (discounted  at the
     loan's  effective  interest rate), or fair value of the collateral.  If the
     loan is in foreclosure,  the carrying value is reduced to the fair value of
     the underlying  collateral,  net of estimated costs to obtain and sell. The
     carrying value of the impaired loans is reduced by establishing a permanent
     writedown charged to realized loss.

     Investments  in  real  estate  are  reported  at  historical   cost,   less
     accumulated  depreciation and impairment writedowns,  with the exception of
     land,  which  is not  depreciated.  If the  value  of any  real  estate  is
     determined to be impaired (i.e.,  when it is probable that the Company will
     be unable to recover the carrying  value of the real estate),  the carrying
     value of the real estate is reduced to the current fair value. The carrying
     value of the impaired  real estate is reduced by  establishing  a permanent
     writedown charged to realized loss.

     Policy loans are carried at unpaid principal balances.

     Short-term  investments,  consisting  primarily of money market instruments
     and other fixed maturity issues  purchased with an original  maturity of 91
     days to one year, are considered available-for-sale and are carried at fair
     value, which approximates amortized cost.

     Derivative  instruments  are  reported  at  fair  value  and  are  obtained
     internally  from the  derivative  accounting  system.  Embedded  derivative
     instruments  are reported at fair value based upon  internally  established
     valuations  that are consistent  with external  valuation  models or market
     quotations.   Guaranteed   minimum   withdrawals   benefits  ("GMWBs")  and
     guaranteed minimum  accumulation  benefits ("GMABs")  represent an embedded
     derivative  liability in the variable  annuity contract that is required to
     be reported  separately from the host variable annuity contract.  GMWBs and
     GMABs are carried at fair value based on actuarial  assumptions  related to
     projected cash flows, including benefits and related contract charges, over
     the  lives  of  the  contracts,   incorporating   expectations   concerning
     contractowner  behavior.  Estimating cash flows involves numerous estimates
     and subjective judgments including those regarding expected market rates of
     return,  market  volatility,  correlations of market returns,  and discount
     rates.

     Securities Lending

     The Company engages in securities  lending whereby certain  securities from
     its portfolio are loaned to other  institutions  for short periods of time.
     Initial  collateral,  primarily  cash, is required at a rate of 102% of the
     market value of the loaned domestic securities. The collateral is deposited


                                       65

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     by the  borrower  with a lending  agent,  and  retained and invested by the
     lending agent according to the Company's  guidelines to generate additional
     income.  The market value of the loaned  securities is monitored on a daily
     basis with additional  collateral  obtained or refunded as the market value
     of the loaned securities fluctuates.

     Repurchase Agreements

     The Company engages in dollar  repurchase  agreements  ("dollar rolls") and
     repurchase  agreements  to increase the return on  investments  and improve
     liquidity. These transactions involve a sale of securities and an agreement
     to repurchase  substantially  the same  securities  as those sold.  Company
     policies  require a minimum of 95% of the fair value of securities  pledged
     under dollar rolls and repurchase  agreement  transactions to be maintained
     as collateral. Cash collateral received is invested in fixed maturities and
     the  offsetting  collateral  liability is included in borrowed money on the
     Balance Sheets.

     Derivatives

     The Company's use of  derivatives  is limited  mainly to hedging  purposes.
     However,  these  derivatives  are not accounted for using hedge  accounting
     treatment under FAS No. 133, as the Company does not seek hedge  accounting
     treatment.  The Company  enters into  interest  rate,  equity  market,  and
     currency contracts,  including swaps, caps, floors, options and futures, to
     reduce and manage risks associated with changes in value,  yield, price, or
     cash flow or exchange rates of assets or liabilities held or intended to be
     held.  Changes in the fair value of open derivative  contracts are recorded
     in net realized  capital gains and losses in the  Statements of Operations.
     Derivatives are included in other investments on the Balance Sheets.

     The Company also has investments in certain fixed maturity  instruments and
     has retail annuity  products that contain embedded  derivatives,  including
     those whose market value is at least  partially  determined by, among other
     things,  levels of or changes in domestic  and/or  foreign  interest  rates
     (short- or long-term), exchange rates, prepayment rates, equity markets, or
     credit  ratings/spreads.  Changes in the fair value of embedded derivatives
     are recorded in net realized  capital gains  (losses) in the  Statements of
     Operations.  Embedded  derivatives  within securities are included in fixed
     maturities  in the  Balance  Sheets.  Embedded  derivatives  within  retail
     annuity products are included in future policy benefits and claims reserves
     on the Balance Sheets.

     Deferred Policy Acquisition Costs and Value of Business Acquired

     Deferred policy  acquisition  costs ("DAC")  represent  policy  acquisition
     costs that have been  capitalized  and are  subject to  amortization.  Such
     costs consist principally of certain  commissions,  underwriting,  contract
     issuance, and agency expenses, related to the production of new and renewal
     business.


                                       66

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     Value of business acquired ("VOBA")  represents the outstanding value of in
     force  business  capitalized  and are subject to  amortization  in purchase
     accounting when the Company was acquired. The value is based on the present
     value of estimated net cash flows embedded in the Company's contracts.

     The amortization  methodology used for DAC and VOBA varies by product type.
     Statement of Financial Accounting Standards ("FAS") No. 60, "Accounting and
     Reporting by Insurance  Enterprises," applies to traditional life insurance
     products,   primarily  traditional  whole  life  and  term  life  insurance
     contracts.  Under FAS No. 60, DAC and VOBA are  amortized  over the premium
     payment period, in proportion to the premium revenue recognized.

     FAS No. 97 applies to universal life and investment-type  products, such as
     fixed and variable deferred  annuities.  Under FAS No. 97, DAC and VOBA are
     amortized,  with interest,  over the life of the related contracts (usually
     25 years) in  relation  to the  present  value of  estimated  future  gross
     profits from investment,  mortality, and expense margins; asset-based fees,
     policy administration,  and surrender charges; less policy maintenance fees
     and  non-capitalized  commissions,  as well as realized gains and losses on
     investments.  Guaranteed investment contracts,  however, are amortized on a
     straight-line basis over the life of the contract.

     Changes  in  assumptions  can  have a  significant  impact  on DAC and VOBA
     balances  and  amortization  rates.   Several  assumptions  are  considered
     significant  in the  estimation  of future gross  profits  associated  with
     variable universal life and variable deferred annuity products.  One of the
     most  significant  assumptions  involved in the  estimation of future gross
     profits  is  the  assumed  return  associated  with  the  variable  account
     performance.  To  reflect  the  volatility  in  the  equity  markets,  this
     assumption  involves a combination of near-term  expectations and long-term
     assumptions  regarding  market  performance.  The  overall  return  on  the
     variable account is dependent on multiple  factors,  including the relative
     mix of the underlying  sub-accounts  among bond funds and equity funds,  as
     well as equity sector  weightings.  Other significant  assumptions  include
     surrender  and  lapse  rates,  estimated  interest  spread,  and  estimated
     mortality.

     Due to the relative  size and  sensitivity  to minor  changes in underlying
     assumptions of DAC and VOBA balances,  the Company performs a quarterly and
     annual  analysis  of DAC and VOBA  for the  annuity  and  life  businesses,
     respectively.  The DAC and VOBA balances are  evaluated for  recoverability
     and are  reduced to the extent  that  estimated  future  gross  profits are
     inadequate to recover the asset.

     At each evaluation date, actual historical gross profits are reflected, and
     estimated  future gross profits and related  assumptions  are evaluated for
     continued reasonableness.  Any adjustment in estimated profit requires that
     the amortization rate be revised  ("unlocking"),  retroactively to the date
     of the policy or contract issuance.  The cumulative prior period adjustment
     is recognized as a component of current  period  amortization.  In general,


                                       67

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     increases in investment returns, and thus estimated profits, lower the rate
     of  amortization.  Increases in surrender  charges and  mortality  margins,
     decreases in  investment  returns,  and  decreases  in  estimated  profits,
     increase the rate of amortization.

     Reserves

     Future  policy  benefits  include  reserves for universal  life,  immediate
     annuities with life  contingent  payouts,  and  traditional  life insurance
     contracts.  Reserves for  universal  life  products are equal to cumulative
     deposits  less  withdrawals  and charges plus  credited  interest  thereon.
     Reserves for  traditional  life insurance  contracts  represent the present
     value of future benefits to be paid to or on behalf of  contractowners  and
     related expenses less the present value of future net premiums.

     Reserves for deferred annuity  investment  contracts and immediate  annuity
     without  life  contingent  payouts are equal to  cumulative  deposits  less
     charges and withdrawals,  plus credited  interest thereon (reserve interest
     rates vary by product up to 10.0% for all periods presented).

     Reserves for immediate  annuities with life contingent  payout benefits are
     computed on the basis of assumed  interest  discount rate,  mortality,  and
     expenses,  including  a margin for  adverse  deviations.  Such  assumptions
     generally vary by plan, year of issue and policy duration. Reserve interest
     rates  ranged from 3.0% to 8.0% for all periods  presented.  Mortality  and
     withdrawal rate  assumptions are based on relevant  Company  experience and
     are periodically reviewed against both industry standards and experience.

     Certain variable annuity contracts offer guaranteed  minimum death benefits
     ("GMDB"),  as well as guaranteed  living benefits.  The GMDB is provided in
     the event the  customer's  account  value at death is below the  guaranteed
     value. Guaranteed living benefits offered include guaranteed minimum income
     benefits,  guaranteed minimum withdrawal  benefits,  and guaranteed minimum
     accumulation   benefits.   Although  the  Company  reinsures  or  hedges  a
     significant  portion of the death and living benefit guarantees  associated
     with its in force business,  declines in the equity market may increase the
     Company's  net  exposure  to the  death and  living  benefits  under  these
     contracts.

     Reserves for GICs are calculated  using the principal amount deposited with
     the  Company,  less  withdrawals,  plus  interest  accrued  to  the  ending
     valuation  date.  Interest on these contracts is accrued by a predetermined
     index plus a spread or a fixed rate,  established  at the issue date of the
     contract.

     Reserves for universal life products are equal to cumulative  deposits less
     withdrawals and charges plus credited  interest thereon.  In addition,  the
     Company holds  reserves as required for SOP 03-1 for certain  products with
     anticipated losses in later policy durations. Reserves for traditional life
     insurance  contracts  represent the present value of future  benefits to be


                                       68

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     paid to or on  behalf  of  contractowners  and  related  expenses  less the
     present value of future net premiums.

     Sales Inducements

     Sales  inducements  represent  benefits  paid to  contractowners  that  are
     incremental to the amounts the Company credits on similar contracts and are
     higher than the contract's  expected  ongoing  crediting  rates for periods
     after the  inducement.  As of January 1, 2004,  such  amounts are  reported
     separately on the balance sheet in accordance with SOP 03-1. Prior to 2004,
     sales inducements were recorded as a component of DAC on the Balance Sheet.
     Beginning  in 2004,  sales  inducements  are  amortized  as a component  of
     interest credited and other benefits to contractowners  using methodologies
     and assumptions consistent with those used for amortization of DAC.

     Revenue Recognition

     For universal life and most annuity  contracts,  charges  assessed  against
     contractowners' funds for the cost of insurance,  surrender,  expenses, and
     other  fees are  recorded  as  revenue  as  charges  are  assessed  against
     contractowners. Other amounts received for these contracts are reflected as
     deposits  and are not  recorded  as  premium  or  revenue.  Related  policy
     benefits  are  recorded  in relation  to the  associated  premiums or gross
     profit  so that  profits  are  recognized  over the  expected  lives of the
     contracts.  When  annuity  payments  with life  contingencies  begin  under
     contracts that were initially investment contracts, the accumulated balance
     in the  account is  treated  as a single  premium  for the  purchase  of an
     annuity and reflected as an offsetting amount in both premiums and benefits
     in the Statements of Operations.

     Premiums  on the  Statements  of  Operations  primarily  represent  amounts
     received under traditional life insurance policies.

     For GICs,  deposits  made to the Company are not recorded as revenue in the
     Statements of Operations  and are recorded  directly to policy  liabilities
     and accruals on the Balance Sheet.

     Separate Accounts

     Separate   Account  assets  and  liabilities   generally   represent  funds
     maintained to meet specific  investment  objectives of  contractowners  who
     bear the investment  risk,  subject,  in limited cases,  to certain minimum
     guarantees.  Investment  income and investment  gains and losses  generally
     accrue  directly  to such  contractowners.  The assets of each  account are
     legally  segregated  and are not  subject  to claims  that arise out of any
     other business of the Company.


                                       69

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     Separate  Account  assets  supporting  variable  options  under annuity and
     universal life contracts are invested,  as designated by the  contractowner
     or participant (who bears the investment risk,  subject,  in limited cases,
     to minimum  guaranteed  rates) under a contract,  in shares of mutual funds
     which are managed by the Company or its  affiliates,  or in other  selected
     mutual funds not managed by the Company or its affiliates.

     Separate Account assets and liabilities are carried at fair value and shown
     as separate captions in the Balance Sheets. Deposits, investment income and
     net  realized  and  unrealized  capital  gains and  losses of the  Separate
     Accounts are not reflected in the Statement of  Operations.  The Statements
     of Cash Flows do not reflect investment activity of the Separate Accounts.

     Assets and liabilities of separate  account  arrangements  that do not meet
     the criteria in SOP 03-1 for  presentation  in the separate  caption in the
     Balance Sheets (primarily  guaranteed  interest  options),  and revenue and
     expenses  related to such  arrangements,  are consolidated in the financial
     statements  with the  general  account.  At  December  31,  2004 and  2003,
     unrealized gains of $100.5 and $112.8, respectively, after taxes, on assets
     supporting  a guaranteed  interest  option are  reflected in  shareholder's
     equity.

     Reinsurance

     The  Company  utilizes  indemnity  reinsurance  agreements  to  reduce  its
     exposure to large losses in certain aspects of its insurance business. Such
     reinsurance  permits  recovery  of a  portion  of losses  from  reinsurers,
     although  it does not  discharge  the primary  liability  of the Company as
     direct insurer of the risks reinsured.  The Company evaluates the financial
     strength of potential  reinsurers  and  continually  monitors the financial
     condition of reinsurers. Only those reinsurance recoverable balances deemed
     probable of  recovery  are  reflected  as assets on the  Company's  Balance
     Sheets.

     Participating Insurance

     Participating  business  approximates  10% of the  Company's  ordinary life
     insurance in force and 26% of premium income. The amount of dividends to be
     paid is determined annually by the Board of Directors. Amounts allocable to
     participating contractowners are based on published dividend projections or
     expected  dividend  scales.  Dividends to  participating  policyholders  of
     $16.2,  $17.2, and $23.7, were incurred during the years ended December 31,
     2004, 2003 and 2002, respectively.

     Income Taxes

     The  Company is taxed at regular  corporate  rates after  adjusting  income
     reported  for  financial  statement  purposes for certain  items.  Deferred
     income  tax  expenses/benefits  result  from  changes  during  the  year in
     cumulative  temporary  differences  between the tax basis and book basis of
     assets and liabilities.


                                       70

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

2.   Investments

     Fixed maturities and equity  securities  available-for-sale  as of December
     31, 2004 were as follows:

<TABLE>
<S>                                                    <C>              <C>             <C>              <C>

                                                                            Gross           Gross
                                                         Amortized       Unrealized       Unrealized         Fair
                                                           Cost             Gains           Losses           Value
                                                       --------------   --------------  ---------------  --------------
      Fixed maturities:
          U.S. government and government
            agencies and authorities                     $     464.0      $       1.8     $        1.1     $     464.7
          State, municipalities and political
            subdivisions                                        20.7                -              0.8            19.9

          U.S. corporate securities:
            Public utilities                                 1,796.9             78.4              8.9         1,866.4
            Other corporate securities                       6,292.4            243.5             22.7         6,513.2
                                                       --------------   --------------  ---------------  --------------
          Total U.S. corporate securities                    8,089.3            321.9             31.6         8,379.6
                                                       --------------   --------------  ---------------  --------------
          Foreign securities:
            Government                                         518.9             24.2              2.2           540.9
            Other                                            2,571.2             97.7             11.5         2,657.4
                                                       --------------   --------------  ---------------  --------------
          Total foreign securities                           3,090.1            121.9             13.7         3,198.3
                                                       --------------   --------------  ---------------  --------------
          Residential mortgage-backed securities             3,440.3             43.9             22.4         3,461.8
          Commercial mortgaged-backed securities             1,107.8             34.9              3.0         1,139.7
          Other asset-backed securities                      1,934.2             14.3             14.7         1,933.8
                                                       --------------   --------------  ---------------  --------------
          Total fixed maturities, including fixed
            maturities pledged                              18,146.4            538.7             87.3        18,597.8
          Less: fixed maturities pledged                     1,100.5              9.8              1.7         1,108.6
                                                       --------------   --------------  ---------------  --------------
      Fixed maturities                                      17,045.9            528.9             85.6        17,489.2
      Equity securities                                         34.8              0.5                -            35.3
                                                       --------------   --------------  ---------------  --------------
      Total investments available-for-sale               $  17,080.7      $     529.4     $     $ 85.6     $  17,524.5
                                                       ==============   ==============  ===============  ==============

      </TABLE>


                                       71

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     Fixed maturities and equity  securities  available-for-sale  as of December
     31, 2003 were as follows:

<TABLE>
<S>                                                    <C>              <C>             <C>              <C>

                                                                            Gross           Gross
                                                         Amortized       Unrealized       Unrealized         Fair
                                                           Cost             Gains           Losses           Value
                                                       --------------   --------------  ---------------  --------------
      Fixed maturities:
          U.S. government and government
            agencies and authorities                     $     195.5      $       2.0     $        0.1     $     197.4
          State, municipalities and political
            subdivisions                                        31.7                -              2.5            29.2

          U.S. corporate securities:
            Public utilities                                 1,341.2             84.3              8.0         1,417.5
            Other corporate securities                       6,246.4            300.9             33.7         6,513.6
                                                       --------------   --------------  ---------------  --------------
          Total U.S. corporate securities                    7,587.6            385.2             41.7         7,931.1
                                                       --------------   --------------  ---------------  --------------
          Foreign securities:
            Government                                         487.1             21.7              3.9           504.9
            Other                                            1,984.4             96.0             24.1         2,056.3
                                                       --------------   --------------  ---------------  --------------
          Total foreign securities                           2,471.5            117.7             28.0         2,561.2
                                                       --------------   --------------  ---------------  --------------
          Residential mortgage-backed securities             3,247.0             66.7             21.8         3,291.9
          Commercial mortgage-backed securities                774.2             45.8              2.1           817.9
          Other asset-backed securities                      1,273.0             17.2             21.1         1,269.1

          Total fixed maturities, including fixed
            maturities pledged                              15,580.5            634.6            117.3        16,097.8
          Less: fixed maturities pledged                       555.5              6.4              2.8           559.1
                                                       --------------   --------------  ---------------  --------------
      Fixed maturities                                      15,025.0            628.2            114.5        15,538.7
      Equity securities                                        115.2              5.0                -           120.2
                                                       --------------   --------------  ---------------  --------------
      Total investments available-for-sale               $  15,140.2      $     633.2     $      114.5     $  15,658.9
                                                       ==============   ==============  ===============  ==============

     </TABLE>


     At December 31, 2004 and 2003,  net unrealized  appreciation  is $451.9 and
     $522.3, respectively, on total fixed maturities, including fixed maturities
     pledged to creditors, and equity securities.


                                       72

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     The  aggregate  unrealized  losses and  related  fair values of total fixed
     maturities,  including fixed  maturities  pledged to creditors,  and equity
     securities with unrealized  losses as of December 31, 2004, are shown below
     by duration:

     <TABLE>
     <S>                                   <C>                 <C>

                                                Unrealized             Fair
                                                   Loss                Value
                                           -----------------   -----------------
     Duration category:
       Less than six months below cost       $      27.2         $   3,199.9
       More than six months and less
         than twelve months below cost              29.9             1,710.7
       More than twelve months below cost           30.2               709.1
                                           -----------------   -----------------
                                             $      87.3        $    5,619.7
                                           =================   =================

     </TABLE>

     Of the  unrealized  losses less than 6 months in  duration of $27.2,  there
     were $12.3 in unrealized losses that are primarily related to interest rate
     movement or spread  widening  for other than  credit-related  reasons.  The
     remaining  unrealized  losses of $14.9 as of December 31, 2004,  relates to
     securities  under the guidance  prescribed  by EITF Issue No.  99-20.  This
     category includes U.S.  government-backed  securities,  principal protected
     securities, and structured securities, which did not have an adverse change
     in cash flows for which the carrying amount was $1,560.4.

     Of the  unrealized  losses  more  than 6 months  and less than 12 months in
     duration of $29.9, there were $16.9 in unrealized losses that are primarily
     related  to  interest  rate  movement  or spread  widening  for other  than
     credit-related  reasons.  The  remaining  unrealized  losses of $13.0 as of
     December 31, 2004,  relates to securities under the guidance  prescribed by
     EITF  Issue  No.  99-20.  This  category  includes  U.S.  government-backed
     securities,  principal  protected  securities,  and structured  securities,
     which did not have an adverse  change in cash flows for which the  carrying
     amount was $768.8.

     Of the  unrealized  losses more than 12 months in duration of $30.2,  there
     were $18.0,  in unrealized  losses that are  primarily  related to interest
     rate movement or spread widening for other than credit-related reasons. The
     remaining  unrealized  losses of $12.2 as of December 31, 2004,  relates to
     securities  under the guidance  prescribed  by EITF Issue No.  99-20.  This
     category includes U.S.  government-backed  securities,  principal protected
     securities, and structured securities, which did not have an adverse change
     in cash flows for which the carrying amount was $222.8.


                                       73
<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     The  amortized  cost and fair value of fixed  maturities as of December 31,
     2004 are shown below by contractual maturity.  Actual maturities may differ
     from contractual maturities because securities may be restructured, called,
     or prepaid.

     <TABLE>
     <S>                                    <C>                <C>

                                                Amortized            Fair
                                                  Cost               Value
                                            -----------------  -----------------
     Due to mature:
       One year or less                       $      336.8       $      341.5
       After one year through five years           4,066.3            4,151.2
       After five years through ten years          4,209.5            4,403.0
       After ten years                             3,051.6            3,166.9
       Mortgage-backed securities                  4,548.0            4,601.4
       Other asset-backed securities               1,934.2            1,933.8
     Less: fixed maturities pledged                1,100.5            1,108.6
                                            -----------------  -----------------
     Fixed maturities, excluding fixed
       maturities pledged                     $   17,045.9       $   17,489.2
                                            =================  =================

     </TABLE>

     The Company did not have any  investments  in a single  issuer,  other than
     obligations of the U.S. government,  with a carrying value in excess of 10%
     of the Company's shareholder's equity at December 31, 2004.

     At December 31, 2004 and 2003,  fixed  maturities with fair values of $11.9
     and  $20.1,  respectively,  were  on  deposit  as  required  by  regulatory
     authorities.

     The  Company  is a member  of the  Federal  Home  Loan  Bank of Des  Moines
     ("FHLB")  and is  required  to  maintain a  collateral  deposit  that backs
     funding  agreements  issued to the FHLB.  At  December  31,  2004 and 2003,
     respectively,  the  Company  had $376.3 and $125.3 in  non-putable  funding
     agreements issued to the FHLB. At December 31, 2004 and 2003, respectively,
     assets  with  a  carrying   value  of   approximately   $422.0  and  $148.2
     collateralized  the funding agreements to the FHLB.  Collateralized  assets
     are included in fixed maturities in the Balance Sheets.

     The Company enters into dollar repurchase  agreements  ("dollar rolls") and
     repurchase  agreements  to increase its return on  investments  and improve
     liquidity.  At  December  31,  2004 and  2003,  the  carrying  value of the
     securities pledged in dollar rolls and repurchase agreements was $715.9 and
     $536.8,  respectively.  The  carrying  value of the  securities  pledged in
     dollar rolls and repurchase agreements is included in pledged securities on
     the Balance Sheets.  The repurchase  obligation related to dollar rolls and
     repurchase  agreements  totaled  $713.4 and $534.2 at December 31, 2004 and
     2003,  respectively.  The repurchase obligation related to dollar rolls and
     repurchase agreements is included in borrowed money on the Balance Sheets.


                                       74
<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     The Company engages in securities  lending whereby certain  securities from
     its portfolio are loaned to other  institutions  for short periods of time.
     Initial  collateral,  primarily  cash, is required at a rate of 102% of the
     market value of the loaned domestic securities. The collateral is deposited
     by the  borrower  with a lending  agent and  retained  and  invested by the
     lending agent according to the Company's  guidelines to generate additional
     income.  The market value of the loaned  securities is monitored on a daily
     basis with additional  collateral  obtained or refunded as the market value
     of the loaned securities fluctuates.

     The primary risk associated with  short-term  collateralized  borrowings is
     that the  counterparty  will be  unable to  perform  under the terms of the
     contract.  The  Company's  exposure  is  limited  to the  excess of the net
     replacement  cost  of the  securities  over  the  value  of the  short-term
     investments,  an amount that was not  material at December  31,  2004.  The
     Company  believes  the  counterparties  to  the  dollar  rolls,  repurchase
     agreements,  reverse  repurchase  agreements,  and  securities  lending are
     financially responsible and that the counterparty risk is immaterial.

     Impairments

     The  following   table   identifies   the  Company's   other-than-temporary
     impairments by type as of December 31:

     <TABLE>
     <S>                               <C>             <C>          <C>            <C>          <C>            <C>

                                                 2004                         2003                        2002
                                       ---------------------------- ---------------------------- ---------------------------
                                                         No. of                       No. of                      No. of
                                         Impairment    Securities    Impairment     Securities    Impairment    Securities
                                      --------------- ------------ --------------- ------------ -------------- ------------
     U.S. Corporate                     $     -            -         $  23.7           16         $    0.1            1
     Residential mortgage-backed            9.1           88            81.3          173             81.3          125
     Foreign                                8.5            4            11.5            2              8.5            3
     Asset-backed                          11.5            6             5.8            7             31.1           14
     Equity                                   -            -               -            -                -            1
     Limited partnerships                   2.2            1               -            -                -            -
                                      --------------- ------------ --------------- ------------ -------------- ------------
     Total                              $  31.3           99         $ 122.3          198         $  121.0          144
                                      =============== ============ =============== ============ ============== ============

     </TABLE>

     The remaining fair value of the impaired  fixed  maturities at December 31,
     2004 and 2003 is $168.7 and $192.0, respectively.


                                       75

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     Net Investment Income

     Sources of net investment income were as follows:

     <TABLE>
     <S>                                                    <C>                <C>                <C>

                                                                            Year ended December 31,
                                                                  2004               2003               2002
                                                            -----------------  -----------------  ------------------
     Fixed maturities                                          $       960.5     $        957.6     $         946.1
     Equity securities                                                   0.3                0.2                   -
     Mortgage loans on real estate                                     221.8              208.5               202.2
     Real estate                                                         0.2                0.6                 0.3
     Policy loans                                                        9.8                8.8                 9.5
     Short-term investments and cash equivalents                         1.4                1.5                 3.7
     Other                                                             (98.4)            (138.6)             (127.9)
                                                            -----------------  -----------------  ------------------
     Gross investment income                                         1,095.6            1,038.6             1,033.9
     Less: investment expenses                                          71.7               64.0                44.6
                                                            -----------------  -----------------  ------------------
     Net investment income                                     $     1,023.9     $        974.6     $         989.3
                                                            =================  =================  ==================


     </TABLE>

     Net Realized Capital Gains and Losses

     Net realized capital gains (losses) are comprised of the difference between
     the carrying value of  investments  and proceeds from sale,  maturity,  and
     redemption,   as  well  as  losses   incurred  due  to  the  impairment  of
     investments.  Net realized  capital gains (losses) on  investments  were as
     follows:

     <TABLE>
     <S>                                                    <C>                <C>                <C>

                                                                             Year ended December 31,
                                                                   2004               2003                2002
                                                            -----------------  ------------------  -----------------
     Fixed maturities                                          $       44.0      $        108.7      $      (105.9)
     Equity securities                                                  6.4                 0.2                0.1
     Derivatives                                                        9.3                 1.7              (92.0)
     Real estate                                                          -                (3.4)               1.7
     Other                                                             (2.1)               (0.3)              (0.4)
                                                            -----------------  ------------------  -----------------
     Pretax net realized capital gains (losses)                $       57.6      $        106.9      $      (196.5)
                                                            =================  ==================  =================
     After-tax net realized capital gains (losses)                   $ 37.4      $         69.5      $      (127.7)
                                                            =================  ==================  =================

     </TABLE>

     Proceeds from the sale of fixed  maturities  and equity  securities and the
     related gross gains and losses were as follows:

     <TABLE>
     <S>                                                    <C>                <C>                <C>

                                                                              Year ended December 31,
                                                                   2004                2003               2002
                                                            -----------------   -----------------  -----------------
     Proceeds on sales                                        $   9,916.3         $  13,664.8        $  15,027.8
     Gross gains                                                    145.5               297.6              253.3
     Gross losses                                                    59.3                60.4              224.2

     </TABLE>



                                       76

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     Changes in accumulated other comprehensive income related to changes in net
     unrealized  capital gains and losses on  securities,  including  securities
     pledged were as follows:

     <TABLE>
     <S>                                                    <C>                <C>                <C>

                                                                           Year ended December 31,
                                                                 2004                2003               2002
                                                           -----------------   -----------------  -----------------
     Fixed maturities                                        $   (65.9)          $   (90.4)         $   556.5
     Equity securities                                            (4.5)                8.6               (3.9)
     DAC/VOBA                                                    (48.1)              151.2             (353.1)
     Sales inducements                                            (6.7)                  -                  -
     Other                                                        11.3                13.4                2.8
                                                           -----------------   -----------------  -----------------
     Subtotal                                                   (113.9)               82.8              202.3
     Deferred income taxes                                        43.4               (27.9)               0.9
                                                           -----------------   -----------------  -----------------
     Net unrealized capital gains (losses)                   $   (70.5)             $ 54.9          $   203.2
                                                           =================   =================  =================

     </TABLE>


3.   Financial Instruments

     Estimated Fair Value

     The following  disclosures are made in accordance with the  requirements of
     FAS No. 107,  "Disclosures about Fair Value of Financial  Instruments." FAS
     No. 107  requires  disclosure  of fair value  information  about  financial
     instruments,  whether or not recognized in the balance sheet,  for which it
     is practicable to estimate that value.  In cases where quoted market prices
     are not available,  fair values are based on estimates  using present value
     or other valuation techniques.

     Those  techniques  are  significantly  affected  by the  assumptions  used,
     including  the discount  rate and  estimates of future cash flows.  In that
     regard,  the derived  fair value  estimates,  in many  cases,  could not be
     realized in immediate  settlement of the  instrument.  FAS No. 107 excludes
     certain  financial  instruments,  including  insurance  contracts,  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 following valuation methods and assumptions were used by the Company in
     estimating the fair value of the following financial instruments:

     Fixed  maturity  securities:  The  fair  values  for  the  actively  traded
     marketable  bonds are determined  based upon the quoted market prices.  The
     fair values for  marketable  bonds  without an active  market are  obtained
     through  several  commercial  pricing  services which provide the estimated
     fair values.  Fair values of privately  placed bonds are determined using a
     matrix-based  pricing  model.  The model  considers  the  current  level of
     risk-free interest rates,  current corporate spreads, the credit quality of
     the issuer, and cash flow characteristics of the security.  Also considered
     are factors such as the net worth of the borrower, the value of collateral,
     the capital structure of the borrower, the presence of guarantees,  and the


                                       77

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     Company's evaluation of the borrower's ability to compete in their relevant
     market.  Using this data, the model generates estimated market values which
     the Company considers reflective of the fair value of each privately placed
     bond.

     Equity  securities:  Fair values of these  securities are based upon quoted
     market price.

     Mortgage  loans on real estate:  The fair values for mortgage loans on real
     estate  are  estimated  using  discounted  cash  flow  analyses  and  rates
     currently  being offered in the  marketplace for similar loans to borrowers
     with  similar  credit  ratings.  Loans  with  similar  characteristics  are
     aggregated for purposes of the calculations.

     Cash,  cash  equivalents,  short-term  investments  under  securities  loan
     agreement  and  policy  loans:   The  carrying  amounts  for  these  assets
     approximate the assets' fair values.  Derivatives are carried at fair value
     on the Balance Sheets.

     Assets held in separate  accounts:  Assets  held in separate  accounts  are
     reported  at the quoted  fair values of the  individual  securities  in the
     separate accounts.

     Other financial  instruments  reported as assets:  The carrying amounts for
     these  financial  instruments  (primarily  derivatives)  approximate  those
     assets' fair values.  Derivatives  are carried at fair value on the Balance
     Sheets.

     Notes  to  affiliates:  Estimated  fair  value  of the  Company's  notes to
     affiliates  are based upon  discounted  future  cash flows using a discount
     rate approximating the current market value.

     Investment  contract  liabilities  (included in future policy  benefits and
     claims reserves):

          With a fixed  maturity:  Fair value is estimated by  discounting  cash
          flows at interest rates  currently  being offered by, or available to,
          the Company for similar contracts.

          Without  a fixed  maturity:  Fair  value is  estimated  as the  amount
          payable to the contractowner upon demand. However, the Company has the
          right under such contracts to delay payment of  withdrawals  which may
          ultimately  result in paying an amount  different than that determined
          to be payable on demand.

     Liabilities  related to separate accounts:  Liabilities related to separate
     accounts  are  reported  at full  account  value in the  Company's  Balance
     Sheets.  Estimated fair values of separate account liabilities are equal to
     their carrying amount.


                                       78

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     The carrying  values and estimated  fair values of certain of the Company's
     financial instruments at December 31, 2004 and 2003 were as follows:

     <TABLE>
     <S>                                                <C>             <C>             <C>             <C>

                                                                    2004                            2003
                                                        ------------------------------  ------------------------------
                                                          Carrying          Fair          Carrying          Fair
                                                            Value           Value           Value           Value
                                                        --------------  --------------  --------------  --------------
     Assets:
         Fixed maturity, including securities
           pledged                                        $ 18,597.8      $ 18,597.8      $ 16,097.8      $ 16,097.8
         Equity securities                                      35.3            35.3           120.2           120.2
         Mortgage loans on real estate                       3,851.8         3,969.4         3,388.7         3,581.4
         Policy loans                                          169.0           169.0           177.1           177.1
         Cash, cash equivalents,
           and short-term investments
           under securities loan agreement                     611.8           611.8            88.0            88.0
         Other investments                                     228.8           229.0            60.8            61.1
         Assets held in separate accounts                   24,746.7        24,746.7        18,220.1        18,220.1
     Liabilities:
         Notes to affiliates                                   435.0           508.5            85.0           145.2
         Investment contract liabilities:
           Deferred annuities                               17,525.9        16,344.6        16,072.4        15,069.0
           Supplementary contracts and
             immediate annuities                               864.9           864.9           840.1           840.1
           Liabilities related to separate accounts         24,746.7        24,746.7        18,220.1        18,220.1

     </TABLE>

     Fair  value  estimates  are made at a  specific  point  in  time,  based on
     available  market   information  and  judgments  about  various   financial
     instruments,  such as estimates of timing and amounts of future cash flows.
     Such  estimates  do not reflect any premium or discount  that could  result
     from  offering  for sale at one time the  Company's  entire  holdings  of a
     particular financial instrument, nor do they consider the tax impact of the
     realization of unrealized  gains or losses.  In many cases,  the fair value
     estimates cannot be substantiated by comparison to independent markets, nor
     can  the  disclosed  value  be  realized  in  immediate  settlement  of the
     instruments.  In  evaluating  the Company's  management  of interest  rate,
     price,  and liquidity  risks, the fair values of all assets and liabilities
     should be taken into consideration, not only those presented above.

     Derivative Financial Instruments

     Interest Rate Caps

     Interest  rate  caps are  used to  manage  the  interest  rate  risk in the
     Company's bond portfolio.  Interest rate caps are purchased  contracts that
     provide  the  Company  with  an  annuity  in an  increasing  interest  rate
     environment.  The notional  amount of the Company's open interest rate caps
     as of December 31, 2004 was $236.2. Carrying value and estimated fair value
     of the open  interest  rate caps was minimal as of December 31,  2004.  The
     notional amount of the Company's open interest rate caps as of December 31,


                                       79

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     2003 was  $1,036.2.  Carrying  value and  estimated  fair value of the open
     interest rate caps were minimal as of December 31, 2003.

     Interest Rate Swaps

     Interest  rate  swaps  are used to  manage  the  interest  rate risk in the
     Company's  bond  portfolio as well as the Company's  liabilities.  Interest
     rate swaps  represent  contracts that require the exchange of cash flows at
     regular  interim  periods,  typically  monthly or  quarterly.  The notional
     amount,  carrying  value and  estimated  fair value of the  Company's  open
     interest rate swaps as of December 31, 2004 were $2,832.8, $34.0 and $34.0,
     respectively.  The notional amount, carrying value and estimated fair value
     of the  Company's  open  interest  rate swaps as of December  31, 2003 were
     $1,266.5, $(91.2) and $(91.2), respectively.

     Futures

     Futures  contracts are used to hedge against a decrease in certain indexes.
     Such decrease  results in increased  reserve  liabilities,  and the futures
     offset this increased  expense.  The  underlying  reserve  liabilities  are
     carried at market value with the change in value recorded in the Statements
     of  Operations,  which is offset by the daily cash movement of the futures.
     The  notional  amount,  carrying  value  and  estimated  fair  value of the
     Company's  open futures  contracts as of December 31, 2004,  were $1,177.9,
     $(0.2) and $(0.2),  respectively.  The notional amount,  carrying value and
     estimated fair value of the Company's open futures contracts as of December
     31, 2003, were $491.3, $0.8 and $0.8, respectively.

     Foreign Exchange Swaps

     Foreign  exchange  swaps  are used to  reduce  the risk of a change  in the
     value,  yield,  or cash flow  with  respect  to  invested  assets.  Foreign
     exchange  swaps  represent  contracts  that require the exchange of foreign
     currency  cash flows for US dollar cash flows at regular  interim  periods,
     typically quarterly or semi-annually.  The notional amount, carrying value,
     and estimated fair value of the Company's open foreign  exchange rate swaps
     as of December 31, 2004 were $146.7, $(34.5) and $(34.5), respectively. The
     notional amount,  carrying value, and estimated fair value of the Company's
     open  foreign  exchange  rate swaps as of December  31,  2003 were  $128.2,
     $(19.4) and $(19.4), respectively.

     Options

     Standard & Poor's ("S&P")  Options are used to hedge against an increase in
     the S&P Index. Such increase results in increased reserve liabilities,  and
     the options offset this increased expense. The options are accounted for in


                                       80

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     a consistent manner with the underlying reserve liabilities,  both of which
     are  carried  at fair  value  with  the  change  in value  recorded  in the
     Statements of Operations.  If the options  mature in the money,  the amount
     received  is  recorded  in income to offset the  increased  expense for the
     reserve liabilities. The notional amount, carrying value and estimated fair
     value of the Company's  open options as of December 31, 2004 were $2,335.4,
     $166.0, and $166.0,  respectively.  The notional amount, carrying value and
     estimated  fair value of the Company's open options as of December 31, 2003
     were $1,287.8, $100.9, and $100.9, respectively.

     Embedded Derivatives

     The Company also has investments in certain fixed maturity  instruments and
     retail annuity products that contain embedded derivatives,  including those
     whose market value is at least partially determined by, among other things,
     levels of or changes in domestic  and/or foreign  interest rates (short- or
     long-term),  exchange rates,  prepayment rates,  equity markets,  or credit
     ratings/spreads.  The  estimated  fair  value of the  embedded  derivatives
     within  securities  as of December 31, 2004 and 2003 was $(4.6) and $(1.1),
     respectively.  The estimated fair value of the embedded  derivatives within
     retail  annuity  products as of December 31, 2004 and 2003,  was $479.9 and
     $238.9, respectively.


4.   Deferred Policy Acquisition Costs and Value of Business Acquired

     Activity for the years ended December 31, 2004, 2003 and 2002,  within VOBA
     was as follows:

     <TABLE>
     <S>                                                       <C>

     Balance at December 31, 2001                                $     202.5
         Adjustment for unrealized gains/losses                        (34.2)
         Interest accrued at 4% - 5%                                    10.1
         Amortization                                                  (43.9)
                                                               -----------------
     Balance at December 31, 2002                                      134.5
         Adjustment for unrealized gains/losses                          7.0
         Interest accrued at 4% - 5%                                     6.6
         Amortization                                                  (36.6)
                                                               -----------------
     Balance at December 31, 2003                                      111.5
         Adjustment for unrealized gains/losses                         (0.5)
         Interest accrued at 4% - 5%                                     6.8
         Amortization                                                   (5.6)
                                                               -----------------
     Balance at December 31, 2004                                $     112.2
                                                               =================

     </TABLE>

     The  estimated  amount of VOBA to be amortized,  net of interest,  over the
     next five years is $15.5,  $13.6,  $11.0,  $10.1,  and $12.3, for the years
     2005, 2006, 2007, 2008 and 2009, respectively. Actual amortization incurred
     during  these years may vary as  assumptions  are  modified to  incorporate
     actual results.


                                       81

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     Analysis of DAC/VOBA - Annuity

     The  variance in  amortization  expense in 2004 versus 2003 was impacted by
     SOP 03-1.  In prior  years,  amortization  of  inducements  was included in
     amortization  of  DAC  and  VOBA.   Beginning  in  2004,  sales  inducement
     amortization  is included as a component of benefit  expense in  accordance
     with SOP 03-1.  Therefore,  the decrease in amortization of DAC and VOBA is
     partially related to 2004 sales inducement  amortization  being included in
     interest   credited   instead  of   amortization  of  DAC  and  VOBA.  Also
     contributing  to the decrease is the  improved  market  performance  during
     2003, which lowered the amortization rate for 2004. Amortization expense in
     2003 was higher than 2002 due in part to the poor equity market performance
     in 2002, which increased the  amortization  rate in 2003, as well as to the
     amortization  of  acquisition  costs  related to  increased  sales of fixed
     annuities  during 2002.  2003 was the first full year of  amortization  for
     this block of acquisition  costs.  Also impacting  amortization  of DAC and
     VOBA are unlocking adjustments discussed below.

     The  actual  separate  account  market  return  exhibited  by the  variable
     deposits invested in mutual funds associated with the Company's liabilities
     in 2004 exceeded the long-term assumption,  thereby producing  deceleration
     of  DAC/VOBA  amortization  of $6.6,  before  tax. As a part of the regular
     analysis of DAC/VOBA,  at the end of the first quarter of 2004, the Company
     modified its assumptions regarding the future rate of spread income on some
     of its fixed annuity  liabilities.  The assumption  modification was in the
     direction of lower spread income,  and produced an acceleration of DAC/VOBA
     amortization of $5.0,  before tax.  Similar regular analysis of DAC\VOBA at
     the end of the third  quarter of 2004  included  unlocking of the Company's
     assumptions   regarding   contractowner   withdrawal  behavior.   Based  on
     experience  studies,  assumed  rates of full  surrender  for both fixed and
     variable  annuities and rates of partial  withdrawal of account balance for
     variable annuities were all modified downward,  producing a deceleration of
     DAC/VOBA amortization of $4.2, before tax. The combined effect of the three
     factors of actual variable return for 2004 exceeding long-term assumptions,
     modification  of future spread income  expectations,  and  modification  of
     expectations  regarding  future  withdrawal  behavior was a deceleration of
     DAC/VOBA  amortization  totaling $5.8,  before tax, or $3.8, net of $2.0 of
     federal income tax expense.

     The Company reset long-term return  assumptions for the separate account to
     8.5% from 9.0% (gross before fund management  fees and mortality,  expense,
     and other policy  charges) as of December  31,  2003,  reflecting a blended
     return of equity and other sub-accounts.  The largest component of the 2003
     unlocking  adjustment  comprised a  deceleration  of DAC/VOBA  amortization
     totaling $41.3, before tax. This component was primarily driven by improved
     market performance.  The Company also unlocked assumptions regarding future
     lapse  rates for fixed  annuities  during the  analysis at the end of 2003,
     resulting in an acceleration of DAC/VOBA  amortization of $6.0, before tax.
     In each of the  regular  analyses  of  DAC/VOBA at the end of the third and
     fourth quarters of 2003,  expectations  regarding  yields on assets backing


                                       82

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     fixed annuity  liabilities were revised  downward,  resulting in respective
     accelerations of DAC/VOBA amortization measuring $2.1, before tax and $6.0,
     before tax. The combined effect of all unlocking in 2003 was a deceleration
     of DAC/VOBA  amortization totaling $27.2, before tax, or $17.7, net of $9.5
     of federal income tax expense.

     As part of the regular analysis of DAC/VOBA, at the end of third quarter of
     2002, the Company  unlocked its long-term rate of return  assumptions.  The
     Company reset long-term assumptions for the separate account return to 9.0%
     (gross before fund management fees and mortality, expense, and other policy
     charges),  as of December 31, 2002,  reflecting a blended  return of equity
     and  other  sub-accounts.  The  largest  component  of the  2002  unlocking
     adjustment  comprised an  acceleration  of DAC/VOBA  amortization  totaling
     $91.5,  before tax. This  component  was primarily  driven by the sustained
     downturn in the equity markets and revised expectations for future returns.
     The Company also unlocked  assumptions  regarding  future lapse and partial
     withdrawal  rates for fixed annuities during the analysis at the end of the
     third  quarter  of  2002,   resulting  in  an   acceleration   of  DAC/VOBA
     amortization measuring $2.0, before tax. During the regular analysis at the
     end of the  fourth  quarter  of 2002,  expectations  regarding  the  assets
     backing  the fixed  annuity  liabilities  were  revised to  reflect  higher
     anticipated  default rates. This fourth quarter  adjustment  resulted in an
     acceleration  of DAC/VOBA  amortization  of $8.0,  before tax. The combined
     effect of all unlocking adjustments in 2002 was an acceleration of DAC/VOBA
     amortization  totaling $101.5 before tax, or $66.0, net of $35.5 of federal
     income tax benefit.

     Analysis DAC/VOBA - Life

     As part of the regular  analysis of DAC/VOBA for the life insurance  block,
     at the end of each of the years ended  December 31, 2004,  2003,  and 2002,
     the  Company  unlocked  due to  assumption  changes  related  primarily  to
     mortality, lapse, expense, and interest amounts. The impact of unlocking on
     the amortization of DAC/VOBA was a decrease of $1.2 in 2004, an increase of
     $6.0 in 2003, and an increase of $5.2 in 2002.


5.   Dividend Restrictions and Shareholder's Equity

     The  Company's  ability  to pay  dividends  to its parent is subject to the
     prior  approval  of the Iowa  Division  of  Insurance  for  payment  of any
     dividend,  which,  when  combined  with  other  dividends  paid  within the
     preceding  twelve  months,  exceeds the greater of (1) ten percent (10%) of
     the Company's  statutory surplus at the prior year end or (2) the Company's
     prior year statutory net gain from operations.  The Company did not pay any
     dividends on its common stock during 2004 or 2002. During 2003, the Company
     paid $12.4 in dividends on its common stock to its Parent.


                                       83

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     The  Insurance  Division of the State of Iowa (the  "Division"),  effective
     January 1, 2004,  recognizes  as net income and capital  and surplus  those
     amounts  determined  in  conformity  with  statutory  accounting  practices
     prescribed or permitted by the Division,  which differ in certain  respects
     from  accounting  principles  generally  accepted  in  the  United  States.
     Statutory net income (loss) was $96.1, $(85.1), and $(328.0), for the years
     ended December 31, 2004, 2003 and 2002, respectively. Statutory capital and
     surplus  was  $1,668.3  and  $1,081.1  as of  December  31,  2004 and 2003,
     respectively.

     As of  December  31,  2004,  the  Company  did not  utilize  any  statutory
     accounting  practices,   which  are  not  prescribed  by  state  regulatory
     authorities  that,  individually or in the aggregate,  materially  affected
     statutory capital and surplus.


6.   Additional Insurance Benefits and Minimum Guarantees

     Under  SOP  03-1,  the  Company  calculates  additional  liabilities  ("SOP
     reserves") for certain guaranteed  benefits and for universal life products
     with certain patterns of cost of insurance  charges and certain other fees.
     The  SOP  reserve  recognized  for  such  products  is in  addition  to the
     liability  previously held (the "Account Value") and recognizes the portion
     of contract  assessments  received in early  years used to  compensate  the
     insurer for services provided in later years.

     ING USA  calculates a benefit  ratio for each block of business  subject to
     the SOP, and calculates an SOP reserve by accumulating amounts equal to the
     benefit ratio  multiplied by the  assessments  for each period,  reduced by
     excess death benefits during the period.  The SOP reserve is accumulated at
     interest  rates  using  the  contract-credited  rate  for the  period.  The
     calculated  reserve  includes a provision for universal life contracts with
     patterns of cost of insurance  charges that produce expected gains from the
     insurance  benefit function  followed by losses from that function in later
     years.


                                       84

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     The SOP  reserve  for  annuities  with GMDBs is  determined  each period by
     estimating  the expected value of death benefits in excess of the projected
     account balance and  recognizing  the excess ratably over the  accumulation
     period based on total expected assessments. The Company regularly evaluates
     estimates used to adjust the additional  liability balance,  with a related
     charge or credit to benefit expense, if actual experience or other evidence
     suggests  that  earlier  assumptions  should  be  revised.   The  following
     assumptions and methodology  were used to determine the GMDB SOP reserve at
     December 31, 2004:

     <TABLE>
     <S>                                 <C>

         Area                            Assumptions/Basis for Assumptions
     -------------------------           ---------------------------------------
         Data used                       Based on 101 investment performance
                                           scenarios stratified based on 10,000
                                           random generated scenarios
         Mean investment performance     8.5%
         Volatility                      18.0%
         Mortality                       60.0%, 60.0%, 75.0%, 75.0% of the
                                         90-95 ultimate mortality table for
                                           standard, rachet, rollup and
                                           combination rollup and rachet,
                                           respectively
         Lapse rates                     Vary by contract type and duration;
                                           range between 1.0% and 40.0%
         Discount rates                  6.5%, based on the portfolio earned
                                           rate of the general account

     </TABLE>

     The SOP reserve for  annuities  with GMABs and GMWBs are  considered  to be
     derivatives  under FAS No. 133 and are  recognized  at fair  value  through
     earnings.

     The SOP reserve for the  guaranteed  minimum  income  benefits  ("GMIB") is
     determined each period by estimating the expected value of the annutization
     benefits  in  excess  of the  projected  account  balance  at the  date  of
     annuitization  and  recognizing  the excess  ratably over the  accumulation
     period based on total expected assessments. The Company regularly evaluates
     estimates used and adjusts the additional liability balance, with a related
     charge or credit to  benefit  expense,  if the actual  experience  or other
     evidence  suggests  that  earlier   assumptions  should  be  revised.   The
     assumptions  used for calculating the additional GMIB liability at December
     31, 2004, are consistent with those used for the calculating the additional
     GMDB liability.  In addition, the calculation of the GMIB liability assumes
     dynamic surrenders and dynamic annuitization reflecting the extent to which
     the benefit, at the time of payment, has a positive value.


                                       85

<PAGE>


ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     The separate account liabilities subject to SOP 03-1 for minimum guaranteed
     benefits,  and the  additional  liabilities  recognized  related to minimum
     guarantees,  by type,  as of December 31,  2004,  and the paid and incurred
     amounts by type for the year ended December 31, 2004 were as follows:

     <TABLE>
     <S>                                                     <C>             <C>                     <C>

                                                              Guaranteed          Guaranteed          Guaranteed
                                                                Minimum            Minimum              Minimum
                                                                 Death          Accumulation/           Income
                                                                Benefit       Withdrawal Benefit        Benefit
                                                                (GMDB)           (GMAB/GMWB)            (GMIB)
                                                             --------------  ---------------------   --------------
     Separate account liability
         balance                                               $ 25,843.4            $ 1,826.7         $  9,079.6
                                                             ==============  =====================   ==============
     Additional liability balance:
         Balance at January 1, 2004                            $     56.5            $    14.5         $     13.6
         Incurred guaranteed benefits                                39.0                 (4.9)              17.1
         Paid guaranteed benefits                                   (28.6)                   -                  -
                                                             --------------  ---------------------   --------------
     Balance at December 31, 2004                              $     66.9            $     9.6         $     30.7
                                                             ==============  =====================   ==============

     </TABLE>


     The net  amount  at risk  (net of  reinsurance)  and the  weighted  average
     attained age of contractowners by type of minimum guaranteed benefit,  were
     as follows as of December 31, 2004:

     <TABLE>
     <S>                                                     <C>             <C>                     <C>

                                                             Guaranteed          Guaranteed          Guaranteed
                                                              Minimum             Minimum             Minimum
                                                               Death           Accumulation/           Income
                                                              Benefit        Withdrawal Benefit       Benefit
                                                               (GMDB)           (GMAB/GMWB)            (GMIB)
                                                           ---------------  ---------------------  ---------------
     Net Amount at Risk (net of reinsurance)                  $ 1,365.7         $     65.4           $  204.3
     Weighted Average Attained Age                                   63                 61                 61

     </TABLE>


     The aggregate  fair value of equity  securities  (including  mutual funds),
     supporting separate accounts with additional insurance benefits and minimum
     investment return guarantees as of December 31, 2004 was $24,746.7.


7.   Sales Inducements

     Sales  inducements  represent  benefits  paid to  contractowners  that  are
     incremental to the amounts the Company credits on similar contracts and are
     higher than the contract's  expected  ongoing  crediting  rates for periods
     after the inducement.  Such amounts are reported  separately on the balance
     sheet as of January 1, 2004.  Prior to 2004, these amounts were included in
     DAC.  Sales  inducements  are  amortized as a component of benefit  expense
     using  methodologies  and  assumptions   consistent  with  those  used  for
     amortization  of DAC.  During the year ended December 31, 2004, the Company


                                       86

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     capitalized  and  amortized  $100.9  and  $65.5,  respectively,   of  sales
     inducements.  The unamortized balance of capitalized sales inducements, net
     of unrealized gains and losses, is $514.6 as of December 31, 2004.


8.   Income Taxes

     Effective  January 1, 2004, the Company files a stand-alone  federal income
     tax  return.  Prior  to that  date,  the  Company  and  each of the  Merger
     Companies,  filed federal income tax returns with their  respective  filing
     groups.

     Income tax expense  (benefit) from  continuing  operations  included in the
     financial statements are as follows:

     <TABLE>
     <S>                                                    <C>                <C>                <C>

                                                                            Year ended December 31,
                                                                  2004               2003               2002
                                                            -----------------  -----------------  ------------------
     Current tax expense (benefit):
         Federal                                              $     4.7          $     1.2          $    (19.9)
                                                            -----------------  -----------------  ------------------
             Total current tax expense (benefit)                    4.7                1.2               (19.9)
                                                            -----------------  -----------------  ------------------
     Deferred tax expense (benefit):
         Operations and capital loss carryforwards                 31.5               53.3                (3.9)
         Other federal deferred tax                                44.5              (55.3)              (36.4)
                                                            -----------------  -----------------  ------------------
             Total deferred tax expense (benefit)                  76.0               (2.0)              (40.3)
                                                            -----------------  -----------------  ------------------
     Total income tax expense (benefit)                       $    80.7          $    (0.8)         $    (60.2)
                                                            =================  =================  ==================

     </TABLE>

     Income  taxes were  different  from the amount  computed  by  applying  the
     federal income tax rate to income from continuing  operations before income
     taxes for the following reasons:

     <TABLE>
     <S>                                                    <C>                <C>                <C>

                                                                            Year ended December 31,
                                                                  2004               2003               2002
                                                            -----------------  -----------------  ------------------
     Income before income taxes and cumulative
         effect of change in accounting principle             $     173.6         $     56.5        $     (176.3)
     Tax rate                                                         35%                35%                 35%
                                                            -----------------  -----------------  ------------------
     Income tax at federal statutory rate                           60.8               19.8               (61.7)
     Tax effect of:
         Meals and entertainment                                     0.5                0.4                 0.6
         Dividend received deduction                                 1.3              (11.5)                0.8
         Product reserves                                            3.0                  -                   -
         Investments                                                15.0                  -                   -
         Refinement of deferred tax balances                           -               (9.5)                  -
         Other                                                       0.1                  -                 0.1
                                                            -----------------  -----------------  ------------------
     Income tax expense (benefit)                              $     80.7          $    (0.8)       $      (60.2)
                                                            =================  =================  ==================

     </TABLE>


                                       87

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     The tax effects of  temporary  differences  that give rise to deferred  tax
     assets and  deferred  tax  liabilities  at  December  31, 2004 and 2003 are
     presented below:

     <TABLE>
     <S>                                                                       <C>                <C>
                                                                                      2004               2003
                                                                               -----------------  -----------------
     Deferred tax assets:
         Operations and capital loss carryforwards                               $     133.5        $     168.5
         Future policy benefits                                                        619.9              517.4
         Goodwill                                                                        9.3                9.8
         Investments                                                                    42.4               20.5
         Employee compensation and benefits                                             19.9               16.8
         Other                                                                          19.5               33.4
                                                                               -----------------  -----------------
                Total gross assets                                                     844.5              766.4

     Deferred tax liabilities:
         Unrealized gains on investments                                              (157.1)            (170.1)
         Deferred policy acquisition cost                                             (663.1)            (529.1)
         Value of purchased insurance in force                                         (33.4)             (38.3)
         Other                                                                          (3.5)              (9.5)
                                                                               -----------------  -----------------
                Total gross liabilities                                               (857.1)            (747.0)
                                                                               -----------------  -----------------
     Net deferred income tax asset (liability)                                   $     (12.6)       $      19.4
                                                                               =================  =================

     </TABLE>

     Valuation  allowances  are provided  when it is  considered  unlikely  that
     deferred  tax assets will be  realized.  No  valuation  allowance  has been
     established  at this  time as  management  believes  the  above  conditions
     presently do not exist.

     At December 31,  2004,  the Company has  operating  loss  carryforwards  of
     approximately $381.5, for federal income tax purposes,  which are available
     to offset future taxable  income.  If not used,  these  carryforwards  will
     expire between 2015 and 2019.

     Net  unrealized  capital  gains and losses are  presented in  shareholder's
     equity net of deferred taxes.

     Under  prior  law,  life  insurance  companies  were  allowed to defer from
     taxation a portion of income.  The deferred  income was  accumulated in the
     Policyholders' Surplus Account. Equitable Life had a Policyholders' Surplus
     Account  prior to the  merger,  which  carried  over to the  Company.  This
     deferred  income only  becomes  taxable  under  certain  conditions,  which
     management believes to be remote.  Furthermore,  the American Jobs Creation
     Act of 2004 allows certain tax-free  distributions  from the Policyholders'
     Surplus  Account  during  2005 and  2006.  Therefore,  based  on  currently
     available  information,  no federal  income taxes have been provided on the
     Policyholders' Surplus Account accumulated balance of $14.4.

     The Company  establishes  reserves for  possible  proposed  adjustments  by
     various  taxing  authorities.  Management  believes  there  are  sufficient
     reserves  provided for, or adequate  defenses against any such adjustments.


                                       88

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     Currently,  the Internal Revenue Service is conducting examinations for the
     years 2000 and 2001 and various state tax audits are in process.


9.   Benefit Plans

     Defined Benefit Plan

     ING North America Insurance  Corporation ("ING North America") sponsors the
     ING  Americas  Retirement  Plan (the  "Retirement  Plan"),  effective as of
     December 31, 2001. Substantially all employees of ING North America and its
     subsidiaries and affiliates  (excluding  certain employees) are eligible to
     participate, including the Company's employees.

     The Retirement Plan is a  tax-qualified  defined benefit plan, the benefits
     of which are  guaranteed  (within  certain  specified  legal limits) by the
     Pension Benefit Guaranty Corporation  ("PBGC"). As of January 1, 2002, each
     participant in the Retirement Plan (except for certain specified employees)
     earns a benefit under a final average compensation  formula.  Subsequent to
     December 31, 2001, ING North America is responsible for all Retirement Plan
     liabilities.  The  costs  allocated  to  the  Company  for  its  employees'
     participation  in the Retirement  Plan were $11.4,  $9.3, and $4.8, for the
     years ended 2004, 2003 and 2002, respectively.

     Defined Contribution Plans

     ING North  America  sponsors  the ING Savings  Plan and ESOP (the  "Savings
     Plan").   Substantially   all  employees  of  ING  North  America  and  its
     subsidiaries and affiliates  (excluding  certain employees) are eligible to
     participate,  including the Company's  employees other than Company agents.
     The Savings Plan is a  tax-qualified  profit  sharing and stock bonus plan,
     which includes an employee stock ownership plan ("ESOP") component. Savings
     Plan  benefits  are not  guaranteed  by the PBGC.  The Savings  Plan allows
     eligible participants to defer into the Savings Plan a specified percentage
     of eligible compensation on a pre-tax basis. ING North America matches such
     pre-tax contributions,  up to a maximum of 6% of eligible compensation. All
     matching  contributions  are subject to a 4-year  graded  vesting  schedule
     (although  certain  specified  participants  are subject to a 5-year graded
     vesting  schedule).  All contributions made to the Savings Plan are subject
     to certain limits imposed by applicable law.  Pre-tax charges to operations
     of the Company  for the Savings  Plan were $3.5,  $2.8,  and $3.0,  for the
     years ended December 31, 2004, 2003 and 2002, respectively.


                                       89

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     Other Benefit Plans

     In  addition  to  providing  retirement  plan  benefits,  the  Company,  in
     conjunction  with  ING  North  America,   provides   certain   supplemental
     retirement  benefits  to  eligible  employees  and  health  care  and  life
     insurance benefits to retired employees and other eligible dependents.  The
     supplemental  retirement  plan  includes a  non-qualified  defined  benefit
     pension plan, and a non-qualified  defined  contribution  plan, which means
     all  benefits  are payable  from the  general  assets of the  Company.  The
     post-retirement  health  care  plan  include  contributory,   with  retiree
     contribution  levels adjusted annually.  The life insurance plan provides a
     flat amount of noncontributory coverage and optional contributory coverage.
     The benefits charges allocated to the Company related to all of these plans
     for the years ended December 31, 2004, 2003, and 2002 were not significant.


10.  Related Party Transactions

     Operating Agreements

     The Company has certain agreements whereby it generates revenues and incurs
     expenses with affiliated entities. The agreements are as follows:

     |X|  Underwriting and distribution  agreement with Directed Services,  Inc.
          ("DSI"),  for the variable  insurance  products issued by the Company.
          DSI is  authorized to enter into  agreements  with  broker-dealers  to
          distribute the Company's variable products and appoint representatives
          of the  broker-dealers  as agents.  For the years ended  December  31,
          2004, 2003 and 2002,  expenses were incurred in the amounts of $371.4,
          $269.3, and $287.1, respectively.
     |X|  Asset management agreement with ING Investment Management LLC ("IIM"),
          in which IIM provides asset  management and accounting  services.  The
          Company records a fee, which is paid quarterly,  based on the value of
          the assets under  management.  For the years ended  December 31, 2004,
          2003 and 2002,  expenses were incurred in the amounts of $69.8, $62.4,
          and $43.4, respectively.
     |X|  Service  agreement with DSI, in which the Company provides  managerial
          and supervisory  services to DSI and earns a fee that is calculated as
          a percentage of average assets in the variable separate accounts.  For
          the years ended December 31, 2004,  2003, and 2002,  revenue for these
          services was $36.4, $27.8, and $25.8 respectively.
     |X|  Expense   sharing   agreements   with  ING  North  America   Insurance
          Corporation ("NAC") for  administrative,  management,  financial,  and
          information technology services,  which were approved in 2001. For the
          years ended December 31, 2004,  2003 and 2002,  expenses were incurred
          in the amounts of $65.0, $67.5, and $70.6, respectively.
     |X|  Services  agreement  between  the  Company  and its  affiliates  dated
          January 1, 2001, and amended  effective January 1, 2002. For the years
          ended December 31, 2004,  2003, and 2002, net expenses  related to the


                                       90

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

          agreement  were  incurred  in the  amount of $5.1,  $16.2,  and $17.1,
          respectively.
     |X|  ING Advisors Network,  a group of  broker-dealers  affiliated with the
          Company,  distributes the Company's  annuity  products.  For the years
          ended December 31, 2004, 2003, and 2002, ING Advisors Network sold new
          contracts of $1,121.8,  $765.8, and $949.1,  respectively.

     Management  and service  contracts and all cost sharing  arrangements  with
     other  affiliated  companies are allocated in accordance with the Company's
     expense and cost allocation methods.

     Reinsurance Agreements

     ING USA entered into a reinsurance  agreement  with Security Life of Denver
     International,  Limited. ("SLDI"), an affiliate,  covering variable annuity
     minimum guaranteed death benefits and minimum guaranteed living benefits of
     variable annuities issued after January 1, 2000. In March 2003, the Company
     amended its  reinsurance  agreement with SLDI.  Under this  amendment,  the
     Company  terminated  the  reinsurance  agreement  for all in force  and new
     business  and  recaptured  all  in  force  business   reinsured  under  the
     reinsurance  agreement  between the Company and SLDI retroactive to January
     1, 2003 and the Company  reduced  its  reinsurance  recoverable  related to
     these liabilities by $150.1. On March 28, 2003, SLDI transferred  assets to
     the Company in the amount of $185.6. The difference in amounts  transferred
     on March 28, 2003 and the reduction of the  reinsurance  recoverables as of
     January 1, 2003, reflects  adjustments on the investment of the reinsurance
     recoverable  as of January 1, 2003.  It also  reflects  adjustments  on the
     investment  income on the assets and letter of credit costs between January
     1, 2003 and the date of the asset  transfer.  It also  encompasses  the net
     effect of a recapture  fee paid in the amount of $5.0 offset by the receipt
     of a $24.1 negative ceding commission. The net impact of which was deferred
     in policy  acquisition  costs  and is being  amortized  over the  period of
     estimated future profits.

     The  Company is a party to a  Facultative  Reinsurance  Agreement  with its
     affiliate,  Security Life of Denver  Insurance  Company  ("Security  Life")
     dated  August  20,  1999.  Under the terms of the  Agreement,  the  Company
     facultatively cedes certain GICs and funding agreements to Security Life on
     a 100%  coinsurance  basis.  As of December 31, 2004,  the value of GIC and
     funding  agreement  reserves  ceded by the Company under this agreement was
     $1,262.7.

     Reciprocal Loan Agreement

     On  January  1,  2004,  the  Company  entered  into a new  reciprocal  loan
     agreement with ING America Insurance  Holding Company,  Inc. ("ING AIH"), a
     Delaware  corporation and affiliate,  to facilitate the handling of unusual
     and/or unanticipated short-term cash requirements.  In accordance with this


                                       91

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     agreement,  the maximum outstanding amount to be borrowed or lent shall not
     exceed 3% of ING USA's total admitted  assets as of the preceding  December
     31. This agreement  supersedes  previous reciprocal loan agreements between
     each of the Merged Companies and ING AIH, which contained various terms and
     maximum borrowing/lending limits.

     Under the previous and current reciprocal loan agreements,  interest on any
     ING USA  borrowings  was charged at the rate of ING AIH's cost of funds for
     the  interest  period plus 0.15%.  Interest on any ING AIH  borrowings  was
     charged at a rate based on the prevailing  interest rate of U.S. commercial
     paper  available  for  purchase  with  a  similar  duration.   Under  these
     agreements,  ING USA incurred interest expense of $0.2, $0.3, and $0.3, for
     the years ended December 31, 2004,  2003, and 2002,  respectively.  ING USA
     earned  interest of $2.5,  $1.0, and $1.3, for the years ended December 31,
     2004, 2003 and 2002,  respectively.  At December 31, 2004 and 2003, ING USA
     had  $184.2  and  $120.4  receivable  from ING AIH under  these  agreements
     included in due from affiliates.

     Notes to Affiliates

     The  Company's  promissory  note in the amount of $50.0 payable to Lion was
     repaid on May 17, 2004. The note was issued on April 15, 1997. Interest was
     charged at an annual  rate of 8.75% and the face  amount was due on demand.
     The Company  incurred  interest  expense of $1.7,  $4.4,  and $4.4, for the
     years ended December 31, 2004, 2003, and 2002, respectively.

     ING USA issued a 30-year  surplus note in the principal  amount of $35.0 on
     December  8, 1999,  to its  affiliate,  Security  Life of Denver  Insurance
     Company  (successor-in-interest to First Columbine Life Insurance Company),
     which matures on December 7, 2029. Interest is charged at an annual rate of
     7.98%.  Payment of the note and related accrued  interest is subordinate to
     payments due to contractowners and claimant and beneficiary claims, as well
     as debts owed to all other  classes of  debtors,  other than  surplus  note
     holders,  of ING USA.  Any payment of  principal  and/or  interest  made is
     subject to the prior approval of the Iowa Insurance Commissioner.  Interest
     expense was $2.8,  $2.8,  and $2.8,  for the years ended December 31, 2004,
     2003, and 2002, respectively.

     On December 29, 2004,  the Company  issued  surplus  notes in the aggregate
     principal  amount of $400.0 (the "Notes"),  scheduled to mature on December
     29,  2034,  to its  affiliates,  ING Life  Insurance  and  Annuity  Company
     ("ILIAC"), ReliaStar Life and SLDI, in an offering that was exempt from the
     registration  requirements  of the  Securities  Act of 1933. The Notes bear
     interest  at a rate of 6.26% per year.  Any  payment  of  principle  and/or
     interest  is  subject  to  the  prior   approval  of  the  Iowa   Insurance
     Commissioner.  Interest is scheduled to be paid semi-annually in arrears on
     June 29 and December 29 of each year, commencing on June 29, 2005. Interest
     expense was $0.2 for the year ended December 31, 2004.


                                       92

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     Tax Sharing Agreements

     The Company has entered into a state tax sharing agreement with ING AIH and
     each of the specific  subsidiaries  that are parties to the agreement.  The
     state tax agreement  applies to situations in which ING AIH and all or some
     of the  subsidiaries  join in the  filing  of a state or  local  franchise,
     income tax,  or other tax return on a  consolidated,  combined,  or unitary
     basis.

     Capital Transactions

     During the years ended December 31, 2004,  2003, and 2002, ING USA received
     capital contributions of $230.0, $88.7, and $456.3, respectively.


11.  Financing Agreements

     The Company  maintains a  revolving  loan  agreement  with  SunTrust  Bank,
     Atlanta (the "Bank").  Under this  agreement,  which is due on demand,  the
     Company  can  borrow up to $125 from the Bank.  Interest  on any  borrowing
     accrues at an annual rate equal to a rate quoted by the Bank to the Company
     for the  borrowing.  Under the  agreement,  the  Company  incurred  minimal
     interest  expense for the years ended  December 31, 2004,  2003,  and 2002,
     respectively.  At December 31, 2004 and 2003,  the Company did not have any
     balances payable to the Bank.

     The Company also  maintains a perpetual  revolving loan agreement with Bank
     of New York ("BONY").  Under this  agreement,  the Company can borrow up to
     $100 from BONY.  Interest  on any of the  Company  borrowing  accrues at an
     annual  rate  equal  to a rate  quoted  by  BONY  to the  Company  for  the
     borrowing.  Under this agreement,  the Company  incurred  minimal  interest
     expense for the years ended December 31, 2004,  2003, and 2002. At December
     31, 2004 and 2003, the Company did not have any balances payable to BONY.


12.  Reinsurance

     At December 31, 2004, ING USA had reinsurance treaties with 17 unaffiliated
     reinsurers and 1 affiliated  reinsurer  covering a portion of the mortality
     risks  and  guaranteed   death  and  living  benefits  under  its  variable
     contracts.  ING USA remains liable to the extent its reinsurers do not meet
     their obligations under the reinsurance agreements.


                                       93
<PAGE>


ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     Reinsurance  ceded in force  for  life  mortality  risks  were  $906.0  and
     $1,209.4 at December 31, 2004 and 2003, respectively.  At December 31, 2004
     and 2003, net receivables were comprised of the following:

     <TABLE>
     <S>                                    <C>                <C>

                                                  2004               2003
                                            -----------------  -----------------
     Claims recoverable from reinsurers      $    13.4           $   17.1
     Payable for reinsurance premiums             (3.2)              (6.6)
     Reinsured amounts due to an
         unaffiliated reinsurer                   (3.2)              (3.1)
     Reserve credits                              17.6               21.1
     Reinsurance ceded                         1,359.9              619.4
     Other                                         3.6                4.0
                                           ------------------  -----------------
     Total                                   $ 1,388.1           $  651.9
                                           ==================  =================

     </TABLE>

     Included in the  accompanying  financial  statements are net policy benefit
     recoveries of $48.4,  $48.4,  and $60.0,  for the years ended  December 31,
     2004, 2003, and 2002, respectively.

     Interest  credited  and  other  benefits  to  contractowners  included  the
     following premiums ceded and reinsurance recoveries:

     <TABLE>
     <S>                                 <C>                <C>                <C>

                                                         Year ended December 31,
                                                2004               2003               2002
                                        -----------------  -----------------  ------------------
     Premiums ceded under reinsurance         $ 12.5             $ 16.4              $ 59.6
     Reinsurance recoveries                      0.8                2.2                 2.7

     </TABLE>


13.  Commitments and Contingent Liabilities

     Leases

     The Company  leases its office  space and  certain  other  equipment  under
     operating leases that expire through 2017.

     For the years ended  December 31, 2004,  2003,  and 2002,  rent expense for
     leases was $7.6,  $7.4,  and $6.6,  respectively.  The  future net  minimum
     payments under  noncancelable  leases for the years ended December 31, 2005
     through  2009 are  estimated  to be  $7.8,  $7.8,  $7.6,  $7.5,  and  $7.5,
     respectively,  and $39.4,  thereafter.  The Company pays  substantially all
     expenses  associated  with its  leased  and  subleased  office  properties.
     Expenses not paid  directly by the Company are paid for by an affiliate and
     allocated back to the Company.


                                       94

<PAGE>


ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     Commitments

     Through the normal course of investment operations,  the Company commits to
     either  purchase or sell  securities,  commercial  mortgage loans, or money
     market  instruments at a specified  future date and at a specified price or
     yield.  The  inability of  counterparties  to honor these  commitments  may
     result in either a higher or lower  replacement cost. Also, there is likely
     to be a change in the value of the securities  underlying the  commitments.
     At  December  31,  2004  and  2003,  the  Company  had  off-balance   sheet
     commitments to purchase investments equal to their fair value of $175.3 and
     $154.0, respectively.

     Litigation

     The  Company  is a party to  threatened  or  pending  lawsuits/arbitrations
     arising  from  the  normal  conduct  of  business.  Due to the  climate  in
     insurance and business  litigation/arbitrations,  suits against the Company
     sometimes  include claims for substantial  compensatory,  consequential  or
     punitive  damages and other types of relief.  Moreover,  certain claims are
     asserted as class  actions,  purporting  to  represent a group of similarly
     situated  individuals.  While it is not possible to forecast the outcome of
     such lawsuits/arbitrations, in light of existing insurance, reinsurance and
     established  reserves, it is the opinion of management that the disposition
     of such  lawsuits/arbitrations will not have a materially adverse effect on
     the Company's operations or financial position.

     Other Regulatory Matters

     Regulatory Matters

     As with many financial services  companies,  the Company and its affiliates
     have received  informal and formal  requests for  information  from various
     state and federal governmental  agencies and self-regulatory  organizations
     in  connection  with  inquiries  and  investigations  of the  products  and
     practices of the financial services industry. In each case, the Company and
     its affiliates have been and are providing full cooperation.

     Fund Regulatory Issues

     Since 2002, there has been increased  governmental and regulatory  activity
     relating to mutual funds and variable insurance products. This activity has
     primarily focused on inappropriate trading of fund shares,  revenue sharing
     and directed  brokerage,  compensation,  sales  practices and  suitability,
     arrangements with service providers,  pricing, compliance and controls, and
     adequacy of disclosure.

     In addition to responding to governmental  and regulatory  requests on fund
     regulatory  issues,  ING  management,  on its  own  initiative,  conducted,
     through  special  counsel  and a national  accounting  firm,  an  extensive
     internal  review of mutual fund trading in ING insurance,  retirement,  and
     mutual fund products. The goal of this review was to identify any instances


                                       95
<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     of  inappropriate  trading  in those  products  by third  parties or by ING
     investment professionals and other ING personnel.

     The internal review identified several isolated arrangements allowing third
     parties to engage in frequent  trading of mutual  funds within the variable
     insurance   and  mutual  fund  products  of  ING,  and   identified   other
     circumstances where frequent trading occurred despite measures taken by ING
     intended  to  combat  market  timing.  Each of the  arrangements  has  been
     terminated and disclosed to regulators,  to the independent trustees of ING
     Funds (U.S.) and in Company reports  previously filed with the SEC pursuant
     to the Securities Exchange Act of 1934, as amended.

     An  affiliate  of the  Company,  ING Funds  Distributors,  LLC  ("IFD") has
     received  notice from the staff of the National  Association  of Securities
     Dealers  ("NASD")  that the staff has made a preliminary  determination  to
     recommend that  disciplinary  action be brought  against IFD and one of its
     registered  persons for  violations  of the NASD Conduct  Rules and federal
     securities laws in connection with frequent trading arrangements.

     Other regulators,  including the SEC and the New York Attorney General, are
     also  likely to take some  action  with  respect to the  Company or certain
     affiliates  before  concluding their  investigation of ING relating to fund
     trading.  The potential  outcome of such action is difficult to predict but
     could subject the Company or certain  affiliates  to adverse  consequences,
     including,  but not limited to, settlement payments,  penalties,  and other
     financial liability.  It is not currently  anticipated,  however,  that the
     actual outcome of such action will have a material adverse effect on ING or
     ING's U.S.-based operations, including the Company.

     ING has  agreed to  indemnify  and hold  harmless  the ING  Funds  from all
     damages  resulting  from  wrongful  conduct by ING or its employees or from
     ING's  internal   investigation,   any  investigations   conducted  by  any
     governmental  or  self-regulatory  agencies,  litigation  or  other  formal
     proceedings,  including  any  proceedings  by the  Securities  and Exchange
     Commission  ("SEC").  Management  reported  to the ING Funds Board that ING
     management   believes   that  the  total  amount  of  any   indemnification
     obligations  will not be material to ING or ING's  U.S.-based  operations ,
     including the Company.


                                       96

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     Other Regulatory Matters

     The New York  Attorney  General and other  regulators  are also  conducting
     broad inquiries and investigations  involving the insurance industry. These
     initiatives currently focus on, among other things,  compensation and other
     sales   incentives,    potential    conflicts   of   interest,    potential
     anti-competitive   activity,   marketing   practices,   certain   financial
     reinsurance  arrangements,  and disclosure.  It is likely that the scope of
     these  investigations  will further broaden before the  investigations  are
     concluded.  U.S.  affiliates  of ING  have  received  formal  and  informal
     requests in connection with such investigations,  and are cooperating fully
     with each request for information.

     These  initiatives  may result in new legislation and regulation that could
     significantly affect the financial services industry,  including businesses
     in which the Company is engaged.

     In light of these and other developments, U.S. affiliates of ING, including
     the Company,  periodically  review  whether  modifications  to our business
     practices are appropriate.


14.  Other Comprehensive Income

     The components of other  comprehensive  income for the years ended December
     31, 2004 and 2003 were as follows:

     <TABLE>
     <S>                                            <C>                 <C>
                                                          2004                2003
                                                    ------------------  -----------------
     Net unrealized capital gains (losses):
         Fixed maturities                            $   451.4          $   517.3
         Equity securities                                 0.5                5.0
         DAC/VOBA                                       (258.6)            (210.5)
         Sales inducements                                (6.7)                 -
         Other                                            (2.6)             (13.9)
                                                    ------------------  -----------------
     Subtotal                                            184.0              297.9
     Less: Deferred income taxes                         (66.4)            (109.8)
                                                    ------------------  -----------------
     Net unrealized capital gains (losses)               117.6              188.1
     Minimum pension liability                            (4.9)                 -
                                                    ------------------  -----------------
     Net accumulated other comprehensive income      $   112.7          $   188.1
                                                    ==================  =================

     </TABLE>

                                       97

<PAGE>


ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
--------------------------------------------------------------------------------

     Changes in accumulated other comprehensive income related to changes in net
     unrealized gains (losses) on securities, including securities pledged, were
     as follows:

     <TABLE>
     <S>                                                   <C>                 <C>                <C>

                                                                           Year ended December 31,
                                                                 2004                2003               2002
                                                           ------------------  -----------------  -----------------
     Unrealized holding gains (losses) arising
         during the year (1)                                  $     (26.8)        $    125.9         $    152.6
     Less: reclassification adjustment for gains
         (losses) and other items included in
         net income (2)                                              43.7               71.0              (50.6)
                                                           ------------------  -----------------  -----------------
     Net unrealized gains (losses) on securities                  $ (70.5)            $ 54.9            $ 203.2
                                                           ==================  =================  =================

     </TABLE>

(1)  Pretax unrealized  holding gains (losses) were $(41.2),  $193.7 and $234.8,
     for the years ended  December 31, 2004,  2003 and 2002,  respectively.
(2)  Pretax  reclassification  adjustments  for gains  (losses)  and other items
     included in net income were $67.2, $109.2 and $(77.8),  for the years ended
     December 31, 2004, 2003 and 2002, respectively.


                                       98

<PAGE>


QUARTERLY DATA (UNAUDITED)


<TABLE>
<S>                                                          <C>            <C>             <C>            <C>

2004  (In millions)                                               First          Second          Third          Fourth
-----                                                        -------------  -------------   -------------  -------------
Total revenue                                                 $   435.7      $    430.2      $    435.8      $   372.1
                                                             -------------  -------------   -------------  -------------
Income before income taxes and
    cumulative effect of change in accounting principle            32.0 **         69.2 **         39.7 **        32.7
Income tax expense                                                  9.8 **         23.0 **         37.0 **        10.9
                                                             -------------  -------------   -------------  -------------

Net income before cumulative effect of
    change in accounting principle                                 22.2 **         46.2 **          2.7 **        21.8
Cumulative effect of change in accounting principle                (1.0)**            -               -              -
                                                             -------------  -------------   -------------  -------------
Net income                                                    $    21.2 **   $     46.2 **   $      2.7 **   $    21.8
                                                             =============  =============   =============  =============

2003 (In millions)                                                First*        Second*          Third*        Fourth*
----                                                         -------------  -------------   -------------  -------------
Total revenue                                                 $   365.0      $    392.0      $    406.3      $   345.7
                                                             -------------  -------------   -------------  -------------
Income (loss) before income taxes                                 (21.0)           46.5            32.6           (1.6)
Income tax expense (benefit)                                       (7.5)           14.4             3.8          (11.5)
                                                             -------------  -------------   -------------  -------------
Net income (loss)                                             $   (13.5)     $     32.1      $     28.8      $     9.9
                                                             =============  =============   =============  =============

</TABLE>

*    2003 amounts have been  restated due to the merger on January 1, 2004.  See
     the  "Significant  Accounting  Policies"  footnote for further  information
     regarding the merger.

**   Income before cumulative  effect of change in accounting  principle for the
     first,  second, and third quarters of 2004 has been restated to include the
     impact of the  implementation  of the TPA,  effective  January 1, 2004. The
     quarterly  adjustment was approximately  $(0.6),  resulting in a total 2004
     reduction of $(2.3).  Also, the  cumulative  effect of change in accounting
     principal was reduced by $(2.0) before tax due to the implementation of the
     TPA.  See  "Recently  Adopted  Accounting  Standards"  in the  "Significant
     Accounting Policies" footnote for further information.


                                       99

<PAGE>




Item 9.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
         Financial Disclosure

         None.

Item 9A. Controls and Procedures

          a)   The Company carried out an evaluation,  under the supervision and
               with the  participation  of its  management,  including its Chief
               Executive   Officer   and  Chief   Financial   Officer,   of  the
               effectiveness of the Company's disclosure controls and procedures
               (as defined in Rule  13a-15(e)  and  15d-15(e) of the  Securities
               Exchange Act of 1934) as of the end of the period covered by this
               report. Based on that evaluation, the Chief Executive Officer and
               the Chief  Financial  Officer have  concluded  that the Company's
               current  disclosure  controls  and  procedures  are  effective in
               ensuring  that  material  information  relating  to  the  Company
               required to be disclosed in the Company's periodic SEC filings is
               made known to them in a timely manner.

          b)   There  has not been any  change  in the  internal  controls  over
               financial  reporting  of the  Company  that  occurred  during the
               period covered by this report that has materially  affected or is
               reasonably likely to materially affect these internal controls.

Item 9B. Other Information

         None.


                                      100

<PAGE>



                                    PART III

Item 10. Directors and Executive Officers of the Registrant

          Omitted pursuant to General Instruction I(2) of Form 10-K, except with
          respect to compliance with Sections 406 and 407 of the  Sarbanes-Oxley
          Act of 2002:

          a)   Code of  Ethics  for  Financial  Professionals
               The  Company  has  approved  and  adopted  a Code of  Ethics  for
               Financial  Professionals  (which  was filed as  Exhibit 14 to the
               Company's  Form 10-K,  as filed  with the SEC on March 29,  2004,
               File No. 033-87270),  pursuant to the requirements of Section 406
               of the  Sarbanes-Oxley  Act of 2002.  Any  waiver  of the Code of
               Ethics  will be  disclosed  by the  Company  by way of a Form 8-K
               filing.

          b)   Designation of Board Financial Expert
               The Company has designated David A. Wheat, Director,  Senior Vice
               President,  and Chief  Financial  Officer of the Company,  as its
               Board Financial  Expert,  pursuant to the requirements of Section
               407 of the  Sarbanes-Oxley  Act of 2002. Because the Company is a
               wholly-owned  subsidiary  of Lion,  it does not have any  outside
               directors sitting on its board.

Item 11.  Executive Compensation

          Omitted pursuant to General Instruction I(2) of Form 10-K.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

          Omitted pursuant to General Instruction I(2) of Form 10-K.

Item 13.  Certain Relationships and Related Transactions

          Omitted pursuant to General Instruction I(2) of Form 10-K.

Item 14.  Principal  Accountant  Fees and Services
          (Dollar amounts in millions, unless otherwise stated)

          In 2004 and  2003,  Ernst & Young  LLP  (Ernst & Young)  served as the
          principal  external  auditing  firm for ING  including  ING  USA.  ING
          subsidiaries,  including  ING USA,  are  allocated  Ernst & Young fees
          attributable to services rendered by Ernst & Young to each subsidiary.
          Ernst & Young  fees  allocated  to the  Company  for the  years  ended
          December 31, 2004


                                      101

<PAGE>


          and 2003 are detailed  below along with a description  of the services
          rendered by Ernst & Young to the Company:

                                               2004                 2003
                                        -------------------  -------------------
          Audit fees                      $     2.6            $     1.8
          Audit-related fees                    0.5                  0.1
          Tax fees                                -*                 0.1
          All other fees                          -*                   -
                                        -------------------  -------------------
                                          $     3.1            $     2.0
                                        ===================  ===================

              *Less than $0.1.

          Audit fees

          Fees for audit  services  include fees  associated  with  professional
          services  rendered  by the  auditors  for  the  audit  of  the  annual
          financial  statements  of the  Company  and  review  of the  Company's
          interim financial statements.

          Audit-related fees

          Audit-related fees were allocated to ING USA for assurance and related
          services that are reasonably  related to the  performance of the audit
          or review of the financial  statements  and are not reported under the
          audit fee item above. These services  consisted  primarily of audit of
          SEC product filings, advice on accounting matters, and progress review
          on  International  Financial  Reporting  Standards and  Sarbanes-Oxley
          projects.

          Tax Fees

          Tax fees allocated to ING USA were for tax compliance, tax advice, and
          tax planning professional  services.  These services consisted of: tax
          compliance  including  the review of original and amended tax returns,
          assistance with questions  regarding tax audits,  and tax planning and
          advisory  services relating to common forms of domestic taxation (i.e.
          income tax and capital tax).

          All other fees

          There were minimal fees  allocated to ING USA under the category  "all
          other fees" in 2004, and no amounts in 2003.  This category  typically
          includes  fees paid for  products  and  services  other than the audit
          fees,  audit-related  fees, and tax fees described above, and consists
          primarily of non-recurring support and advisory services.

          Pre-approval policies and procedures

          ING USA has adopted the  pre-approval  policies and procedures of ING.
          Audit,  audit-related,  and non-audit services provided to the Company
          by  ING's  independent   auditors  are  pre-approved  by  ING's  audit
          committee. Pursuant to ING's pre-approval policies and procedures, the



                                       102

<PAGE>

          ING audit committee is required to pre-approve  all services  provided
          by  ING's   independent   auditors  to  ING  and  its  majority  owned
          legalentities,  including the Company.  The ING pre-approval  policies
          and procedures distinguish four types of services: (1) audit services,
          (2) audit-related services, (3) non-audit services, and (4) prohibited
          services (as described in the Sarbanes-Oxley Act).

          The ING  pre-approval  procedures  consist  of a general  pre-approval
          procedure and a specific pre-approval procedure.

          General pre-approval procedure

          ING's audit committee pre-approves audit, audit-related, and non-audit
          services  to be provided  by ING's  external  audit firms on an annual
          basis,  provided that the amount for such pre-approved service may not
          be  exceeded.  ING's  audit  committee  receives  an  overview  of all
          services   provided,   including   related   fees  and   supported  by
          sufficiently  detailed  information.  ING's audit committee  evaluates
          this overview retrospectively on a semi-annual basis.

          Specific pre-approval procedure

          In addition to audit committee  pre-approval,  all  audit-related  and
          non-audit  engagements that are expected to generate fees in excess of
          EUR 100,000 need specific  approval of ING's Chief  Financial  Officer
          ("CFO").  These  engagements  are  submitted in advance to the General
          Manager of ING Corporate Audit Services,  who will advise ING's CFO on
          the  compatibility  of such  services  with the  independence  policy.
          Further, in addition to audit committee pre-approval under the general
          pre-approval  procedures,  the  audit  committee  must  approve  on  a
          case-by-case basis:

          (i)  Each individual  audit-related and non-audit  engagement which is
               expected  to  generate  fees in  excess of EUR  250,000;

          (ii) All further  audit-related  and  non-audit  engagements  over and
               above the pre-approved amounts.

          In 2004, 100% of each of the audit related services,  tax services and
          all other services were pre-approved by ING's audit committee.


                                      103

<PAGE>


                                     PART IV

Item 15.  Exhibits and Financial Statement Schedules

          (a)  The  following  documents  are filed as part of this  report:

               1.   Financial  statements.  See  Item 8 on Page 49
               2.   Financial  statement  schedules.   See  Index  to  Financial
                    Statement Schedules on Page 110

              Exhibits

               2.   Agreement  and Plan of Merger  dated June 25,  2003,  by and
                    between  USG Annuity & Life  Company,  United Life & Annuity
                    Insurance Company,  Equitable Life Insurance Company of Iowa
                    and Golden  American,  incorporated  by reference in Exhibit
                    99-8 in the Company's  Form 8K filed with the SEC on January
                    2, 2004 (File No. 333-87270).

               3.(i)Restated   Articles  of  Incorporation   Providing  for  the
                    Redomestication  of Golden  American Life Insurance  Company
                    dated  July  2 and  3,  2003,  effective  January  1,  2004,
                    incorporated  by reference to Company's  10-K, as filed with
                    the SEC on March 29, 2004 (File No. 033-87270).

                    Amendment  to Articles of  Incorporation  Providing  for the
                    Name Change of Golden American Life Insurance  Company dated
                    November 20, 2003,  effective January 1, 2004,  incorporated
                    by reference to the Company's 10-K, as filed with the SEC on
                    March 29, 2004 (File No. 033-87270).

                    Amendment  to Articles of  Incorporation  Providing  for the
                    Change in  Purpose  and Powers of ING USA  Annuity  and Life
                    Insurance Company dated March 3 and 4, 2004, effective March
                    11, 2004,  incorporated  by reference to the Company's 10-Q,
                    as filed with the SEC on May 17, 2004 (File No. 033-87270).

               (ii) Amended  and  Restated  By-Laws of ING USA  Annuity and Life
                    Insurance Company,  adopted by the Board of Directors of the
                    Company on June 25, 2003,  as amended  November 11, 2003 and
                    February  25,  2004,   incorporated   by  reference  to  the
                    Company's  Form 10-Q,  as filed with the SEC on May 17, 2004
                    (File No. 033-87270).


                                      104

<PAGE>



               4.   Instruments   Defining  the  Rights  of  Security   Holders,
                    including Indentures (Annuity Contracts).

                    (a)  Single Premium  Deferred  Modified  Guaranteed  Annuity
                         Contract,  Single Premium Deferred modified  Guaranteed
                         Annuity Master  Contract,  and Single Premium  Deferred
                         Modified  Guaranteed Annuity Certificate - Incorporated
                         herein by reference to Pre-Effective Amendment No. 1 to
                         Registration  Statement on Form S-1 for Golden American
                         Life  Insurance  Company  as  filed  with  the  SEC  on
                         February 8, 2002 (File No. 333-67660).

                    (b)  Single Premium  Deferred  Modified  Guaranteed  Annuity
                         Contract  -  Incorporated  herein by  reference  to the
                         initial  Registration  Statement on Form S-1 for Golden
                         American Life Insurance Company,  as filed with the SEC
                         on June 30, 2000 (File No. 333-40596).

                    (b.1)Single Premium  Deferred  Modified  Guaranteed  Annuity
                         Master  Contract and Single Premium  Deferred  Modified
                         guaranteed   Annuity   Certificate  -  Incorporated  by
                         reference  to   Post-Effective   Amendment   No.  1  to
                         Registration  Statement on Form S-1 for Golden American
                         Life  Insurance  Company,  as  filed  with  the  SEC on
                         September 13, 2000 (File No. 333-40596).

                    (c)  Individual Retirement Rider; Roth Individual Retirement
                         Annuity Rider; Individual Retirement Annuity Rider; and
                         Simple Retirement  Account Rider - Incorporated  herein
                         by  reference  to  Post-Effective  Amendment  No. 34 to
                         Registration  Statement on Form N-4 for Golden American
                         Life  Insurance  Company  Separate  Account B, as filed
                         with the SEC on April 15, 2003 (File No. 033-23351).

                    (c.1)403(b)  Rider -  Incorporated  herein by  reference  to
                         Initial  Registration  Statement on Form S-2 for Golden
                         American Life Insurance Company,  as filed with the SEC
                         on April 15, 2003 (File No. 333-104547).

                    (d)  Single  Premium   Deferred   Equity  Indexed   Modified
                         Guaranteed  Annuity  Contract;  Single Premium Deferred
                         Modified Guaranteed Annuity Group Master Contract;  and
                         Single  Premium   Deferred   Equity  Indexed   Modified
                         Guaranteed Annuity  Certificate,  - Incorporated herein
                         by  reference  to  Pre-Effective  Amendment  No.  1  to
                         Registration  Statement  on Form S-2, as filed with the
                         SEC on August 13, 2004 (File No. 333-116137).

                    (e)  Interest  in Fixed  Account  I under  Variable  Annuity
                         Contracts  -  Incorporated   herein  by  reference  to:
                         Post-Effective   Amendment   No.  12  to   Registration
                         Statement  on  Form  N-4  for  Golden   American   Life


                                       105
<PAGE>

                         Insurance Company Separate Account B, as filed with the
                         Securities  and Exchange  Commission  on April 23, 1999
                         (File  Nos.  333-59261,   811-5626);   Incorporated  by
                         reference  to   Post-Effective   Amendment   No.  3  to
                         Registration  Statement on Form N-4 for Golden American
                         life Insurance Company,  as filed with the SEC on April
                         23,   1999  (File  Nos.   333-28769,   811-5626);   and
                         Incorporated  by reference to  Pre-Effective  Amendment
                         No. 1 to Registration  statement on Form N-4 for Golden
                         American Life Insurance  Company Separate Account B, as
                         filed  with  the  SEC  on  June  24,  2000  (File  Nos.
                         333-33914, 811-5626).

                    (f)  Interests in Fixed  Account II under  Variable  Annuity
                         Contracts  -   Incorporated   herein  by  reference  to
                         Post-Effective   Amendment   No.   7  to   Registration
                         Statement on Form N-4 for Separate  Account B of Golden
                         American Life  Insurance  Company as filed with the SEC
                         on  October  2, 2000  (File No.  333-28679,  811-5626),
                         Incorporated  herein  by  reference  to  Post-Effective
                         Amendment No. 2 to  Registration  Statement on Form N-4
                         for  Separate   Account  B  of  Golden   American  Life
                         Insurance  Company  as filed with the SEC on October 2,
                         2000  (File  No.  333-30180,  811-5626),   Incorporated
                         herein by reference to  Post-Effective  Amendment No. 5
                         to  Registration  Statement  on Form  N-4 for  Separate
                         Account B of Golden American Life Insurance  Company as
                         filed  with  the  SEC  on  April  23,  1999  (File  No.
                         333-28755, 811-5626),  Incorporated herein by reference
                         to  Post-Effective  Amendment  No.  1  to  Registration
                         Statement on Form N-4 for Separate  Account B of Golden
                         American Life  Insurance  Company as filed with the SEC
                         on April  23,  1999  (File  No.  333-66757,  811-5626),
                         Incorporated   herein  by  reference  to  Pre-Effective
                         Amendment No. 1 to  Registration  Statement on Form N-4
                         for  Separate   Account  B  of  Golden   American  Life
                         Insurance  Company as filed with the SEC on October 26,
                         2001  (File  No.  333-63692,  811-5626),   Incorporated
                         herein by reference to Pre-Effective Amendment No. 1 to
                         Registration Statement on Form N-4 for Separate Account
                         B of Golden  American Life  Insurance  Company as filed
                         with the SEC on December  11, 2001 (File  No.333-70600,
                         811-5626),    and    Incorporated   by   reference   to
                         Post-Effective   Amendment   No.   1  to   Registration
                         Statement  on  Form  N-4  for  Golden   American   Life
                         Insurance Company Separate Account B, as filed with the
                         SEC on April 16, 2003 (File No. 333-90516, 811-5626).

                    (g)  Interest  in  the  Guaranteed  Account  under  Variable
                         Annuity Contracts - Incorporated herein by reference to
                         Pre-Effective Amendment No. 1 to Registration Statement
                         on Form S-2 for Golden American Life Insurance Company,
                         as  filed  with  the SEC on June  29,  2001  (File  No.
                         333-57212).

               10.  Material Contracts

                    (a)  Service Agreement, dated as of January 1, 1994, between
                         Golden   American   and   Directed   Services,    Inc.,
                         incorporated  by  reference  from  Exhibit  10(b)  to a
                         Registration  Statement  on Form S-1 filed with the SEC
                         on April 29, 1998 (File No. 333-51353).


                                      106

<PAGE>


                    (b)  Asset  Management  Agreement,  dated  January 20, 1998,
                         between Golden  American and ING Investment  Management
                         LLC,  incorporated  by reference  from Exhibit 10(f) to
                         Golden  American's  Form  10-Q  filed  with  the SEC on
                         August 14, 1998 (File No. 033-87270).

                    (c)  Reciprocal   Loan  Agreement  dated  January  1,  2004,
                         between ING USA Annuity and Life Insurance  Company and
                         ING America Insurance Holdings,  Inc.,  incorporated by
                         reference  from Exhibit  10.A(a) to ING USA Annuity and
                         Life  Insurance  Company's Form 10-Q filed with the SEC
                         on or about May 17, 2004 (File No. 333-87270).

                    (d)  Surplus Note,  dated  December 8, 1999,  between Golden
                         American and First  Columbine Life  Insurance  Company,
                         incorporated   by  reference   from  Exhibit  10(g)  to
                         Amendment No. 7 to a Registration  Statement for Golden
                         American  on Form  S-1  filed  with the SEC on or about
                         January 27, 2000 (File No. 333-28765).

                    (e)  Services  Agreement  between  Golden  American  and the
                         affiliated  companies  listed  in  Exhibit  B  to  that
                         Agreement,  dated as of  January  1,  2001,  as amended
                         effective  January 1, 2002,  incorporated  by reference
                         from  Exhibit  10.A  (k) to ING USA  Annuity  and  Life
                         Insurance  Company's  Form 10-K  filed  with the SEC on
                         March 29, 2004 (File No. 033-87270).

                    (f)  Services  Agreement  between  Golden  American  and ING
                         North America Insurance  Corporation  effective January
                         1, 2001,  incorporated  by reference  from Exhibit 10.A
                         (g) to ING USA  Annuity  and Life  Insurance  Company's
                         Form 10-K  filed  with the SEC on March 29,  2004 (File
                         No. 033-87270).

                    (g)  Form of Shared Services  Center  Services  Agreement by
                         and  among  ING  North  America  Insurance  Corporation
                         ("Service   Provider")  and  Ameribest  Life  Insurance
                         Company,   a  Georgia   corporation;   Equitable   Life
                         Insurance  Company of Iowa,  an Iowa  corporation;  USG
                         Annuity & Life Company, an Oklahoma corporation; Golden
                         American, a Delaware corporation;  First Columbine Life
                         Insurance   Company,  a  Colorado   corporation;   Life
                         Insurance  Company of Georgia,  a Georgia  corporation;
                         Southland Life Insurance  Company, a Texas corporation;
                         Security Life of Denver Insurance  Company,  a Colorado
                         corporation;  Midwestern United Life Insurance Company,
                         an  Indiana  corporation;  and  United  Life &  Annuity
                         Insurance Company, a Texas corporation, incorporated by
                         reference from Exhibit 10(r) to Pre-Effective Amendment
                         No. 1 to a Registration  Statement on Form S-1 filed by
                         Registrant  with the SEC on or about  December 11, 2001
                         (File No. 333-70602).


                                      107

<PAGE>



                    (h)  Tax Sharing  Agreement  between  Golden  American,  ING
                         America   Insurance   Holdings,   Inc.  and  affiliated
                         companies,  effective January 1, 2001,  incorporated by
                         reference  from Exhibit 10.A (j) to ING USA Annuity and
                         Life  Insurance  Company's Form 10-K filed with the SEC
                         on March 29, 2004 (File No. 033-87270).

                    (i)  Administrative   Services   Agreement   between  Golden
                         American,  ReliaStar Life Insurance Company of New York
                         and  affiliated  companies  listed on  Exhibit A to the
                         Agreement,  effective  March 1, 2003,  incorporated  by
                         reference  from Exhibit 10.A (m) to ING USA Annuity and
                         Life  Insurance  Company's Form 10-K filed with the SEC
                         on March 29, 2004 (File No. 033-87270).

                    (j)  First   Amendment   to  the   Administrative   Services
                         Agreement  between ING USA  Annuity and Life  Insurance
                         Company and its  affiliates,  effective as of August 1,
                         2004.

                    (k)  Amendment to Asset Management  Agreement between Golden
                         American and ING Investment  Management LLC,  effective
                         January 1, 2003, incorporated by reference from Exhibit
                         10.A  (l)  to  ING  USA  Annuity  and  Life   Insurance
                         Company's  Form  10-K  filed  with the SEC on March 29,
                         2004 (File No. 033-87270).

                    (l)  Third  Amendment  to the  Asset  Management  Agreement,
                         between Golden  American and ING Investment  Management
                         LLC,   effective  August  18,  2003,   incorporated  by
                         reference  from Exhibit 10.A (n) to ING USA Annuity and
                         Life  Insurance  Company's Form 10-K filed with the SEC
                         on March 29, 2004 (File No. 033-87270).

                    (m)  Lease  Agreement,  dated as of April 16,  1998,  by and
                         between  Golden   American  and  Dunwoody   Associates,
                         incorporated  by reference from Exhibit 10.A (o) to ING
                         USA  Annuity  and Life  Insurance  Company's  Form 10-K
                         filed  with  the  SEC  on  March  29,  2004  (File  No.
                         033-87270).

                    (n)  First Amendment to Lease  Agreement,  dated November 4,
                         1998, between Golden American and Dunwoody  Associates,
                         incorporated  by reference from Exhibit 10.A (p) to ING
                         USA  Annuity  and Life  Insurance  Company's  Form 10-K
                         filed  with  the  SEC  on  March  29,  2004  (File  No.
                         033-87270).

                    (o)  Second  Amendment  to Lease  Agreement,  dated  June 1,
                         2000, between Golden American and Dunwoody  Associates,
                         incorporated  by reference from Exhibit 10.A (q) to ING
                         USA  Annuity  and Life  Insurance  Company's  Form 10-K
                         filed  with  the  SEC  on  March  29,  2004  (File  No.
                         033-87270).

                    (p)  Services  Agreement  with ING Financial  Advisers,  LLC
                         ("INGFA"),  entered into June 1, 2002 by Equitable Life
                         Insurance  Company  of  Iowa,  as  subsumed  by ING USA
                         pursuant to the January 1, 2004 merger.


                                       108
<PAGE>

                    (q)  Surplus  Note  for  $50,000,000   aggregate   principal
                         amount,  dated  December  29,  2004,  issued by ING USA
                         Annuity and Life  Insurance  Company to its  affiliate,
                         Security Life of Denver International Limited.

                    (r)  Surplus  Note  for  $175,000,000   aggregate  principal
                         amount,  dated  December  29,  2004,  issued by ING USA
                         Annuity and Life  Insurance  Company to its  affiliate,
                         ING Life Insurance and Annuity Company.

                    (s)  Surplus  Note  for  $175,000,000   aggregate  principal
                         amount,  dated  December  29,  2004,  issued by ING USA
                         Annuity and Life  Insurance  Company to its  affiliate,
                         ReliaStar Life Insurance Company.

                    (t)  Lease  Agreement  dated  August 31,  1995,  between The
                         Graham Group, Inc. and Equitable Life Insurance Company
                         of  Iowa,  as  subsumed  by ING USA  Annuity  and  Life
                         Insurance  Company  pursuant  to the  January  1,  2004
                         merger.

                    (u)  Underwriting  Agreement  between  Golden  American Life
                         Insurance  Company ("Golden  American" or "Registrant")
                         and Directed Services,  Inc., incorporated by reference
                         from  Exhibit  1 to  Amendment  No.  9 to  Registrant's
                         Registration  Statement  on Form  S-1  filed  with  the
                         Securities and Exchange  Commission ("SEC") on or about
                         February 17, 1998 (File No. 333-87272).

               14.  ING Code of Ethics for Financial Professionals, incorporated
                    by  reference  from  Exhibit 14 to ING USA  Annuity and Life
                    Insurance  Company's  Form 10-K  filed with the SEC on March
                    29, 2004 (File No. 033-87270).

               31.1 Certificate of David A. Wheat pursuant to Section 302 of the
                    Sarbanes-Oxley Act of 2002.

               31.2 Certificate of Harry N. Stout pursuant to Section 302 of the
                    Sarbanes-Oxley Act of 2002.

               32.1 Certificate of David A. Wheat pursuant to Section 906 of the
                    Sarbanes-Oxley Act of 2002.

               32.2 Certificate of Harry N. Stout pursuant to Section 906 of the
                    Sarbanes-Oxley Act of 2002.


                                      109

<PAGE>


                     Index to Financial Statement Schedules


<TABLE>
<S>                                                                                    <C>

                                                                                       Page
                                                                                       ----

Report of Independent Registered Public Accounting Firm                                 111

I. Summary of Investments - Other than Investments in Affiliates as of
       December 31, 2004                                                                112

IV. Reinsurance Information as of and for the years ended
       December 31, 2004, 2003 and 2002                                                 113

Schedules other than those listed above are omitted because they are not
required or not applicable.

</TABLE>

<PAGE>


             Report of Independent Registered Public Accounting Firm



The Board of Directors
ING USA Annuity and Life Insurance Company

We have audited the  consolidated  financial  statements  of ING USA Annuity and
Life  Insurance  Company as of December  31, 2004 and 2003,  and for each of the
three years in the period ended  December  31, 2004,  and have issued our report
thereon dated March 18, 2005.  Our audits also included the financial  statement
schedules  listed in Item 15.  These  schedules  are the  responsibility  of the
Company's  management.  Our responsibility is to express an opinion based on our
audits.

In our  opinion,  the  financial  statement  schedules  referred to above,  when
considered  in  relation  to the basic  financial  statements  taken as a whole,
present fairly, in all material respects, the information set forth therein.



                                                           /s/ Ernst & Young LLP


Atlanta, Georgia
March 18, 2005


<PAGE>


                   ING USA Annuity and Life Insurance Company,
          (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
                                   Schedule I
          Summary of Investments - Other than Investments in Affiliates
                             As of December 31, 2004
                                  (In Millions)

<TABLE>
<S>                                                                   <C>               <C>               <C>

                                                                                                              Amount
                                                                                                             Shown on
Type of Investments                                                        Cost             Value*         Balance Sheet
                                                                      ---------------   ---------------   ----------------
Fixed maturities:
    U.S. government and government agencies and authorities             $    464.0        $    464.7         $    464.7
    State, municipalities and political subdivisions                          20.7              19.9               19.9
    Public utilities securities                                            1,796.9           1,866.4            1,866.4
    Other U.S. corporate securities                                        6,292.4           6,513.2            6,513.2
    Foreign securities (1)                                                 3,090.1           3,198.3            3,198.3
    Residential mortgage-backed securities                                 3,440.3           3,461.8            3,461.8
    jCommercial mortgage-backed securities                                 1,107.8           1,139.7            1,139.7
    Other asset-backed securities                                          1,934.2           1,933.8            1,933.8
                                                                      ---------------   ---------------   ----------------
       Total fixed maturities, including fixed maturities pledged       $ 18,146.4        $ 18,597.8         $ 18,597.8
                                                                      ===============   ===============   ================
Total equity securities                                                 $     34.8        $     35.3         $     35.3
                                                                      ===============   ===============   ================

Mortgage loans                                                          $  3,851.8        $  3,969.4         $  3,851.8
Policy loans                                                                 169.0             169.0              169.0
Other investments                                                            228.8             229.0              228.8
                                                                      ---------------   ---------------   ----------------
       Total investments                                                $ 22,430.8        $ 23,000.5         $ 22,882.7
                                                                      ===============   ===============   ================

</TABLE>

*    See Notes 2 and 3 of Notes to Financial Statements.

(1)  The  term  "foreign"  includes  foreign   governments,   foreign  political
     subdivisions,  foreign  public  utilities  and all other  bonds of  foreign
     issuers.   Substantially  all  of  the  Company's  foreign  securities  are
     denominated in U.S. dollars.


                                      112

<PAGE>


                   ING USA Annuity and Life Insurance Company,
          (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
                                   Schedule IV
                             Reinsurance Information
         As of and for the years ended December 31, 2004, 2003 and 2002
                                  (In Millions)


<TABLE>
<S>                                       <C>             <C>            <C>            <C>             <C>

                                                                                                        Percentage of
                                             Gross           Ceded         Assumed          Net         assumed to net
                                          -------------   -------------  -------------  -------------   ---------------
Year ended December 31, 2004
Life insurance in force                    $   7,405.6     $     906.0     $        -     $  6,499.6          0.0%

Premiums:
    Life insurance                                25.0             2.2              -           22.8
    Accident and health insurance                  0.4             0.4              -              -
                                          -------------   -------------  -------------  -------------
Total premiums                             $      25.4     $       2.6     $        -     $     22.8
                                          =============   =============  =============  =============
Year ended December 31, 2003
Life insurance in force                    $   8,001.4     $   1,209.4     $        -     $  6,792.0          0.0%

Premiums:
    Life insurance                                27.4             1.4              -           26.0
    Accident and health insurance                  0.2             0.2              -              -
                                          -------------   -------------  -------------  -------------
Total premiums                             $      27.6     $       1.6     $        -     $     26.0
                                          =============   =============  =============  =============
Year ended December 31, 2002
Life insurance in force                    $   8,722.9     $   1,370.5     $        -     $  7,352.4          0.0%

Premiums:
    Life insurance                                38.4             1.6              -           36.8
    Accident and health insurance                  0.2             0.2              -              -
                                          -------------   -------------  -------------  -------------
Total premiums                             $      38.6     $       1.8     $        -     $     36.8
                                          =============   =============  =============  =============


</TABLE>


                                      113
<PAGE>


                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned thereunto duly authorized.

                                   ING USA Annuity and Life Insurance Company
                                   (Registrant)


March 17, 2005                     By /s/ David A. Wheat
--------------                        -----------------------------------------
    (Date)                                David A. Wheat
                                          Director, Senior Vice President and
                                            Chief Financial Officer
                                          (Duly Authorized Officer and Principal
                                            Financial Officer)


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities indicated on or before March 18, 2005.


Signatures                                   Title


/s/ David A. Wheat
-------------------------------------        Director, Senior Vice President and
    David A. Wheat                             Chief Financial Officer


/s/ Jacques de Vaucleroy
-------------------------------------        Director
    Jacques de Vaucleroy


/s/ Thomas J. McInerney
-------------------------------------        Director and Chairman
    Thomas J. McInerney


/s/ Kathleen A. Murphy
-------------------------------------        Director
    Kathleen A. Murphy


/s/ Catherine H. Smith
-------------------------------------        Director
    Catherine H. Smith


/s/ Harry N. Stout
-------------------------------------        President
    Harry N. Stout


/s/ Roger W. Fisher
-------------------------------------        Vice President and Director
    Roger W. Fisher                             Chief Accounting Officer


                                      114

<PAGE>

                                                                  Exhibit 10.(j)


                                 FIRST AMENDMENT
                                     TO THE
                        ADMINISTRATIVE SERVICES AGREEMENT


     This  First  Amendment,  effective  as of  August 1,  2004,  is made to the
Administrative Services Agreement (the "Agreement"),  dated as of March 1, 2003,
entered into by and between  ReliaStar Life Insurance Company of New York, a New
York insurance  company and the affiliated  companies  specified in Exhibit A to
the Agreement.

     IN CONSIDERATION, of the mutual promises set forth herein, and intending to
be legally bound hereby, the parties agree to amend the Agreement as follows:

     1. The Agreement  shall be amended to add the following new section:  TERM.
This Agreement  shall be effective on the first day of March 2003, and shall end
of the 31st day of March, 2005. This Agreement shall be automatically renewed on
the first day of each calendar year  thereafter for a twelve-month  period under
the same terms and  conditions,  subject to the provisions for  termination  set
forth therein.

     2. Except as specifically  amended by this First  Amendment,  the Agreement
remains in full force and effect.

     IN WITNESS WHEREOF, the parties have caused this First Amendment to be duly
executed as of the date first written above.

RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK


By: /s/  Paula Cludray-Engelke
         ------------------------------------
Name:    Paula Cludray-Engelke
Title:   Secretary

ING USA ANNUITY AND LIFE INSURANCE COMPANY


By: /s/  Paula Cludray-Engelke
         ------------------------------------
Name:    Paula Cludray-Engelke
Title:   Secretary

ING FINANCIAL ADVISERS, LLC


By: /s/  John F. Todd
         ------------------------------------
Name:    John F. Todd
Title:   Assistant Secretary


<PAGE>

ING LIFE INSURANCE AND ANNUITY COMPANY


By: /s/  Paula Cludray-Engelke
         ------------------------------------
Name:    Paula Cludray-Engelke
Title:   Secretary


ING NORTH AMERICA INSURANCE CORPORATION


By: /s/  John F. Todd
         ------------------------------------
Name:    John F. Todd
Title:   Assistant Secretary


RELIASTAR LIFE INSURANCE COMPANY


By: /s/  Paula Cludray-Engelke
         ------------------------------------
Name:    Paula Cludray-Engelke
Title:   Secretary


SECURITY LIFE OF DENVER INSURANCE COMPANY


By: /s/  Paula Cludray-Engelke
         ------------------------------------
Name:    Paula Cludray-Engelke
Title:   Secretary


SOUTHLAND LIFE INSURANCE COMPANY


By: /s/  Paula Cludray-Engelke
         ------------------------------------
Name:    Paula Cludray-Engelke
Title:   Secretary


<PAGE>

                                                                  Exhibit 10.(p)


                               SERVICES AGREEMENT


This  Services  Agreement  ("Agreement")  is made this first day of June,  2002,
("Effective  Date") by and between  Equitable Life Insurance Company of Iowa, an
insurance  company  organized  and existing  under the laws of the state of Iowa
("Company"),  and ING Financial  Advisers,  LLC, a  broker-dealer  organized and
existing under the laws of the state of Delaware ("Service Provider").

                                    RECITALS

     WHEREAS,  Service Provider is a broker-dealer  registered with and a member
of the National  Association  of  Securities  Dealers and a  investment  advisor
registered  with the  Securities  and Exchange  Commission  with  experience and
expertise in broker-dealer and financial advisory services and investment; and

     WHEREAS,   Service  Provider   possesses   certain   resources,   including
experienced  personnel,  facilities and  equipment,  which enables it to provide
certain administrative, management, professional, advisory, consulting and other
services to the others ("Services"); and

     WHEREAS,  each party desires from time to time to perform certain  Services
on behalf of, and receive certain  Services from, the others,  as described with
particularity in Exhibit A attached hereto; and

     WHEREAS,  Company desires to obtain certain  services from Service Provider
as described herein for the benefit if its customers;

     WHEREAS,  each party  contemplates  that such an  arrangement  will achieve
operating economies,  synergies and expense savings, and improve services to the
benefit of its contractowners or contractowners; and

NOW,  THEREFORE,  in  consideration of these premises and of the mutual promises
set forth herein, and intending to be legally bound hereby, the parties agree as
follows:

     1. Services.

     (a) Subject to the terms,  conditions,  and  limitations of this Agreement,
the Service Provider will perform for the Company such of the Services described
in Exhibit A, attached hereto and incorporated herein by this reference,  as the
Company may from time to time request.

     (b)  The  Service  Provider  shall  employ  all  operating  and  management
personnel  necessary to provide the  Services  required by this  Agreement.  The
Service  Provider shall also maintain such  facilities and equipment and arrange
for provision of services by third parties as it deems  reasonably  necessary in
order to provide the Services required by the Agreement.

     (c) The Service  Provider  shall keep and  maintain or cause to be kept and
maintained full and complete  documentation  and records related to the Services
provided including the accounting necessary to support charges for Services. The
Service  Provider shall maintain custody of said  documentation  and records and
shall make them available to the Company and the appropriate insurance regulator
of the Company upon request.

                                       1


<PAGE>

     2. Charges for Services.

     (a) It is the  intention  of the parties  that the charges for the Services
provided  under  this  Agreement  be  determined  in  accordance  with  fair and
reasonable  standards  and that no party  realize a profit nor incur a loss as a
result of the Services rendered pursuant to this Agreement.

     (b) The Company  agrees to  reimburse  the Service  Provider for all direct
costs  incurred on behalf of the Company and for all indirect costs which may be
charged to the Company as follows:

          (i) "Direct Costs" include costs incurred by the Service  Provider for
     Services  provided  directly to the Company,  including but not limited to:
     (a) All costs  incident to any  employee or  employees  who are employed in
     rendering  Services to the  Company,  such as salary,  payroll  taxes,  and
     benefits  and (b) the  cost of  other  reasonable  and  necessary  business
     expenses  incurred by employees  who are employed in rendering  Services to
     the Company  such as training,  travel and  lodging.  Direct Costs shall be
     charged in accordance with reasonable  functional cost studies and/or other
     information  and  methodologies  used by the Service  Provider for internal
     cost distribution including,  where appropriate,  an analysis of time spent
     by each employee providing Services to the Company and/or the percentage of
     administrative  systems utilized.  Data for this analysis will be collected
     through tracking of unit costs of Services,  through time studies conducted
     periodically,  or through other methods consistent with customary insurance
     accounting  practices   consistently  applied.   Annually,  the  bases  for
     determining direct costs shall be modified and adjusted by mutual agreement
     of the Service Provider and the Company, where necessary or appropriate, to
     fairly and  equitably  reflect  the actual  cost  incurred  by the  Service
     Provider on behalf of the Company.

          (ii) "Indirect  Costs" include all other costs incurred by the Service
     Provider in rendering Services to the Company, including but not limited to
     the  cost  of rent or  depreciation  of  office  space,  utilities,  office
     equipment, and supplies utilized by employees who are employed in rendering
     Services  to the  Company.  Indirect  costs shall be charged to the Company
     based on the  proportion  of total direct costs  chargeable  to the Company
     under  subparagraph  (i),  herein.  In other  words,  if the  direct  costs
     chargeable to the Company  represents 20% of the Service  Provider's  total
     direct costs,  then 20% of the Service  Provider's  indirect  costs will be
     charged to the Company.

     (c) The charges for Direct Costs and Indirect Costs referred to above shall
be made by the  Service  Provider  on a monthly,  quarterly  or annual  basis as
appropriate for the particular Service.

     (d) In the event the Service  Provider or the Company should  discover upon
review of its  accounting by its internal  auditors,  independent  auditor,  any
state insurance  department,  or other regulatory agency, that an amount charged
for Services provided  hereunder was erroneous,  the party discovering the error
will  give  prompt  notice  of such  error  to the  affected  party  under  this
Agreement.  Such notice shall contain a  description  of the  accounting  error,
corrective action and supporting documentation. Any amounts owing as a result of
the correction shall be paid within sixty (60) days after notice has been given.

     (e) The Company shall have the right to inspect and audit,  upon reasonable
notice to the Service  Provider,  all books and records of the Service  Provider
related to the  provision  of the  Services so as to verify the  accuracy of all
expenses reimbursed under this Agreement.


                                       2

<PAGE>

     3. Term.

     This Agreement  shall be effective as of the Effective  Date, and shall end
on the 31st day of December, 2002. This Agreement shall be automatically renewed
on the first day of each  calendar year  thereafter  for a  twelve-month  period
under the same terms and  conditions,  subject to the provisions for termination
set forth herein.

     4. Termination.

     This Agreement may be terminated by the Service  Provider or by the Company
by providing  thirty (30) days' written  notice to that effect  addressed to the
other party. Any Services  provided  following the effective date of termination
which, by their nature,  continue after  termination shall be provided under the
same terms and conditions which prevailed at the time of such notice.

     5. Standard of Service.

     The  Service  Provider  shall  perform  the  Services  in a  competent  and
professional  manner  according to standards agreed upon by the Service Provider
and the Company. The Service Provider agrees that it will exercise due diligence
to abide by and comply with all laws, statutes, rules,  regulations,  and orders
of any  governmental  authority in the  performance  of its Services  under this
Agreement.  The  Service  Provider  will  conduct its  business  and perform its
obligations  in a manner  which  will  not  cause  the  possible  revocation  or
suspension of the Company's  Certificate(s) of Authority or cause the Company to
sustain  any  fines,  penalties,  or other  disciplinary  action  of any  nature
whatsoever.

     6. Limitation of Authority.

     The  Company  shall  retain  ultimate  control and  responsibility  for all
Services that it has delegated to the Service Provider under this Agreement.  In
no event shall the Services  involve  control of the  management of the business
and  affairs  of the  Company.  The  Service  Provider  shall  provide  Services
hereunder as an independent contractor,  and shall act hereunder so as to assure
the separate operating identity of the Company.  While rendering Services to the
Company  pursuant to this  Agreement,  the Service  Provider,  its  officers and
employees  shall not at any time or for any purpose be considered  agents of the
Company  unless  otherwise  expressly  agreed  to  by  the  parties.   Under  no
circumstances  shall the Services  provided pursuant to this Agreement be deemed
to be those of a third  party  administrator  pursuant to any  applicable  state
statutes.

     7. Indemnification.

     (a) The Company  hereby agrees to  indemnify,  defend and hold harmless the
Service Provider,  its officers,  directors and employees,  from and against any
and all  claims,  demands,  losses,  liabilities,  actions,  lawsuits  and other
proceedings, judgements and awards, and costs and expenses (including reasonable
attorneys' fees), arising directly or indirectly, in whole or in part out of any
action taken by the Service Provider within the scope of its duties or authority
hereunder, excluding only such of the foregoing as result from the negligence or
willful acts or  omissions of the Service  Provider,  its  officers,  directors,
agents and employees.  The provisions of this section shall survive  termination
of this Agreement.

                                       3


<PAGE>

     (b) The  Service  Provider  hereby  agrees to  indemnify,  defend  and hold
harmless the Company and its officers,  directors and employees from and against
any and all claims,  demands,  losses,  liabilities,  action, lawsuits and other
proceedings,  judgments and awards, fines and penalties,  and costs and expenses
(including reasonable attorneys' fees), arising directly or indirectly, in whole
or in part,  out of the negligence or any willful act or omission of the Service
Provider  or of  any  of  its  officers,  directors,  agents  or  employees,  in
connection  with this  Agreement or the  performance  of the Service  Provider's
Services  hereunder,  or out of any action taken by the Service  Provider beyond
the  scope  of  the  Service  Provider's  duties  or  authority  hereunder.  The
provisions of this section shall survive termination of this Agreement.

     8. Notices.

     All notices,  requests, and communications required or permitted under this
Agreement  shall be in writing and deemed given when addressed to the applicable
address set forth in Exhibit B attached  hereto and (i)  delivered by hand to an
officer of the other party,  (ii) deposited  with the U.S.  Postal  Service,  as
first-class  certified or registered mail,  postage prepaid,  or (iii) deposited
with an overnight  courier.  Any notice of a change of address shall be given in
the same manner.

     9. Cooperation.

     Each party to this Agreement shall cooperate with the other party, and with
appropriate  governmental  authorities  (including,   without  limitation,   the
Securities  and Exchange  Commission,  the National  Association  of  Securities
Dealers  and state  insurance  regulators)  and shall  permit  such  authorities
reasonable  access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.

     10. Arbitration.

     Any controversy or claim arising out of or relating to this  Agreement,  or
the breach thereof, shall be settled by arbitration in accordance with the Rules
of the American  Arbitration  Association,  and  judgment  upon the award may be
entered in any Court having jurisdiction thereof.

     11. Waiver.

     No waiver of any  provision  of this  Agreement  shall be deemed,  or shall
constitute, waiver of any other provision, whether or not similar, nor shall any
waiver  constitute  a  continuing  waiver.  No waiver  shall be  binding  unless
executed  in writing by the party  making  the  waiver.  Failure of any party to
exercise or delay in exercising  any right or power granted under this Agreement
shall not operate as a waiver of any such right or power.

     12. Miscellaneous.

     This  Agreement  may not be  assigned  by either  party  without  the prior
written  consent  of the other  party.  This  Agreement  constitutes  the entire
agreement of the parties hereto. This Agreement may be amended only by a written
instrument executed by both parties. If any portion of this Agreement is invalid
under any  applicable  statute or rule of law, it shall not affect the remainder
of this Agreement which shall remain valid and binding.  This Agreement shall be
binding  on the  parties,  their  legal  representatives  and  successors.  This
Agreement  shall be construed in accordance with and governed by the laws of the
State of Connecticut, without regard to principles of conflict of laws.

                                       4


<PAGE>

     13. Counterparts.

     This  Agreement  may be executed in  separate  counterparts,  each of which
shall be deemed an original,  but all of which together shall constitute one and
the same instrument.


     IN WITNESS  WHEREOF,  the parties  have caused  this  Agreement  to be duly
executed as of the date first above written.

                                        ING Financial Advisers, LLC


                                        By:/s/      Christina Lareau
                                           -------------------------------------
                                           Name:    Christina Lareau
                                           Title:   Vice President


                                        Equitable Life Insurance Company of Iowa


                                        By:/s/      Paula Cludray-Engelke
                                           -------------------------------------
                                           Name     Paula Cludray-Engelke
                                           Title:   Secretary


                                       5


<PAGE>

                                    Exhibit A


o    Financial  counseling  and related  counseling  and  education  services to
     existing and potential policyholders,  contractowners, certificate holders,
     beneficiaries, and other customers of Company, including in connection with
     payment  of life  benefit  proceeds  to  beneficiaries  of  life  insurance
     policies and related products.

o    Administrative  services,  including  customer  service,  establishment and
     maintenance of customer benefit accounts and information files,  processing
     account payments, and tax reporting.

o    Preparation of sales promotional items,  advertising materials and training
     programs.

o    Related  financial and other  reporting,  information  and data  processing
     services, and printing, record, file, mail and supply services.



<PAGE>

                                    Exhibit B
                              Addresses for Notice



ING Financial Advisers, LLC
151 Farmington Avenue
Hartford, CT 06156

Equitable Life Insurance Company of Iowa
919 Locust Street
Des Moines, Iowa  50309



<PAGE>

                                                                  Exhibit 10.(q)

THIS  SURPLUS  NOTE HAS BEEN ISSUED IN A  TRANSACTION  EXEMPT FROM  REGISTRATION
UNDER THE UNITED STATES  SECURITIES  ACT OF 1933, AS AMENDED (THE "ACT") AND MAY
NOT BE  REOFFERED,  RESOLD  OR  OTHERWISE  TRANSFERRED  IN THE  ABSENCE  OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE PURCHASER OF THIS SURPLUS
NOTE IS HEREBY  NOTIFIED  THAT THE SELLER OF THIS SURPLUS NOTE MAY BE RELYING ON
THE EXEMPTION FROM  REGISTRATION  UNDER THE SECURITIES ACT PROVIDED BY RULE 144A
UNDER THE SECURITIES ACT.

                               6.257% SURPLUS NOTE

December 29, 2004                                         Amount: $50,000,000.00


For  value  received,  ING USA  Annuity  and  Life  Insurance  Company,  an Iowa
corporation  ("Borrower"),  promises  to pay to the  order of  Security  Life of
Denver International  Limited, a Bermuda corporation  ("Lender"),  the principal
sum of  Fifty  Million  Dollars  ($50,000,000.00)  on  December  29,  2034  (the
"Scheduled  Maturity Date") and to pay interest  thereon from the effective date
of this Surplus Note, semiannually in arrears on June 29 and December 29 in each
year,  commencing June 29, 2005 (each a "Scheduled  Interest Payment Date"),  at
the rate of 6.257% per annum,  until the principal hereof is paid. The date upon
which any state or federal  agency or court obtains an order or grants  approval
for the rehabilitation, liquidation, conservation, reorganization, receivership,
dissolution  or  the  commencement  of any  bankruptcy,  insolvency  or  similar
proceeding of Borrower  shall also be deemed to be the Scheduled  Maturity Date.
Principal  and  interest  shall be payable on the terms and  conditions  set out
below.

     1. Principal and interest payments shall be payable at the office of Lender
in the city of Hamilton,  Bermuda, or such other place as Lender shall designate
in writing to  Borrower.  Payments  shall be made in collected  and  immediately
available funds in lawful money of the United States of America.

                                       1

<PAGE>

     2.  Interest on this  Surplus Note shall be computed on the basis of a year
of 360 days and for the actual  number of days  elapsed.  In any event  should a
Scheduled  Interest Payment Date or Scheduled  Maturity Date fall on a day other
than a Business Day (as hereinafter defined),  then such payment of principal or
interest shall be due on the next following day that is a Business Day, with the
same  force and  effect as if made on the  Scheduled  Interest  Payment  Date or
Scheduled  Maturity Date hereof,  and no additional  interest shall accrue as to
such payment for the period  after such date;  provided,  however,  that if such
next following day that is a Business Day shall fall in the next calendar month,
then such  payment of  principal  or interest  shall be due on the  Business Day
immediately preceding such Scheduled Interest Payment Date or Scheduled Maturity
Date. For purposes of this Surplus Note, "Business Day" means any day other than
a Saturday,  Sunday or other day on which  commercial banks in New York City are
required by law to close,  provided  that  banking  institutions  located at the
place of payment  designated  by Lender are  carrying out  transactions  in U.S.
dollars.

     3. (a) No principal  payment shall be permitted on this Surplus Note unless
such  payment has received the prior  approval of the  Commissioner  of the Iowa
Insurance Division (the "Commissioner").

     (b) Periodic interest payments shall be paid as required under the terms of
this Surplus Note, subject to the prior approval of the Commissioner.

     (c)  Borrower  shall use its best  efforts  to obtain the  approval  of the
Commissioner  for the payment by Borrower of interest on and  principal  of this
Surplus Note on the Scheduled  Interest Payment Dates or Scheduled Maturity Date
hereof,  and, in the event any such  approval has not been obtained for any such
payment or any portion  thereof at or prior to the  Scheduled  Interest  Payment
Date or Scheduled  Maturity Date hereof,  as the case may be, to continue to use
its best  efforts to obtain such  approval  promptly  thereafter.  Not less than
thirty (30) days prior to each  Scheduled  Interest  Payment  Date or  Scheduled
Maturity Date hereof (excluding any such Scheduled Maturity Date which arises as
a result  of the  obtaining  of an order or the  granting  of  approval  for the
rehabilitation,   liquidation,   conservation,   reorganization,   receivership,
dissolution  or  the  commencement  of any  bankruptcy,  insolvency  or  similar
proceeding of Borrower),  Borrower will seek the approval of the Commissioner to
make each payment of interest on and the  principal of this Surplus Note. In the
event the Commissioner does not approve  Borrower's  request to make an interest
or principal payment as scheduled herein,  Borrower shall promptly notify Lender
or any subsequent holder of this Surplus Note thereof.

                                       2


<PAGE>

     (d) If the  Commissioner  does not  approve  the  making of any  payment or
portion  thereof  of  principal  of or  interest  on  this  Surplus  Note on the
Scheduled Interest Payment Date or Scheduled Maturity Date hereof, the Scheduled
Interest  Payment Date or Scheduled  Maturity  Date as the case may be, shall be
extended  and  such  payment  or any  unpaid  portion  thereof  shall be made by
Borrower on the next  following  Business Day on which  Borrower  shall have the
approval of the Commissioner to make such payment or any unpaid portion thereof.
Interest will continue to accrue on any such unpaid principal through the actual
date of payment at the rate of interest stated on the face hereof. Interest will
not accrue on interest with respect to which the Scheduled Interest Payment Date
has been extended, during such period of extension.

     (e) If the  Commissioner  approves  the  making of a payment  of  principal
and/or  interest in an amount  insufficient  to satisfy  Borrower's  obligations
under this Surplus Note and other surplus  notes issued on the  Effective  Date,
payment shall be made on this Surplus Note and each other surplus note issued on
the Effective Date on a pro-rata basis.

     4. Subject to the prior approval of the  Commissioner,  Borrower may prepay
this  Surplus  Note in whole on, or within  thirty  (30) days  after,  the tenth
anniversary of the execution of this Surplus Note, upon thirty (30) days written
notice to Lender,  without premium or penalty,  at the principal amount so to be
prepaid, plus accrued interest thereon to the date of such prepayment.

     5. In the event of the dissolution,  liquidation,  receivership, insolvency
or bankruptcy of Borrower,  repayment of principal and payment of interest under
this Surplus Note shall be  subordinated  to the prior  payment of, or provision
for,  all  liabilities  (as  reported in the  statutory  statement of assets and
liabilities) of Borrower,  other than debts owed by Borrower to other holders of
surplus  notes issued by Borrower,  with which this Surplus Note shall rank pari
passu, but shall rank superior to the claim,  interest, and equity of the shares
or shareholders of Borrower.

                                       3


<PAGE>

     6. No act or failure  on the part of  Borrower  with  respect to any of the
terms or  provisions  hereof  shall give  Lender any right to declare the unpaid
principal or interest on this Surplus Note to be due and payable  immediately or
otherwise than in accordance with the terms and conditions hereof. However, once
payment due hereunder has been approved by the  Commissioner,  the payment shall
be made when due.  If  Borrower  fails to pay the full  amount of such  approved
payment on the date such amount is scheduled to be paid,  such  approved  amount
will be  immediately  payable  on such date  without  any  action on the part of
Lender and, to the extent permitted by applicable law, interest will also accrue
on any such approved but unpaid  interest  through the actual date of payment at
the rate of interest stated on the face hereof. In the event that Borrower fails
to  perform  any of its other  obligations  hereunder,  Lender  may  pursue  any
available  remedy to enforce the  performance  of any  provision of this Surplus
Note, provided however,  that such remedy shall in no event include the right to
declare this Surplus Note immediately payable.  Borrower shall reimburse Lender,
in full,  for any  reasonable  expense  incurred  by Lender in  connection  with
enforcing the performance of this Surplus Note,  including,  but not limited to,
reasonable  attorneys'  fees and  expenses.  A delay or  omission  by  Lender in
exercising  any right or remedy  accruing as a result of  Borrower's  failure to
perform its obligations  hereunder and the continuation thereof shall not impair
such  right  or  remedy  or  constitute  a  waiver  of or  acquiescence  in such
non-performance  by  Borrower.  To the  extent  permitted  by law,  no remedy is
exclusive of any other remedy and all remedies are cumulative.

     7. Borrower  covenants that it shall not  consolidate  with, or merge into,
any other corporation or convey or transfer its properties,  assets and in force
business  substantially  as an  entirety  to any  person,  unless  (i)  Borrower
provides  the holder of the Surplus  Note with  advance  written  notice of such
consolidation, merger, conveyance or transfer and a certificate of an authorized
officer of Borrower  stating  that it has complied  with all terms  contained in
this Section 7; and (ii) the corporation  formed by such  consolidation  or into
which Borrower is merged or the person which acquires by conveyance or transfer,
the  properties,  assets and in force business of Borrower  substantially  as an
entirety  shall be a corporation  organized  and existing  under the laws of the
United  States of America,  any State  thereof or the  District of Columbia  and
shall expressly assume,  in a manner  satisfactory to the holder of this Surplus
Note,  the due and  punctual  payment of the  principal  of and interest on this
Surplus Note in accordance  with its terms and the performance of every covenant
of this Surplus  Note on the part of Borrower to be performed or observed.  Upon
any  consolidation  of  Borrower  with,  or merger of Borrower  into,  any other
corporation or any conveyance or transfer of the properties, assets and in force
business of Borrower  substantially  as an entirety to any person in  accordance
with this Section 7, the successor  corporation  formed by such consolidation or
into which  Borrower is merged or to which such  conveyance  or transfer is made
shall succeed to, and be substituted for, and may exercise every right and power
of,  Borrower under this Surplus Note, with the same effect as if such successor
corporation had been named as Borrower herein.

                                       4


<PAGE>

     8. Borrower covenants that, in the event Lender or any subsequent holder of
this  Surplus  Note  desires to sell,  transfer  or convey its  interest in this
Surplus  Note,  Borrower will fully  cooperate and promptly take all  reasonable
measures to facilitate  such sale,  transfer or conveyance,  including,  but not
limited  to,  providing  the  information  referenced  in  Rule  144A(d)(4),  as
promulgated by the Securities and Exchange  Commission  under the Securities Act
of 1933, as amended.  THIS SURPLUS NOTE HAS BEEN ISSUED IN A TRANSACTION  EXEMPT
FROM REGISTRATION  UNDER THE SECURITIES ACT AND MAY NOT BE REOFFERED,  RESOLD OR
OTHERWISE  TRANSFERRED  IN THE  ABSENCE OF SUCH  REGISTRATION  OR AN  APPLICABLE
EXEMPTION THEREFROM.  THE PURCHASER OF THIS SURPLUS NOTE IS HEREBY NOTIFIED THAT
THE  SELLER  OF  THIS  SURPLUS  NOTE  MAY  BE  RELYING  ON  THE  EXEMPTION  FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144A UNDER THE SECURITIES
ACT.

     9. No amendments  shall be made to this Surplus Note without the consent of
Borrower and Lender, and the prior approval of the Commissioner.

     10.  Except for the  conditions  described  in  subsections  (a) and (b) of
Section 3 above,  no  provision  of this  Surplus Note shall alter or impair the
obligation  of  Borrower,  which  is  absolute  and  unconditional,  to pay  the
principal  of, and interest on, this Surplus Note at the times,  place and rate,
and in the coin or  currency,  herein  prescribed.  No provision of this Surplus
Note shall  extinguish  the  ultimate  liability  of Borrower for the payment of
principal and interest hereunder.

     11.  This  Surplus  Note shall be governed by the laws of the State of Iowa
and shall be effective as of December 29, 2004.

                                       5


<PAGE>

     IN WITNESS WHEREOF, Borrower has caused this Surplus Note to be executed in
its name and attested to by its authorized  officer and its corporate seal to be
hereunder affixed, all as of the date first written above.


                                      ING USA Annuity and Life Insurance Company


                                      By:/s/   David S. Pendergrass
                                         ---------------------------------------
                                               David S. Pendergrass
                                               Vice President and Treasurer

ATTEST: /s/ Spencer Shell
        -----------------

                                       6


<PAGE>

                                                                  Exhibit 10.(r)


THIS  SURPLUS  NOTE HAS BEEN ISSUED IN A  TRANSACTION  EXEMPT FROM  REGISTRATION
UNDER THE UNITED  STATES  SECURITIES  ACT OF 1933,  AS AMENDED (THE  "SECURITIES
ACT") AND MAY NOT BE REOFFERED,  RESOLD OR OTHERWISE  TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE PURCHASER OF THIS
SURPLUS  NOTE IS HEREBY  NOTIFIED  THAT THE SELLER OF THIS  SURPLUS  NOTE MAY BE
RELYING ON THE EXEMPTION FROM REGISTRATION  UNDER THE SECURITIES ACT PROVIDED BY
RULE 144A UNDER THE SECURITIES ACT.

                              6.257 % SURPLUS NOTE

December 29, 2004                                        Amount: $175,000,000.00


For  value  received,  ING USA  Annuity  and  Life  Insurance  Company,  an Iowa
corporation ("Borrower"), promises to pay to the order of ING Life Insurance and
Annuity Company, a Connecticut corporation ("Lender"),  the principal sum of One
Hundred Seventy Five Million Dollars ($175,000,000.00) on December 29, 2034 (the
"Scheduled  Maturity Date") and to pay interest  thereon from the effective date
of this Surplus Note, semiannually in arrears on June 29 and December 29 in each
year,  commencing June 29, 2005 (each a "Scheduled  Interest Payment Date"),  at
the rate of 6.257% per annum,  until the principal hereof is paid. The date upon
which any state or federal  agency or court obtains an order or grants  approval
for the rehabilitation, liquidation, conservation, reorganization, receivership,
dissolution  or  the  commencement  of any  bankruptcy,  insolvency  or  similar
proceeding of Borrower  shall also be deemed to be the Scheduled  Maturity Date.
Principal  and  interest  shall be payable on the terms and  conditions  set out
below.

     1. Principal and interest payments shall be payable at the office of Lender
in the city of  Hartford,  Connecticut,  or such  other  place as  Lender  shall
designate  in writing  to  Borrower.  Payments  shall be made in  collected  and
immediately available funds in lawful money of the United States of America.

                                       1

<PAGE>

     2.  Interest on this  Surplus Note shall be computed on the basis of a year
of 360 days and for the actual  number of days  elapsed.  In any event  should a
Scheduled  Interest Payment Date or Scheduled  Maturity Date fall on a day other
than a Business Day (as hereinafter defined),  then such payment of principal or
interest shall be due on the next following day that is a Business Day, with the
same  force and  effect as if made on the  Scheduled  Interest  Payment  Date or
Scheduled  Maturity Date hereof,  and no additional  interest shall accrue as to
such payment for the period  after such date;  provided,  however,  that if such
next following day that is a Business Day shall fall in the next calendar month,
then such  payment of  principal  or interest  shall be due on the  Business Day
immediately preceding such Scheduled Interest Payment Date or Scheduled Maturity
Date. For purposes of this Surplus Note, "Business Day" means any day other than
a Saturday,  Sunday or other day on which  commercial banks in New York City are
required by law to close,  provided  that  banking  institutions  located at the
place of payment  designated  by Lender are  carrying out  transactions  in U.S.
dollars.

     3. (a) No principal  payment shall be permitted on this Surplus Note unless
such  payment has received the prior  approval of the  Commissioner  of the Iowa
Insurance Division (the "Commissioner").

     (b) Periodic interest payments shall be paid as required under the terms of
this Surplus Note, subject to the prior approval of the Commissioner.

     (c)  Borrower  shall use its best  efforts  to obtain the  approval  of the
Commissioner  for the payment by Borrower of interest on and  principal  of this
Surplus Note on the Scheduled  Interest Payment Dates or Scheduled Maturity Date
hereof,  and, in the event any such  approval has not been obtained for any such
payment or any portion  thereof at or prior to the  Scheduled  Interest  Payment
Date or Scheduled  Maturity Date hereof,  as the case may be, to continue to use
its best  efforts to obtain such  approval  promptly  thereafter.  Not less than
thirty (30) days prior to each  Scheduled  Interest  Payment  Date or  Scheduled
Maturity Date hereof (excluding any such Scheduled Maturity Date which arises as
a result  of the  obtaining  of an order or the  granting  of  approval  for the
rehabilitation,   liquidation,   conservation,   reorganization,   receivership,
dissolution  or  the  commencement  of any  bankruptcy,  insolvency  or  similar
proceeding of Borrower),  Borrower will seek the approval of the Commissioner to
make each payment of interest on and the  principal of this Surplus Note. In the
event the Commissioner does not approve  Borrower's  request to make an interest
or principal payment as scheduled herein,  Borrower shall promptly notify Lender
or any subsequent holder of this Surplus Note thereof.

                                       2


<PAGE>

     (d) If the  Commissioner  does not  approve  the  making of any  payment or
portion  thereof  of  principal  of or  interest  on  this  Surplus  Note on the
Scheduled Interest Payment Date or Scheduled Maturity Date hereof, the Scheduled
Interest  Payment Date or Scheduled  Maturity  Date as the case may be, shall be
extended  and  such  payment  or any  unpaid  portion  thereof  shall be made by
Borrower on the next  following  Business Day on which  Borrower  shall have the
approval of the Commissioner to make such payment or any unpaid portion thereof.
Interest will continue to accrue on any such unpaid principal through the actual
date of payment at the rate of interest stated on the face hereof. Interest will
not accrue on interest with respect to which the Scheduled Interest Payment Date
has been extended, during such period of extension.

     (e) If the  Commissioner  approves  the  making of a payment  of  principal
and/or  interest in an amount  insufficient  to satisfy  Borrower's  obligations
under this Surplus Note and other surplus  notes issued on the  Effective  Date,
payment shall be made on this Surplus Note and each other surplus note issued on
the Effective Date on a pro-rata basis.

     4. Subject to the prior approval of the  Commissioner,  Borrower may prepay
this  Surplus  Note in whole on, or within  thirty  (30) days  after,  the tenth
anniversary of the execution of this Surplus Note, upon thirty (30) days written
notice to Lender,  without premium or penalty,  at the principal amount so to be
prepaid, plus accrued interest thereon to the date of such prepayment.

     5. In the event of the dissolution,  liquidation,  receivership, insolvency
or bankruptcy of Borrower,  repayment of principal and payment of interest under
this Surplus Note shall be  subordinated  to the prior  payment of, or provision
for,  all  liabilities  (as  reported in the  statutory  statement of assets and
liabilities) of Borrower,  other than debts owed by Borrower to other holders of
surplus  notes issued by Borrower,  with which this Surplus Note shall rank pari
passu, but shall rank superior to the claim,  interest, and equity of the shares
or shareholders of Borrower.

                                       3


<PAGE>

     6. No act or failure  on the part of  Borrower  with  respect to any of the
terms or  provisions  hereof  shall give  Lender any right to declare the unpaid
principal or interest on this Surplus Note to be due and payable  immediately or
otherwise than in accordance with the terms and conditions hereof. However, once
payment due hereunder has been approved by the  Commissioner,  the payment shall
be made when due.  If  Borrower  fails to pay the full  amount of such  approved
payment on the date such amount is scheduled to be paid,  such  approved  amount
will be  immediately  payable  on such date  without  any  action on the part of
Lender and, to the extent permitted by applicable law, interest will also accrue
on any such approved but unpaid  interest  through the actual date of payment at
the rate of interest stated on the face hereof. In the event that Borrower fails
to  perform  any of its other  obligations  hereunder,  Lender  may  pursue  any
available  remedy to enforce the  performance  of any  provision of this Surplus
Note, provided however,  that such remedy shall in no event include the right to
declare this Surplus Note immediately payable.  Borrower shall reimburse Lender,
in full,  for any  reasonable  expense  incurred  by Lender in  connection  with
enforcing the performance of this Surplus Note,  including,  but not limited to,
reasonable  attorneys'  fees and  expenses.  A delay or  omission  by  Lender in
exercising  any right or remedy  accruing as a result of  Borrower's  failure to
perform its obligations  hereunder and the continuation thereof shall not impair
such  right  or  remedy  or  constitute  a  waiver  of or  acquiescence  in such
non-performance  by  Borrower.  To the  extent  permitted  by law,  no remedy is
exclusive of any other remedy and all remedies are cumulative.

     7. Borrower  covenants that it shall not  consolidate  with, or merge into,
any other corporation or convey or transfer its properties,  assets and in force
business  substantially  as an  entirety  to any  person,  unless  (i)  Borrower
provides  the holder of the Surplus  Note with  advance  written  notice of such
consolidation, merger, conveyance or transfer and a certificate of an authorized
officer of Borrower  stating  that it has complied  with all terms  contained in
this Section 7; and (ii) the corporation  formed by such  consolidation  or into
which Borrower is merged or the person which acquires by conveyance or transfer,
the  properties,  assets and in force business of Borrower  substantially  as an
entirety  shall be a corporation  organized  and existing  under the laws of the
United  States of America,  any State  thereof or the  District of Columbia  and
shall expressly assume,  in a manner  satisfactory to the holder of this Surplus
Note,  the due and  punctual  payment of the  principal  of and interest on this
Surplus Note in accordance  with its terms and the performance of every covenant
of this Surplus  Note on the part of Borrower to be performed or observed.  Upon
any  consolidation  of  Borrower  with,  or merger of Borrower  into,  any other
corporation or any conveyance or transfer of the properties, assets and in force
business of Borrower  substantially  as an entirety to any person in  accordance
with this Section 7, the successor  corporation  formed by such consolidation or
into which  Borrower is merged or to which such  conveyance  or transfer is made
shall succeed to, and be substituted for, and may exercise every right and power
of,  Borrower under this Surplus Note, with the same effect as if such successor
corporation had been named as Borrower herein.

                                       4


<PAGE>

     8. Borrower covenants that, in the event Lender or any subsequent holder of
this  Surplus  Note  desires to sell,  transfer  or convey its  interest in this
Surplus  Note,  Borrower will fully  cooperate and promptly take all  reasonable
measures to facilitate  such sale,  transfer or conveyance,  including,  but not
limited  to,  providing  the  information  referenced  in  Rule  144A(d)(4),  as
promulgated by the Securities and Exchange  Commission  under the Securities Act
of 1933, as amended.  THIS SURPLUS NOTE HAS BEEN ISSUED IN A TRANSACTION  EXEMPT
FROM REGISTRATION  UNDER THE SECURITIES ACT AND MAY NOT BE REOFFERED,  RESOLD OR
OTHERWISE  TRANSFERRED  IN THE  ABSENCE OF SUCH  REGISTRATION  OR AN  APPLICABLE
EXEMPTION THEREFROM.  THE PURCHASER OF THIS SURPLUS NOTE IS HEREBY NOTIFIED THAT
THE  SELLER  OF  THIS  SURPLUS  NOTE  MAY  BE  RELYING  ON  THE  EXEMPTION  FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144A UNDER THE SECURITIES
ACT.

     9. No amendments  shall be made to this Surplus Note without the consent of
Borrower and Lender, and the prior approval of the Commissioner.

     10.  Except for the  conditions  described  in  subsections  (a) and (b) of
Section 3 above,  no  provision  of this  Surplus Note shall alter or impair the
obligation  of  Borrower,  which  is  absolute  and  unconditional,  to pay  the
principal  of, and interest on, this Surplus Note at the times,  place and rate,
and in the coin or  currency,  herein  prescribed.  No provision of this Surplus
Note shall  extinguish  the  ultimate  liability  of Borrower for the payment of
principal and interest hereunder.

     11.  This  Surplus  Note shall be governed by the laws of the State of Iowa
and shall be effective as of December 29, 2004.

                                       5


<PAGE>

     WITNESS  WHEREOF,  Borrower  has caused this Surplus Note to be executed in
its name and attested to by its authorized  officer and its corporate seal to be
hereunder affixed, all as of the date first written above.


                                      ING USA Annuity and Life Insurance Company



                                      By:/s/   David S. Pendergrass
                                         ---------------------------------------
                                               David S. Pendergrass
                                               Vice President and Treasurer

ATTEST: /s/ Spencer Shell
        -----------------

                                       6


<PAGE>

                                                                  Exhibit 10.(s)


THIS  SURPLUS  NOTE HAS BEEN ISSUED IN A  TRANSACTION  EXEMPT FROM  REGISTRATION
UNDER THE UNITED STATES  SECURITIES  ACT OF 1933, AS AMENDED (THE "ACT") AND MAY
NOT BE  REOFFERED,  RESOLD  OR  OTHERWISE  TRANSFERRED  IN THE  ABSENCE  OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE PURCHASER OF THIS SURPLUS
NOTE IS HEREBY  NOTIFIED  THAT THE SELLER OF THIS SURPLUS NOTE MAY BE RELYING ON
THE EXEMPTION FROM  REGISTRATION  UNDER THE SECURITIES ACT PROVIDED BY RULE 144A
UNDER THE SECURITIES ACT.

                               6.257% SURPLUS NOTE

December 29, 2004                                        Amount: $175,000,000.00


For  value  received,  ING USA  Annuity  and  Life  Insurance  Company,  an Iowa
corporation  ("Borrower"),  promises  to pay  to the  order  of  ReliaStar  Life
Insurance Company, a Minnesota corporation ("Lender"),  the principal sum of One
Hundred Seventy Five Million Dollars ($175,000,000.00) on December 29, 2034 (the
"Scheduled  Maturity Date") and to pay interest  thereon from the effective date
of this Surplus Note, semiannually in arrears on June 29 and December 29 in each
year,  commencing June 29, 2005 (each a "Scheduled  Interest Payment Date"),  at
the rate of 6.257% per annum,  until the principal hereof is paid. The date upon
which any state or federal  agency or court obtains an order or grants  approval
for the rehabilitation, liquidation, conservation, reorganization, receivership,
dissolution  or  the  commencement  of any  bankruptcy,  insolvency  or  similar
proceeding of Borrower  shall also be deemed to be the Scheduled  Maturity Date.
Principal  and  interest  shall be payable on the terms and  conditions  set out
below.

     1. Principal and interest payments shall be payable at the office of Lender
in the city of  Minneapolis,  Minnesota,  or such  other  place as Lender  shall
designate  in writing  to  Borrower.  Payments  shall be made in  collected  and
immediately available funds in lawful money of the United States of America.

                                       1

<PAGE>

     2.  Interest on this  Surplus Note shall be computed on the basis of a year
of 360 days and for the actual  number of days  elapsed.  In any event  should a
Scheduled  Interest Payment Date or Scheduled  Maturity Date fall on a day other
than a Business Day (as hereinafter defined),  then such payment of principal or
interest shall be due on the next following day that is a Business Day, with the
same  force and  effect as if made on the  Scheduled  Interest  Payment  Date or
Scheduled  Maturity Date hereof,  and no additional  interest shall accrue as to
such payment for the period  after such date;  provided,  however,  that if such
next following day that is a Business Day shall fall in the next calendar month,
then such  payment of  principal  or interest  shall be due on the  Business Day
immediately preceding such Scheduled Interest Payment Date or Scheduled Maturity
Date..  For purposes of this Surplus  Note,  "Business  Day" means any day other
than a Saturday,  Sunday or other day on which commercial banks in New York City
are required by law to close,  provided that banking institutions located at the
place of payment  designated  by Lender are  carrying out  transactions  in U.S.
dollars.

     3. (a) No principal  payment shall be permitted on this Surplus Note unless
such  payment has received the prior  approval of the  Commissioner  of the Iowa
Insurance Division (the "Commissioner").

     (b) Periodic interest payments shall be paid as required under the terms of
this Surplus Note, subject to the prior approval of the Commissioner.

     (c)  Borrower  shall use its best  efforts  to obtain the  approval  of the
Commissioner  for the payment by Borrower of interest on and  principal  of this
Surplus Note on the Scheduled  Interest Payment Dates or Scheduled Maturity Date
hereof,  and, in the event any such  approval has not been obtained for any such
payment or any portion  thereof at or prior to the  Scheduled  Interest  Payment
Date or Scheduled  Maturity Date hereof,  as the case may be, to continue to use
its best  efforts to obtain such  approval  promptly  thereafter.  Not less than
thirty (30) days prior to each  Scheduled  Interest  Payment  Date or  Scheduled
Maturity Date hereof (excluding any such Scheduled Maturity Date which arises as
a result  of the  obtaining  of an order or the  granting  of  approval  for the
rehabilitation,   liquidation,   conservation,   reorganization,   receivership,
dissolution  or  the  commencement  of any  bankruptcy,  insolvency  or  similar
proceeding of Borrower),  Borrower will seek the approval of the Commissioner to
make each payment of interest on and the  principal of this Surplus Note. In the
event the Commissioner does not approve  Borrower's  request to make an interest
or principal payment as scheduled herein,  Borrower shall promptly notify Lender
or any subsequent holder of this Surplus Note thereof.

                                       2

<PAGE>

     (d) If the  Commissioner  does not  approve  the  making of any  payment or
portion  thereof  of  principal  of or  interest  on  this  Surplus  Note on the
Scheduled Interest Payment Date or Scheduled Maturity Date hereof, the Scheduled
Interest  Payment Date or Scheduled  Maturity  Date as the case may be, shall be
extended  and  such  payment  or any  unpaid  portion  thereof  shall be made by
Borrower on the next  following  Business Day on which  Borrower  shall have the
approval of the Commissioner to make such payment or any unpaid portion thereof.
Interest will continue to accrue on any such unpaid principal through the actual
date of payment at the rate of interest stated on the face hereof. Interest will
not accrue on interest with respect to which the Scheduled Interest Payment Date
has been extended, during such period of extension.

     (e) If the  Commissioner  approves  the  making of a payment  of  principal
and/or  interest in an amount  insufficient  to satisfy  Borrower's  obligations
under this Surplus Note and other surplus  notes issued on the  Effective  Date,
payment shall be made on this Surplus Note and each other surplus note issued on
the Effective Date on a pro-rata basis.

     4. Subject to the prior approval of the  Commissioner,  Borrower may prepay
this  Surplus  Note in whole on, or within  thirty  (30) days  after,  the tenth
anniversary of the execution of this Surplus Note, upon thirty (30) days written
notice to Lender,  without premium or penalty,  at the principal amount so to be
prepaid, plus accrued interest thereon to the date of such prepayment.

     5. In the event of the dissolution,  liquidation,  receivership, insolvency
or bankruptcy of Borrower,  repayment of principal and payment of interest under
this Surplus Note shall be  subordinated  to the prior  payment of, or provision
for,  all  liabilities  (as  reported in the  statutory  statement of assets and
liabilities) of Borrower,  other than debts owed by Borrower to other holders of
surplus  notes issued by Borrower,  with which this Surplus Note shall rank pari
passu, but shall rank superior to the claim,  interest, and equity of the shares
or shareholders of Borrower.

                                       3

<PAGE>

     6. No act or failure  on the part of  Borrower  with  respect to any of the
terms or  provisions  hereof  shall give  Lender any right to declare the unpaid
principal or interest on this Surplus Note to be due and payable  immediately or
otherwise than in accordance with the terms and conditions hereof. However, once
payment due hereunder has been approved by the  Commissioner,  the payment shall
be made when due.  If  Borrower  fails to pay the full  amount of such  approved
payment on the date such amount is scheduled to be paid,  such  approved  amount
will be  immediately  payable  on such date  without  any  action on the part of
Lender and, to the extent permitted by applicable law, interest will also accrue
on any such approved but unpaid  interest  through the actual date of payment at
the rate of interest stated on the face hereof. In the event that Borrower fails
to  perform  any of its other  obligations  hereunder,  Lender  may  pursue  any
available  remedy to enforce the  performance  of any  provision of this Surplus
Note, provided however,  that such remedy shall in no event include the right to
declare this Surplus Note immediately payable.  Borrower shall reimburse Lender,
in full,  for any  reasonable  expense  incurred  by Lender in  connection  with
enforcing the performance of this Surplus Note,  including,  but not limited to,
reasonable  attorneys'  fees and  expenses.  A delay or  omission  by  Lender in
exercising  any right or remedy  accruing as a result of  Borrower's  failure to
perform its obligations  hereunder and the continuation thereof shall not impair
such  right  or  remedy  or  constitute  a  waiver  of or  acquiescence  in such
non-performance  by  Borrower.  To the  extent  permitted  by law,  no remedy is
exclusive of any other remedy and all remedies are cumulative.

     7. Borrower  covenants that it shall not  consolidate  with, or merge into,
any other corporation or convey or transfer its properties,  assets and in force
business  substantially  as an  entirety  to any  person,  unless  (i)  Borrower
provides  the holder of the Surplus  Note with  advance  written  notice of such
consolidation, merger, conveyance or transfer and a certificate of an authorized
officer of Borrower  stating  that it has complied  with all terms  contained in
this Section 7; and (ii) the corporation  formed by such  consolidation  or into
which Borrower is merged or the person which acquires by conveyance or transfer,
the  properties,  assets and in force business of Borrower  substantially  as an
entirety  shall be a corporation  organized  and existing  under the laws of the
United  States of America,  any State  thereof or the  District of Columbia  and
shall expressly assume,  in a manner  satisfactory to the holder of this Surplus
Note,  the due and  punctual  payment of the  principal  of and interest on this
Surplus Note in accordance  with its terms and the performance of every covenant
of this Surplus  Note on the part of Borrower to be performed or observed.  Upon
any  consolidation  of  Borrower  with,  or merger of Borrower  into,  any other
corporation or any conveyance or transfer of the properties, assets and in force
business of Borrower  substantially  as an entirety to any person in  accordance
with this Section 7, the successor  corporation  formed by such consolidation or
into which  Borrower is merged or to which such  conveyance  or transfer is made
shall succeed to, and be substituted for, and may exercise every right and power
of,  Borrower under this Surplus Note, with the same effect as if such successor
corporation had been named as Borrower herein.

                                       4


<PAGE>

     8. Borrower covenants that, in the event Lender or any subsequent holder of
this  Surplus  Note  desires to sell,  transfer  or convey its  interest in this
Surplus  Note,  Borrower will fully  cooperate and promptly take all  reasonable
measures to facilitate  such sale,  transfer or conveyance,  including,  but not
limited  to,  providing  the  information  referenced  in  Rule  144A(d)(4),  as
promulgated by the Securities and Exchange  Commission  under the Securities Act
of 1933, as amended.  THIS SURPLUS NOTE HAS BEEN ISSUED IN A TRANSACTION  EXEMPT
FROM REGISTRATION  UNDER THE SECURITIES ACT AND MAY NOT BE REOFFERED,  RESOLD OR
OTHERWISE  TRANSFERRED  IN THE  ABSENCE OF SUCH  REGISTRATION  OR AN  APPLICABLE
EXEMPTION THEREFROM.  THE PURCHASER OF THIS SURPLUS NOTE IS HEREBY NOTIFIED THAT
THE  SELLER  OF  THIS  SURPLUS  NOTE  MAY  BE  RELYING  ON  THE  EXEMPTION  FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144A UNDER THE SECURITIES
ACT.

     9. No amendments  shall be made to this Surplus Note without the consent of
Borrower and Lender, and the prior approval of the Commissioner.

     10.  Except for the  conditions  described  in  subsections  (a) and (b) of
Section 3 above,  no  provision  of this  Surplus Note shall alter or impair the
obligation  of  Borrower,  which  is  absolute  and  unconditional,  to pay  the
principal  of, and interest on, this Surplus Note at the times,  place and rate,
and in the coin or  currency,  herein  prescribed.  No provision of this Surplus
Note shall  extinguish  the  ultimate  liability  of Borrower for the payment of
principal and interest hereunder.

                                       5

<PAGE>

     11.  This  Surplus  Note shall be governed by the laws of the State of Iowa
and shall be effective as of December 29, 2004.

     IN WITNESS WHEREOF, Borrower has caused this Surplus Note to be executed in
its name and attested to by its authorized  officer and its corporate seal to be
hereunder affixed, all as of the date first written above.


                                      ING USA Annuity and Life Insurance Company


                                      By:/s/   David S. Pendergrass
                                         ---------------------------------------
                                               David S. Pendergrass
                                               Vice President and Treasurer

ATTEST:/s/ Spencer Shell
        -----------------

                                       6


<PAGE>

                                                                  Exhibit 10.(t)

                                LEASE AGREEMENT

                              DATED AUGUST 31, 1995

                                 BY AND BETWEEN

                   THE GRAHAM GROUP, INC., an Iowa corporation

                                    LANDLORD



                                       AND

          EQUITABLE LIFE INSURANCE COMPANY OF IOWA, an Iowa corporation

                                     TENANT



                                Des Moines, Iowa

<PAGE>


                         LEASE AGREEMENT BY AND BETWEEN
                           THE GRAHAM GROUP, INC., AND
                    EQUITABLE LIFE INSURANCE COMPANY OF IOWA


                                TABLE OF CONTENTS

Article #        Name                                                     Page


Article 1        Demised Premises, Building, Site and Project               1
Article 2        Term of Lease                                              1
Article 3        Use                                                        2
Article 4        Base Rent                                                  2
Article 5        Definitions                                                3
Article 6        Improvements and Possession                                5
Article 7        Building Services                                          7
Article 8        Compliance With Laws                                       7
Article 9        Repairs                                                    7
Article 10       Alterations and Additions                                 10
Article 11       Insurance                                                 11
Article 12       Damage by Fire or Other Casualty                          14
Article 13       Eminent Domain                                            15
Article 14       Bankruptcy                                                15
Article 15       Defaults                                                  16
Article 16       Assignment and Subletting                                 17
Article 17       Surrender of Possession                                   18
Article 18       Priority of Lease
                 Certificate to Purchasers and Mortgage                    18
Article 19       Rights Reserved by Landlord                               19
Article 20       Name of Building                                          20
Article 21       Option to Extend Term                                     20
Article 22       Covenant of Quiet Enjoyment                               22
Article 23       Notices                                                   22
Article 24       Parking                                                   23
Article 25       Phase 2 - Building                                        27
Article 26       Unperformed Covenants
                 May Be Performed by other Party                           32
Article 27       Liens                                                     33
Article 28       Landlord's Covenants; Title Insurance                     33
Article 29       Indemnification                                           34
Article 30       Personal Property Taxes                                   34
Article 31       No Partnership                                            34
Article 32       Right of First Refusal                                    35
Article 33       Waiver                                                    36

<PAGE>

Article 34       Injunction                                                36
Article 35       Cumulative Rights                                         36
Article 36       Authority of Parties                                      36
Article 37       Cumulative Remedies                                       36
Article 38       Holding Over                                              36
Article 39       Structural Weakness                                       36
Article 40       Covenants Binding and Successor                           37
Article 41       Short Form                                                37
Article 42       Costs and Fees                                            37
Article 43       Waiver                                                    37
Article 44       Number and Gender                                         38
Article 45       Broker's Commission                                       38
Article 46       Headings                                                  38
Article 47       Partial Invalidity                                        38
Article 48       Entire Agreement                                          38
Article 49       Counterparts                                              38
Article 50       Survival                                                  38
Article 51       Time of Essence                                           39
Article 52       Applicable Law                                            39
Article 53       Accounting and Audit                                      39
Article 54       Skywalks                                                  39
Article 55       Limitation of Mortgagee's Liability                       39


                                    EXHIBITS

Exhibit A - Legal Description (Demised Premises, Parcel One and Parcel Two)

Exhibit B - Legal  Description  (Principal  Land, DMDC Land, 12th Street Parking
            Land And Graham's Fine Arts Land)

Exhibit C - Methodology Letter

Exhibit D - Landlord Special Warranty Deed (North-half of the Site)

Exhibit E - Landlord Special Warranty Deed (DMDC Land)

Exhibit F - Tenant Special Warranty Deed (DMDC Land and DMDC Ramp)


<PAGE>

                                 LEASE AGREEMENT


THIS LEASE  AGREEMENT (the Lease"),  made and entered into as of the 31st day of
August, 1995, by and between THE GRAHAM GROUP, INC., an Iowa corporation, of Des
Moines,  Iowa,  (hereinafter  called  "Landlord"),  and EQUITABLE LIFE INSURANCE
COMPANY OF IOWA, an Iowa corporation,  of Des Moines,  Iowa (hereinafter  called
"Tenant"). WITNESSETH:

     WHEREAS,  Landlord  and  Tenant  desire  to enter  into  this  Lease of the
"Demised Premises" as that term is hereinafter described;

     NOW, THEREFORE, in consideration of the respective covenants and agreements
hereinafter  set forth and other good and  valuable  consideration,  the parties
hereto hereby covenant and agree as follows:

                                    ARTICLE 1

                  DEMISED PREMISES, BUILDING, SITE AND PROJECT

Subject to and upon the terms,  provisions and conditions hereinafter set forth,
Landlord  does  hereby  lease  unto  Tenant and Tenant  does  hereby  lease from
Landlord  205,330  square feet,  more or less,  of Usable Area,  as  hereinafter
defined, on six floors above grade, in addition to an underground parking garage
containing  approximately  100 parking  spaces (the  "Demised  Premises")  in an
office  building  known as "The  Equitable  Building"  (the  "Building"),  to be
constructed on a downtown block bordered by 9th Street on the East,  10th Street
on the West,  Grand Avenue on the North and Locust  Street on the South,  in the
City of Des Moines, Iowa (the "Site") and more particularly described in Exhibit
"A" attached hereto and incorporated herein by this reference, together with all
rights, privileges, easements, rights of ingress and egress and appurtenances of
whatever kind and character,  benefiting,  belonging or appertaining thereto and
such other rights which are specifically created by this Lease.  Hereinafter the
Demised Premises, the Building, and the Site are collectively referred to as the
"Project".

                                    ARTICLE 2

                                  TERM OF LEASE

     2.1 The term of this Lease  (hereinafter  called the "Term") shall commence
sixty (60) days after the date the Landlord's  architect and Tenant's  architect
certify  that the  conditions  set  forth  in  Sections  6.1 and 6.2  have  been
satisfied  (hereinafter called the "Commencement  Date"), and shall terminate at
the end of the  twentieth  (20th)  full  lease  year  (as  hereinafter  defined)
following the Term Commencement Date.

     2.2 No  later  than  fifteen  (15)  days  prior to the  Commencement  Date,
Landlord and Tenant  shall  execute a "short form lease",  in  recordable  form,
specifying, among other things, the precise amount of Usable Area in the Demised
Premises and the commencement and termination dates of this Lease. "Usable Area"
contained  in the  Demised  Premises  shall be  computed  from  time to time and
certified to by Landlord's architect,  and shall mean the total number of square
feet at the floor level of such space  falling  within the inside  finish of the
exterior curtain wall, or from the glass line where at least fifty percent (50%)
of the outer  wall of the  Building  is glass,  excluding  stairs  and  elevator
shafts,  flues,  stacks,  pipe shafts and vertical  ducts,  together  with their
enclosing walls, public areas (e.g. elevator lobbies on each floor), rest rooms,
air conditioning  rooms, fan rooms and janitor's and electrical  closets located
on and serving such floor, and receiving areas and other functional areas of the
Building, plus any areas of the Building which compose a part of the City of Des
Moines,  Iowa (the "City")  skywalk system (the "Skywalk  System") and any other
municipal  areas  related to the  operation of the  Building.  Upon  substantial
completion of the  construction of the Demised  Premises,  Landlord's  architect
shall  certify to Landlord and Tenant,  and  Tenant's  architect  shall  confirm
within  thirty  (30) days  thereafter,  the  exact  Usable  Area of the  Demised
Premises.  If Tenant's architect does not object to Landlord's  certification of

                                       1

<PAGE>

the Usable  Area of the  Demised  Premises  within the thirty (30) day period as
hereinbefore set forth, then the certification of Landlord's  architect shall be
deemed accepted by Tenant.

     2.3 If there is a change in the size of the  Building  or Demised  Premises
during the Term, the Usable Area in the Building or the Usable Area contained in
the Demised  Premises  shall be adjusted on a monthly  average basis for the Tax
Year and Fiscal  Year in  question.  The Usable  Area  contained  in the Demised
Premises shall be determined on a monthly average basis.

                                    ARTICLE 3

                                       USE

     3.1 Tenant may use and occupy the Demised Premises for any lawful purpose.

     3.2 Tenant shall not use the Demised Premises for any unlawful purpose.

     3.3  Tenant  shall not use the  Demised  Premises  for any  extra-hazardous
activity.

     3.4 Tenant  shall use its best  efforts to comply  with and  conform to all
requirements of governmental  authorities  having  jurisdiction over the Demised
Premises and the Building with respect to the occupancy, use or manner of use of
the Demised  Premises by Tenant.  Landlord  shall use its best efforts to comply
with or cause to be complied with, all requirements of governmental  authorities
having  jurisdiction  over the Demised Premises and the Building with respect to
the public portions and common areas of the Building.

                                    ARTICLE 4

                                    BASE RENT

     4.1 Tenant shall pay Landlord,  or its assigns, at Landlord's office in the
City,  or at such other place as Landlord  may from time to time  designate,  in
lawful  money of the United  States,  for the use of the  Demised  Premises,  an
annual  base  rent per  square  foot of Usable  Area  contained  in the  Demised
Premises, payable in equal monthly installments,  in advance on the first day of
the Term of this Lease, and on the first day of each month thereafter during the
continuance of this Lease as follows, to-wit:

     1st through 10th lease year $11.95 per square foot per annum of Usable Area

     11th  through  20th lease year  $13.15 per square  foot per annum of Usable
     Area

The above  stated  annual  lease year base rent per square  foot of Usable  Area
contained  in the  Demised  Premises  for  the  lease  year  in  question  shall
hereinafter  be referred to as "Base  Rent".  As used herein  "lease year" shall
mean in the case of the first lease year,  a  consecutive  period of twelve (12)
calendar  months with the first  calendar  month  commencing on the first day of
January  occurring on or about the Term  Commencement  Date, or in the event the
Term  Commencement  Date is not on the 1st day of January,  the "1st lease year"
shall be that portion of the first calendar year from the Term Commencement Date
to the last day of December,  plus a consecutive  period of twelve (12) calendar
months  following  such  partial  year;  thereafter,  lease year shall mean each
successive  twelve (12) calendar  month period  following the  expiration of the
first lease year.

     4.2 If the Term Commencement Date of this Lease commences other than on the
first day of a month,  the  monthly  installment  of Base Rent  payable for such
month shall be prorated.

     4.3 All unpaid Base Rent and Additional Rent, as hereinafter defined, shall
bear  interest at the money  center  prime rate as  published in the Wall Street
Journal, its successor or a similar service, plus two percent (2%) per annum, or
at the maximum rate allowed by law,  whichever is less,  from its due date until
paid.

                                       2

<PAGE>

                                    ARTICLE 5

                                   DEFINITIONS

     5.1 Definitions:

     (a) "Fiscal Year" shall mean any twelve month period,  beginning  January 1
and ending the following December31, which contains any part of the Term of this
Lease.

     (b) "Taxes"  shall mean (i) all real estate  taxes and special  assessments
levied or assessed against the Project (less any credits  allocable to such real
estate taxes or special assessments);  (ii) any Taxes,  assessments,  charges or
fees hereafter  substituted  therefor and (iii) subject to the  limitations  set
forth below,  the reasonable  costs of disputing or protesting the amount of any
Taxes,   including  all  reasonable  attorneys'  fee  incurred  by  Landlord  in
connection therewith.  There shall be excluded from Taxes all federal, state and
local income taxes,  federal excess profit taxes,  franchise,  capital stock and
federal or state estate or inheritance taxes of Landlord.  The cost of disputing
or protesting the amount of any Taxes,  shall not be included in the calculation
of Taxes for any  Fiscal  Year  unless  such  costs  are less  than the  savings
resulting from such dispute or protest. Landlord shall, after being requested to
do so by Tenant,  use reasonable  efforts to have the North half of the Site, as
hereinafter  defined,  separately  assessed from the Site. Tenant shall have the
right to contest any Taxes.

     (c) "Operating  Expenses" shall mean all costs of management,  operating or
maintenance  of the Project,  based on a calendar year period and  determined in
accordance with generally accepted accounting  principles  consistently applied,
including  by way of  illustration,  but not  limitation,  utilities,  insurance
premiums,  janitorial and cleaning  services,  licenses,  permits,  security and
inspection  fees,  heating  and  cooling,   maintenance  and  repairs,   general
administration  costs and expenses,  management  fees,  labor and supplies,  and
amortized  amounts  (over  the  expected  life of such  item) of  capital  items
(exclusive of structural  repairs or  replacements)  to the extent that any such
capital item constitutes,  in the reasonable opinion of a qualified professional
a substantial labor or cost - saving device or operation; provided, however, for
the  initial  five (5) lease  years of the  Term,  Operating  Expenses  shall be
reduced by Two Hundred  Seventy Five Thousand and No/100 Dollars  ($275,000.00).
Operating  Expenses Shall not include the following:  (i) costs of  alterations,
improvements or additions to any tenant's premises; (ii) principal,  interest or
other  payments on loans or  invested  capital;  (iii)  costs of capital  items,
except for capital  items  includable in Operating  Expenses as aforesaid;  (iv)
depreciation and amortization expenses; (v) legal and professional fees incurred
in connection  with leases or the leasing or ownership (as opposed to operation)
of the Project or in connection  with the Skywalk  System;  (vi)  administrative
costs not specifically  incurred in the management  maintenance and operation of
the Project; (vii) executive salaries over the rank of building manager;  (viii)
Taxes;  (ix) management fees to the extent that they exceed amounts  customarily
charged to manage first-class office buildings in downtown Des Moines, Iowa; (x)
repairs,  restoration or other work to the Project occasioned by fire, windstorm
or other insured  casualty;  and (xi) any other expenses  which under  generally
accepted  accounting  principles  consistently  applied  would not be considered
Operating Expenses as permitted herein.

     (d)  "Tenant's  Proportionate  Share  of  Taxes"  shall  be the  percentage
determined  by dividing the square feet of Usable Area  contained in the Project
into the square feet of Usable Area contained in the Demised  Premises.  Tenants
Proportionate  Share  of Taxes  shall be  reduced  by  three  (3) full  years of
property  tax  abatement  the  Project  has,  or shall be,  granted  by the City
pursuant to Chapter 404, Code of Iowa (the "Tax Abatement Proceedings"),  or, in
the event the City does not grant to the Project such  property  tax  abatement,
Tenant's  Proportionate Share of Taxes shall nevertheless be reduced in a manner
as such would have been done had such tax abatement been provided. Upon the Term
Commencement Date,  Tenant's  Proportionate Share of Taxes shall be deemed to be
one hundred percent (100%). Tenant shall be responsible for the payment of Taxes
on the Demised  Premises  which would become due,  payable and delinquent if not
paid during the Term of this Lease. For example,  if the Term  Commencement Date
is after  September  30, 1997 but before  March 31,  1998,  Tenant shall pay all
those Taxes which would become due,  payable and delinquent if not paid by March
31,  1998.  The last  Taxes to be paid by Tenant  during  the Term of this Lease

                                       3

<PAGE>

shall be those Taxes which would become due,  payable and delinquent if not paid
by September 30 of the twentieth (20th) lease year of the Lease.

     (e) "Tax Year" shall mean any twelve month period  designated by applicable
taxing authorities as the basis for payment of Taxes, which includes any part of
the Term of this  Lease.  Currently,  the Tax Year begins on July 1 of each year
and ends on the following June 30.

     (f)  "Tenant' s  Proportionate  Share of Operating  Expenses"  shall be the
percentage  determined  by dividing the square feet of Usable Area  contained in
the  Building  into the square  feet of Usable  Area  contained  in the  Demised
Premises.  Upon the Term  Commencement  Date,  Tenant's  Proportionate  Share of
Operating Expenses shall be deemed to be one hundred percent (100%).

     (g)  "Additional   Rent"  shall   hereinbefore  and  hereinafter  mean  the
additional  amount  of  money  to be paid by  Tenant  to  Landlord  as  Tenant's
Proportionate  Share of Taxes  and  Tenant's  Proportionate  Share of  Operating
Expenses, as such terms are defined in Sections 5.1(d) and 5.1(f) above.

     (h)  "Toxic  or  Hazardous  Substances"  shall be  interpreted  broadly  to
include,  but not be limited to, any  material or  substance  that is defined or
classified  under federal,  state or local laws as: (a) a "hazardous  substance"
pursuant  to  Section   101  of  the   Comprehensive   Environmental   Response,
Compensation  and  Liability  Act,  42 U.S.C.  ss.9601(14),  Section  311 of the
Federal Water  Pollution  Contract Act, 33 U.S.C.  ss.1321,  as now or hereafter
amended; (b) a "hazardous waste" pursuant to Section 1004 or Section 3001 of the
Resource  Conservation and Recovery Act, 42 U.S.C. ss. 6903, 42 U.S.C.  ss.6921,
as now or hereafter  amended;  (c) a toxic pollutant under Section  307(l)(a) of
the  Federal  Water  Pollution  Control  Act,  33  U.S.C.  ss.1317(l)(a);  (d) a
"hazardous  air  pollutant"  under  Section  112 of the Clean Air Act, 42 U.S.C.
ss.741 2, as now or  hereafter  amended;  (e) a "hazardous  material"  under the
Hazardous Material Transportation Act, 49 U.S.C. ss.1802(2), as now or hereafter
amended;  (f)toxic or  hazardous  pursuant  to  regulations  promulgated  now or
hereafter  under the  aforementioned  laws;  or (g)  presenting  a risk to human
health or the environment under other applicable  federal,  state or local laws,
ordinances,  or  regulations,  as now or as may be passed or  promulgated in the
future. "Toxic or Hazardous Substances" shall also mean any substance that after
release  into  the  environment  and upon  exposure,  ingestion,  inhalation  or
assimilation,  either  directly  from the  environment  or directly by ingestion
through food  chains,  will or may  reasonably  be  anticipated  to cause death,
disease,  behavior  abnormalities,  cancer or genetic  abnormalities.  "Toxic or
Hazardous Substances"  specifically  includes,  but is not limited to, asbestos,
polychlorinated biphenyls (PCBs), petroleum and petroleum based derivatives, and
urea formaldehyde.

     5.2  Landlord  shall  pay or cause  to be paid,  before  due,  payable  and
delinquent,   all  Taxes.  From  the  Term  Commencement  Date,  and  thereafter
throughout  the Term,  Tenant  shall pay to  Landlord  as  Additional  Rent,  in
addition to the Base Rent  required in Article 4 of this Lease,  an amount equal
to  the  Taxes  payable  in any  Tax  Year.  Taxes  shall  be  paid  in  monthly
installments,  at the same  time and  place  as Base  Rent is to be paid,  in an
amount  estimated  from time to time by Landlord by a written  notice to Tenant.
Upon  receipt  by  Landlord  of a  statement  for Taxes  payable  in a Tax Year,
Landlord shall furnish  Tenant with a written  statement of the actual Taxes for
such Tax Year.  If the total amount paid by Tenant,  for any Tax Year during the
Term of this Lease,  is less than the actual  Taxes due from Tenant for such Tax
Year, as shown on such  statement,  Tenant shall pay the  deficiency to Landlord
within  fifteen  (15) days after demand  therefor by Landlord.  If, on the other
hand,  the total amount paid by Tenant for any Tax Year exceeds the actual Taxes
due from  Tenant  for such Tax  Year,  such  excess  shall be  credited  against
payments next due hereunder;  and, if no such payments are next due, such excess
shall be refunded  by  Landlord.  The amount of any refund of Taxes  received by
Landlord  shall be credited  against Taxes for the Tax Year in which such refund
is received.  In determining the amount of Taxes for any Tax Year, the amount of
special  assessments  to be  included  shall be  limited  to the  amount  of the
installment (plus any interest payable thereon) of such special assessment which
would have been  required to have been paid during such Tax Year if Landlord had
elected to have such  special  assessment  paid over the maximum  period of time
permitted by law.

                                       4

<PAGE>

     5.3 Tenant shall also pay to Landlord as rent, in addition to the Base Rent
required in Article 4 of this Lease, an amount (the `Operating  Expense Amount")
equal to the  Tenant's  Proportionate  Share of Operating  Expenses  incurred by
Landlord,  with respect to each Fiscal Year. The Operating  Expense Amount shall
be paid in monthly  installments,  at the same time and place as Base Rent is to
be paid, in an amount  reasonably  estimated  from time to time by Landlord by a
written  notice to Tenant.  Landlord  shall  cause to be kept books and  records
showing Operating  Expenses,  in accordance with generally  accepted  accounting
principles  consistently applied. As promptly as practicable following the close
of each Fiscal Year,  Landlord  shall cause the amount of the Operating  Expense
Amount  for such  Fiscal  Year to be  computed,  and shall  deliver  to Tenant a
statement of the Operating  Expense Amount;  and Tenant shall pay any deficiency
to Landlord as provided in Section 5.5 of this Lease.  If the total  amount paid
by Tenant during any Fiscal Year exceeds the actual Operating Expense Amount due
from Tenant for such Fiscal Year, such excess shall be credited against payments
next due hereunder;  and, if no such payments are next due, such excess shall be
refunded by Landlord.

     5.4 For any Fiscal  Year which  does not fall  entirely  within the Term of
this  Lease,  Tenant  shall be  obligated  to pay  only a pro rata  share of the
Operating  Expense Amount, as hereinabove  determined,  based upon the number of
days of the Term falling within the Fiscal Year in question.

     5.5 Within one hundred twenty (120) days after the end of each Fiscal Year,
Landlord shall provide Tenant with detailed financial  information and a written
statement  explaining the  computation  of Additional  Rent. In the event Tenant
desires  additional  information  with  respect to  specific  items of  expense,
amortization  or the  amounts  thereof,  Landlord  shall  provide  to Tenant all
information  and  documentation   relevant  to  those  specific  expense  items,
amortization  or the  amounts  thereof,  in order  that such  objections  can be
satisfied or otherwise resolved. Any deficiency in the amount of Additional Rent
shall be due and payable by Tenant  within  fifteen  (15) days after  Tenant has
accepted such statement.

                                    ARTICLE 6

                           IMPROVEMENTS AND POSSESSION

     6.1 Landlord  agrees at its sole  expense to proceed with due  diligence to
expediently  perform all necessary  on-site and off-site work in connection with
the  development  of the Site and  construct  or  cause  to be  constructed  the
Building,  as  anticipated  by the Request for Proposal for Tenant  submitted to
Landlord dated December 15, 1994 and the Development Proposal dated February 28,
1995 prepared for Tenant by Landlord,  as such is  supplemented by a Development
Presentation  dated April 10, 1995  prepared  for Tenant by Landlord  and letter
dated March 21, 1995 to Tenant from Landlord (collectively the "Proposal").  The
Site and the Building  (including the skywalk  bridge to the Building)  shall be
constructed  in accordance  with the terms and  conditions  of the Proposal,  as
modified by the mutual agreement of Landlord and Tenant, and as further modified
by the terms and conditions of this Lease, in a good and  workmanlike  manner as
soon as reasonably possible (in accordance with a development  schedule mutually
acceptable to Landlord and Tenant),  but, subject to Section 6.7 hereof,  in any
event complete the same prior to May 1, 1997.

     6.2 Tenant's  Improvements  (hereinbefore  and  hereinafter  referred to as
"Tenant's  Improvements")  shall include the construction of all improvements to
be made by  Tenant  to the  Demised  Premises  pursuant  to  Tenant's  plans and
specifications as hereinafter described. In order to facilitate the construction
of Tenant's  Improvements,  Landlord and Tenant will consult with each other and
use reasonable  efforts to coordinate their activities.  In this regard,  Tenant
shall have its architect  timely  prepare and deliver  plans and  specifications
(hereinafter   called   "Tenant's  Plans  and   Specifications")   for  Tenant's
Improvements  to be  constructed  to the Demised  Premises.  Tenant's  Plans and
Specifications shall be reasonably acceptable to Landlord. In the event Landlord
has not delivered reasonable  objections to Tenant's Plans and Specifications to
Tenant within thirty (30) days of its receipt from Tenant of Tenant's  Plans and
Specifications,  Landlord  shall be deemed to have approved  Tenant's  Plans and
Specifications and Tenant shall cause  construction of Tenant's  Improvements to
commence in  accordance  with a  development  schedule  mutually  acceptable  to
Landlord and Tenant.  Graham Construction  Company,  Des Moines,  Iowa, shall be

                                       5

<PAGE>

given the  non-exclusive  right to bid  Tenant's  Improvements  work;  provided,
however,  Tenant retains in its sole and absolute discretion the right to select
the party who shall  construct  Tenant's  Improvements.  The costs  incurred  by
Tenant for construction of the Tenant's  Improvements  shall be paid by Landlord
as a  reimbursement  to  Tenant,  provided  that the  total of such  costs to be
reimbursed  by Landlord  to Tenant  shall not exceed  Thirty and No/100  Dollars
($30.00)  per square  foot of Usable  Area in the  Demised  Premises  ("Tenant's
Improvement Allowance").  Landlord shall reimburse Tenant (but no more than once
a month) for the direct arid  actual  costs and  expenses  incurred by Tenant in
connection with construction of Tenant's Improvements. Should Tenant not use all
of Tenant's  Improvement  Allowance  as above  provided,  any unused  portion of
Tenant's Improvement  Allowance shall be paid to Tenant on the Term Commencement
Date of this Lease.  Tenant  shall  proceed with due  diligence  to  expediently
perform  all  of  the  work   associated   with  the   development  of  Tenant's
Improvements, but, subject to Section 6.7 hereof, in any event complete the same
prior to November 1, 1997.

     6.3 Landlord and Tenant agree, as to their respective  construction work to
be performed, to use reasonable efforts to perform or cause to be performed such
work  so as not to (i)  cause  any  increase  in the  cost of  constructing  the
Building or the Demised  Premises  (unless such cost is  reasonably  necessary),
(ii)  unreasonably  interfere with any construction  work being performed on the
Building or the Demised Premises, or (iii) unreasonably  interfere with the use,
occupancy or enjoyment of the Building or the Demised Premises.

     6.4 Landlord and Tenant  agree that all  construction  work to be performed
hereunder  by  either  shall  be done in a good  and  workmanlike  manner,  with
first-class  materials  and in  accordance  with  all  applicable  laws,  rules,
ordinances and regulations. Each shall pay all costs, expenses, and liabilities,
and  remove  all  liens,  arising  out of or in any way  connected  with its own
construction, except as otherwise expressly provided in this Lease.

     6.5 Landlord and Tenant as respects their  respective  construction,  shall
use reasonable  efforts to cause their respective  architects and contractors to
cooperate and  coordinate  construction  with the  architects,  contractors  and
construction  work of the other party to the extent reasonably  practicable,  to
achieve the objectives set forth in Section 6.3 above.

     6.6 Tenant may take possession of any part of the Demised Premises prior to
the Commencement  Date (which Tenant may do without the prior written consent of
Landlord)  for purposes of preparing  the Demised  Premises for the operation of
its  business,  and in such event  Tenant shall not be obligated to pay Landlord
Base  Rent or  Additional  Rent for the  period of such  occupancy  prior to the
Commencement Date for that portion of the Demised Premises so occupied.

     6.7 Notwithstanding anything to the contrary contained in Article 6 of this
Lease,  (a) if Landlord  shall be delayed or hindered in or  prevented  from the
performance of any act required  pursuant to this Article 6 by reason of acts of
God, strikes, lockouts, labor troubles,  inability to procure labor or material,
failure  of  power,  restrictive   governmental  laws  or  regulations,   riots,
insurrection,  war or other  reason of a like  nature not the fault of the party
delayed in performing  work or doing ads required under this Lease (such reasons
referred to collectively as "Force  Majeure"),  the period of the performance of
any such act shall be  extended  for a period  equivalent  to the period of such
delay but in no event beyond August 1, 1997; (b) if Landlord shall be delayed or
hindered in or prevented from the  performance  of any act required  pursuant to
this  Article 6  because  of Force  Majeure,  the time for  Tenant  to  complete
Tenant's  Improvements  shall be extended  by a like  number of days;  or (c) if
Tenant shall be delayed or hindered in or prevented from the  performance of any
of Tenant's Improvements because of an act of Force Majeure, the time for Tenant
to complete Tenant's  Improvements  shall be extended for a period equivalent to
the period of such delay but in no event beyond the later of February 1, 1998 or
ninety (90) days  following the date by which Landlord had to completes its acts
pursuant to tins section b. 1.

                                       6

<PAGE>

                                    ARTICLE 7

                                BUILDING SERVICES

     7.1 Landlord  shall provide the  following  services on all days during the
Term of this Lease, except as otherwise stated:

     (a)  Subject  to  all  governmental   rules,   regulations  and  guidelines
applicable  thereto,  heating and air conditioning  when necessary,  in Tenant's
reasonable judgment, for normal comfort in the Demised Premises.

     (b)  Electricity  for Tenant's  office use shall be available at all times.
After the Term Commencement Date, Tenant shall furnish and install,  or Landlord
shall  furnish  and  install at  Tenant's  request,  at  Tenant's  sole cost and
expense, all lighting,  tubes, lamps, bulbs and ballasts required in the Demised
Premises. In the event Landlord is required to furnish and install, Tenant shall
pay Landlord's reasonable charges therefor on demand.

     (c) City  water from  regular  Building  outlets  for  drinking,  lavatory,
restroom and kitchen purposes.

     (d)  Janitor  and  security  services  in and about the  Demised  Premises,
comparable to the standard janitor and security service furnished by other first
class City office buildings similar in construction,  general location,  use and
occupancy. Notwithstanding the above, Tenant may elect, in its sole and absolute
discretion, to provide janitor and/or security services in and about the Demised
Premises.

     (e) Passenger  elevator  service to be provided by operator less  automatic
elevators.

     (f) Freight elevator service.

     7.2 No  interruption  in, or temporary  stoppage  of, any of the  aforesaid
services  for a period of three (3) days or less,  caused by repairs,  renewals,
improvements,  alterations,  strikes,  lockouts,  labor controversy,  accidents,
inability to obtain fuel or  supplies,  or other  causes  beyond the  reasonable
control of Landlord,  shall be deemed an eviction or disturbance of Tenant's use
and possession,  or render Landlord liable for damages,  by abatement of rent or
otherwise, or relieve Tenant from any obligations under the terms of this Lease.
Notwithstanding  the above,  in the event of any  interruption  in, or temporary
stoppage of, any of the  aforesaid  services for a period of more than three (3)
days,  Base Rent and  Additional  Kent snail be abated until such  services have
been  restored;  provided,  further,  that in the  event  such  condition  shall
continue for a period of more than ninety (90) days,  then Tenant may  terminate
this Lease by giving written notice of such cancellation to Landlord.

     7.3 In connection with the development of the Building, Landlord represents
that  as of  the  Term  Commencement  Date  the  design  of the  Building  is in
compliance with the Model Energy Code,  Division 8 of the Iowa Building Code, as
adopted by the state  building code  commissioner  pursuant to the Code of Iowa,
Chapter 103A.7(6)(1995).

                                    ARTICLE 8

                              COMPLIANCE WITH LAWS

     8.1 Landlord  represents  and warrants to Tenant that the Project,  but for
Tenant's Improvements,  and its use as anticipated under this Lease comply fully
with (and no  notices  of  violation  have been  received  in  connection  with)
environmental,   air,  quality,  zoning,  flood  plain,  planning,  subdivision,
building,  health,  labor,  discrimination,  fire,  traffic,  safety,  and other
governmental or regulatory rules, regulations, laws, ordinances, statutes, codes
and  requirements  applicable  to the Project in which the Demised  Premises are
located (collectively,  the "Building Laws"), including, without limitation, the
Americans  with  Disabilities  Act of 1990,  42 U.S.C.  ss. -1 2213  (1991),  as
amended.  Landlord has received, or will receive, such final certificates as may
be required or customary and evidencing  compliance  with all building codes and
permits,  and  approval of full  occupancy  of the Demised  Premises  and of all
installations  therein.  Landlord shall cause the Project to be  continuously in
compliance  with all  Building  Laws (as the same may be  amended  from  time to
time).

     8.2 Landlord agrees to protect,  defend, indemnify and hold Tenant harmless
from and  against  all  liability  threatened  against or  suffered by Tenant by
reason of a breach by Landlord of the foregoing  representations  and warranties
contained in the preceding  Section 8.1. The foregoing  indemnity  shall include

                                       7

<PAGE>

the  cost  of  all   alterations  to  the  Project   (including   architectural,
engineering, legal and accounting costs), all fines, fees and penalties, and all
legal and other  expenses  (including  attorneys'  fees),  incurred by Tenant in
connection  with the Project being in violation of any Building Laws and for the
cost of collection of the sums due under the indemnity.

     8.3 Landlord represents and warrants to Tenant that: (i) Landlord is not in
violation of, or subject to, any existing,  pending or threatened  investigation
by any governmental  authority under any applicable federal, state or local law,
regulation  or ordinance  pertaining  to air and water  quality,  the  handling,
transportation,  storage,  treatment,  usage or disposal  of Toxic or  Hazardous
Substances,  air emissions, other environmental matters and all zoning and other
land use matters; (ii) any handling,  transportation,  storage, treatment or use
of Toxic or Hazardous  Substances that has occurred on the Site to date has been
in compliance with all applicable  federal,  state, and local laws,  regulations
and  ordinances;  and (iii) no leak,  spill,  release,  discharge,  emission  or
disposal of Toxic or Hazardous  Substances  has occurred on the Site to date and
the soil,  groundwater,  and soil  vapor on or under  the Site  shall be free of
Toxic or Hazardous Substances as of the Term Commencement Date.

     8.4 Landlord  agrees to  indemnify,  defend (with counsel  satisfactory  to
Tenant)  and hold Tenant and its  officers,  employees,  contractors  and agents
harmless  from any  claims,  judgments,  damages,  penalties,  fines,  expenses,
liabilities  or losses  arising  during or after the Lease Term out of or in any
way  relating  to the  presence,  release  or  disposal  of Toxic  or  Hazardous
Substances on or from the Project or the Demised Premises, or to a breach of the
environmental  warranties made by Landlord above,  unless the Toxic or Hazardous
Substances  are  present  solely  as a result  of the  actions  of  Tenant,  its
officers,  employees,  contractors  or agents.  Such  indemnity  shall  include,
without limitation, costs incurred in connection with:

     (a) Toxic or Hazardous Substances present or suspected to be present in the
soil,  groundwater or soil vapor on or under the Project or the Demised Premises
before  Tenant  occupies  the Project or the Demised  Premises or the Lease Term
commences; or

     (b) Toxic or Hazardous Substances that migrate,  flow, percolate,  diffuse,
or in any way move onto or under the  Project or the  Demised  Premises,  during
Tenant's occupancy of the Demised Premises after the Lease Term commences; or

     (c) Toxic or Hazardous  Substances present on or under the Demised Premises
as a result of any discharge,  dumping,  spilling (accidental or otherwise) onto
the Project or the Demised  Premises  during  Tenant's  occupancy of the Demised
Premises  or  after  the  Lease  Term  commences  by  any  person,  corporation,
partnership, or entity other than Tenant, its officers,  employees,  contractors
or agents.

     The  indemnification  provided  by this  Article 8 shall also  specifically
cover,  without limitation,  costs incurred in connection with any investigation
of Site  conditions  or any  cleanup,  remedial,  removal  or  restoration  work
required  by any  federal,  state  or local  governmental  agency  or  political
subdivision  or other third party because of the presence or suspected  presence
of Toxic or Hazardous Substances in the soil,  groundwater,  or soil vapor on or
under the  Project  or the  Demised  Premises,  unless  the  Toxic or  Hazardous
Substances  are  present  solely  as a result  of the  actions  of  Tenant,  its
officers,  employees,  contractors or agents. Such costs may include, but not be
limited to,  diminution  in the value of the Demised  Premises,  damages for the
loss or  restriction  on use of Usable  Area or of any  amenity  of the  Demised
Premises, sums paid in settlements of claims,  attorneys fees, consultants fees,
and expert fees.

                                       8

<PAGE>

     The  foregoing  environmental  indemnity  shall  survive the  expiration or
termination  of this Lease  and/or  any  transfer  of all or any  portion of the
Demised Premises,  or of any interest in this Lease.  Notwithstanding  any other
provision of this Lease,  Landlord shall be personally liable without limitation
on  recourse,   for  performance  of  its  obligations  under  this  Article  8.
Notwithstanding  anything in this Section 8.4 to the  contrary,  the presence of
Toxic or  Hazardous  Substances  on the Site or in the  Building  shall not give
Tenant the right to terminate this Lease or, subject to Article 26 hereof,  hold
back,  offset or fail to pay any  amounts  otherwise  due under this  Lease,  un
Tenant cannot legally occupy the Site or the Building; provided, however, Tenant
can  pursue  any other  right or remedy  provided  for  under  this  Lease or as
otherwise provided at law or in equity.

     8.5 Tenant represents and warrants that Tenant's  Improvements  comply with
Building Laws.

                                    ARTICLE 9

                                     REPAIRS

     9.1 Tenant  shall,  during the entire Term of this  Lease,  and at Tenant's
sole cost and expense, keep the Demised Premises in as good order, condition and
repair as they were at the time Tenant took  possession of the same,  reasonable
wear and tear,  damage from fire and other  casualties and repairs which are the
obligation of Landlord excepted.

     9.2 All repairs and  replacements  shall be of quality and class comparable
to the original work.

     9.3 Landlord,  its employees,  agents, or contractors,  after giving Tenant
reasonable  notice,  shall  have the right to enter  the  Demised  Premises,  at
reasonable times, for the purpose of inspection,  cleaning,  repairing, altering
or improving  the same;  however,  nothing  contained in this Article 9 shall be
construed as imposing  any duty on Landlord to make any repairs or  replacements
which are the obligation of Tenant

     9.4  Landlord  shall make all  necessary  repairs  and  maintenance  to the
exterior of the Building, doors, floors, lobby, windows, and all public areas of
the  Building.  Landlord  agrees that the Building will be maintained as a first
class office  building and that the Building and the balance of the Project will
be kept in a clean and neat  condition.  Landlord  shall  maintain  and keep all
Building  equipment  such as elevators,  plumbing,  heating,  air  conditioning,
electrical systems,  lighting,  and similar equipment in the Demised Premises in
good operating  condition and repair.  The cost of such repairs and  maintenance
incurred in connection with the proper management,  maintenance and operation of
the  Building  (including  any  skywalks  and  municipal  areas  related  to the
operation  of the  Building  and which  Landlord  is  required  to  operate  and
maintain)  shall be deemed  Operating  Expenses  to the extent  permitted  under
Section 5.1 of this Lease.

     9.5 Landlord  shall make all  reasonable  repairs and  replacements  to the
Building,  as necessary,  to interior walls and floors and to items which result
from any deficiencies or defects in their initial construction. Such repairs and
replacements  shall be at  Landlord's  sole  cost and  expense  and shall not be
deemed as  Operating  Expenses  under  Section  5.1 of this  Lease.  In addition
Landlord  shall provide for Tenant to be named as a third party  beneficiary  of
all contracts for  construction of  improvements to the Demised  Premises and of
the representations and warranties contained therein.

     9.6 Subject to the provisions of Section 11.3 of this Lease,  all damage or
injury to the Demised  Premises,  to the  furniture,  fixtures or  equipment  of
Tenant,  or  to  the  Building  caused  by  Landlord,  its  agents,   employees,
contractors or other invitees, due to negligence,  shall be repaired or replaced
promptly  by  Landlord,  at its sole  cost and  expense,  and  such  repairs  or
replacements shall not be deemed as Operating Expenses under Section 5.1 of this
Lease.

     9.7  Landlord  shall make,  at its sole cost and  expense,  any  structural
repairs to the  Building  such as repairs to the roof,  foundation  or  exterior
walls (structural repairs or repairs to exterior walls shall include windows and
doors) and any such  repairs  shall not be deemed as  Operating  Expenses  under
Section 5.1 of this Lease.

                                       9

<PAGE>

     9.8 If  Landlord  shall  fail to have  performed,  or to have  caused,  any
maintenance or repairs to the Demised  Premises  required to be made by Landlord
under this Lease (i) within  thirty (30) days after  written  notice  thereof by
Tenant to Landlord,  or (ii) if such repair cannot with all reasonable diligence
be completed within such thirty (30) day period,  and Landlord has not commenced
repair  within  such thirty (30) day period and  thereafter  proceeded  with all
reasonably  diligence,  Tenant may, but is not required to, make such repairs as
are  necessary.  In the event of an  emergency  which will  cause  damage to the
Demised  Premises,  and if it shall  become  necessary  to  promptly  make  such
emergency  repairs before  written notice can be given to Landlord,  Tenant may,
but is not required to, make such emergency  repairs as are necessary,  provided
Tenant at the very least notify in person or by telephone the management  office
of the Landlord prior to making such repairs.  Tenant may recover the reasonable
cost of any repairs made by it.

     9.9  Tenant  may,  at its  sole  cost and  expense,  make  all  repairs  or
replacements  to the  interior  of the  Demised  Premises  as  Tenant  may  deem
desirable or necessary in the conduct of its business;  provided,  however, that
without the prior written  consent of Landlord,  which shall not be unreasonably
withheld,  Tenant shall have no right to make or cause to be made any repairs or
replacements which shall affect or impair the structural  integrity or soundness
of the Building,  including,  without limitation, any repairs or replacements to
the floor slab,  load bearing  walls,  entrances  and showcase  windows  (except
repairs to such windows and entrances) of the Demised  Premises,  or any utility
systems running through the Demised  Premises;  and provided  further,  however,
that  any  alterations  permitted  hereunder  and  made by  Tenant  shall  be in
accordance with the requirements of law and local regulations and performed in a
good and workmanlike manner.

                                   ARTICLE 10

                            ALTERATIONS AND ADDITIONS

     10.1  Tenant  shall  not  make,  as  a  single  project,  any  alterations,
improvements or additions to the Demised Premises which will result in a cost of
more than Four Hundred  Thousand and No/100  Dollars  ($400,000.00)  without the
prior  written  consent of Landlord,  which  consent  shall not be  unreasonably
withheld. In the event a single project is undertaken by Tenant where Landlord's
consent is required,  Landlord  may require  Tenant to furnish it with plans and
specifications,  names  and  addresses  of  contractors,  copies  of  contracts,
necessary permits and licenses,  and an  indemnification in such form and amount
as may be reasonably  required by Landlord to guarantee the full  performance of
the work and the full payment of all labor and materials furnished for the work.

     10.2 Tenant will carry and will cause its contractors and subcontractors to
carry such workmen's compensation,  general liability, and personal and property
damage insurance as Landlord may reasonably require.

     10.3 All such work shall be done in a good and workmanlike manner.

     10.4  Tenant  shall  pay all costs and  expenses  of any such  alterations,
improvements  or  additions,  and upon  completion  shall furnish  Landlord,  at
Landlord's request, with evidence,  satisfactory to Landlord,  that full payment
has been made  therefor,  or Tenant may furnish  Landlord with  mechanic's  lien
waivers for all labor and materials so furnished.

     10.5 If any  mechanic  lien is filed  against the  Demised  Premises or the
Building  for  labor or  materials  furnished  to  Tenant  for any  alterations,
improvements or additions,  whether or not done pursuant to this Article 10, the
same shall be  discharged  by Tenant  within  thirty  (30) days  thereafter,  at
Tenant's  expense.  If such lien is not discharged and removed by payment or the
filing of a bond, as provided by law,  within said thirty (30) day period,  then
Landlord shall have the right, but no obligation,  to secure such discharge; and
Tenant  shall  reimburse  Landlord,  upon  demand,  for all costs  and  expenses
incurred by Landlord in connection with securing such discharge.

                                       10

<PAGE>

     10.6 At the termination of this Lease,  by lapse of time or otherwise,  all
alterations,  improvements and additions to the Demised Premises shall belong to
Landlord,  without any payment therefor. Tenant shall have the right at any time
or times while this Lease is in effect,  to remove all of its trade fixtures and
equipment;  however,  Tenant shall be responsible  for all damage to the Demised
Premises caused by such removal.  Notwithstanding  anything in this Lease to the
contrary,  at the  termination  of this  Lease,  by lapse of time or  otherwise,
Tenant may remove all  plaques in the  Building,  plus other  marks,  emblems or
symbols  containing  the  word  "Equitable",  "Hubbell",  "USG",  or any  entity
affiliated  with  Tenant,  which  are  attached  to or a part  of the  Building;
however,  Tenant shall be responsible  for all damage to the Building  caused by
such removal and the cost of refurbishment caused by such removal.

                                   ARTICLE 11

                                    INSURANCE

     11.1 (a) Landlord  shall carry public  liability  insurance on the Project,
naming the Tenant as an additional  insured and  providing  coverage of not less
than  $5,000,000.00  against  liability for bodily injury,  including death, and
personal injury for any one (1) occurrence,  and  $1,000,000.00  property damage
insurance,  or combined single limit  insurance in the amount of  $5,000,000.00,
and will include contractual liability coverage recognizing this Lease, products
and/or completed  operations  liability.  Any such policy will also provide that
Landlord and Tenant shall be given a minimum of ten (10) days written  notice by
the  insurance  company  prior to  cancellation,  termination  or change in such
insurance.

     (b) Prior to commencement of Landlord's work and until completion  thereof,
Landlord shall effect and maintain  Builders Risk Insurance  covering  Landlord,
Landlord's mortgagee, Tenant, and Landlord's contractors and subcontractors,  as
their  interest  may  appear,  against  loss or  damage by fire,  vandalism  and
malicious  mischief  and  such  other  risks  as are  customarily  covered  by a
so-called  "All-Risk"  policy of  insurance  (including  but not  limited to the
perils covered by standard Fire and Extended Coverage Insurance),  of Landlord's
work and all  materials,  equipment,  supplies and  temporary  structures of all
kinds  incidental to Landlord's work and equipment,  all while forming a part of
or  contained in such  improvements  or  temporary  structures,  or while on the
Demised Premises or within 100 feet thereof, or when adjacent thereto,  while on
sidewalks,  streets or alleys,  all to the full 100% insurable  value thereof at
all times on a  completed  value  basis.  Landlord  further  agrees to carry (1)
Workers'  Compensation and Occupational Disease Insurance in accordance with the
laws of the State of Iowa, including Employers' Liability Insurance to the limit
of  $500,000.00,   and  (2)  Comprehensive   Insurance,   including  "non-owned"
automobiles,  against bodily injury, including death resulting therefrom, in the
limits of $1,000,000.00  for any one occurrence and $250,000.00  property damage
or a combined  single limit of  $1,000,000.00.  In addition,  Landlord agrees to
indemnify  and hold  Tenant  harmless  against  any and all claims for injury to
persons or damage to property by reason of the use of the Demised  Premises  for
the  performance  of Landlord's  work,  and claims arising out of any failure of
Landlord  or its  agents,  contractors  and  employees  to comply  with any law,
ordinance,  code  requirement,  regulations or other  requirement  applicable to
Landlord's work,  including  reasonable  attorneys' fees arising from all of the
foregoing  claims.  Landlord  further  agrees to  require  all  contractors  and
subcontractors  engaged  in the  performance  of  Landlord's  work to effect and
maintain  existence  of, and naming Tenant as an  additional  insured,  prior to
commencement  of Landlord's  work and until  completion  thereof,  the following
insurance coverages

        (i)  Workers'  Compensation and Occupational Disease Insurance in
accordance with the laws of the State of Iowa,  including Employer's Liability
Insurance to the limit of $500,000.00.

        (ii) Comprehensive  General  Liability  Insurance,  excluding
"Automobile Liability"  against bodily injury,  including  death  resulting
therefrom,  and personal  injury  in the  limits of  $5,000,000.00  for any one
occurrence  and property  damage in the  limits of  $1,000,000.00  for any one
occurrence  or a combined single limit policy of $5,000,000.00 per occurrence.

      (iii)  Comprehensive   Automobile  Insurance,   including  "non-owned"
automobiles, against bodily injury, including death resulting therefrom, in
the limits of $1,000,000.00 for any one occurrence and $250,000.00 property
damage or a combined single limit of $1,000,000.00.

                                       11

<PAGE>

     (c) Landlord shall carry insurance  which covers the Building  against fire
and such other  risks as are from time to time  included  in all  "All-Risk"  or
so-called  "All-Risk"  policy of  insurance,  including  but not  limited to the
perils covered by standard Fire and Extended Coverage Insurance, for 100% of the
replacement cost, of the Building, and naming Tenant and Landlord's mortgagee as
additional insureds.

     (d)  Landlord  shall  provide  Tenant  with  certificates  or, at  Tenant's
request,  copies of the  policies,  evidencing  that such  insurance as required
herein is in full force and effect and stating the terms thereof. Landlord shall
deliver in every  instance  during the Lease Term a certificate  of insurance to
Tenant at least thirty (30) days prior to the time it is obligated to effect and
maintain  the  insurance   required  herein  and  thereafter   shall  deliver  a
certificate  of insurance at least thirty (30) days prior to the  expiration  of
any said policy or policies.

     11.2 (a) Tenant  shall  carry  public  liability  insurance  on the Demised
Premises, naming the Landlord as an additional insured and providing coverage of
not less than  $5,000,000.00  for bodily injury,  including  death, and personal
injury for any one (1) occurrence,  and $1,000,000.00 property damage insurance,
or a combined  single  limit in the amount of  $5,000,000.00,  and will  include
contractual liability coverage recognizing this Lease, products and/or completed
operations liability. Any such policy will also provide that Landlord and Tenant
shall be given a minimum of thirty  (30) days  written  notice by the  insurance
company prior to cancellation, termination or change in such insurance.

     (b) Prior to  commencement of Tenant's work and until  completion  thereof,
Tenant  shall  effect and  maintain  Builder's  Risk  Insurance  (if required in
writing  by  Landlord's  mortgagee)  covering  Landlord,  Landlord's  mortgagee,
Tenant, Tenant's contractors and Tenant's subcontractors,  as their interest may
appear,  against loss or damage by fire,  vandalism and  malicious  mischief and
such other risks as are customarily covered by a so-called  "All-Risk" policy of
insurance  (including but not limited to the perils covered by standard Fire and
Extended Coverage Insurance),  of Tenant's work and Tenant's  Improvements,  and
all  materials,  equipment,  supplies  and  temporary  structures  of all  kinds
incidental to Tenant's work,  Tenant's  Improvements  and  equipment,  all while
forming a part of or contained in such improvements or temporary structures,  or
while on the  Demised  Premises  or within 100 feet  thereof,  or when  adjacent
hereto,  while on sidewalks,  streets or alleys,  all to the full 100% insurable
value thereof at all times on a completed value basis.  Tenant further agrees to
carry (1) Workers' Compensation and Occupational Disease Insurance in accordance
with the laws of the State of Iowa,  including Employer's Liability Insurance of
the limit of $500,000.00, and (2) Comprehensive Insurance; including "non-owned"
automobiles,  against bodily injury, including death resulting therefrom, in the
limits of $1,000,000.00  for any one occurrence and $250,000.00  property damage
or a combined single limit of $1,000,000.00, each such policy naming Landlord as
an additional  insured.  Tenant shall deliver in every instance during the Lease
Term a  certificate  of insurance to Landlord at least thirty (30) days prior to
the time it is obligated to effect and maintain  the  insurance  required  under
this  grammatical  paragraph  and  thereafter  shall  deliver a  certificate  of
insurance at least thirty (30) days prior to the  expiration  of any said policy
or policies. In addition,  Tenant agrees to indemnify and hold Landlord harmless
against any and all claims for injury to persons or damage to property by reason
of the use of the Demised  Premises for the  performance  of Tenant's  work, and
claims  arising  out of any  failure of Tenant or its  agents,  contractors  and
employees to comply with any law,  ordinance,  code requirement,  regulations or
other  requirement  applicable  to  Tenant's  work  and  Tenant's  Improvements,
including  reasonable  attorneys' fees arising from all of the foregoing claims.
Tenant further agrees to require all contractors and  subcontractors  engaged in
the performance of Tenant's work to effect and maintain existence of, and naming
Landlord as an additional  insured,  prior to  commencement of Tenant's Work and
until completion thereof, the following insurance coverages:

          (i)  Workers'  Compensation  and  Occupational  Disease  Insurance  in
accordance  with the laws of the State in which the  property  is  located,
including Employer's Liability Insurance to the limit of $500,000.00.

                                       12

<PAGE>

          (ii) Comprehensive General Liability Insurance,  excluding "Automobile
Liability" against bodily injury,  including death resulting therefrom, and
personal injury in the limits of  $3,000,000.00  for any one occurrence and
property damage in the limits of $1,000,000.00  for any one occurrence or a
combined single limit policy of $5,000,000.00 per occurrence.

        (iii)  Comprehensive   Automobile  Insurance,   including  "non-owned"
automobiles, against bodily injury, including death resulting therefrom, in
the limits of $1,000,000.00 for any one occurrence and $250,000.00 property
damage or a combined single limit of $1,000,000.00.

     (c) Landlord shall have no liability to insure Tenant's  personal  property
and  trade  fixtures  in the  Demised  Premises.  Any such  insurance  policy or
policies  carried by Tenant on its personal  property and trade  fixtures  shall
contain an endorsement by which the insurer agrees to waive subrogation  against
Landlord and its agents and  employees  with respect to any loss covered by such
insurance.  Tenant hereby releases  Landlord and its agents and employees,  from
all  liability  for property  damage from fire or other  casualty to the Demised
Premises, whether the same is caused by negligence of Landlord or Tenant, and no
insurer  shall be  subrogated  to any rights  against  Landlord  or Tenant  with
respect to such damage.

     (d) Tenant shall  provide  Landlord  with  certificates  or, at  Landlord's
request,  copies of the  policies,  evidencing  that such  insurance as required
herein is in full force and effect and stating the terms  thereof.  Tenant shall
deliver in every  instance  during the Lease Term a certificate  of insurance to
Landlord at least  thirty (30) days prior to the time it is  obligated to effect
and  maintain the  insurance  required  herein and  thereafter  shall  deliver a
certificate  of insurance at least thirty (30) days prior to the  expiration  of
any said policy or policies.  Any insurance  coverage  required of Tenant herein
may be provided under a blanket policy or policies maintained by Tenant covering
other premises, property or assureds, in addition to the Demised Premises.

     11.3 Landlord and Tenant and all parties  (including without limitation any
insurer issuing policies to Landlord and Tenant)  claiming under them,  mutually
release and discharge each other from all claims and liabilities arising from or
caused by any casualty or hazard covered or required  hereunder to be covered in
whole  or  in  part  by  insurance   on  the  Building  and  Demised   Premises,
respectively,  or in connection with property on or activities  conducted on the
Building or Demised Premises,  respectively,  and waive any right of subrogation
which  might  otherwise  exist in or accrue to any  person on  account  thereof,
provided  that such release shall not operate in any case where the effect is to
invalidate or increase the cost of such insurance  coverage;  provided,  that in
the case of  increased  cost,  the other party shall have the right (but not the
obligation),  within  thirty (30) days  following  written  notice,  to pay such
increased  cost,  thereby  keeping  such  release  and  waiver in full force and
effect.

     11.4 Tenant and Landlord  will not do or suffer to be done  anything  which
will  contravene  the  others  insurance  policies  or  prevent  the other  from
procuring such policies,  as such policies are required by the terms herein.  If
anything  done,  omitted to be done or suffered to be done by Tenant in, upon or
about the Demised  Premises  shall cause the rates of any insurance  effected or
carried by Landlord on the Demised  Premises or other  property to be  increased
beyond the regular rate from time to time applicable to the Demised Premises for
use for the purpose  permitted  under this Lease, or such other property for the
use or uses made thereof,  Tenant will pay the amount of such increase  promptly
upon Landlord's  demand. If anything done,  omitted to be done or suffered to be
done by  Landlord  in,  upon or about the  Project  shall cause the rates of any
insurance  effected  or  carried  by Tenant  on the  Demised  Premises  or other
property to be increased beyond the regular rate from time to time applicable to
the Demised Premises for use for the purpose permitted under this Lease, or such
other property for the use or uses made thereof, Landlord will pay the amount of
such increase promptly upon Tenant's demand.

                                       13

<PAGE>

     11.5 Tenant shall  indemnify and hold Landlord  harmless from any liability
for damages,  claims,  judgments,  liabilities,  loss, suits,  interest,  fines,
penalties,  costs and  expense,  including  reasonable  attorneys'  fees (herein
collectively  "Claims")  because  of  personal  injury or death to any person or
damage or destruction to property arising out of the use, occupancy,  management
and  control  of  the  Demised  Premises  or  Tenant's  operations,  conduct  or
activities  in  connection  with the Project by Tenant or by any other person or
persons  holding under Tenant or its agents,  employees,  contractors,  tenants,
licensees and  concessionaires,  excepting,  however,  Claims as may result from
injuries  or damage  caused by act or neglect  of  Landlord,  or its  employees,
agents,  licensees,  contractors,  subtenants,  licensees  and  concessionaires.
Landlord shall indemnity, defend and hold Tenant harmless from any liability for
Claims  because  of  personal  injury  or  death  to any  person  or  damage  or
destruction to property arising out of use, occupancy, management and control of
the Building or Landlord's operations,  conduct or activities in connection with
the Project by Landlord or by any other person or persons holding under Landlord
or its agents, employees,  contractors,  tenants, licensees and concessionaires,
excepting,  however,  Claims as may result from injuries or damage caused by act
or  neglect  of  Tenant,  or  its  employees,   agents,  employees  contractors,
subtenants, licensees and concessionaires.

                                   ARTICLE 12

                        DAMAGE BY FIRE OR OTHER CASUALTY

     12.1 Tenant shall give immediate written notice to Landlord of any material
damage to the Demised  Premises  caused by fire or other  casualty;  and, within
thirty (30) days after  Landlord  receives such written  notice,  Landlord shall
determine  whether the  Demised  Premises is  reasonably  repairable  within two
hundred  seventy (270) days after the occurrence of such fire or other casualty.
In the event such  rebuilding,  restoration  or repair of the  Demised  Premises
cannot  reasonably be expected to be completed  within two hundred seventy (270)
days  after the  occurrence  of such fire or other  casualty,  then  Tenant  may
terminate this Lease by giving written notice of such  cancellation  to Landlord
within  fifteen (15) days after  Landlord  has given Tenant the above  described
notice with respect to how long it is anticipated to rebuild,  restore or repair
the Demised Premises. Landlord shall, if Tenant does not elect to terminate this
Lease as above provided,  proceed with reasonable diligence and at its sole cost
and  expense to rebuild,  restore and repair the Demised  Premises to the extent
reasonably  possible to their original  condition.  Landlord shall have no duty,
however, to rebuild, restore or repair any portion of the alterations, additions
or improvements made by Tenant to the Demised Premises pursuant to Article 10 of
this Lease. If Tenant wants any other or additional repairs or restoration,  and
if Landlord consents thereto,  which consent shall not be unreasonably withheld,
the same shall be done at Tenant's  expense,  subject to all the  provisions  of
Article 10 of this Lease.  Notwithstanding  the foregoing,  if any such casualty
loss occurs  within the last two (2) years of the Term or of any  renewal  term,
Landlord shall be under no obligation to rebuild,  restore or repair the Demised
Premises,  in which case this Lease shall  terminate at Landlord's  option,  and
Landlord  shall  receive  the  proceeds  of any  insurance,  exclusive  of  such
insurance proceeds assigned to that portion of the cost of Tenant's Improvements
and repairs or replacements to the Demised  Premises which exceeded the Tenant's
Improvement  Allowance  provided by Landlord to Tenant  pursuant to the terms of
this Lease, unless such casualty loss occurs at a time when Tenant possesses the
right or option to  extend  or renew  the Term of this  Lease for an  additional
period so at least five (5) years remain on the Term and Tenant  exercises  said
option to extend the Term of this Lease within  fifteen (15) days of its receipt
of notice from Landlord of Landlord's intention to terminate this Lease.

     12.2 During the period from the occurrence of a casualty  until  Landlord's
repairs are completed or this Lease is terminated, Base Rent and Additional Rent
shall be reduced  and abated in  proportion  to the amount of Usable Area of the
Demised Premises which is rendered  untenantable as the result of such casualty.
Notwithstanding the above, if an occurrence of the character referred to in this
Article 12 shall affect all or a substantial portion of the Demised Premises and
in Tenant's reasonable discretion render the Demised Premises unsuitable for the
purposes leased,  Base Rent and Additional Rent shall be fully abated during any
applicable rebuilding, restoration or repair of the Demised Premises.


                                       14

<PAGE>

                                   ARTICLE 13

                                 EMINENT DOMAIN

     13.1 If the whole of the Demised  Premises  or  Building,  or such  portion
thereof as will make the  Demised  Premises in  Tenant's  reasonable  discretion
unsuitable for the purposes  leased,  is condemned for any public use or purpose
by any legally constituted authority, then, in either of such events, this Lease
shall terminate as of the time of taking possession by such public authority and
all Base Rent and  Additional  Rent shall be accounted  for between the Landlord
and Tenant as of the date of the surrender of possession;  and Tenant shall have
no right to participate in any condemnation award or purchase price so received.
Nothing herein contained,  however, shall prevent or bar Tenant from seeking its
own award or damages for loss of or damage to  Tenant's  business or its repairs
or replacements, improvements or additions made to the Demised Premises pursuant
to this  Lease,  resulting  from such taking or  purchase.  If this Lease is not
terminated  because only a portion of the Demised Premises is taken or otherwise
acquired,  then the Base Rent and Additional Rent shall be adjusted according to
the nature and extent of the property taken or otherwise  acquired,  which shall
be Tenant's sole remedy for such taking; and Landlord shall make all alterations
and repairs to restore the Demised Premises to an extent reasonably  possible to
their original  condition.  Notwithstanding  the above,  if an occurrence of the
character  referred  to in this  Article 13 shall  affect  all or a  substantial
portion of the Demised Premises and in Tenant's reasonable discretion render the
Demised Premises  unsuitable for the purposes  leased,  Base Rent and Additional
Rent shall be fully abated  during any  applicable  rebuilding,  restoration  or
repair of the  Demised  Premises.  In  addition  to the above,  Tenant  shall be
entitled  to the  value  assigned  to  that  portion  of the  cost  of  Tenant's
Improvements  and repairs or replacements to the Demised Premises which exceeded
the Tenant's  Improvement  Allowance  provided by Landlord to Tenant pursuant to
the terms of this Lease.

     13.2 Notwithstanding the foregoing, if this Lease is not terminated because
only a portion of the Demised  Premises is taken, but such taking or acquisition
occurs within the last five (5) years of the Term or any renewal term,  Landlord
shall be under no obligation to rebuild, restore or repair the Demised Premises,
in which case this Lease  shall  terminate  at  Landlord's  option,  unless such
taking or  acquisition  occurs at a time when Tenant possess the right or option
to renew the Term of this  Lease for an  additional  period so at least five (5)
years remain on the Term and Tenant  exercises said option to extend the Term of
this Lease within  fifteen  (15) days of the receipt of notice from  Landlord of
Landlord's intention to terminate this Lease.

                                   ARTICLE 14

                                   BANKRUPTCY

     14.1 Neither this Lease,  nor any interest  therein,  nor any estate hereby
created  shall pass to any trustee or  receiver  or assignee  for the benefit of
creditors of Tenant or otherwise by operation of law.  Notwithstanding  anything
to the contrary contained in this Lease, if during the Lease Term (a) the estate
hereby  created shall be taken in execution or otherwise by operation of law, or
(b) if Tenant shall make an assignment  for the benefit of  creditors,  or shall
file a voluntary  petition in  bankruptcy,  or shall be  adjudged  insolvent  or
bankrupt  pursuant  to the  provisions  of any state or  federal  insolvency  or
bankruptcy law, or if a receiver of the property of Tenant shall be appointed by
reason  of  Tenant's  insolvency  or  inability  to  pay  its  debts,  and  such
proceeding,  event or occurrence is not removed or dismissed  within one hundred
twenty (120) days after it was begun,  then in any of said events  Landlord may,
at its option upon giving fifteen (15) days' written notice to Tenant, terminate
this Lease immediately and all rights to Tenant hereunder, and Tenant shall then
surrender the Demised Premises to Landlord.  Notwithstanding  anything contained
herein to the contrary, in the event Tenant or the trustee in bankruptcy assumes
the Lease under the Bankruptcy Code, as hereinafter  defined,  it is agreed that
for the purpose of assigning  Tenant's interest hereunder to any other person or
entity,  such  interest may be assigned  only after the  trustee,  Tenant or the
proposed assignee have complied with all of the terms,  covenants and conditions
of this Lease,  including,  without limitation,  those with respect to Base Rent
and  Additional  Rent and the use of the Demised  Premises as permitted  herein,
Landlord and Tenant  acknowledge  that such terms,  covenants and conditions are
commercially reasonable in the context of a bankruptcy proceeding of Tenant. Any
person or entity to which the Lease is assigned  pursuant to the  provisions  of
the Bankruptcy  Code shall be deemed without further act or deed to have assumed
all of the  obligations  arising  under this Lease on and after the date of such
assignment. Any such assignee shall upon request execute and deliver to Landlord
an instrument confirming such assignment.

                                       15

<PAGE>

     14.2 Landlord  shall  promptly  after  obtaining  knowledge  thereof notify
Tenant of any  filing  by or  against  Landlord  of a  petition  under 11 U.S.C.
Section 101 et seq ("Bankruptcy Code"). If the Landlord,  or a trustee appointed
under the  Bankruptcy  Code,  rejects this Lease and (i) if the rejection by the
Landlord/trustee  amounts to such a breach as would entitle Tenant to treat this
Lease as terminated by virtue of its terms, applicable nonbankruptcy law, or any
agreement made by the Tenant,  then Tenant may treat this Lease as terminated by
the  rejection;  or (ii) if the Term of this  Lease has  commenced,  Tenant  may
retain its rights under this Lease  (including but not limited to rights such as
those  relating to the amount and timing of payment of Base Rent and  Additional
Rent and other amounts payable by Tenant and any right of use, possession, quiet
enjoyment,  subletting,  assignment or hypothecation) that are in or appurtenant
to the  Demised  Premises  for the balance of the Term of this Lease and for any
renewal  or  extension  of such  rights  to the  extent  that  such  rights  are
enforceable  under  applicable  nonbankruptcy  law.  If the Tenant  retains  its
rights,  Tenant may offset  against the Base Rent and  Additional  Rent reserved
under this Lease for the balance of the Term after the date of the  rejection of
this Lease and for the Term of any renewal or extension of this Lease, the value
of any damage caused by the nonperformance after the date of such rejection,  of
any obligation of the Landlord  under this Lease,  but the Tenant shall not have
any other  right  against  the  Landlord  or its estate on account of any damage
occurring after such date caused by such  nonperformance.  The rejection of this
Lease by the  Landlord  with  respect to which the  Tenant  elects to retain its
rights does not affect the enforceability under applicable  nonbankruptcy law of
any provision in this Lease pertaining to radius, location, use, exclusivity, or
tenant  mix or  balance.  Tenant  shall  have all the  rights of a Tenant  under
applicable Iowa law and the Bankruptcy Code and the parties agree that after the
closing  of the  Bankruptcy  Code  case,  the law for the  State of Iowa and the
Bankruptcy Code shall continue to control.

                                   ARTICLE 15

                                    DEFAULTS

     15.1 Tenant shall be in default under this Lease if (A)(i) default shall be
made in the  payment  of the Base  Rent or  Additional  Rent or any  installment
thereof or in the payment of any other sum  required to be paid by Tenant  under
this Lease and such  default  shall  continue  for five (5) days  after  written
notice from Landlord to Tenant, or (ii) except as otherwise  provided in Article
14, if default  shall be made in the  observance  or  performance  of any of the
other  covenants or conditions in this Lease which Tenant is required to observe
and perform and such default  shall  continue for thirty (30) days after written
notice from  Landlord to Tenant (or if such default does not involve the payment
of money and is not  susceptible  of cure within such thirty (30) day period but
is  susceptible of cure within a reasonable  time,  such period of time shall be
extended for the length of time that Tenant takes to cure such default  provided
that  Tenant  commences  such  cure  within  such  thirty  (30) day  period  and
prosecutes the same to completion with diligence),  and (B) a court of competent
jurisdiction  determines  that  Tenant  failed to perform or observe  such term,
condition,  provision  or  agreement  binding upon it under this Lease and after
such  final  determination  Tenant  fails to cure such  default  within the cure
period  provided in (A)(i) or (ii) above.  In such event  Landlord may treat the
occurrence of any one or more of the foregoing events as a breach of this Lease,
and thereupon at its option may, with or without notice or demand of any kind to
Tenant  or any other  person,  have any one or more of the  following  described
remedies  in  addition to all other  rights and  remedies  provided at law or in
equity or elsewhere herein:

             (i) Landlord may terminate this Lease and the Term created hereby,
in which event Landlord may forthwith  repossess the Demised  Premises and be
entitled to recover  forthwith  as damages a sum of money equal to the excess of
the present value of the Base Rent and Additional Rent provided to be paid by
Tenant for the balance of the Term of this  Lease,  over the  present  value of
the fair market rental  value of the Demised  Premises  for said  period,  plus
any other sum of money and damages  owed by Tenant to  Landlord.  Should the
fair  market  rental value exceed the value of the Base Rent and Additional
Rent provided to be paid by Tenant for the  balance  of the Term of this  Lease,
Landlord  shall have no obligation to pay Tenant the excess or any part thereof.

                                       16

<PAGE>

             (ii) Landlord may terminate  Tenant's right of possession and may
repossess the Demised  Premises by forcible entry and detainer suit, or by
taking peaceful possession or otherwise, without terminating this Lease, in
which event Landlord shall make reasonable  efforts to relet the Demised
Premises for the account of Tenant,  for such rent and upon such terms and
conditions as shall be reasonably satisfactory  to  Landlord.  For the  purpose
of such  reletting,  Landlord  is authorized to redecorate and to make any
necessary  alterations and repairs. For the period that Landlord is unable to
relet the Demised  Premises,  Tenant shall continue to pay to Landlord,  as
damages,  a sum equal to the amount of the Base Rent and  Additional  Rent
provided to be paid by Tenant for the balance of the Term of this Lease. If the
Demised Premises are relet and a sufficient sum shall not be realized from such
reletting,  after paying all of the costs of any such redecoration,  alterations
and repairs,  and the expenses of such reletting,  to satisfy the payment of the
Base Rent and Additional  Rent provided to be paid by Tenant for the balance of
the Term of this Lease,  Tenant shall  satisfy and pay any such  deficiency
upon written demand from Landlord to Tenant  therefor from time to time.  Tenant
agrees  that  Landlord  may file suit to recover any sums falling  due under the
terms of this  Article  15 from time to time and that no suit or recovery of any
portion due Landlord  hereunder  shall be any defense to any subsequent action
brought for any amount not theretofore reduced to judgment in favor of Landlord.

     15.2  Landlord  shall be in  default  under  this  Lease if (A)(i)  any sum
payable by Landlord to Tenant  hereunder  shall not be paid within five (5) days
after  written  notice  from  Tenant to  Landlord,  (ii) or except as  otherwise
provided  in  Article  14,  if  default  shall  be  made  in the  observance  or
performance  of any of the other  covenants  or  conditions  in this Lease which
Landlord is required to observe and perform and such default shall  continue for
thirty  (30) days after  written  notice  from  Tenant to  Landlord  (or if such
default  does not involve the  payment of money and is not  susceptible  of cure
within  such  thirty  (30)  day  period  but is  susceptible  of cure  within  a
reasonable  time,  such period of time shall be extended  for the length of time
that Landlord takes to cure such default  provided that Landlord  commences such
cure within such thirty (30) day period and  prosecutes  the same to  completion
with  diligence),  and (B) a court of  competent  jurisdiction  determines  that
Landlord  failed to perform  or  observe  such  term,  condition,  provision  or
agreement  binding  upon it under this Lease and after such final  determination
Landlord fails to cure such default within the cure period provided in (A)(i) or
(ii) above.  In such event Tenant may treat the occurrence of any one or more of
the foregoing events as a breach of this Lease, and thereupon at its option may,
with or without  notice or demand of any kind to Landlord  or any other  person,
exercise any remedies  available to Tenant at law or in equity.  Notwithstanding
anything  in this Lease to the  contrary,  in the event  Landlord  is in default
under the terms and conditions of Article 25 hereof,  Tenant shall have no right
to hold back,  offset or fail to pay any amounts  otherwise due under this Lease
because of such  default;  however,  Tenant at its option  may,  with or without
notice or demand of any kind to Landlord or any other person, exercise any other
remedies available to Tenant at law or in equity.

                                   ARTICLE 16

                            ASSIGNMENT AND SUBLETTING

     16.1  Tenant  may  transfer  or assign  this  Lease or sublet  the  Demised
Premises,  or any part thereof,  by voluntary act,  operation of law (subject to
Section 14.1), or otherwise,  without the prior written consent of Landlord.  No
such assignment or sublease shall relieve Tenant of any of Tenant's  obligations
under this Lease without Landlord's  written approval,  which may be withheld by
Landlord in its sole and absolute discretion.

     16.2 Subject to Article 32,  Landlords  rights to assign this Lease are and
shall remain unqualified.

                                       17

<PAGE>

                                   ARTICLE 17

                             SURRENDER OF POSSESSION

     17.1 At the  expiration  of the  Term of this  Lease,  by  lapse of time or
otherwise, Tenant shall surrender possession of the Demised Premises to Landlord
in good order, condition and repair,  reasonable wear and tear, damage from fire
and  other  casualties,  repairs  which  are  the  obligation  of  Landlord  and
conditions caused by Landlord's breach hereunder excepted.

     17.2 If Tenant  fails or refuses to remove its  property  from the  Demised
Premises  at the  expiration  of  the  Term  of  this  Lease,  Tenant  shall  be
conclusively  presumed  to have  abandoned  the same,  and title  thereto  shall
thereupon  pass to  Landlord  without  any  cost,  either  by  set-off,  credit,
allowance or  otherwise;  and Landlord,  at its option,  may (i) accept title to
such  property,  or (ii) at  Tenant's  expense,  remove  the  same,  or any part
thereof,  in any manner  that  Landlord  shall  choose,  and  store,  destroy or
otherwise  dispose of the same without  incurring  any  liability  whatsoever to
Tenant or any other person.

                                   ARTICLE 18

                                PRIORITY OF LEASE

                     CERTIFICATE TO PURCHASERS AND MORTGAGEE

     18.1 Tenant agrees that, from time to time upon not less than ten (10) days
prior  request by  Landlord,  Tenant will  deliver to Landlord a  statement,  in
writing,  certifying  to the best of Tenant's  knowledge  (i) that this Lease is
unmodified  and in full force and  effect (or if there have been  modifications,
that the Lease,  as modified,  is in full force and  effect);  (ii) the dates on
which Tenant  began  paying Base Rent,  and that no Base Rent has been paid more
than one (1) month in advance; (iii) that, to the best of its knowledge, neither
Tenant nor Landlord is in default under any  provision of this Lease,  or, if in
default,  the nature thereof in detail; (iv) that, to the best of its knowledge,
Tenant has no existing  defenses or off-sets to the  enforcement  of this Lease,
or, if any,  specifying  the same;  and (v) provided the  Commencement  Date has
occurred,  that Tenant has accepted and occupied the Demised Premises, and that,
to the best of its  knowledge,  the  Demised  Premises  have been  completed  in
accordance  with the terms of this Lease subject to items which may be contained
on a punch list, it being intended that any such statement may be relied upon by
any  prospective  purchaser  or  tenant  of  the  Building,  any  mortgagees  or
prospective  mortgagees  thereof,  or any  prospective  assignee of any mortgage
thereof.

     18.2  This  Lease  shall be prior to all  mortgages.  1 at the  request  of
Landlord,  Tenant  will,  at any time and from  time to time,  subordinate  this
Lease,  but not terms and  conditions  relating  to  casualty,  condemnation  or
purchase  options granted to Tenant under Article 24 or Article 25 hereof,  to a
first mortgage  placed against the Project  provided that Landlord  secures from
the lender and furnishes to Tenant a written  agreement  satisfactory  to Tenant
providing  that so long as there shall be no default on the part of Tenant under
this Lease (or if such default shall exist so long as Tenant's time to cure such
default,  if any, shall not have expired),  Tenant shall not be disturbed in its
occupancy and possession of the Demised Premises, Tenant agrees to attorn to any
such lender or its successors or assigns.

     18.3 In the event of  foreclosure  or  exercise  of power of sale under any
such mortgage now or hereafter  affecting  the Building,  the holder of any such
mortgage (or purchaser at any sale pursuant  thereto) shall, in addition to such
rights it may have at law or in  equity,  have the  option of (i)  supplementing
this  Article  18, so as to  require  Tenant,  pursuant  to a written  agreement
satisfactory to Tenant, to attorn to such holder or purchaser,  or to enter into
a new lease with such holder or purchaser  (as  landlord) for the balance of the
Term then remaining hereunder upon the same terms and conditions  (including but
not limited to the  priority  of the new lease as  required by Section  18.2) as
those herein provided,  or (ii)  notwithstanding  this Article 18, to elect that
this Lease become or remain,  as the case may be, superior to such mortgage.  No
act or omission on the part of Landlord  which would  entitle  Tenant  under the
terms of this Lease, or by law to be relieved of Tenant's obligations  hereunder
or to terminate  this Lease,  shall result in a release or  termination  of such
obligations  or a  termination  of this Lease unless (a) Tenant shall have first
given written notice of Landlord's act or failure to act to any first  mortgagee
whose  name  and  address  shall  have  thereafter  been  furnished  to  Tenant,
specifying  the act or failure to act in  violation  of Tenant's  rights and (b)
such mortgagee after receipt of such notice, has failed or refused to correct or

                                       18

<PAGE>

cure the condition  complained of within the time to cure such default,  as such
is provided for in this Lease, but nothing  contained in this Section 18.3 shall
impose any obligation on any such mortgagee to correct or cure any condition.

                                   ARTICLE 19

                           RIGHTS RESERVED BY LANDLORD

     19.1 Landlord  shall have the following  rights,  each of which Landlord in
its  reasonable  discretion  may exercise  without  notice to Tenant and without
liability  to Tenant for damage or injury to  property,  person or  business  on
account of the exercise  thereof,  except as may otherwise be provided for under
the terms of this Lease; and the exercise of any such rights shall not be deemed
to  constitute an eviction or  disturbance  of Tenant's use or possession of the
Demised Premises,  and shall not give rise to any claim for set-off or abatement
of Base Rent or Additional Rent.

     (a) In order to  fulfill  its  obligations  under  this  Lease,  enter  the
Building  to  decorate  or  to  make   repairs,   alterations,   additions;   or
improvements, whether structural or otherwise, in and about the Building, or any
part  thereof,  and for such purposes to enter Upon the Demised  Premises,  and,
during the  continuance of any of said work, to temporarily  close doors,  entry
ways, public space and corridors in the Building and to interrupt or temporarily
suspend  services or use of  facilities,  all without  affecting any of Tenant's
obligations  under this Lease,  so long as the Demised  Premises are  reasonably
accessible and Tenant's use thereof is not unreasonably disturbed.

     (b) To furnish  door keys or other  entry  devices for doors in the Demised
Premises at the  commencement of this Lease. To retain at all times,  and to use
in  appropriate  instances,  keys or other entry devices to all doors within and
into the  Demised  Premises.  Tenant  agrees  to  purchase  only  from  Landlord
additional  duplicate  keys or other  entry  devices as  required,  to change no
locks,  and not to affix  locks on doors  without the prior  written  consent of
Landlord.  Nothing  herein  contained  shall  prevent  Tenant  from  locking its
computer room, or other areas containing  confidential  information,  or require
Tenant to furnish  Landlord,  during the Term of this  Lease,  with keys to such
room or other  areas,  nor prevent  Tenant from  changing  locks on such room or
other areas at will.  Upon the  expiration  of the Term or of Tenant's  right to
possession,  Tenant shall return all keys or other entry devices to Landlord and
shall disclose to Landlord the combination of any safes, cabinets or vaults left
in the Demised Premises.

     (c) To approve the  weight,  size and  location of safes,  vaults and other
heavy equipment and articles in and about the Demised  Premises and the Building
(so as not to exceed  the legal  live load per  square  foot  designated  by the
structural  engineers for the Building).  Movements of Tenant's property into or
out of the  Building  and  within the  Building,  are  entirely  at the risk and
responsibility of Tenant.

     (d) To close the Building after Tenant's  regular  working hours,  subject,
however to  Tenant's  right to  admittance  to the Demised  Premises  under such
reasonable  regulations as Landlord and Tenant consent to in writing,  which may
include,  but shall not be limited to, a  requirement  that persons  entering or
leaving  the  Building  identify  themselves  to a watchman by  registration  or
otherwise  and  establish  their  right to enter or  leave  the  Building.  Such
regulations  may  include,  but  shall  not be  limited  to,  the  requiring  of
identification from Tenant's employees,  agents, clients,  customers,  invitees,
visitors and guests.

         (e) To establish controls consented to by Tenant in writing, for the
purpose of regulating all property and packages (both personal and otherwise) to
be moved into or out of the Building and the Demised Premises; provided,
however, that Landlord recognizes that Tenant shall have the unrestricted right
to transport files and other business documents in and out of the Building at
all times.

         (f) To show the Demised Premises to prospective tenants at reasonable
hours and upon reasonable notice during the last twelve (12) months of the Term
and, if vacated or abandoned, to show the Demised Premises at any time to
prepare the Demised Premises for re-occupancy.


                                      19

<PAGE>

     19.2  Tenant  shall keep and  observe  the rules and  regulations  mutually
agreed to in writing, from time to time and delivered by Landlord to Tenant, for
the use,  entry,  operation  and  management  of the  Demised  Premises  and the
Building, each of which rules and regulations shall become a part of this Lease.
No such rule or regulation,  however,  shall contradict or abrogate any right or
privilege herein expressly granted to Tenant.

                                   ARTICLE 20

                                NAME OF BUILDING

     20.1  During  the Term of this  Lease,  the  Building  shall  be named  THE
EQUITABLE BUILDING, or if Tenant so requests, by such other name as requested by
Tenant  provided  that the  effective  date for any name change is not less than
ninety (90) days after the Landlord's receipt of Tenant's requesting the change.
Landlord shall at its expense,  initially  install and maintain signage or other
forms  of  identification,  for the  Building  name,  both on the  interior  and
exterior of the Building (but outside of the Demised  Premises),  containing the
name of the Building designated as above stated; provided, however,  maintenance
and repair of such  signage or other forms of  identification  shall be included
within the definition of Operating  Expenses.  In connection  with any change of
the Building name requested by Tenant as aforesaid,  Tenant shall be responsible
and pay for,  and  promptly  commence  and  complete  the changing of all of the
Building's  then  existing  signage  or other  forms of  identification  for the
Building name and, prior to the  commencement of any work with respect  thereto,
shell submit to Landlord for  Landlord's  review and  approval  (which  approval
shall not be unreasonably  withheld) the proposed plans and  specifications  for
same.  No such work  shall  commence  prior to the date the name  change  can be
effective as aforesaid. The design and location of any additional signs or forms
of  identification  requested  by Tenant shall not be subject to the approval of
Landlord.  Landlord  shall maintain the  directories  in the Building.  Landlord
shall make available to Tenant all spaces on said Building directories. Landlord
covenants and agrees that it will not enter into any lease or other  arrangement
respecting  the use of any space of the  Building  during the Term of this Lease
without Tenant's written  approval,  which may be withheld by Tenant in its sole
and absolute discretion.

     20.2 After the expiration of the Term of this Lease,  Landlord shall change
the name of the  Building  and the  Landlord  agrees to never have the  Building
named by the then name of Tenant,  or any entity  affiliated  with  Tenant.  The
obligations created by the preceding sentence shall be binding upon and inure to
the benefit of the parties  hereto and their  respective  successors and assigns
and shall be deemed to be covenants  which run with the land.  Each party hereto
shall  from  time  to  time  execute,   acknowledge  and  deliver  such  further
instruments  and perform such  additional acts as the other party may reasonably
request to effectuate this Section 20.2.

                                   ARTICLE 21

                              OPTION TO EXTEND TERM

     21.1  Provided  that  Tenant is not in default in its  performance  of this
Lease,  Landlord  hereby  grants to Tenant an option to extend  the Term of this
Lease for five (5) successive  additional periods of five (5) years each (herein
generally called the "renewal terms'). Base Rent during each applicable five (5)
year renewal term shall be the lesser of (i) the annual fair market rental value
per square foot of Usable Area contained in the Demised Premises as of the first
day of the third year  preceding  the  expiration  of the  initial  Term of this
Lease, or applicable extension thereof, or (ii) the following:

     (a)  first  five  year  renewal  term - an annual  base rent of $15.12  per
          square foot of Usable Area contained in the Demised Premises;

     (b)  second  five year  renewal  term - an annual  base rent of $17.39  per
          square foot of Usable Area contained in the Demised Premises;

     (c)  third  five  year  renewal  term - an annual  base rent of $19.99  per
          square foot of Usable Area contained in the Demised Premises;

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     (d)  fourth  five year  renewal  term - an annual  base rent of $22.99  per
          square foot of Usable Area contained in the Demised Premises; and

     (e)  fifth  five  year  renewal  term - an annual  base rent of $26.44  per
          square foot of Usable Area contained in the Demised Premises.

Each such renewal term shall be upon the same terms,  agreements  and conditions
as in this Lease set forth for the initial  term  hereof,  except that Base Rent
during each such renewal term shall be as set forth  above,  and except  further
that  Tenant  shall  have no further  election  to extend the Term of this Lease
beyond the fifth  additional  five year renewal term.  Tenant shall  exercise an
option  to extend  the Term of this  Lease by giving  notice to  Landlord  on or
before the last day of the  nineteenth  (19th) year of the initial  Term of this
Lease, or on or before the last day of the fourth (4th) year of any renewal term
of this Lease.  In the event  Landlord and Tenant have not agreed upon an annual
fair market rental value per square foot of Usable Area contained in the Demised
Premises  (which shall take into account the  creditworthiness  of Tenant) on or
before March 1 of the eighteenth  year of the initial Term of this Lease,  or on
or before  March 1 of the third year of any  renewal  term,  as the case may be,
Landlord shall promptly  thereafter select a disinterested  person with at least
ten (10) years  professional  experience as a real estate appraiser  licensed by
the  State of Iowa,  and  Landlord  shall  give  Tenant  written  notice of such
appointment.  Within  thirty (30) days  thereafter,  Tenant shall give  Landlord
written notice of Tenant's  designated  appraiser having the same experience and
qualifications.   The  two   appraisers   so  selected   shall  select  a  third
disinterested  appraiser with the same  experience and  qualifications;  and the
three  appraisers  shall promptly  determine the annual fair market rental value
per square foot of Usable Area of the Demised  Premises,  exclusive  of Tenant's
Improvement Allowance and all other leasehold improvements made upon the Demised
Premises by Tenant,  for the applicable  renewal term of this Lease. If a second
appraiser is not appointed  and timely notice given thereof as herein  provided,
then the first  appraiser  shall  determine such annual fair market rental value
per square foot of Usable Area of the Demised  Premises.  If, within thirty (30)
days after the appointment of the second appraiser, the two appraisers appointed
by the parties are unable to agree upon the  appointment  of a third  appraiser,
then the two appraisers shall be discharged and the appointment process repeated
until a third appraiser is duly selected. The determination of a majority of the
appraisers,  or of the sole  appraiser,  as the case may be, shall be conclusive
and binding upon the parties,  and shall be the annual fair market  rental value
per square foot of Usable Area of the Demised  Premises to be used in connection
with determining  21.1(i) above, for the applicable  renewal term of this Lease.
If any  appraiser  fails or  ceases  to act,  a  substitute  shall  promptly  be
appointed  by the  same  person  or  persons  authorized  to  make  the  initial
appointment.  The parties shall bear the expenses of the appraisers  selected by
each of them; and the expenses of the third  appraiser shall be borne equally by
Landlord and Tenant.

If the Tenant elects to exercise any such option,  upon and subject to the terms
and  conditions  stated  above,  the Term of this Lease  shall be  automatically
extended  for the  period of such  additional  term  without  necessity  for the
execution of any  instrument  to effect the same,  and in such event the phrases
"the Term of this Lease",  "renewal  term" and "the Term hereof' as used in this
Lease shall include such  additional  term. No exercise of any option under this
Lease shall be effective if any default occurs after the exercise and before the
commencement  of the renewal  term and such default is not cured within the full
and uninterrupted  applicable grace period, if any.  Notwithstanding anything to
the contrary  contained  in this Lease,  the term "Term"  whenever  used in this
Lease  shall be  defined  to  include  the  original  term and all  renewals  or
extensions thereof made pursuant to the terms and conditions hereof

     21.2  Notwithstanding  anything to the contrary contained in this Lease, if
Tenant  shall fail to give notice to Landlord of Tenant's  election to renew and
extend the Term of this Lease for any option period provided herein,  within the
time period set forth  herein,  Landlord  may not  terminate  this Lease  unless
Landlord notifies Tenant in writing that the Landlord may, at its sole election,
terminate  Tenant's option to renew and extend the Lease if Tenant does not send
written notice of Tenant's exercise of such option within thirty (30) days after
receipt of such notice from  Landlord.  If Landlord does not receive within said
thirty (30) day period  written notice of the exercise by Tenant of such option,
Tenant's option shall thereafter terminate,  and this Lease shall terminate upon

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the  expiration of the original  Term of this Lease or the then current  renewal
Term, as the case may be, unless sooner terminated pursuant to the terms of this
Lease.

                                   ARTICLE 22

                           COVENANT OF QUIET ENJOYMENT

     Landlord covenants that Tenant, upon paying the Base Rent, Additional Rent,
charges for services and other  payments  herein  reserved,  and,  upon keeping,
observing and performing all the other terms, covenants, conditions,  provisions
and agreements herein contained on the part of the Tenant to be, kept,  observed
and performed, shall, during the Term of this Lease, peaceably and quietly have,
hold and enjoy the Demised Premises, free from disturbance by Landlord,  subject
to the terms,  covenants,  conditions,  provisions and agreements of this Lease.

                                   ARTICLE 23

                                     NOTICES

         23.1 All notices required or permitted to be given under the terms of
this Lease shall be in writing and delivered (i) personally, (ii) delivery by
overnight courier service or (iii) sending the same by U.S. certified mail,
return receipt requested. Until further notification, the addresses of the
parties shall be as follows:

         Landlord:         The Graham Group, Inc.
                           Attn: George D. Milligan
                           President
                           901 Grand Avenue
                           Des Moines, Iowa 50309


         Tenant:           Equitable Life Insurance Company of Iowa
                           Attn: Christopher R. Welp
                           Vice President - Tax and Support Services
                           700 Locust Street - Suite 201
                           Des Moines, Iowa 50309


         With a copy to:   President
                           Equitable Life Insurance Company of Iowa
                           604 Locust Street
                           Des Moines, Iowa 50309


or such other  addresses  not exceeding a total of two (2) as Landlord or Tenant
may from time to time designate in a written notice to the other party.

     Notice given as aforesaid shall be sufficient  service thereof and shall be
deemed given as of the date  received as evidenced by the return  receipt of the
registered or certified  mail or the express mail  delivery  receipt as the case
may be.

     23.2 Notwithstanding the foregoing,  either party hereto may give the other
telephonic notice of the need for emergency repairs,  immediately  followed by a
confirming  written  notice  delivered  in the manner  provided in Section  23.1
above.

     23.3 If any party  ("Mortgagee")  shall notify Tenant that it is the holder
of a mortgage, deed of trust or other security instrument affecting the Project,
or the Phase 2 - Building, as hereinafter defined, no notice,  request or demand
thereafter sent by Tenant to Landlord shall be effective unless and until a copy

                                       22

<PAGE>

of the same shall also be sent to such  Mortgagee  in the manner  prescribed  in
Section 23.1 and to such address as such Mortgagee shall designate.

                                   ARTICLE 24

                                     PARKING

     24.1 At all time times  during the Term of this Lease,  Landlord  agrees to
furnish and Tenant agrees as hereinafter  provided to pay for and lease, parking
rights for:

         (i) All parking spaces for vehicles located in the underground parking
portion of the Project;

        (ii) All parking spaces for vehicles located on the surface level of
the North half of the Site, as hereinafter defined, (such parking will be lost
in connection with the development of the Phase 2 - Building, as hereinafter
defined, but approximately 75 parking rights for vehicles are anticipated to be
located in the underground portion of the Phase 2 - Building for use in
connection with its operation);

       (iii) 150 parking rights for vehicles in parking spaces designated by
Petula Associates, Ltd., an Iowa corporation ("Principal") in the parking garage
owned by Principal (the "Principal Garage") and located in the block bordered by
9th Street on the East, 10th Street on the West, High Street on the North and
Grand Avenue on the South, Des Moines, Iowa (the "Principal Land"), and more
particularly described in Exhibit "B" attached hereto and incorporated herein
by this reference, pursuant to the Parking Agreement (the "Principal Parking
Agreement") entered into between Principal, Landlord and Tenant on or about
even date herewith;

        (iv) 100 parking spaces located on the surface level of land known as
the South half of the block bordered by 10th Street on the East, 11th street on
the West, Locust Street on the North and Walnut Street on the South, Des Moines,
Iowa (the "DMDC Land") and more particularly described in Exhibit "B" attached
hereto and incorporated herein by this reference (such 100 parking spaces will
be replaced by 100 parking spaces in the DMDC Ramp, as defined in Section 24.5,
which is to be constructed in connection with the development of the Phase 2 -
Building);

         (v) 60 parking spaces located on the surface level of land known as the
Southwest quarter of the block bordered by 11th Street on the East, 12th Street
on the West, Locust Street on the North and Walnut Street on the South, Des
Moines, Iowa (the "12th Street Parking Land") and more particularly described
in Exhibit "B" attached hereto and incorporated herein by this reference; and

        (vi) 65 parking spaces located on the surface level of land known as
the Northwest quarter of the block bordered by 10th Street on the East, 11th
Street on the West, Grand Avenue on the North and Locust Street on the South,
Des Moines, Iowa ("Graham's Fine Arts Land"), and more particularly described
in Exhibit "B" attached hereto and incorporated herein by this reference.

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<PAGE>



     No specific  parking  spaces in the Principal  Garage are to be assigned to
Tenant  but  Principal  will  issue to Tenant  the  aforesaid  number of parking
stickers  and/or cards,  each of which will  authorize  parking in the Principal
Garage of a vehicle on which the sticker is displayed, or Principal will provide
a  reasonable   alternative  means  of  identifying  and  controlling   vehicles
authorized  to be parked in the  Principal  Garage.  Principal may designate the
area in the Principal  Garage within which each such vehicle may be parked,  and
Principal may change such designations  from time to time.  "Parking Permits" as
used herein shall mean the parking  rights for vehicles as such are described in
this  Section  24.1 (i)  through  (vi) above.  Notwithstanding  anything in this
Article  24 to the  contrary,  Tenant  shall  only be  required  to pay for such
parking spaces described in (iv), (v) and (vi) above, to the extent Tenant, from
time to time,  feels it has a need to use such  spaces.  Tenant may  increase or
decrease,  from time to time,  its use of such  designated  spaces  upon  giving
Landlord at least thirty (30) days prior  written  notice of Tenant's  desire to
use and pay for such additional or decreased spaces.

     Subject to the terms and conditions of Section 24.2 hereof, Landlord at its
sole cost and expense, except as otherwise contractually obligated,  shall keep,
or cause to be kept, the above described parking spaces in good order, condition
and repair.

     24.2 As rental for the Parking Permits ("Parking Rental"), Tenant covenants
and agrees to pay Landlord (or Principal if the Principal  Parking  Agreement so
provides)  during the Term of this Lease,  as  Additional  Rent  hereunder,  the
following  stated  monthly  parking  rates  (which rates  include any  operating
expenses associated with the Parking Permits); plus any applicable sales tax for
each of the parking stickers/cards to be issued by Landlord:

     (a)  The monthly parking rate for parking spaces located in the underground
          parking  portion  of the  Project  shall be Sixty and  No/100  Dollars
          ($60.00);

     (b)  The monthly  parking rate for parking  spaces on the surface  level of
          the  North  half of the  Site  shall  be  Thirty  and  No/100  Dollars
          ($30.00);

     (c)  The monthly  parking  rate for the 150 parking  spaces for vehicles in
          the  Principal  Garage  shall  be at the rate as  provided  for in the
          Principal Parking Agreement;

     (d)  The monthly  parking rate for the surface parking spaces being used on
          the DMDC Land shall be Thirty and No/100 Dollars
                  ($30.00);

     (e)  The monthly  parking rate for the surface parking spaces being used on
          the 12th  Street  Parking  Land  shall be Thirty  and  No/100  Dollars
          ($30.00); and

     (f)  The monthly  parking rate for the surface parking spaces being used on
          the  Graham's  Fine  Arts  Land  shall be Thirty  and  No/100  Dollars
          ($30.00).

     Notwithstanding  the  above,  after the second  lease  year,  Landlord  may
increase  or  decrease  parking  rates  for  Parking  Permits  so as to  reflect
reasonable  increases  in  Landlord's  expenses  associated  with  such  Parking
Permits; provided, however, any such annual increase shall not exceed any annual
increase in the  Consumer  Price  Index (the  "CPI") for such lease  year;  and,
provided,  further, parking rates for the 150 parking spaces for vehicles in the
Principal  Garage  may be  increased  or  decreased  pursuant  to the  terms and
conditions of the Principal Parking  Agreement.  Parking Rental is to be payable
monthly in advance on the first day of each and every  month  during the Term of
this Lease and a pro rata  portion of such sums shall be payable for any partial
calendar month in the event this Lease  commences (or ends) on a date other than
the first (or last) day of a calendar  month.  For  purposes of this Lease,  CPI
shall mean the Consumer Price Index published by the Bureau of Labor  Statistics
of the Unites States  Department of Labor for urban  consumer  families based on
the  all-cities  average  for all group  commodities  and items  (1967 = 100) or
successor or substitute index appropriately adjusted.

                                       24

<PAGE>

     24.3 If the parking spaces covered by the Parking Permits are not available
to  Tenant  during  any  portion  of the Term of this  Lease as the  result of a
casualty,  condemnation,  settlement in lieu of  condemnation,  or other similar
happening, this Lease shall continue without abatement of Base Rent and Landlord
shall  within  ninety  (90) days  make  available  to  Tenant up to thirty  (30)
substitute  unassigned  parking  spaces in the City  structured  parking  garage
located in the block bordered by 8th Street on the East, 9th Street oh the West,
Grand Avenue on the North and Locust Street on the South, Des Moines,  Iowa with
the balance of substitute  unassigned parking spaces being made available in the
Principal  Garage or, if  sufficient  parking  spaces are not  available  in the
Principal  Garage,  in the DMDC Ramp (if it  exists),  or in another  comparable
downtown  parking  location  in close  proximity  to the Demised  Premises.  The
substitute  parking  spaces  shall be provided to Tenant at a rental rate not to
exceed the rate Tenant would have paid for the surface parking spaces covered by
the Parking Permits relating to the DMDC Land.  Landlord represents and warrants
that the parking  spaces as provided  for herein  shall be  available  to Tenant
throughout the Term of this Lease.  Notwithstanding  the above,  the obligations
imposed by this Section 24.3 shall not apply to any Mortgagee who acquires title
to the Project through possession,  foreclosure proceeding or delivery of a deed
in lieu of foreclosure;  provided,  such Mortgagee uses its best efforts to make
available sufficient substitute unassigned parking spaces as above provided and;
provided, further, that in the event such Mortgagee does not make available such
substitute  unassigned  parking  spaces,  Mortgagee in lieu  thereof  assigns to
Tenant any interest Mortgagee has in any insurance proceeds,  condemnation award
or purchase price which results from the above described  parking spaces covered
by the  Parking  Permits  not being  available  due to  casualty,  condemnation,
settlement in lieu of condemnation or other similar happening.

     24.4 Principal,  or the operator of the Principal Garage,  may make, modify
and  enforce  rules and  regulations  relating to the parking of vehicles in the
Principal Garage, and Tenant shall abide by such rules and regulations and shall
exercise reasonable efforts to cause its employees and invitees to abide by such
rules and regulations.  Additionally,  Principal reserves the right to alter the
size of the Principal Garage.

     24.5 (i) If Tenant exercises its option as provided in Section 25 of this I
se to have Landlord  construct the Phase 2 - Building,  subject to the terms and
conditions  of this Section 24.5,  Landlord  shall proceed with due diligence to
expediently  construct  and  maintain at its sole cost and expense a  structured
parking  ramp (the "DMDC  Ramp")  which  shall  contain at least  seven  hundred
seventy five (775) parking  spaces on the DMDC.  Land. One hundred (100) parking
spaces for  vehicles in the DMDC ramp shall  replace  Landlord's  obligation  to
supply the 100 parking spaces described in Section 24.1 (iv) above. Upon request
by Tenant, Landlord shall construct the DMDC Ramp in two phases. Landlord agrees
to furnish at least seven hundred seventy five (775) parking rights for vehicles
in parking spaces in the DMDC Ramp and Tenant agrees as hereinafter  provided to
pay for and lease seven hundred  seventy five (775) parking spaces at a rate per
month to be negotiated  by the Landlord and Tenant in good faith,  with the goal
being a monthly cost to Tenant which is as low as possible  while still allowing
Landlord to structure an economically viable parking ramp project. Landlord will
take all action within its power to obtain the maximum  benefits  available from
the City for the DMDC Ramp,  and such  benefits  will be fully  reflected in the
monthly  parking rate to be charged by Landlord to Tenant for parking  spaces in
the DMDC Ramp.  In the  alternative  to Landlord  constructing  the DMDC Ramp as
above provided,  upon request by Tenant,  Landlord shall within thirty (30) days
of such request,  sell, close (at Tenant's executive office in the Building) and
convey to Tenant the unencumbered fee title to the DMDC Land by special warranty
deed in the form attached  hereto as Exhibit E and  incorporated  herein by this
reference,  for Two Hundred  Fifty  Thousand and No/I 00 Dollars  ($250,000.00),
plus  reasonable  costs  incurred  by Landlord  in  preparing  the DMDC Land for
surface parking as required by this Lease, and Tenant shall  thereafter  proceed
with due diligence to expediently  construct and maintain the DMDC Ramp as above
provided.  In the event Tenant  acquires  title to the DMDC Land pursuant to the
terms and conditions of this Section  24.5(i),  the DMDC Land shall be free from
all conditions, covenants and restrictions except for such items to which Tenant
is a party of record,  survey  matters  first  appearing  after the date hereof,
parties in possession  and the lien of unpaid real estate taxes then due but not
payable and  delinquent.  In the event Tenant  constructs the DMDC Ramp,  Tenant
shall  lease to  Landlord  an  amount of  parking  spaces in the DMDC Ramp as is
necessary to fulfill  Landlord's  obligation to supply  parking spaces to Tenant
pursuant to Section 24.1 (ii) and (iv) above and  Landlord  shall pay Tenant for

                                       25

<PAGE>

such spaces at a rate per month to be  negotiated  by the Landlord and Tenant in
good faith,  with the goal being a monthly  cost to Landlord  which is as low as
possible while still allowing Tenant to structure an economically viable parking
ramp project.  The monthly  parking cost Landlord is to pay Tenant for the above
described  parking spaces in the DMDC Ramp which has been  constructed by Tenant
in  accordance  with this Section  24.5 shall be the same  monthly  parking cost
Tenant  is to  pay  Landlord  for  such  spaces  to be  provided  to  Tenant  in
fulfillment of Landlord's obligation to supply parking spaces to Tenant pursuant
to Section 24.1 (ii) and (iv) above.  After Landlord has sold to Tenant the DMDC
Land, Landlord shall have no further obligation under this to construct the DMDC
Ramp. Prior to the construction of the DMDC Ramp, plans and specifications  will
be  developed by the party  intending to construct  the DMDC Ramp and such plans
and  specifications  will be  circulated  for the  review  and  approval  of the
non-constructing  party,  which  approval  shall not be  unreasonably  withheld.
Notwithstanding  the above,  if Tenant  constructs  the DMDC Ramp, the DMDC Ramp
shall not contain more than seven hundred  seventy five (775) parking spaces for
vehicles without Landlord's prior written consent, which consent may be withheld
by Landlord in its sole and absolute discretion.

       (ii) In the event any Mortgagee acquires the interest of Landlord in
the Demised Premises, it shall have no obligation to construct the DMDC Ramp as
provided for herein; provided, however, upon request by Tenant, Mortgagee shall
within thirty (30) days of such request, sell, close (at Tenant's executive
office in the Building) and convey to Tenant the unencumbered fee title to the
DMDC Land from such Mortgagee by special warranty deed in the form attached
hereto as Exhibit "E" for Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00) plus reasonable costs incurred by Landlord in preparing the DMDC
Land for surface parking required by this Lease, and Tenant shall thereafter
proceed with due diligence to expediently construct and maintain the DMDC Ramp
as provided in Section 24.5(i) above.

     24.6 At the  termination of this Lease if it is amended in lieu of Landlord
and Tenant  entering into a new lease in connection  with the development of the
Phase 2 - Building, as defined in Section 25.1, or at the termination of any new
lease  entered  into  between   Landlord  and  Tenant  in  connection  with  the
development  of such Phase 2 - Building,  assuming  Tenant has not  acquired the
DMDC Land pursuant to Section 25.14 hereof,  Landlord shall purchase from Tenant
the DMDC Land and the DMDC Ramp for their  combined  fair market  value.  In the
event  Landlord and Tenant  cannot agree upon the combined  fair market value of
the DMDC Land and the DMDC Ramp on or before  November 1 of the last year of the
initial  term of the lease  affecting  the Phase 2 -  Building,  or on or before
November 1 of the last year of any  renewal  period of the lease  affecting  the
Phase 2 -  Building,  as the  case  may be,  Landlord  shall  promptly  select a
disinterested  person with at least ten (10) years professional  experience as a
real estate  appraiser  licensed by the State of Iowa,  and Landlord  shall give
Tenant written notice of such  appointment.  Within thirty (30) days thereafter,
Tenant  shall give  Landlord  written  notice of Tenant's  designated  appraiser
having the same  experience and  qualifications.  The two appraisers so selected
shall  select a third  disinterested  appraiser  with the  same  experience  and
qualifications;  and the three appraisers shall promptly  determine the combined
fair market value of the DMDC Land and the DMDC Ramp.  If a second  appraiser is
not appointed and timely notice given thereof as herein provided, then the first
appraiser  shall  determine such combined fair market value of the DMDC Land and
the DMDC Ramp.  If, within thirty (30) days after the  appointment of the second
appraiser,  the two appraisers appointed by the parties are unable to agree upon
the  appointment  of a  third  appraiser,  then  the  two  appraisers  shall  be
discharged and the appointment  process repeated until a third appraiser is duly
selected.  The  determination  of a majority of the  appraisers,  or of the sole
appraiser, as the case may be, shall be conclusive and binding upon the parties,
and shall be the combined  fair market value of the DMDC Land and the DMDC Ramp.
If any  appraiser  fails or  ceases  to act,  a  substitute  shall  promptly  be
appointed  by the  same  person  or  persons  authorized  to  make  the  initial
appointment.  The parties shall bear the expenses of the appraisers  selected by
each of them; and the expenses of the third  appraiser shall be borne equally by
Landlord and Tenant.  Within thirty (30) days after the combined market value of
the DMDC  Land and the DMDC  Ramp has  been  determined  pursuant  to the  above
described process, Tenant shall sell, close (at Tenant's executive office in the
Building) and convey to Landlord the unencumbered fee title to the DMDC Land and
DMDC Ramp by special  warranty deed in the form  attached  hereto as Exhibit "F"
and incorporated  herein by this reference,  for an amount of cash to be paid at
closing equal to the above described combined fair market value of the DMDC Land
and DMDC Ramp less Nine Hundred Thousand Dollars  ($900,000.00)  (i.e. the value

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<PAGE>

of the Polk County,  Iowa grant applied toward  Landlord's  original cost of the
DMDC Land). In the event Landlord  acquires title to the DMDC Land and DMDC Ramp
pursuant to the terms and  conditions  of this Section  24.6,  the DMDC Land and
DMDC Ramp shall be free from all conditions,  covenants and restrictions  except
for such  items to which  Tenant  is a party of  record,  survey  matters  first
appearing  after the date hereof,  parties in possession  and the lien of unpaid
real  estate  taxes now due but not  payable  and  delinquent.  In the event any
Mortgagee  acquires  the  interest of Landlord  in the  Demised  Premises,  such
Mortgagee  shall have no  obligation  to purchase  from Tenant the DMDC Land and
DMDC  Ramp for  their  combined  fair  market  value  pursuant  to the terms and
conditions of this Section 24.6.

     24.7 Landlord shall use reasonable  efforts to assist Tenant's employees to
rent  additional  auto parking spaces in both publicly owned and privately owned
parking  garages  and  lots;  provided,  however,  this  provision  shall not be
applicable to any Mortgagee.

     24.8  Notwithstanding  anything in this Article 24 to the contrary,  in the
event  Tenant's  right under  Section  25.1 to request the  construction  of the
"Phase 2 - Building" has terminated and Landlord  constructs the North Building,
as hereinafter defined,  pursuant to Section 25.2 herein, Landlord may terminate
its obligation to supply the parking spaces  described in Section  24.1(u) above
so long as a comparable  number of parking spaces at comparable  prices are made
available to Tenant in another  comparable  downtown location in close proximity
to the Demised  Premises.  In the event any  Mortgagee  acquires the interest of
Landlord in the Demised  Premises,  such  Mortgagee  shall have no obligation to
comply with the terms and conditions of this Section 24.8.

                                   ARTICLE 25

                               PHASE 2 - BUILDING

     25.1 Upon the written request by Tenant to Landlord, which request shall be
accompanied  by the  "request  for  proposal"  described in Section 25.3 hereof,
Landlord has agreed to construct an additional  office  building to be leased to
Tenant, consisting of an unknown amount of square feet of Usable Area and floors
above grade, with approximately 75 underground  parking stalls on the North half
of the Site (the "Phase 2-  Building").  However,  in the event Tenant elects to
make the above  described  request,  it must advise Landlord of its desire on or
before September 30, 2014. Notwithstanding anything to the contrary contained in
this Lease, if Tenant shall fail to give notice to Landlord of Tenant's election
to construct the Phase 2 - Building in accordance with the terms of this Section
25.1,  Tenant's right to make such election shall not terminate  unless Landlord
notifies  Tenant in writing  that  Tenant's  right to make such  election  shall
terminate  if Tenant does not send written  notice of Tenant's  exercise of such
election within thirty (30) days after receipt of such notice from Landlord.  If
Landlord  does not receive  such notice of election  within said thirty (30) day
period, Tenant's right to make such election shall thereafter terminate:

     25.2 In the event Tenant does not request Landlord to construct the Phase 2
- Building pursuant to Section 25.1 herein,  Tenant acknowledges and agrees that
Landlord  may  develop  the North half of the Site for a party or parties  other
than  Tenant  (such  building  shall  hereinafter  be  referred to as the "North
Building"); provided, however, that Landlord's development of the North Building
shall be subject to the following terms and  conditions:  (i) the North Building
shall be a single structure developed by Landlord on the North half of the Site;
(ii) Landlord shall preserve Tenant's unrestricted access to any entrance on the
North  side of the  Building;  (iii) a  reasonable  courtyard  will be  built by
Landlord at no cost to Tenant  which  courtyard  shall  completely  separate the
Building and the North Building,  and such courtyard shall further enable Tenant
to preserve  its  corporate  image,  as well as  preserving  adequate  light and
landscaping  opportunities  to the North  side of the  Building;  (iv) the North
Building  will be designed to preserve  intact the  structural  integrity of the
Building;  (v) there will be no skywalk  bridge or skywalk  corridor  connection
from the North Building to the Building (the North  Building  reserves the right
to directly  connect by skywalk  bridge into the City parking ramp to the East);
(vi) the North  Building will be a first class,  "Class A" building  composed of
construction  materials which equal or exceed the quality of such materials used
for the Building; and (vii) the design of the North Building will compliment and

                                       27

<PAGE>

be  architecturally  compatible  with  (but not  duplicate)  the  design  of the
Building.  The plans for the North  Building will be submitted to Tenant for its
review and  approval at least one hundred  eighty  (180) days prior to the North
Building's  scheduled  construction  start so as to allow Tenant to confirm that
such plans and  specifications  satisfy the criteria  for the North  Building as
such are set forth above.  Landlord and Tenant  shall  thereafter  enter into an
amendment to this Lease providing for the deletion of the North half of the Site
from the Site,  restating  Tenant's  Proportionate  Share of Taxes and restating
Tenant's Proportionate Share of Operating Expenses.

     25.3 This Lease may be amended in connection  with the  development  of the
Phase 2 - Building,  or either  Landlord  or Tenant may request  that they enter
into a new lease in connection  with the  development of the Phase 2 - Building,
or Tenant may become  the owner of the North  half of the Site  pursuant  to the
terms and  conditions  of Section 25.14  herein.  Leasing  terms and  conditions
applicable to the Phase 2 - Building shall be substantially  the same as in this
Lease set forth,  except that Base Rent for the Phase 2 - Building  shall be the
fair  market  rental  value per square foot of Usable  Area for  comparable  new
property  in  the  greater   metropolitan  Des  Moines,  Iowa  area,  with  such
determination to be calculated  pursuant to the same methodology  which was used
to determine  Base Rent for the Building.  For a discussion of such  methodology
see the April 21, 1995 letter from George D.  Milligan,  President of The Graham
Group,  Inc., to Christopher R. Welp, Vice President - Tax and Support  Services
of  Equitable  of Iowa  Companies  as  clarified by the May 24, 1995 letter from
Russell F. Schrage,  of the law firm of Nyemaster,  Goode,  McLaughlin,  Voigts,
West,  Hansell & O'Brien, a Professional  Corporation,  to Charles Taylor of The
Graham Group, Inc. (the "Methodology Letters"),  copies of which are attached as
Exhibit "C" and incorporated herein by this reference. As is true in this Lease,
Tenant's  Proportionate.  Share of Taxes  under any  applicable  lease  shall be
reduced to the extent that the Phase 2 - Building  and Site are  entitled to any
property tax  abatement;  and Operating  Expenses shall also be decreased to the
extent that any  economic  development  grants are made  available to either the
Landlord  or Tenant  (assuming  Tenant  would  assign its  interest  in any such
benefits  to  Landlord).  Landlord  and Tenant  shall in good  faith  diligently
proceed to amend this Lease or enter into a new lease, as herein anticipated. In
connection with the  development of the Phase 2 - Building,  upon the request of
either  Landlord or Tenant,  the parties  hereto  shall enter into a  reciprocal
easement agreement reasonably  acceptable to both parties which shall, by way of
illustration  but not  limitation,  permit  pedestrian  traffic to flow back and
forth between the Building and the Phase 2 - Building.

     25.4 Along with  Tenant's  written  request as such is described in Section
25.1,  Tenant shall provide to Landlord a "request for proposal"  summarizing in
general terms  Tenant's  expectations  for the Phase 2 - Building,  and Landlord
shall   thereafter  be  responsible   for  the  preparation  of  all  plans  and
specifications  for  construction  of all  aspects  of the  Phase 2 -  Building,
subject to  Tenant's  right of  approval  thereof as  hereinafter  described  in
Section  25.6.   Landlord  may  retain  architects,   designers,   planners  and
consultants,  subject to the prior written  consent of Tenant which shall not be
unreasonably withheld.

     25.5 It is the intention of the parties  hereto that the Phase 2 - Building
be designed,  constructed  and operated as a first-class  facility.  The parties
further acknowledge that the pricing methodology  referred to in 25.3 above will
not vary with  respect  to the Phase 2 -  Building  regardless  of the number of
floors or Usable Area  contained  in the Phase 2 - Building.  The parties  agree
that they will cooperate  with one another in reviewing and approving  plans and
specifications and estimated costs of construction as anticipated herein.

                                       28

<PAGE>

     25.6 Landlord  acknowledges  that Tenant's  willingness  to enter into this
Lease and undertake the obligations set forth herein is predicated upon Tenant's
receiving  assurances  as to the  architectural  and  functional  harmony of the
Project  being  able to be  supplemented  by the  development  of the  Phase 2 -
Building.  In order to provide  Tenant  with such  assurances,  where  plans and
specifications  are required  hereunder to be approved by Tenant, the submission
and  approval  of  plans  and  specifications  which  are to be  accompanied  by
estimated costs of construction  associated therewith,  shall be accomplished in
accordance with the following procedure:

         (i) Within ninety (90) days of Landlord's receipt of the written
request described in Section 25.1 hereof and the request for proposal described
in Section 25.4 hereof, Landlord shall cause such plans and specifications and
estimated costs of construction associated therewith to be prepared and
submitted to Tenant.

        (ii) Within forty-five (45) days after Tenant shall have received
such plans and specifications and estimated costs of construction associated
therewith, Tenant shall give Landlord notice of its approval or disapproval
thereof, specifying in the case of the latter its reasons therefor.

       (iii) Landlord shall, within thirty (30) days of its receipt of a
notice of disapproval given pursuant to clause (ii) above, undertake promptly
to amend and modify the plans and specifications and estimated costs of
construction associated therewith so as to meet the reasons for Tenant's
disapproval specified in the notice of disapproval and, upon completion
thereof, the same shall be resubmitted to Tenant for its final approval
or revision which revision may be made by Tenant in its sole and absolute
discretion.

       (iv) Tenant shall, within thirty (30) days of its receipt of the
resubmitted plans and specifications and estimated costs of construction given
pursuant to clause (iii) above, either approve such plans and specifications or
specify exactly how such plans and specifications are to be revised (hereinafter
such final plans and specifications are referred to as the "Approved Final
Plans").

       (v) The Approved Final Plans shall not be modified or amended thereafter
without the approval of Tenant.

     The parties recognize that Tenant may elect to "phase"  construction of the
Phase 2 - Building or the components  thereof (i.e.,  carry out  construction of
the same as certain  plans and  specifications  are being  completed and without
Approved Final Plans, as hereinafter  defined).  The parties  further  recognize
that "phase"  construction  requires close cooperation,  and Landlord and Tenant
will make their personnel available to each other and their architects and other
consultants on a reasonable  schedule to assist in the flow of  information  and
the  timely  preparation  of  required  construction   documents.  In  order  to
facilitate Tenant's review of plans and specifications  submitted to it pursuant
to the provision of this Article,  Tenant shall  continuously  informally review
and approve or comment upon plans and  specifications as they are in the process
of being prepared and delivered to Tenant so that, to the extent possible,  such
plans and  specifications  will have been  informally  reviewed  and approved by
Tenant by the time that they are  submitted  to Tenant  for formal  approval  in
final form;  provided,  that nothing  herein  shall affect or diminish  Tenant's
right to review and  approve,  in its sole and  absolute  discretion,  the final
plans and  specifications in the context of a completed stage or unit thereof in
accordance with the procedures set forth herein.

     Any document  required to be  submitted to Tenant for approval  pursuant to
this Article 25 shall be  accompanied  by a letter from  "Landlord's  Designated
Representative"  (as defined  below) stating that such document is submitted for
approval  pursuant  to this Lease and the time  within  which such  approval  is
required to be given hereunder,  and unless  accompanied by such a letter,  such
document  shall  not be deemed to have been  submitted  for  approval.  Any such
document shall be deemed to have been submitted on the date of receipt. All such
documents  shall be sent to the following  representative  of Tenant  ("Tenant's
Designated Representative") at the following address (unless or until some other
representative  or address  is  specified  for same by Tenant in a notice  given
pursuant to Article 25 of this Lease):

                                       29

<PAGE>



        Tenant:   Christopher R. Welp, Vice President - Tax and Support Services
                  Equitable Life Insurance Company of Iowa
                  700 Locust Street - Suite 201
                  Des Moines, Iowa 50309


With a copy to:   President
                  Equitable Life Insurance Company of Iowa
                  604 Locust Street
                  Des Moines, Iowa 50309

The person listed below shall be "Landlord's Designated Representative" (unless
or until some other representative or address is specified for same by Landlord
in a notice given pursuant to Article 25 of this Lease):

      Landlord:   George D. Milligan, President
                  The Graham Group, Inc.
                  910 Grand Avenue
                  Des Moines, Iowa 50309

With a copy to:   Charles Taylor, Esq.
                  The Graham Group, Inc.
                  910 Grand Avenue
                  Des Moines, Iowa 50309

     Any  notice  of  approval  or  disapproval  required  to be given by Tenant
pursuant to this Section  25.6 shall be  accompanied  by a letter from  Tenant's
Designated  Representative  directed to Landlord's Designated  Representative at
the address specified above, stating such notice is given pursuant to this Lease
and  setting   forth  the  time  (if  any)  within  which   revised   plans  and
specifications must be submitted for approval hereunder,  and unless accompanied
by such a letter,  such notice shall not be deemed to have been given.  Any such
document  shall be deemed to have been  submitted  on the date of its receipt by
the Landlord's Designated Representative named herein.

     Subject to the rights reserved by Tenant in this Article 25, Landlord shall
be solely and primarily responsible for the planning,  design,  construction and
inspection of the Phase 2 - Building (other than so much of the same as shall be
included in Tenant's Construction Obligations - which shall include a Thirty and
No/100  ($30.00)  per square foot of Usable Area  Tenant  Improvement  Allowance
being made available by Landlord to Tenant),  and neither the reservation or the
exercise  of  such  rights  shall  be  deemed  to  relieve  Landlord  from  such
responsibility  or to create  any  liability  by Tenant  to third  parties  with
respect to the same.  Landlord will and does hereby  indemnify,  defend and save
Tenant harmless from and against any and all claims, actions, damages, liability
and expense (including  reasonable attorneys' fees) resulting from or based upon
the Approved Final Plans.

     25.7 The Approved  Final Plans for the Phase 2 - Building shall comply with
all applicable laws.

     25.8  As  promptly  as is  reasonably  practicable  following  approval  by
Landlord  and Tenant of the  Approved  Final  Plans,  Landlord  shall enter into
general  contracts  for the  construction  of all  components  of the  Phase 2 -
Building with responsible contractors chosen by Landlord. Construction costs for
the Phase 2 - Building  are to be a pass  through of actual  construction  costs
resulting from a competitive bid process.

                                       30

<PAGE>

     25.9 After  approval of the Approved  Final Plans,  Landlord shall commence
and prosecute  with diligence and continuity to completion and in an orderly and
coordinated  manner the  construction of the Phase 2 - Building.  Landlord shall
complete  Landlord's  Construction  Obligations,   as  hereinafter  defined,  in
sufficient time to permit the respective components of the Phase 2 - Building to
be opened for business with the general public at times as set forth in the time
schedule  mutually  acceptable  to Landlord and Tenant.  Landlord's  obligations
under  this  Article  25 are  referred  to  herein as  "Landlord's  Construction
Obligations".

     25.10  Upon   completion   and   performance   by  Landlord  of  Landlord's
Construction  Obligations  with  respect to the Phase 2 - Building,  Tenant will
cause or construct and complete Tenant's Construction Obligations as promptly as
is reasonably possible.  Tenant's obligations under this Article 25 are referred
to herein as "Tenant's Construction Obligations".

     25.11 In order to facilitate the  coordination of construction of the Phase
2 - Building, each party will consult with the other party from time to time and
will use reasonable efforts to coordinate its activities with those of the other
parties.  The parties will agree upon a schedule  which will provide among other
things for a timely  exchange of  information  and  approvals in order to enable
each party to meet its  Construction  Obligations  under this Lease. The parties
recognize that it will be necessary for Landlord to be completing  certain parts
of  Landlord's  Construction  Obligations  at the same time as  Tenant  shall be
performing  Tenant's  Construction  Obligations.  In  order  to  facilitate  the
coordination  of such  activities  and to achieve the  objective  of opening the
Phase 2 - Building for business in the time period as stated above,  the parties
will use reasonable efforts to develop such detailed  construction  schedules as
shall  permit each of the parties to perform its  respective  construction  work
without interference from the other.

     Without  limiting  the  generality  of the  foregoing,  (i) Tenant  will be
permitted  to visit and have access to the Phase 2 - Building at all  reasonable
times  during  construction  and will be kept well  informed as to  construction
progress; and (ii) Tenant will be afforded an opportunity to make inspections of
the Phase 2 - Building at all reasonable  times during  construction in order to
determine  progress  and  will  be  invited  to  attend  all job  meetings  with
architects,  engineers and contractors  with respect to construction  associated
with the completion of the Phase 2 - Building.

     25.12  Landlord  represents  and warrants (i) that Building Laws permit the
construction  of the  Project  contemplated  by this  Lease;  and (ii)  that the
parking as provided in Article 24 herein  provides  for a  sufficient  number of
parking spaces to comply with the  requirements  of applicable  laws and of this
Lease with respect to the Project.  Landlord shall attain,  at its expense,  all
governmental approvals, consents, authorizations, permits and certificates which
may be necessary to permit it to carry out and complete Landlord's  Construction
Obligations  and Tenant  shall  obtain  all  governmental  approvals,  consents,
authorizations,  permits and  certificates  which may be necessary to permit the
performance of Tenant's Construction Obligations.

     25.13 The  obligations  created by Section 25.1 through Section 25.13 shall
be  binding  upon and  inure to the  benefit  of the  parties  hereto  and their
respective  successors  and assigns and shall  further be deemed to be covenants
which run with the land;  provided,  however, the obligations created by Section
25.1  through  Section  25.13  shall not  create  any  personal  or  contractual
liability on any  Mortgagee,  or its  successors  a31nd  assigns and;  provided,
further,  if Landlord  violates the obligations  created by Section 25.1 through
Section 25.13,  Tenant may not terminate this Lease or holdback,  offset or fail
to pay any  amounts  otherwise  due under this  Lease,  but may pursue any other
right or remedy provided at law or in equity.  Except as  specifically  provided
above with respect to any Mortgagee,  the obligations created by this Article 25
shall be binding  upon and inure to the benefit of the parties  hereto and their
successors  and assigns and shall  further be deemed to be  covenants  which run
with the land.

                                       31

<PAGE>

     25.14  Notwithstanding  anything in this Lease to the  contrary,  if within
four hundred eighty (480) days from the date Tenant  provides  Landlord with the
"request for proposal" referred to in Section 25.4, (i) Landlord and Tenant have
not  agreed  upon  Approved  Final  Plans  and  modified  this  Lease as  herein
anticipated,  or entered  into a new lease for the Phase 2 - Building  as herein
anticipated; and (ii) Landlord has not commenced the construction of the Phase 2
- Building on the North half of the Site as  anticipated  herein,  Tenant  shall
have the right to purchase  for Two Million  Seven  Hundred  Thousand and No/100
Dollars ($2,700,000.00) in cash, the unencumbered fee title to the land known as
the North  half of the  Site,  as such is  legally  described  as Parcel  Two on
Exhibit A attached hereto and incorporated herein by this reference,  and/or for
Two  Hundred  Fifty  Thousand  and No/I 00 Dollars  ($250,000.00)  in cash,  the
unencumbered fee title to the land known as the DMDC Land, as legally  described
as Parcel  One on  Exhibit B attached  hereto  and  incorporated  herein by this
reference. In the event Tenant elects to purchase the North half of the Site and
the DMDC Land pursuant to the terms and  conditions of this Section  25.14,  the
closing shall be at Tenant's executive office in the Building within thirty (30)
days after Tenant has given Landlord  written notice of such election and at the
closing  Landlord shall sell,  close and convey to Tenant the  unencumbered  fee
title  to the  North  half of the  Site by  special  warranty  deed in the  form
attached hereto as Exhibit D and incorporated herein by this reference;  and the
unencumbered  fee title to the DMDC Land by  special  warranty  deed in the form
attached hereto as Exhibit E and incorporated  herein by this reference.  In the
event Tenant  acquires  title to the North half of the Site and/or the DMDC Land
pursuant to the terms and  conditions of this Section  25.14,  the North half of
the Site and/or the DMDC Land shall be free from all  conditions,  covenants and
restrictions except for such items to which Tenant is a party of record,  survey
matters first  appearing  after the date hereof,  parties in possession  and the
lien of unpaid real estate taxes then due but not payable and delinquent.

                                   ARTICLE 26

                              UNPERFORMED COVENANTS

                         MAY BE PERFORMED BY OTHER PARTY

     26.1 If  Landlord  shall  fail to  perform  any of the  terms,  provisions,
covenants or conditions to be performed or complied with by Landlord pursuant to
this Lease,  and any such failure shall,  if it relates to a matter which is not
of an emergency  nature,  remain uncured for a period of thirty (30) consecutive
days after  Tenant  shall  have  served  upon  Landlord  notice of such  failure
(provided, however, if the failure is of such character as to reasonably require
more than  thirty (30) days to cure,  such thirty (30) day time period  shall be
extended for a sufficient time to permit Landlord to cure such failure,  so long
as  Landlord  has  commenced  to cure such  failure  within such thirty (30) day
period and is diligently  curing such  failure),  or if  appropriate  corrective
measures are not initiated  within  twenty-four (24) hours after service of such
notice if, in Tenant's judgment reasonably exercised,  such failure relates to a
matter  which is of an  emergency  nature,  then Tenant may at Tenant's  option,
perform any such term,  provision,  covenant or condition and the full amount of
the cost and expense entailed shall  immediately be owing by Landlord to Tenant,
and Tenant  shall have the right to deduct the  amount  thereof,  together  with
interest at the rate of interest as provided in Section 4.3 of this Lease,  from
any  financial  payments  then  due or  thereafter  coming  due  hereunder,  and
irrespective  of who may own or have an interest in the Demised  Premises at the
time such  deductions are made. The option given in this Section 26.1 is for the
protection  of Tenant,  and its  existence  shall not release  Landlord from the
obligations herein provided to be performed by Landlord or deprive Tenant of any
legal rights which it may have by reason of any such default by Landlord.

                                       32

<PAGE>



     26.2 If Tenant shall fail to perform any of the terms, provisions covenants
or conditions to be performed or complied with b Tenant  pursuant to this Lease,
and any  such  failure  shall,  if it  relates  to a  matter  which is not of an
emergency  nature,  remain uncured for a period of thirty (30)  consecutive days
after Landlord  shall have served upon Tenant notice of such failure  (provided,
however,  if the failure is of such a character  as to  reasonably  require more
than  thirty  (30)  days to cure,  such  thirty  (30) day time  period  shall be
extended for a sufficient  time to permit Tenant to cure such failure so long as
Tenant has commenced to cure such failure within such thirty (30) day period and
is diligently curing such failure),  or if appropriate  corrective  measures are
not initiated within  twenty-four (24) hours after service of such notice if, in
Landlord's judgment reasonably exercised, such failure relates to a matter which
is of an emergency nature, then Landlord may, at Landlord's option,  perform any
such term, provision,  covenant or condition and the full amount of the cost and
expense entailed shall  immediately be due and owing by Tenant to Landlord.  The
option  given in this Section 26.2 is for the  protection  of Landlord,  and its
existence  shall not release Tenant from the  obligations  herein provided to be
performed by Tenant or deprive Landlord of any legal rights which it may have by
reason of any such default by Tenant.

                                   ARTICLE 27

                                      LIENS

     Tenant shall keep the Demised  Premises  free from any liens arising out of
any work performed,  materials  furnished on, in or to the Demised Premises,  or
obligations  incurred by Tenant.  In the event that Tenant shall not, within ten
(10)  days  following  the  imposition  of any such  lien,  cause the same to be
released of record by payment or posting of a proper bond,  Landlord shall have,
in addition to all other remedies  provided in this Lease and by law, the right,
but no  obligation,  to cause the same to be  released by such means as it shall
deem proper,  including  payment of the claim giving rise to such lien. All such
sums paid by Landlord and all expenses  incurred by it in  connection  therewith
shall be  considered  Additional  Rent and shall be  payable  to it by Tenant on
demand   with   interest   at  the  rate  as  set  out  in  Section  4.3  above.
Notwithstanding the foregoing  provisions of this Section 27, Tenant may in good
faith and with due diligence  contest the validity of any lien and defer payment
and discharge  thereof  during the pendency of such contest  provided:  (i) that
such contest shall not have the effect of  preventing  the sale or forfeiture of
the Building,  or any interest therein,  to satisfy such lien; (ii) that, within
ten (10) days after Tenant has been notified of the filing of such lien,  Tenant
shall have  notified  Landlord in writing of Tenant's  intention to contest such
lien and posts with Landlord such security therefor as Landlord shall reasonably
request  (for  example,  a bond or title  indemnity);  and  (iii)  Tenant  shall
prosecute or cause such contest to be prosecuted with  reasonable  diligence and
shall pay or cause to be paid the amount of the lien plus any  interest  finally
determined to be due upon the conclusion of such contest.

                                   ARTICLE 28

                      LANDLORDS COVENANTS; TITLE INSURANCE

     Landlord  covenants and warrants that: (i) Landlord is the fee owner of the
Site,  DMDC Land, 12th Street Parking Land and Graham's Fine Arts Land; (ii) the
Demised Premises are free from any building,  zoning or other  restrictions that
would prevent or adversely  affect the use of the Demised  Premises as an office
building;  and (iii) if Tenant pays the Base Rent and Additional  Rent and other
amounts  herein  provided,  and duly observes and performs all of the covenants,
terms and conditions  hereof,  Tenant shall peaceably and quietly hold, have and
enjoy the  Demised  Premises  during  the Lease  Term  without  interruption  by
Landlord  or any  person or persons  claiming  by,  through  or under  Landlord,
subject to the terms and  conditions of this Lease and future laws,  ordinances,
orders, rules or regulations imposed by governmental or public authorities.

                                       33

<PAGE>



     Landlord at its expense,  has furnished Tenant, and Tenant has accepted and
approved,  a Pro Forma Policy  ("Commitment")  for a policy of title  insurance,
issued August 21, 1995,  as revised as File No.  T95-5721 by Security Land Title
Company,  as agent for First American Title Insurance  Company ("Title Company")
and insuring Tenant's interests in the Demised Premises,  DMDC Land; 12th Street
Parking  Land and the  Graham's  Fine Arts  Land,  together  with the  Principal
Parking Agreement and City Tax Abatement Proceedings,  including  identification
of any liens,  tenancies,  agreement,  encumbrances  and other matters of public
record.  Landlord at its sole cost and expense shall cause a title policy,  with
endorsements as required by Tenant, and in the amount of  $20,000,000.00,  to be
issued to Tenant  pursuant to the Commitment and dated as of the date on which a
fully executed copy of this Lease shall have been delivered  without  conditions
by Tenant,  or its agents,  employees  or  contractors.  Landlord  shall  within
forty-five  (45) days  after the  request of Tenant and at no cost or expense to
Tenant, cause an ALTA 3.1 endorsement to be issued by the Title Company pursuant
to the  Commitment;  provided,  however,  any such request by. Tenant may not be
made  until  after  Tenant's  receipt  of an "as built"  survey  which  shall be
delivered  by  Landlord  to Tenant  within  sixty (60) days  following  the Term
Commencement Date.

                                   ARTICLE 29

                                 INDEMNIFICATION

     29.1 Subject to Section 11.3 above Tenant shall indemnify and hold harmless
Landlord and the  management  agent of the Building  and said  persons,  agents,
employees and servants  against any and all  liabilities,  obligations,  claims,
demands,  costs and  expenses  of every kind and  nature,  including  reasonable
attorneys' fees resulting from any injury to or death to any person or damage to
any property  caused by Tenant or any subtenant or their  respective  employees,
agents, guests, servants, invitees or customers.

     29.2  Subject to Section  11.3 above,  Landlord  shall  indemnify  and hold
harmless Tenant and its agents, employees, servants and invitees against any and
all liabilities,  obligations, claims, demands, costs and expenses of every kind
and nature,  including reasonable  attorneys' fees, resulting from any injury to
or death to any  person or  damage to any  property  caused by  Landlord  or its
employees, agents, guests, servants, invitees or customers.

                                   ARTICLE 30

                             PERSONAL PROPERTY TAXES

     Tenant  shall  pay or  cause to be paid,  before  delinquency,  any and all
taxes,  assessments,  license fees and other  charges  levied or assessed  which
become payable during the Term hereof, upon all Tenant's  equipment,  furniture,
fixtures,  and personal property located in the Demised  Premises.  On demand by
Landlord, Tenant shall furnish Landlord with evidence of any such payment.

                                   ARTICLE 31

                                 NO PARTNERSHIP

     Nothing  contained  herein  shall be deemed  or  construed  by the  parties
hereto,  nor by any third party,  as creating the  relationship of principal and
agent or of partnership or of joint venture between the parties hereto. It being
understood  and agreed that  neither the method of  computation  of Base Rent or
Additional Rent, nor any other provision  contained herein,  nor any acts of the
parties herein,  shall be deemed to create any relationship  between the parties
hereto other than the relationship of landlord and tenant.

                                       34

<PAGE>

                                   ARTICLE 32

                             RIGHT OF FIRST REFUSAL

     32.1 (a) In the event  Landlord  receives an offer for the  purchase of the
Project, or the Phase 2 - Building,  which Landlord is ready to accept, Landlord
shall in  writing  notify  Tenant of such  offer  and all of the  terms  thereof
including with such notice a copy of such offer if in writing,  and Tenant shall
have twenty (20) days from receipt of such offer to notify  Landlord that it has
elected to purchase the Project  and/or the Phase 2 - Building on the same terms
and conditions as contained in such offer. In such event the parties shall close
such purchase in the same manner and subject to the same terms and conditions as
provided in such offer except the time  requirements  may be extended for thirty
(30) days or as otherwise  agreed upon by the parties.  If Tenant does not elect
to purchase the Project  and/or the Phase 2 - Building,  the Landlord is free to
sell the same in accordance  with the terms and conditions of such offer. In the
event such sale is not closed by Landlord  and the  offeror for any reason,  the
terms and  conditions  of this  Section 32.1 shall again be applied to any other
offers which Landlord is ready to accept.

     (b) Notwithstanding anything contained in 32.1(a) above to the contrary, in
the  event  Mortgagee   acquires  title  to  the  Project  through   possession,
foreclosure  proceeding  or  delivery  of a deed  in lieu  of  foreclosure,  and
thereafter  receives  an offer for the  purchase  of the  Project,  or the phase
2-Building,  which  Mortgagee  is ready to  accept,  Mortgagee  shall in writing
notify Tenant of such offer and all of the terms thereof,  and Tenant shall have
seven (7) business  days from receipt of such offer to notify  Landlord  that it
has elected to  purchase  the Project  and/or the Phase  2-Building  on the same
terms and conditions as contained in such offer. In such event the parties shall
close  such  purchase  in the same  manner  and  subject  to the same  terms and
conditions  as provided in such offer.  If Tenant does not elect to purchase the
Project and/or the Phase  2-Building  from  Mortgagee,  the Mortgagee is free to
sell the same in  accordance  with the terms and  conditions  of such  offer and
thereafter  such offeror  shall be free to further  sell the Project  and/or the
Phase 2- Building free of any  restrictions  under this Article 32. In the event
such sale is not closed by Mortgagee  and the  original  offeror for any reason,
the terms and  conditions of this Section  32.1(b) shall again be applied to any
other offers which Mortgagee is ready to accept.

     32.2 Notwithstanding  Section 32.1 above,  Landlord may not transfer all or
any portion of its fee interest in the Project,  DMDC Land,  12th Street Parking
Land or the Graham  Fine Arts Land prior to the Term  Commencement  Date of this
Lease;  provided,  however,  Landlord may sell or transfer all or any portion of
its  interest in the  Project,  the DMDC Land,  12th Street  Parking Land or the
Graham  Fine  Arts Land by way of a  mortgage  for  purposes  of  financing  the
development of the Project and the  construction,  development  and operation of
the  Site  and the  Building  thereon,  including  both  interim  and  permanent
financing  and;  provided,  further,  that  after  the Term  Commencement  Date,
Landlord may also assign or transfer its ownership interest in the Project,  the
DMDC Land,  12th  Street  Parking  Land or the Graham  Fine Arts Land to an Iowa
limited  partnership  whose sole general partner is The Graham Group,  Inc. and,
provided,  further The Graham Group,  Inc. owns more than fifty percent (50%) of
all ownership  interests in such limited partnership and all remaining ownership
interests are held by (i) John G. Graham or Barbara H. Graham,  husband and wife
and  residents  of Des  Moines,  Iowa,  or their  lineal  descendants,  and (ii)
officers  or  directors  of The Graham  Group,  Inc.  In no event shall any such
assignment  or transfer  cause  Landlord to be released,  relieved or discharged
from any of its covenants,  obligations  and liabilities  under this Lease.  Any
permitted  transferee  or  assignee  shall  enter into an  assumption  agreement
reasonably  satisfactory to Tenant,  which assumption agreement provides for the
assumptor assuming all obligations of Landlord under this Lease.  Landlord shall
notify Tenant of any such transfer or assignment  and include with such notice a
copy of the transfer or assignment document, or other evidence or explanation of
the transfer or assignment.  No sale or transfer of the Project, DMDC Land, 12th
Street  Parking Land or Graham Fine Arts Land,  or  interests  in the  Landlord,
whether permitted or not, shall relieve Landlord from its obligations under this
Lease.

                                       35

<PAGE>

                                   ARTICLE 33

                                     WAIVER

     All waivers  hereunder  must be in writing  and specify the act,  omission,
term,  covenant  or  condition  waived.  The waiver by Landlord or Tenant of any
term,  covenant or condition of this Lease shall not be deemed to be a waiver of
such term,  covenant or  condition on any  subsequent  breach of the same or any
other term, covenant or condition.

                                   ARTICLE 34

                                   INJUNCTION

     In the  event  of a breach  by  Landlord  or  Tenant  of any of the  terms,
covenants,  conditions,  provisions or  agreements  of this Lease,  Landlord and
Tenant shall additionally have the right of injunction.

                                   ARTICLE 35

                                CUMULATIVE RIGHTS

     All rights and remedies of Landlord and Tenant herein  enumerated  shall be
cumulative  and none shall  exclude  any other  right or remedy  allowed by law.

                                   ARTICLE 36

                              AUTHORITY OF PARTIES

     Each  individual  executing this Lease on behalf of Landlord or Tenant,  as
the case may be,  represents  and warrants that he or she is duly  authorized to
execute and deliver this Lease on behalf of that entity,  in  accordance  with a
duly adopted resolution of its board of directors and that this Lease is binding
upon Landlord or Tenant, as the case may be, in accordance with its terms.

                                   ARTICLE 37

                               CUMULATIVE REMEDIES

     No remedy or  election  hereunder  by  Landlord  or Tenant  shall be deemed
exclusive,  but shall be cumulative with all other remedies at law or in equity.

                                   ARTICLE 38

                                  HOLDING OVER

     Tenant shall not be entitled to hold over in the Demised Premises after the
expiration or sooner  termination of the Term.  Tenant shall indemnify  Landlord
for,  and hold  Landlord  harmless  from and  against,  any and all loss,  cost,
damage,  liability,  or  expenses  (including,  without  limitation,  reasonable
attorneys'  fees)  arising out of or in  connection  with any delay by Tenant in
surrendering the Demised Premises,  including,  without  limitation,  any claims
made by any  succeeding  tenant which are founded on such delay.  If Tenant does
holdover,  Tenant shall be deemed to be a tenant-at-will and, in addition to all
other sums due under this Lease, shall pay to Landlord base rent plus additional
rent on a per diem basis in amount equal to one and one-half times the Base Rent
and Additional Rent payable during the last full calendar month of the Term.

                                   ARTICLE 39

                               STRUCTURAL WEAKNESS

     Landlord covenants and agrees that in the event that at any time during the
Lease Term,  any  excavation  or building  operation  shall be  conducted on any
property adjacent to or abutting the Project, or in the event that any operation
shall be commenced under or in connection with any adjoining street or alley, or
in the event it shall be necessary for any reason, other than due to overloading
by Tenant, to strengthen the foundations of the Building,  then and in each such

                                       36

<PAGE>

event,  Landlord  shall,  at no cost or expense to Tenant,  cause to be done and
furnished,  any and all necessary work,  labor and material in connection  with,
and for the  purpose of shoring  upon and  protecting  the walls and  structural
members of the Building.

                                   ARTICLE 40

                        COVENANTS BINDING AND SUCCESSORS

     All covenants and agreements  herein  contained shall run with the land and
shall be binding upon and inure to the benefit of the  successors and assigns of
the respective  parties hereto whether or not expressly  stated herein,  and the
parties and their successors shall be bound jointly and severally by this Lease.

                                   ARTICLE 41

                                   SHORT FORM

     Simultaneously  with the  execution of this Lease,  Landlord and Tenant are
executing a short form  instrument  or memorandum of this Lease for recording in
the land records of Polk County, Iowa, to give notice of this Lease, and setting
forth a description of the Demised Premises,  the Lease Term,  Tenant's right of
first refusal to purchase the Project or the Phase 2 - Building,  Tenant's right
to purchase  the North half of the Site,  Tenant's  rights to purchase  the DMDC
Land,  Landlord's  obligation  to reacquire  the DMDC Land,  and other  portions
hereof  (except  rental  and other  economic  provisions)  as  either  party may
reasonably request. Within thirty (30) days after the Tern Commencement Date, or
any time  thereafter  upon the reasonable  request of either party,  the parties
hereto  shall  execute  in  recordable  form an  instrument  supplementing  such
instrument or memorandum for the purpose of specifically  designating in writing
the Term  Commencement  Date,  and the date of  expiration  of the initial Lease
Term.  The cost and  expense of  recording  these  instruments  shall be divided
equally between Landlord and Tenant.

                                   ARTICLE 42

                                 COSTS AND FEES

     If either party incurs any reasonable  attorneys'  fees or court costs as a
result of the other party's failure to perform any of the obligations hereunder,
the prevailing  party shall be reimbursed by the  non-prevailing  party for such
reasonable expenses, and any such reasonable expenses that have not been paid or
reimbursed  by such non-  prevailing  party,  may be added to or included in any
judgment  rendered  in the  prevailing  party's  favor in any  lawsuit  or other
proceeding.

                                   ARTICLE 43

                                     WAIVER

     No waiver by  Landlord  or Tenant of any  breach of any term,  covenant  or
condition  hereof shall be deemed a waiver of the same or any subsequent  breach
of the same or any other term,  covenant or  condition.  The  acceptance of Base
Rent or Additional Rent by Landlord,  or the acceptance by Tenant of monies from
Landlord,  shall  not be  deemed a waiver  of any  earlier  breach  by Tenant or
Landlord of any term,  covenant or condition  hereof,  regardless of Landlord or
Tenant's  knowledge  of such  breach when such rent or monies are  accepted.  No
covenant,  term or condition of this Lease shall be deemed waived by Landlord or
Tenant  unless  waived in writing.  The consent or approval by Landlord to or of
any act by Tenant requiring  Landlord's  consent or approval shall not be deemed
to waive or render  unnecessary  Landlord's  consent  or  approval  to or of any
subsequent  similar or non-similar act by Tenant, and the consent or approval by
Tenant to or of any act by Landlord requiring Tenant's consent or approval shall
not be deemed to waive or render unnecessary  Tenant's consent or approval to or
of any subsequent similar or non-similar act by Landlord.

                                       37

<PAGE>

                                   ARTICLE 44

                                NUMBER AND GENDER

     The use herein of a singular  term shall  include the plural and use of the
masculine, feminine or neuter genders shall include all others.

                                   ARTICLE 45

                               BROKER'S COMMISSION

     Each party represents and warrants that it has caused or incurred no claims
for brokerage  commissions or finder's fees in connection  with the execution of
this Lease,  and each party shall indemnify and hold the other harmless  against
and from all  liabilities  arising from any such claims caused or incurred by it
(including  without  limitation,  the  cost  of  reasonable  attorneys'  fees in
connection therewith).

                                   ARTICLE 46

                                    HEADINGS

     The  Section  headings,  Article  headings,  table  of  contents,  index of
definitions  and Section and Article  numbers in this Lease are for the purposes
of convenience,  reference and heading only, and the words contained therein and
division  thereof  shall  in no way be held  to  explain,  modify  or aid in the
interpretation, construction or meaning of the provisions of this Lease.

                                   ARTICLE 47

                               PARTIAL INVALIDITY

     If any provision of this Lease or the application  thereof to any person or
circumstance  shall to any extent be invalid or unenforceable,  the remainder of
this Lease,  of the  application of such  provision to persons or  circumstances
other  than  those as to which it is  invalid  or  unenforceable,  shall  not be
affected thereby and each provision of this Lease shall be valid and enforceable
to the fullest extent permitted by law.

                                   ARTICLE 48

                                ENTIRE AGREEMENT

     There are no representations,  covenants, warranties, promises, agreements,
conditions or undertakings,  oral or written,  between Landlord and Tenant other
than  herein set  forth.  Except as herein  otherwise  provided,  no  subsequent
alteration,  amendment,  change or addition to this Lease shall be binding  upon
Landlord or Tenant unless in writing and signed by them.

                                   ARTICLE 49

                                  COUNTERPARTS

     This Lease may be executed in several counterparts,  each of which shall be
deemed an original.

                                   ARTICLE 50

                                    SURVIVAL

     Notwithstanding  anything to the  contrary  contained  in this  Lease,  the
termination of this Lease shall not relieve Landlord from Landlord's, nor Tenant
from  Tenant's,  rights and  obligations  accruing and  applicable to the period
prior to such termination. In addition to and notwithstanding anything contained
herein to the contrary,  all provisions  contained in this Lease relating to the
Phase 2 - Building  (including,  without limitation,  all provisions relating to
the  construction  of the Phase 2 - Building by Landlord,  the DMDC Land and the
construction  of the DMDC Ramp) shall survive the  termination of this Lease and
shall continue as the ongoing rights and  obligations of The Graham Group,  Inc.
and the Equitable Life Insurance Company of Iowa in accordance with their terms.

                                       38

<PAGE>

                                   ARTICLE 51

                                 TIME OF ESSENCE

     Time is of the  essence in this Lease and of all of the terms,  provisions,
agreements and conditions contained herein.

                                   ARTICLE 52

                                 APPLICABLE LAW

     This Lease shall be construed under the laws of the State of Iowa.

                                   ARTICLE 53

                              ACCOUNTING AND AUDIT

     Landlord  shall  keep  complete  and  accurate  books  and  records  of the
Operating  Expenses.  Landlord  shall  preserve  for a period of three (3) years
after the end of each Lease  Year,  all of such books and records for such lease
year.  Such  books  of  record  and  account  shall be kept  and  maintained  in
accordance with generally accepted accounting  practices  consistently  applied.
Tenant shall have the right, at its sole cost and expense,  during the aforesaid
period of three (3) years at reasonable times during business hours, upon notice
to Landlord and within sixty (60) days  thereafter,  but not more often than the
once each lease  year,  to examine and audit all such books and records for such
lease year.

                                   ARTICLE 54

                                    SKYWALKS

     Landlord  shall not enter into any  contract  which would  permit a skywalk
bridge or skywalk  corridor to be  connected to the  Building,  or the Phase 2 -
Building,  without the receipt of the prior  written  approval of Tenant,  which
approval may be withheld by Tenant in its sole and absolute discretion.

                                   ARTICLE 55

                       LIMITATION OF MORTGAGEE'S LIABILITY

     Notwithstanding  anything in this Lease to the  contrary,  the  obligations
created  hereby shall not create any personal  liability  on any  Mortgagee  who
acquires  title to the Project  through  possession,  foreclosure  proceeding or
delivery of a deed in lieu of foreclosure.  Tenant  acknowledges and agrees that
it shall look solely to Mortgagee's  interest in the Project for satisfaction of
any  liability  under or in  respect of this  Lease or for the  satisfaction  of
Tenant's  remedies for the  collection  of a judgment  (or other legal  process)
requiring the payment of money by Mortgagee and no other  property and assets of
Mortgagee shall be subject to levy, execution or other enforcement procedure for
the satisfaction of Tenant's remedies under or in respect of this Lease.

                                       39

<PAGE>

     IN WITNESS WHEREOF, the parties have caused this Lease to be executed as of
the day and year first above written.

                                       LANDLORD:
                                       THE GRAHAM GROUP, INC.
                                       an Iowa Corporation


                                       By /s/   George D. Milligan
                                         --------------------------------------
                                       Name     George D. Milligan
                                       Title    President
ATTEST:

By: /s/  Charles R. Taylor
    ----------------------
Name     Charles R. Taylor
Title    Secretary


                                       TENANT:
                                       EQUITABLE LIFE INSURANCE COMPANY
                                       OF IOWA, an Iowa Corporation


                                       By: /s/  Christopher R. Welp
                                           -------------------------------------
                                       Name     Christopher R. Welp
                                       Title    Vice President - Tax & Support
                                                Services
ATTEST:

By: /s/  Paul E. Larson
    ----------------------
Name     Paul E. Larson
Title    Executive Vice President &
         Chief Financial Officer


                                       40

<PAGE>

FOR LANDLORD:
STATE OF IOWA     )
                  ) SS:
COUNTY OF POLK    )

     On this 31st day of August,  1995, before me a Notary Public in and for the
State of Iowa,  personally appeared George D. Milligan and Charles R. Taylor, to
me  personally  known,  who  being by me duly  sworn  did say that  they are the
President  and  Secretary,  respectively,  of THE GRAHAM  GROUP,  INC.,  an Iowa
corporation,  and that the  foregoing  Lease was  signed and sealed on behalf of
said  corporation  and the  said  George  D.  Milligan  and  Charles  R.  Taylor
acknowledged  the execution of said  instrument to be the voluntary act and deed
of s corporation for e uses and purposes therein set forth.



                                     -------------------------------------------
                                     Notary Public in and for the State of IOWA


My Commission Expires:     2-1-98




FOR TENANT:
STATE OF IOWA     )
                  )SS:
COUNTY OF POLK    )

     On this 31st day of August,  1995, before me a Notary Public in and for the
State of Iowa, personally appeared Christopher R. Welp and Paul E. Larson, to me
personally  known,  who  being by me duly  sworn  did say that they are the Vice
President  - Tax &  Support  Services  and  Executive  Vice  President  &  Chief
Financial Officer, respectively, of EQUITABLE LIFE INSURANCE COMPANY OF IOWA, an
Iowa  corporation,  and that the foregoing Lease was signed and sealed on behalf
of said  corporation  and the  said  Christopher  R.  Welp  and  Paul E.  Larson
acknowledged  the execution of said  instrument to be the voluntary act and deed
of said corporation for the uses and purposes therein set forth.



                                      __________________________________________
                                      Notary Public in and for the State of IOWA


My Commission Expires:     2-1-98


<PAGE>


                                   EXHIBIT "A"

                                LEGAL DESCRIPTION

Parcel One

(South  half of Site  identified  as Parcels B and C
on the Survey  prepared  by LandTech Services, Inc.)


Lots 2 and 3 (except the North 8 feet  thereof) of the OFFICIAL  PLAT OF BLOCK 2
OF CAMPBELL AND McMULLEN ADDITION TO FORT DES MOINES; Also Lot 5 of the OFFICIAL
FLAT OF THE SOUTHWEST 1/4 OF SECTION 4, TOWNSHIP 78 NORTH,  RANGE 24 WEST OF THE
5TH P.M.,  now  included in and  forming a part of the City of Des Moines,  Folk
County, Iowa.

The  South  8.0  feet of Lot 1 and  the  North  8.0  feet of Lots 2 and 3 of the
OFFICIAL PLAT OF BLOCK 2 OF CAMPBELL AND McMULLEN ADDm0N TO FORT DES MOINES; and
the  South  16.0  feet of Lot 4 of the  OFFICIAL  PLAT OF THE  SOUTHWEST  1/4 OF
SECTION 4,  TOWNSHIP 78 NORTH,  RANGE 24 WEST OF THE 5TH F.M.,  all now being in
and forming a part of the City of Des Moines, Polk County, Iowa.

Parcel Two

(North  half of the Site  identified  as  Parcel  A
on the  Survey  prepared  by LandTech Services, Inc.)

Lot 1  (except  the South 8 feet  thereof)  of the  OFFICIAL  PLAT OF BLOCK 2 OF
CAMPBELL AND McMULLEN ADDITION TO FORT DES MOINES;  Also Lot 4 (except the South
16 feet  thereof)  of the  OFFICIAL  PLAT OF THE  SOUTHWEST  1/4 OF  SECTION  4,
TOWNSHIP 78 NORTH,  RANGE 24 WEST OF THE 5TH P.M., now included in and forming a
part of the City of Des Moines, Polk County, Iowa (except streets and alleys).


<PAGE>

                                   EXHIBIT "B"

                                LEGAL DESCRIPTION


DMDC LAND - PARCEL 1
---------

Lots 1, 2, 7 and 8 in Block 4 in WEST FORT DES MOINES  SUBDIVISION,  an Official
Hat included in and forming a part of the City of Des Moines, Iowa.


12TH STREET PARKING LAND - PARCEL 2
------------------------

Lots 5 and 6 in Block 25, in CAMPBELL AND MCMULLEN ADDITION, now included in and
forming a part of the City of Des Moines, Iowa.


GRAHAM'S FINE ARTS LAND - PARCEL 3
-----------------------

Lot 6 (except the North 7 feet for street purposes) and all of Lot 5, Block 3 in
CAMPBELL AND McMULLEN ADDITION now included in and forming a part of the City of
Des Moines, Iowa.


PRINCIPAL LAND - PARCEL 4
--------------

Lots  1,2,  3, 4 and 5 of the  OFFICIAL  FLAT  OF LOTS  1,2 and 3 in  Block 3 of
HOLCOMB'S  ADDITION TO FORT DES MOINES;  Lots 4, land 6 in Block 3 in  HOLCOMB'S
ADDITION  TO FORT DES  MOINES;  Lots 2, 3, 4 and 5 in Block 60 in  CAMPBELL  AND
MCMULLEN ADDITION TO TOWN OF FORT DES MOINES;  Lot 3 of the OFFICIAL PLAT of the
Southwest  Quarter (SW 1/4) of Section 4,  Township 78 North,  Range 24, West of
the St P and all of the Vacated North/South alley right-of-way lying East of and
adjoining  said Lot 4 in Block 60 in Campbell and  McMullen  Addition to Town of
Fort Des  Moines  and  lying  East of and  adjoining  Lots 4 and 6 in Block 3 in
Holcomb's Addition to Fort Des Moines, all now included in and forming a part of
the City of Des Moines, Iowa.


<PAGE>



                                   EXHIBIT "C"



                             THE GRAHAM GROUP, INC.
                                910 GRAND AVENUE
                             DES MOINES, IOWA 50309
REAL ESTATE DEVELOPMENT
PROPERTY MANAGEMENT                                               TELEPHONE
  AND SALES                                                     (515)244-0387
INTERIOR DESIGN                                                      FAX
INVESTMENTS                                                     (515)244-6815
GENERAL C0NTRACTING


                                 April 21, 1995


Christopher R Welp
Vice President - Tax and Support Services
Equitable of Iowa Companies
700 Locust Street, Suite 201
Des Moines, Iowa 50306-3700


RE:  Phase 1 - Building comprising  approximately  203,997 square feet of Usable
     Area  consisting  of 6 floors  above grade,  in addition to an  underground
     parking garage  containing 100 parking stalls,  to be located on a downtown
     block  bordered by 9th Street on the East,  10th Street on the West,  Grand
     Avenue on the North,  and Locust Street to the South,  in Des Moines,  Iowa
     (the "Site")

Dear Mr. Welp:

In connection  with the development of the above  referenced  Phase I - Building
and Site,  a letter of intent  dated April 21, 1995 (the "Letter of Intent") was
entered into by you, as Vice  President - Tax and Support  Services on behalf of
Equitable of Iowa Companies and the  undersigned,  as President on behalf of The
Graham Group,  Inc. The Letter of Intent  references to this letter for purposes
of explaining the  methodology in determining  initial Base Rent per square foot
of Usable Area for the Phase I -  Building.  Base Rent per square foot of Usable
Area for the Phase 2- Building,  if applicable,  shall be calculated pursuant to
the same methodology as was used for the Phase I - Building. The methodology for
establishing Base Rent per square foot of Usable Area for the Phase 1 - Building
was as follows:

             Phase I Building Methodology for Calculating Base Rent
             ------------------------------------------------------

             Debt                                     $ 17,300,000
             Equity (Cash)                               3,400,000
             Equity (Land) (1)                           2,000,000
                                                     -------------
               TOTAL SOURCES:                         $ 22,700,000


<PAGE>

Christopher R. Welp
April 21, 1995
Page 2


       Sitework/Parking                                 1,475,000
       Architect Fees                                     530,000
       Building Shell (2)                              11,088,000
       Tenant Improvements                              5,100,000
       Real Estate Commission                             300,000
       Loan Fees                                          173,000
       Development Fee                                    300,000
       Owner Contingency                                  231,000
       Loan Closing Costs                                  60,000
       Land (1)                                         2,000,000
       Construction Period Interest                     1,443,000
                                                     -------------
         TOTAL USES                                  $ 22,700,000

       Base Rent                                     $      11.95
                                                     -------------

       Rental income (168,024 x 11.95)                  2,007,887
       Parking Income (Estimated)                          70,000
                                                     -------------
         TOTAL INCOME                                $  2,077,887


       Annual Debt Service                           $  1,636,822
       (8.25% with 25 yr. amortization;
       assumes approximate 115 spread
       over 10-year Treasuries and
       continued creditworthiness of
       Equitable)

       Possible Discretionary Cash                   $    441,065
       Debt Service Coverage:                                1.25
       Possible cash return if
       construction and financing
       assumptions are correct                                 8%


<PAGE>



Christopher R. Welp
April 21, 1995
Page 3


(1)  If the Phase 2- Building is developed,  the North half of the Site shall be
     assumed to have a land value of $2,000,000.

(2)  Construction costs for the Phase 2 - Building,  if applicable,  are to be a
     pass through of actual  construction costs resulting from a competitive bid
     process.

By way of  illustration,  based upon a loan of $17,300,000 (the "Loan") which is
assumed to be 76% of the value of the Total  Uses,  with an  interest  rate of 8
1/4% which is  approximately  115 basis points over the most recently issued ten
year United States  Treasury  Security as determined in accordance with standard
United States Government  securities practice and a 25 year amortization period,
annual  payments of principal and interest would be  $1,636,822.  Since the Loan
requires annual payments of Base Rent, plus estimated  parking income,  to be at
least 1.25 (actual  calculations  for the Phase 1 - Building create debt service
coverage of 1.269) times the annual payments of principal and interest  required
to be paid under the Loan, Base Rent plus parking income (estimated) must in the
aggregate  be at  least  $2,077,887.  Assuming  parking  income  (estimated)  of
$70,000,  Base  Rent  must  be  $2,007,887.  In  addition,  if the  construction
financing  assumptions  are  correct,  it is to be assumed  that the Landlord is
entitled to a cash return of 8% on its  $5,400,000  equity  position.  Given the
above  requirements and assumptions,  Base Rent plus parking income  (estimated)
must in the  aggregate be  $2,077,887  (annual debt service of  $1,636,822  plus
possible  discretionary  cash return on equity of  $441,065).  Assuming  parking
income  (estimated)  of $70,000,  Base Rent must be $2,007,887  which results in
Base Rent per square foot of Usable Area of $11.95.

The above stated  methodology  was  developed by us on the  assumption  that the
Phase 1 - Building  would be  composed  of 168,024  square  feet of Usable  Area
consisting of five floors above grade,  when in fad the Phase I - Building is to
be composed of  approximately  203,997 square feet of Usable Area  consisting of
six floors above grade.  The  addition of an  additional  floor of the Phase I -
Building does not affect the pricing methodology described herein. Likewise, the
methodology  will not vary with respect to the Phase 2- Building  regardless  of
the number of floors contained in the Phase 2- Building.

The Phase 2- Building,  if applicable,  shall also assume that Landlord's equity
(land) value is $2,000,000.  We are also assuming the creditworthiness of Tenant
on the date  Landlord  and  Tenant  enter  into a lease  providing  the Phase 2-
Building will be equal to or better than that as of the date Landlord and Tenant
enter into the Lease providing for the development of the Phase 1 - Building, or
an appropriate  adjustment  shall be made to the 115 basis points spread as such
is described above.

It is  understood  that the above  described  methodology  is to be  employed in
computing the Base Rent for the Phase 2 - Building,  if and when,  such is built
in accordance with the terms of Paragraph 9 of the Letter of Intent.

<PAGE>

Christopher R. Welp
April 21, 1995
Page 4


If the above methodology is acceptable to you, please so indicate by signing and
returning to me two copies of this letter.


Very truly yours,
THE GRAHAM GROUP, INC.



George D. Milligan, President

The undersigned hereby consents
  and agrees to the foregoing.
EQUITABLE OF IOWA COMPANIES


By:/s/ Christopher R. Welp
   -----------------------------
Name:  Christopher R. Welp
Its:   Vice President - Tax and Support Services


Date:  April 27, 1995
       --------------

<PAGE>


                                   EXHIBIT "C"

                      NYEMASTER, GOODE, MCLAUGHLIN, VOIGTS,
                             WEST, HANSELL & O'BRIEN
                           A PROFESSIONAL CORPORATION
                         ATTORNEYS AND COUNSELORS AT LAW


<TABLE>
<S>                   <C>                       <C>                       <C>                       <C>

JOHN J. MCLAUGHLIN    THOMAS N. ZUREK           JAMES C. WINE             NORBERT W. KAUT           1900 HUB TOWER
L.R. VOICTS           CARLTON T. KING           BRUCE W. BAKER            KRISTIN DARNELL FYDA      699 WALNUT STREET
DREW R. TILLOTSON     GREGORY P. PAGE           THOMAS W. FOLEY           ANDRE H. MERRETT          DES MOINES IOWA 50309
JAMES B. WEST         RANDALL G. HORSTMANN      STEVEN H. LYTLE           DARCI L. FRAHM               (515)283-3100
EDGAR F. HAMSELL      JAY EATON                 TERRY C. HANCOCK          JASON P. THEIN
W. DON BRITTIM, JR.   BURNS MOSSMAN             ANTHONY A. LONGNECKER
R. CRAIG SHIVES       PHYLLIS E. PEARSON        JOHN E. LANDESS
DON MUYSKENS          BRADFORD L. AUSTIN        JOSEPH A. QUINN
ROGER L. FERRIS       SARAJ. SERSLAND           WADE H. SCHUT                                       FACSIMILE (515) 283-3108
LAWRENCE E, MYERS     HAYWARD L. DRAPER         MARK 0. ALJETS            OF COUNSEL
KEITH E. LUCHTEL      JAMES E. GRITZNER         G.  THOMAS SULLIVAN       RAY NYEMASTER             WRITER'S DIRECT DIAL NUMBER
                                                                                                    (515) 283-3105
GERALD J. NEWBROUGM   MICHAEL W. THRALL         KEVIN F. HOWE             D.J. GOODE
ROBERTA. VAMORSOEL    MARK C. DICKINSON         JOAN FLETCHER             SAMUEL 0. O'BRIEN
RICHARD J. SAPP       GREGORY B. WILCOX         THOMAS H. WALTON          FRANK B. COMFORT
G.R. NEUMANN          JOHN F. LORENTZEN         WILLARD L. BOYD III       LUTHER L. HILL, JR.
JAMES R. MUMFORD      STEVEN J. ROY             LISETTE SELL              MILTON 0. RIEPE
RUSSELL E. SCHRAGE    FRANK B. MARTY            JOHN W. WETHERELL         THOMAS H. MCCOLLUM


</TABLE>

                                  May 24, 1995

Charles Taylor, Esq.
The Graham Group, Inc.
910 Grand Avenue
Des Moines, Iowa 50309


RE:  Phase 1-Building ("Phase I - Building')  comprising  approximately  203,997
     square feet of Usable Area  consisting of 6 floors above grade, in addition
     to an underground  parking  garage  containing  100 parking  stalls,  to be
     located on a downtown block bordered by 9th Street on the East, 10th Street
     on the West,  Grand Avenue on the North, and Locust Street to the South, in
     Des Moines, Iowa (the "Site")

Dear Charlie:

Enclosed you will find two  "compared" and "clean" copies of the revised form of
Lease  Agreement  ("Lease')  between The Graham  Group,  Inc.  (`Landlord")  and
Equitable of Iowa Companies ("Tenant"). To expedite the transaction I am sending
you the  enclosures  before  Tenant has had an  opportunity  to review the same.
Accordingly, the enclosures are subject to Tenant's review and comment.

It is my  understanding  that you may be sending the Lease to  Commerce  Bank of
Kansas City for its review. Such procedure is fine with us. As stated before, in
the event you feel it is desirable for Commerce  Bank,  you and Ito get together
to "overview" the Lease, I am more than willing to do the same.

While  there  may be  certain  areas of the  Lease  with  which  both of us have
continuing  concerns,  the one major area of  concern  that I am left with deals
with the Exhibit "C" - Methodology Letter. In accordance with your request,  the
sole  references to the  Methodology  Letter appear in Section 25.2 of the Lease
and also as Exhibit "C" to the Lease.  Jam still  troubled by the absence in the
Methodology  Letter of a  clarification  with  respect to certain  points  which
include the following:


<PAGE>

Charles Taylor, Esq.
May 24, 1995
Page 2

     1. The Methodology Letter states that "Construction costs for the Phase 2 -
Building,  if applicable,  are to be a pass through of actual construction costs
resulting from a competitive  bid process".  The Landlord has indicated in prior
discussions with the Tenant that no "profit" is being taken by the Landlord,  or
any of its  affiliates,  in  connection  with the  development  of the Phase I -
Building  with the  exception  of a  modest  "Development  Fee" of  $300,000.00.
Notwithstanding,  I assume  that the above  means that  Landlord is taking out a
reasonable cost factor  attributable to its "overhead" but is not taking out any
"profit".  I assume this would also be the case in the construction of the Phase
2 - Building, if applicable. However, in connection with the Phase 2 - Building,
if neither the Landlord, nor one of its affiliates,  is the contractor,  I would
assume that a reasonable "overhead" and "profit" factor would have to be paid to
the contractor but neither the Landlord, nor one of its affiliates, would take a
"Development Fee", "overhead charge" or other payment.

     2. I would  assume that there would be no real  estate  commission  paid in
connection with the development of the Phase 2 - Building.

     3. I would assume the "Development Fee" would be a comparable percentage of
the "Total Uses" in connection  with the  development of the Phase 2 - Building,
as such would be modified by (I) above.

I am  encouraged  by your  feeling the  financing  methodology  works in a high,
medium or low interest rate market. In any event, assuming that the above fairly
states the positions of the Landlord,  and its  affiliates,  I believe it is the
Tenant's present intentions to limit discussion regarding the Methodology Letter
to those in the Lease, the Methodology Letter and this letter.

Should your  conclusions with respect to the above described points which appear
in the Methodology  Letter be as described above,  please so indicate by signing
and returning to me the enclosed  copy of this letter.  Thank you for giving the
above your attention.

Very truly yours,



Russell E. Schrage
RES/kkb
Enclosures
cc: Christopher R. Welp


The undersigned hereby agrees to the foregoing.

THE GRAHAM GROUP, INC.


By: /s/
    ----------------------------
Name:___________________________
Title:__________________________
Date:___________________________


<PAGE>


THE IOWA STATE BAR ASSOCIATION I              FOR THE LEGAL EFFECT OF THE USE OF
Official Form No. 105                         THIS FORM.  CONSULT YOUR LAWYER


                                   EXHIBIT "D"

--------------------------------------------------------------------------------
                                                           SPACE ABOVE THIS LINE
                                                                    FOR RECORDER

                              SPECIAL WARRANTY DEED


For the Consideration of Ten ($10.00)  ____________________________Dollar(s) and
other  valuable  consideration,  THE GRAHAM  GROUP,  INC.,  do hereby  Convey to
EQUITABLE  LIFE  INSURANCE  COMPANY OF IOWA, an Iowa  corporation  the following
described real estate in ________ County, Iowa:

Lot 1  (except  the South 8 feet  thereof)  of the  OFFICIAL  PLAT OF BLOCK 2 OF
CAMPBELL AND McMULLEN ADDITION TO FORT DES MOINES:  also Lot 4 (except the South
16 feet  thereof)  of the  OFFICIAL  PLAT OF THE  SOUTHWEST  1/4 OF  SECTION  4,
TOWNSHIP 78 NORTH,  RANGE 24 WEST OF THE 5TH P.M., now included in and forming a
part of the City of Des Moines, Polk County, Iowa (except streets and alleys).

Subject to all "Permitted Exceptions" as appear on Exhibit 1 attached hereto and
incorporated herein by this reference.

     Grantors do Hereby  Covenant  with  Grantees and  successors in interest to
Warrant  and Defend the real  estate  against  the lawful  Claims of all persons
claiming by, through or under them,  except as may be above stated.  Each of the
undersigned hereby relinquishes all rights of dower,  homestead and distributive
share in and to the real estate.

     Words  and  phrases  herein,  including  acknowledgment  hereof,  shall  be
construed  as in the  singular or plural  number,  and as  masculine or feminine
gender, according to the context.


STATE OF Iowa)                                               Dated:_____________
             ) ss
Polk COUNTY  )

                                               THE GRAHAM GROUP, INC.


                                               By:
                                                 _______________________________
                                               Name:____________________________
                                               Title:___________________________


On  this  _______  day  of  _____________   199__,   before  me,  (Grantor)  the
undersigned,  a  Notary  Public  in and  for  said  State,  personally  appeared
____________________________________________________________   (Grantor)  to  me
known to be the  identical  persons  named  in and who  executed  the  foregoing
instrument    and    acknowledged    that    they    executed    the   same   as
______________________ their voluntary act and deed.


       (Grantor)

______________________
______________________                          ________________________________
                                                Notary  Public

       (Grantor)

(This form of acknowledgement for individual grantor(s) only)


<PAGE>


STATE OF _____________

______________________ COUNTY, ss:

On this  ______ day of  ______________,  199___  before me, the  undersigned,  a
Notary    Public    in    and    for    said    State,    personally    appeared
__________________________________ to me known to be the identical persons named
in and who  executed  the  foregoing  instrument,  and  acknowledged  that  they
executed the same as their voluntary act and deed.


                                                  ______________________________
                                                  Notary Public

<PAGE>


                                    EXHIBIT 1


     Permitted Exceptions
     --------------------

1.   Items to  which  Equitable  Life  Insurance  Company  of Iowa is a party of
     record.

2.   Survey matters first appearing after the date hereof

3.   Parties in possession.

4.   Real Estate Taxes then due but not payable and delinquent.


<PAGE>

THE IOWA STATE BAR ASSOCIATION I              FOR THE LEGAL EFFECT OF THE USE OF
Official Form No. 105                         THIS FORM.  CONSULT YOUR LAWYER


                                   EXHIBIT "E"

--------------------------------------------------------------------------------
                                                           SPACE ABOVE THIS LINE
                                                                   FOR RECORDER


                              SPECIAL WARRANTY DEED

For  the   Consideration   of  Ten  ($10.00)   Dollar(s)   and  other   valuable
consideration,  THE GRAHAM GROUP,  INC., an Iowa corporation do hereby Convey to
EQUITABLE  LIFE  INSURANCE  COMPANY OF IOWA, an Iowa  corporation  the following
described real estate in Polk County, Iowa:

Lots 1, 2, 7 and 8 in Block 4 in WEST FORT DES MOINES SUBDIVISION, and Official
Plat included in and forming a part of the City of Des Moines, Iowa.

Subject to all "Permitted Exceptions" as appear on Exhibit 1 attached hereto and
incorporated herein by this reference.

     Grantors do Hereby  Covenant  with  Grantees and  successors in interest to
Warrant  and Defend the real  estate  against  the lawful  Claims of all persons
claiming by, through or under them,  except as may be above stated.  Each of the
undersigned hereby relinquishes all rights of dower,  homestead and distributive
share in and to the real estate.

     Words  and  phrases  herein,  including  acknowledgment  hereof,  shall  be
construed  as in the  singular or plural  number,  and as  masculine or feminine
gender, according to the context.


STATE OF Iowa)                                               Dated:_____________
             ) ss
Polk COUNTY  )

                                               THE GRAHAM GROUP, INC.


                                               By:______________________________
                                               Name:____________________________
                                               Title:___________________________


On this  _______  day of  _____________  199__,  before  me,  __________________
(Grantor) the  undersigned,  a Notary  Public in and for said State,  personally
appeared  __________________  (Grantor) to me known to be the identical  persons
named in and who executed the foregoing  instrument and  acknowledged  that they
executed the same as __________________ their voluntary act and deed.


       (Grantor)

______________________
______________________                          ________________________________
                                                Notary  Public

       (Grantor)

(This form of acknowledgement for individual grantor(s) only)


<PAGE>


STATE OF _____________

______________________ COUNTY, ss:


On this  ______ day of  ______________,  199___  before me, the  undersigned,  a
Notary    Public    in    and    for    said    State,    personally    appeared
__________________________________ to me known to be the identical persons named
in and who  executed  the  foregoing  instrument,  and  acknowledged  that  they
executed the same as their voluntary act and deed.


                                                  ______________________________
                                                  Notary Public

<PAGE>


                                    EXHIBIT I


     Permitted Exceptions
     --------------------

1.   Items to  which  Equitable  Life  Insurance  Company  of Iowa is a party of
     record.

2.   Survey matters first appearing after the date hereof

3.   Parties in possession (month to month agreements).

4.   Real Estate Taxes then due but not payable and delinquent.


<PAGE>



THE IOWA STATE BAR ASSOCIATION I              FOR THE LEGAL EFFECT OF THE USE OF
Official Form No. 105                         THIS FORM.  CONSULT YOUR LAWYER


                                   EXHIBIT "F"

--------------------------------------------------------------------------------
                                                           SPACE ABOVE THIS LINE
                                                                    FOR RECORDER


                              SPECIAL WARRANTY DEED


For  the   Consideration   of  Ten  ($10.00)   Dollar(s)   and  other   valuable
consideration,THE EQUITABLE LIFE INSURANCE COMPANY OF IOWA., an Iowa corporation
do hereby Convey toTHE GRAHAM GROUP,  INC.,  an Iowa  corporation  the following
described real estate in Polk County, Iowa:

Lots 1, 2, 7 and 8 in Block 4 in WEST FORT DES MOINES  SUBDIVISION,  an Official
Plat included in and forming a part of the city of Des Moines, Iowa.

Subject to all "Permitted Exceptions" as appear on Exhibit 1 attached hereto and
incorporated herein by this reference.


     Grantors do Hereby  Covenant  with  Grantees and  successors in interest to
Warrant  and Defend the real  estate  against  the lawful  Claims of all persons
claiming by, through or under them,  except as may be above stated.  Each of the
undersigned hereby relinquishes all rights of dower,  homestead and distributive
share in and to the real estate.

     Words  and  phrases  herein,  including  acknowledgment  hereof,  shall  be
construed  as in the  singular or plural  number,  and as  masculine or feminine
gender, according to the context.

STATE OF Iowa)                                               Dated:_____________
             ) ss
Polk COUNTY  )

                                        EQUITABLE LIFE INSURANCE COMPANY OF IOWA


                                        By:_____________________________________
                                           Name:________________________________
                                           Title:_______________________________


On this  _______  day of  _____________  199__,  before  me,  __________________
(Grantor) the  undersigned,  a Notary  Public in and for said State,  personally
appeared  __________________  (Grantor) to me known to be the identical  persons
named in and who executed the foregoing  instrument and  acknowledged  that they
executed the same as __________________ their voluntary act and deed.


       (Grantor)

______________________
______________________                          ________________________________
                                                Notary  Public

       (Grantor)

(This form of acknowledgement for individual grantor(s) only)


<PAGE>


                                    EXHIBIT 1

     Permitted Exceptions
     --------------------

1.   Items to  which  Equitable  Life  Insurance  Company  of Iowa is a party of
     record.

2.   Survey matters first appearing after the date hereof

3.   Parties in possession (month to month agreements).

4.   Real Estate Taxes then due but not payable and delinquent.


<PAGE>


                                                                    Exhibit 31.1


                                  CERTIFICATION

I, David A. Wheat, certify that:

1.   I have reviewed this annual report on Form 10-K of ING USA Annuity and Life
     Insurance Company and Subsidiary;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     a)   designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure  that  material  information  relating  to the
          registrant,  including its consolidated subsidiaries, is made known to
          us by others within those entities,  particularly during the period in
          which this report is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     c)   disclosed  in this  report  any  change in the  registrant's  internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's  fourth fiscal quarter in
          the case of an annual  report)  that has  materially  affected,  or is
          reasonably  likely to materially  affect,  the  registrant's  internal
          control over financial reporting; and

5.   The registrant's other certifying officer(s) and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

     a)   all significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.


Date: March 17, 2005
      ------------------


By    /s/ David A. Wheat
      --------------------------------------
          David A. Wheat
          Director, Senior Vice President and
            Chief Financial Officer
          Duly Authorized Officer and Principal Financial Officer)

<PAGE>


                                                                    Exhibit 31.2

                                  CERTIFICATION

I, Harry N. Stout, certify that:

1.   I have reviewed this annual report on Form 10-K of ING USA Annuity and Life
     Insurance Company and Subsidiary;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     a)   designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure  that  material  information  relating  to the
          registrant,  including its consolidated subsidiaries, is made known to
          us by others within those entities,  particularly during the period in
          which this report is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     c)   disclosed  in this  report  any  change in the  registrant's  internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's  fourth fiscal quarter in
          the case of an annual  report)  that has  materially  affected,  or is
          reasonably  likely to materially  affect,  the  registrant's  internal
          control over financial reporting; and

5.   The registrant's other certifying officer(s) and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

     a)   all significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.


Date: March 17, 2005
      ---------------

By    /s/ Harry N. Stout
      --------------------------------------
          Harry N. Stout
          President
          Duly Authorized Officer and Principal Officer)


<PAGE>


                                                                    Exhibit 32.1


                                  CERTIFICATION


Pursuant to 18 U.S.C.  ss.1350,  the undersigned  officer of ING USA Annuity and
Life Insurance  Company (the "Company")  hereby certifies that, to the officer's
knowledge,  the Company's Annual Report on Form 10-K for the year ended December
31, 2004 (the "Report")  fully complies with the  requirements  of Section 13 or
15(d),  as  applicable,  of the  Securities  Exchange  Act of 1934  and that the
information  contained in the Report fairly presents,  in all material respects,
the financial condition and results of operations of the Company.



March 17, 2005                       By:    /s/  David A. Wheat
--------------                              ------------------------------------
     (Date)                                      David A. Wheat
                                                 Director, Senior Vice President
                                                    and Chief Financial Officer


<PAGE>


                                                                    Exhibit 32.2

                                  CERTIFICATION


Pursuant to 18 U.S.C.  ss.1350,  the undersigned  officer of ING USA Annuity and
Life Insurance  Company (the "Company")  hereby certifies that, to the officer's
knowledge,  the Company's Annual Report on Form 10-K for the year ended December
31, 2004 (the "Report")  fully complies with the  requirements  of Section 13 or
15(d),  as  applicable,  of the  Securities  Exchange  Act of 1934  and that the
information  contained in the Report fairly presents,  in all material respects,
the financial condition and results of operations of the Company.



March 17, 2005                             By /s/  Harry N. Stout
--------------                                ----------------------------------
    (Date)                                         Harry N. Stout
                                                   President