WRL SERIES FUND, INC.
GROWTH PORTFOLIO
MONEY MARKET PORTFOLIO
BOND PORTFOLIO
GLOBAL PORTFOLIO
SUPPLEMENT DATED JANUARY 2, 1996 TO PROSPECTUS
DATED MAY 1, 1995 AS SUPPLEMENTED JULY 26, 1995
The first three sentences of the second paragraph on page 14 under the
heading "Management of the Fund The Sub-Adviser" are deleted. The following
sentence replaces the fourth sentence to the second paragraph on page 14 under
the same heading as above:
Scott W. Schoelzel serves as the portfolio manager for the Growth
Portfolio.
WRL00089a
<PAGE>
PROSPECTUS
WRL SERIES FUND, INC.
GROWTH PORTFOLIO
MONEY MARKET PORTFOLIO
BOND PORTFOLIO
GLOBAL PORTFOLIO 1
201 Highland Avenue
[WRL LOGO] Largo, Florida 34640
Telephone: (800) 851-9777 [JANUS SYMBOL]
(813) 585-6565
WRL Series Fund, Inc. (the 'Fund') is a diversified, open-end management
investment company consisting of separate series or investment portfolios. This
Prospectus pertains only to the Growth Portfolio, Bond Portfolio, Money Market
Portfolio and Global Portfolio of the Fund (collectively, 'Portfolios').
The investment objective of the Growth Portfolio is growth of capital. The
investment objective of the Money Market Portfolio is to obtain maximum current
income consistent with preservation of principal and maintenance of liquidity.
The investment objective of the Bond Portfolio is to seek the highest possible
current income within the confines of the primary goal of insuring the
protection of capital by investing in debt securities issued by the U.S.
Government and its agencies and in medium to high-quality corporate debt
securities. The investment objective of the Global Portfolio is to seek long-
term growth of capital in a manner consistent with preservation of capital,
primarily through investments in common stocks of foreign and domestic issuers.
The Global Portfolio's investment in foreign securities involves special risks
that should be considered carefully before investing. There can be, of course,
no assurance that the Portfolios will achieve their objectives.
Shares of the Fund are sold only to insurance company separate accounts
(the 'Separate Accounts') of Western Reserve Life Assurance Co. of Ohio ('WRL'),
PFL Life Insurance Company ('PFL'), and AUSA Life Insurance Company Inc.
('AUSA') (WRL, PFL, and AUSA together, the 'Life Companies') to fund the
benefits under certain individual variable life insurance policies (the
'Policies') and individual and group variable annuity contracts (the 'Annuity
Contracts'). The Life Companies are affiliates. The Separate Accounts, which may
or may not be registered with the Securities and Exchange Commission, invest in
shares of one or more of the portfolios in accordance with the allocation
instructions received from holders of the Policies and the Annuity Contracts
(collectively, the 'Policyholders'). Such allocation rights are further
described in the prospectuses and/or the Policies and the Annuity Contracts.
WRL and Janus Capital Corporation serve as the investment adviser
('Investment Adviser') and the sub-adviser ('Sub-Adviser') respectively, to the
Portfolios (collectively, 'Advisers'). See 'The Investment Adviser' and 'The
Sub-Adviser.'
This Prospectus sets forth concisely the information about the Portfolios
that prospective investors ought to know before investing. Investors should read
this Prospectus and retain it for future reference.
Additional information about the Fund, the Portfolios and other portfolios
of the Fund has been filed with the Securities and Exchange Commission and is
available upon request without charge by calling or writing the Fund. The
Statement of Additional Information pertaining to the Portfolios bears the same
date as this Prospectus and is incorporated by reference into this Prospectus in
its entirety.
AN INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE
PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, A BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY
AND INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
Prospectus Dated May 1, 1995
1 The Janus symbol is a service mark of Janus Capital Corporation.
<PAGE>
WRL SERIES FUND, INC.
GROWTH PORTFOLIO
MONEY MARKET PORTFOLIO
BOND PORTFOLIO
GLOBAL PORTFOLIO
201 Highland Avenue
Largo, Florida 34640
Telephone (813) 585-6565
(800) 851-9777
FINANCIAL HIGHLIGHTS....................................................... 1
THE GROWTH PORTFOLIO, MONEY MARKET PORTFOLIO,
BOND PORTFOLIO AND GLOBAL PORTFOLIO AND THE FUND........................... 5
MANAGEMENT OF THE FUND..................................................... 13
DIVIDENDS AND DISTRIBUTIONS................................................ 14
TAXES...................................................................... 15
PURCHASE AND REDEMPTION OF SHARES.......................................... 15
VALUATION OF SHARES........................................................ 16
THE FUND AND ITS SHARES.................................................... 16
PERFORMANCE INFORMATION.................................................... 17
GENERAL INFORMATION........................................................ 18
i
<PAGE>
FINANCIAL HIGHLIGHTS
The information contained in the tables below for a share of capital stock
outstanding of the Growth, Money Market and Bond Portfolios, respectively, for
the years ended December 31, 1994, 1993, 1992, 1991, 1990, 1989, 1988 and 1987
and for the period October 2, 1986 through December 31, 1986 is based on each
Portfolio's audited financial statements incorporated by reference in the
Statement of Additional Information. The per share data and ratios for the
period October 2, 1986, through December 31, 1986 are not annualized amounts or
percentages. The Fund's Annual Report contains additional performance
information for each Portfolio. A copy of the Annual Report may be obtained
without charge upon request.
<TABLE>
<CAPTION>
GROWTH PORTFOLIO
Year Ended December 31, Period from
---------------------------------------------------------------------------------- 10/2/86 to
1994 1993 1992 1991 1990 1989 1988 1987 12/31/86
-------- -------- -------- -------- -------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 26.25 $ 25.83 $ 26.26 $ 17.48 $ 17.85 $ 12.97 $ 11.14 $ 10.14 $ 10.00
Income From Investment
Operations
Net Investment
Income............. .22 .28 .36 .27 .30 .19 .31 .21 .00
Net Gains or Losses
on Securities
(both realized and
unrealized)........ (2.41) .79 .52 10.75 (.33) 6.29 1.83 1.00 .14
-------- -------- -------- -------- -------- ------- ------- ------- -----------
Total From
Investment
Operations....... (2.19) 1.07 .88 11.02 (.03) 6.48 2.14 1.21 .14
-------- -------- -------- -------- -------- ------- ------- ------- -----------
Less Distributions
Dividends (from
net investment
income)............ (.22) (.28) (.36) (.27) (.30) (.19) (.31) (.21) .00
Distributions (from
capital gains)..... .00 (.37) (.95) (1.97) (.04) (1.41) .00 .00 .00
-------- -------- -------- -------- -------- ------- ------- ------- -----------
Distributions in
excess of capital
gains.............. (.03) .00 .00 .00 .00 .00 .00 .00 .00
-------- -------- -------- -------- -------- ------- ------- ------- -----------
Total
Distributions.... (.25) (.65) (1.31) (2.24) (.34) (1.60) (.31) (.21) .00
-------- -------- -------- -------- -------- ------- ------- ------- -----------
Net Asset Value,
End of Period.......... $ 23.81 $ 26.25 $ 25.83 $ 26.26 $ 17.48 $ 17.85 $ 12.97 $ 11.14 $ 10.14
-------- -------- -------- -------- -------- ------- ------- ------- -----------
-------- -------- -------- -------- -------- ------- ------- ------- -----------
Total Return*............ (8.31%) 3.97% 2.35% 59.79% (.22%) 47.04% 18.62% 10.90% 5.84%
Ratios/Supplemental Data
Net Assets,
End of Period
(000 omitted).......... $814,383 $934,810 $711,422 $393,511 $129,057 $74,680 $28,497 $15,815 $ 716
Ratio of Expenses to
Average Net Assets** .84% .87% .86% .90% 1.00% 1.00% 1.00% 1.00% .19%
Ratio of Net Income to
Average Net Assets..... .88% 1.07% 1.44% 1.21% 2.06% 1.18% 2.50% 1.84% .03%
Portfolio Turnover
Rate................... 107.33% 77.91% 77.70% 7.27% 157.07% 123.80% 76.27% 222.13% 8.55%
<FN>
* The total return shown for 1986 is for the three month period ended December
31, 1986 and is not annualized. The total return of the Portfolio reflects
the advisory fee and all other Portfolio expenses and includes reinvestment
of dividends and capital gains; it does not reflect the charges against the
corresponding sub-accounts or the charges and deductions under the applicable
Policy or Annuity Contract.
** Ratio is not annualized and is net of advisory fee waiver for the periods
ended December 31, 1986, 1987, 1988 and 1989 for which periods the annualized
ratio of expenses to average net assets would have been 6.76%, 1.90%, 1.49%
and 1.13%, respectively, absent the advisory fee waiver by Western Reserve
Life.
</FN>
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO*
Year Ended December 31, Period from
------------------------------------------------------------------------- 10/2/86 to
1994 1993 1992 1991 1990 1989 1988 1987 12/31/86
------- ------- ------- ------- ------- ------ ------ ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00 $ 1.00
Income From Investment
Operations
Net Investment Income....... .04 .02 .03 .05 .07 .07 .05 .04 .01
Net Gains or Losses on
Securities (both realized
and unrealized)......... .00 .00 .00 .00 .00 .00 .00 .00 .00
------- ------- ------- ------- ------- ------ ------ ----- -----------
Total From Investment
Operations.............. .04 .02 .03 .05 .07 .07 .05 .04 .01
------- ------- ------- ------- ------- ------ ------ ----- -----------
Less Distributions
Dividends (from net
investment income)........ (.04) (.02) (.03) (.05) (.07) (.07) (.05) (.04) (.01)
Distributions (from
capital gains)............ .00 .00 .00 .00 .00 .00 .00 .00 .00
------- ------- ------- ------- ------- ------ ------ ----- -----------
Total Distributions....... (.04) (.02) (.03) (.05) (.07) (.07) (.05) (.04) (.01)
------- ------- ------- ------- ------- ------ ------ ----- -----------
Net Asset Value, End of
Period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00 $ 1.00
------- ------- ------- ------- ------- ------ ------ ----- -----------
------- ------- ------- ------- ------- ------ ------ ----- -----------
Total Return**.................. 3.44% 2.45% 3.03% 5.25% 7.09% 8.09% 5.77% 4.56% 1.14%
Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted)................. $93,081 $45,782 $45,600 $33,695 $24,931 $6,233 $5,114 $ 582 $ 101
Ratio of Expenses to Average
Net Assets***................. .60% .66% .70% .70% .66% .70% .70% .89% .12%
Ratio of Net Income to Average
Net Assets.................... 3.59% 2.41% 2.99% 5.07% 7.09% 7.82% 6.26% 4.83% 1.14%
Portfolio Turnover Rate......... N/A N/A N/A N/A N/A N/A N/A N/A N/A
<FN>
* Formerly the Government Money Market Portfolio. Pursuant to shareholder
vote, the name and investment objective of the Portfolio was changed
effective May 1, 1988.
** The total return shown for 1986 is for the three month period ended December
31, 1986 and is not annualized. The total return of the Portfolio reflects
the advisory fee and all other Portfolio expenses and includes reinvestment
of dividends and capital gains; it does not reflect the charges against the
corresponding sub-accounts or the charges and deductions under the
applicable Policy or Annuity Contract.
*** Ratio is not annualized and is net of advisory fee waiver for the periods
ended December 31, 1986, 1987, 1988 and 1989, for which periods the
annualized ratio of expenses to average net assets would have been 6.33%,
1.63%, 1.16% and 0.84%, respectively, absent the advisory fee waiver by
Western Reserve Life.
</FN>
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
BOND PORTFOLIO
Year Ended December 31, Period from
--------------------------------------------------------------------------- 10/2/86 to
1994 1993 1992 1991 1990 1989 1988 1987 12/31/86
------- ------- ------- ------- ------- ------ ------ ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period......... $ 11.24 $ 11.18 $ 11.18 $ 9.91 $ 10.07 $ 9.29 $ 9.22 $ 10.28 $ 10.00
Income From Investment
Operations
Net Investment Income..... .63 .72 .75 .86 .79 .75 .90 .25 .13
Net Gains or Losses on
Securities (both
realized and
unrealized)............. (1.44) .95 .32 1.30 (.16) .78 .07 (.89) .15
------- ------- ------- ------- ------- ------ ------ ------- -----------
Total From Investment
Operations............ (.81) 1.67 1.07 2.16 .63 1.53 .97 (.64) .28
------- ------- ------- ------- ------- ------ ------ ------- -----------
Less Distributions
Dividends (from net
investment income)...... (.63) (.72) (.75) (.86) (.79) (.75) (.90) (.38) .00
Distributions (from
capital gains).......... .00 (.89) (.32) (.03) .00 .00 .00 (.04) .00
------- ------- ------- ------- ------- ------ ------ ------- -----------
Total Distributions..... (.63) (1.61) (1.07) (.89) (.79) (.75) (.90) (.42) .00
------- ------- ------- ------- ------- ------ ------ ------- -----------
Net Asset Value,
End of Period............... $ 9.80 $ 11.24 $ 11.18 $ 11.18 $ 9.91 $10.07 $ 9.29 $ 9.22 $ 10.28
------- ------- ------- ------- ------- ------ ------ ------- -----------
------- ------- ------- ------- ------- ------ ------ ------- -----------
Total Return*................. (6.94%) 13.38% 6.79% 18.85% 6.21% 14.65% 7.73% (5.66%) 11.49%
Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted)............... $71,064 $90,715 $56,820 $22,291 $10,143 $7,025 $3,372 $ 1,400 $ 127
Ratio of Expenses to Average
Net Assets**................ .59% .64% .70% .70% .69% .70% .70% .86% .12%
Ratio of Net Income to Average
Net Assets.................. 5.94% 5.94% 6.49% 8.02% 8.82% 8.60% 8.96% 7.17% 1.51%
Portfolio Turnover Rate....... 131.73% 149.02% 80.73% 33.47% 18.09% 23.62% 21.54% 134.76% 123.68%
<FN>
* The total return shown for 1986 is for the three month period ended December
31, 1986 and is not annualized. The total return of the Portfolio reflects
the advisory fee and all other Portfolio expenses and includes reinvestment
of dividends and capital gains; it does not reflect the charges against the
corresponding sub-accounts or the charges and deductions under the applicable
Policy or Annuity Contract.
** Ratio is not annualized and is net of advisory fee waiver for the periods
ended December 31, 1986, 1987, 1988, 1989 and 1991, for which periods the
annualized ratio of expenses to average net assets would have been 6.37%,
2.12%, 1.07%, 0.82% and 0.82%, respectively, absent the advisory fee waiver
by Western Reserve Life.
</FN>
</TABLE>
3
<PAGE>
GLOBAL PORTFOLIO
The information contained in the table below for a share of capital stock
outstanding of the Global Portfolio for the years ended December 31, 1994 and
1993, and for the period December 3, 1992 (commencement of operations) through
December 31, 1992, is based on the Portfolio's audited financial statements
incorporated by reference in the Statement of Additional Information. The Fund's
Annual Report contains additional performance information for this Portfolio. A
copy of the Annual Report may be obtained without charge upon request.
<TABLE>
<CAPTION>
Year Ended
December 31, Period from
------------------- 12/3/92 to
1994 1993 12/31/92
-------- ------- -----------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period...................................... $ 13.62 $ 10.16 $ 10.00
Income From Investment Operations
Net Investment Income (Loss)......................................... .10 .04 (.02)
Net Gains or Losses on Securities
(both realized and unrealized)..................................... .10 3.72 .18
-------- ------- -----------
Total From Investment Operations................................... .20 3.76 .16
-------- ------- -----------
Less Distributions
Dividends (from net investment income)............................... (.10) (.04) .00
Dividends in excess of net investment income......................... (.01) .00 .00
Distributions (from capital gains)................................... (.56) (.26) .00
Distributions in excess of capital gains............................. (.03) .00 .00
-------- ------- -----------
Total Distributions................................................ (.70) (.30) .00
-------- ------- -----------
Net Asset Value, End of Period............................................ $ 13.12 $ 13.62 $ 10.16
-------- ------- -----------
-------- ------- -----------
Total Return*............................................................. .25% 35.05% 1.62%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)................................... $261,778 $99,094 $ 508
Ratio of Expenses to Average Net Assets**................................. 1.01% 1.09% 2.48%
Ratio of Net Income to Average Net Assets................................. .73% .30% (2.23%)
Portfolio Turnover Rate................................................... 192.06% 79.93% .00%
<FN>
* The total return shown for 1992 is for the period from December 3, 1992
through December 31, 1992 and is not annualized. The total return of the
Portfolio reflects the advisory fee and all other Portfolio expenses and
includes reinvestment of dividends and capital gains; it does not reflect the
charges against the corresponding sub-accounts or the charges and deductions
under the applicable Policy or Annuity Contract.
** Ratio is annualized for the period ended December 31, 1992.
</FN>
</TABLE>
4
<PAGE>
THE GROWTH PORTFOLIO, MONEY MARKET PORTFOLIO,
BOND PORTFOLIO AND GLOBAL PORTFOLIO AND THE FUND
The Fund is a diversified, open-end management investment company
registered under the Investment Company Act of 1940, as amended (the '1940
Act'). The Growth Portfolio, Money Market Portfolio, Bond Portfolio and Global
Portfolio are series of the Fund. The Fund consists of several series, or
separate investment portfolios, which offer shares for investment by the
Separate Accounts. This Prospectus describes only the Growth, Money Market, Bond
and Global Portfolios.
A particular portfolio of the Fund may not be available under the Policy or
Annuity Contract you have chosen or may not be available in your state due to
certain state insurance law considerations. The prospectus or plan document for
the particular Policy or Annuity Contract you have chosen will indicate the
portfolios which are generally available under the applicable Policy or Annuity
Contract and should be read in conjunction with this Prospectus.
INVESTMENT OBJECTIVES OF THE PORTFOLIOS
The Portfolios' investment objectives and, unless otherwise noted, their
investment policies and techniques, may be changed by the Board of Directors of
the Fund without shareholder or Policyholder approval. A change in the
investment objectives or policies of a Portfolio may result in that Portfolio
having an investment objective or policies different from that which a
Policyholder deemed appropriate at the time of investment.
GROWTH PORTFOLIO
The investment objective of the Growth Portfolio is growth of capital.
The Growth Portfolio will invest substantially all of its assets in common
stocks when the portfolio manager believes that the relevant market environment
favors profitable investing in those securities. Common stock investments are
selected in industries and companies that the portfolio manager believes are
experiencing favorable demand for their products and services, and which operate
in a favorable competitive environment and regulatory climate. The Sub-Adviser's
analysis and selection process focuses on stocks issued by companies with
earnings growth potential. In particular, the Growth Portfolio intends to buy
stocks with earnings growth potential that may not be recognized by the market.
Securities are selected solely for their growth potential; investment income is
not a consideration.
The Growth Portfolio may invest up to 25% of its assets in foreign
securities, as described below and in the Statement of Additional Information.
(See 'Foreign Investments and Special Risks', page 10.)
Although the Portfolio's assets will be invested primarily in common stocks
at most times, the Portfolio may increase its cash position when the Sub-Adviser
is unable to locate investment opportunities with desirable risk/reward
characteristics. The Portfolio may invest in government securities, high grade
commercial paper, corporate bonds and debentures, warrants, preferred stocks or
certificates of deposit of commercial banks or other debt securities when the
Sub-Adviser perceives an opportunity for capital growth from such securities, or
so that the Portfolio may receive a return on its uninvested cash. See the
Statement of Additional Information for further descriptions of such securities.
In the latter case, investment income may increase and may constitute a larger
portion of the return on the Portfolio's investments than if the Portfolio were
fully invested in common stocks. The Portfolio may invest up to 25% of its
assets in securities of issuers in a single industry. The Growth Portfolio does
not currently hold or intend to invest more than 5% of its assets in
non-investment grade securities. See the Statement of Additional Information for
further information concerning such securities and bond ratings.
The Growth Portfolio may also invest in repurchase agreements and reverse
repurchase agreements. See 'Certain Portfolio Policies and Techniques -
Repurchase and Reverse Repurchase Agreements', page 8.
5
<PAGE>
MONEY MARKET PORTFOLIO
The objective of the Money Market Portfolio is to obtain maximum current
income consistent with preservation of principal and maintenance of liquidity.
The Portfolio intends to achieve its objective by investing only in money
market instruments and other short-term securities and repurchase agreements
secured by such permitted investments. The Money Market Portfolio does not
currently intend to invest in foreign securities. All securities purchased by
the Portfolio mature within one year (397 days for 'when-issued securities')
from the date of purchase, although repurchase agreements may be collateralized
by securities maturing in more than one year. (See Appendix A of the Statement
of Additional Information for a more detailed description of certain of these
instruments.) Such instruments may include the following:
1. Direct obligations issued by the U.S. Treasury including Treasury bills,
notes and bonds, which may differ from each other only in interest rates,
maturities and dates of issuance. These issues, plus some Federal agency
obligations, are guaranteed by the full faith and credit of the U.S.
Government. Other Federal agency obligations only have the guarantee of the
agency. Although obligations of agencies and instrumentalities are not direct
obligations of the U.S. Treasury, payment of the interest and principal on
such obligations is generally backed directly or indirectly by the U.S.
Government. This support can range from the backing of the full faith and
credit of the United States, to U.S. Treasury guarantees, or to the backing
solely of the issuing agency or instrumentality itself.
2. Bank obligations including time deposits, certificates of deposit, bankers'
acceptances and other bank obligations if they are obligations of banks
having total assets in excess of $1 billion that are subject to regulation by
the U.S. Government, including U.S. subsidiaries of foreign banks. In this
Prospectus, a 'bank' includes commercial banks, savings banks and savings and
loan associations.
3. Commercial paper, including variable amount master demand notes (see Appendix
A of the Statement of Additional Information) of U.S. corporations, rated, or
whose issuer is rated with respect to comparable securities, in one of the
two highest rating categories by any two nationally recognized statistical
rating organizations ('NRSROs') (or by one NRSRO if it is the only NRSRO
rating that security) or, if not rated, of a comparable quality as determined
by the Board of Directors of the Fund. The Board of Directors of the Fund
must approve or ratify the acquisition of any unrated security or a security
rated by only one NRSRO. See Appendix B of the Statement of Additional
Information for a description of certain of these ratings.
4. Repurchase and reverse repurchase agreements. (See 'Certain Portfolio
Policies and Techniques - Repurchase and Reverse Repurchase Agreements', page
8.)
The Money Market Portfolio operates under a rule of the Securities and
Exchange Commission ('SEC') which permits it, subject to certain conditions, to
use the amortized cost method of valuing its shares. See 'Purchase and
Redemption of Shares - Money Market Portfolio Net Asset Valuation' in the
Statement of Additional Information for a description of the conditions.
BOND PORTFOLIO
The investment objective of the Bond Portfolio is to seek the highest
possible current income within the confines of the primary goal of insuring the
protection of capital by investing at least 65%, and generally a higher
percentage of its assets in debt securities issued by the U.S. Government and
its agencies and in medium to high-quality corporate debt securities.
Generally, the Portfolio invests in corporate debt securities having a
rating within the three highest grades as determined by Moody's Investors
Service, Inc. ('Moody's') (Aaa or Aa or A) or Standard & Poor's Corporation
('S&P') (AAA or AA or A). The Portfolio may, however, invest in debt securities
within the fourth highest grade as determined by Moody's (Baa) or S&P (BBB), if
the Sub-Adviser determines such investments meet the Portfolio's investment
objective and the debt securities' ratings are supported by an internal credit
review that the Sub-Adviser will conduct in each such instance.
6
<PAGE>
Bonds rated Baa by Moody's or BBB by S&P are considered medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security for such bonds appear adequate for the
present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and, in fact, have speculative
characteristics. The Portfolio may invest up to 25% of its assets in securities
of issuers in a single industry. The Portfolio does not currently hold or intend
to invest more than 5% of its assets in non-investment grade securities. See the
Statement of Additional Information for further information concerning such
securities and bond ratings.
An increase in interest rates tends to reduce the market value of fixed
income investments, and a decline in interest rates tends to increase their
value. The Bond Portfolio's performance is, accordingly, quite sensitive to
market interest rate fluctuations. In order to take advantage of differences in
securities prices and yields, or of fluctuations in interest rates, consistent
with its investment objective, the Portfolio may trade for short-term profits.
The Portfolio may also invest in repurchase agreements and reverse repurchase
agreements. (See 'Certain Portfolio Policies and Techniques - Repurchase and
Reverse Repurchase Agreements' and 'Fixed-Income Investing', pages 8 and 9,
respectively.)
The Portfolio may invest up to 25% of its assets in foreign securities, as
described in the Statement of Additional Information. (See 'Foreign Investments
and Special Risks', page 10.)
GLOBAL PORTFOLIO
The investment objective of the Global Portfolio is long-term growth of
capital in a manner consistent with preservation of capital, primarily through
investments in common stocks of foreign and domestic issuers. The Portfolio
seeks to invest in companies and other organizations on a worldwide basis,
regardless of country of organization or place of principal business activity,
as well as domestic and foreign governments, government agencies and other
governmental entities. Realization of income is not a significant investment
consideration and any income realized on the Portfolio's investments will,
therefore, be incidental to the Portfolio's objective.
The Portfolio's assets will normally be invested in securities of issuers
from at least five different countries, including the United States, although
the Portfolio may at times, on a temporary basis as determined by the
Sub-Adviser, invest all its assets in fewer than five or even a single country.
When recommending allocations of the Portfolio's investments among geographic
regions and individual countries, and among assets denominated in U.S. and
foreign currencies, the Sub-Adviser considers various factors, such as prospects
for relative economic growth among countries, regions or geographic areas;
expected levels of inflation; government policies influencing business
conditions; and the outlook for currency relationships.
Although it is the policy of the Portfolio to purchase and hold securities
for long-term capital growth in a manner consistent with preservation of
capital, changes in the Portfolio will generally be made whenever the
Sub-Adviser believes they are advisable, typically either as a result of
securities having reached a price objective or by reason of developments not
foreseen at the time of the investment decision. Since investment changes
ordinarily will be made without reference to the length of time a security has
been held, a significant number of short-term transactions may result. The rate
of portfolio turnover will not be a limiting factor when changes are deemed to
be appropriate. However, certain tax rules may restrict the Portfolio's ability
to sell securities in some circumstances when the security has been held for an
insufficient length of time. Increased portfolio turnover necessarily results in
correspondingly higher brokerage costs for the Portfolio which are ultimately
borne by the shareholders and Policyholders.
The Sub-Adviser seeks to reduce the risks associated with these
considerations through diversification and active professional management. The
Portfolio is designed for long-term investors who can accept worldwide
investment risk. As with any long-term investment, the value of shares when sold
may be higher or lower than when purchased.
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The Portfolio seeks to invest substantially all of its assets in common
stocks when the portfolio manager believes that the relevant market environment
favors profitable investing in those securities. Common stock investments are
selected from industries and companies that the portfolio manager believes are
experiencing favorable demand for their products and services, and which operate
in a favorable competitive environment and regulatory climate.
Although the assets of the Portfolio are ordinarily invested in common
stocks at most times, the Portfolio may increase its cash position when the
Sub-Adviser is unable to locate investment opportunities with desirable
risk/reward characteristics. The Portfolio may invest in government securities,
corporate bonds and debentures, high-grade commercial paper, preferred stocks,
certificates of deposits or other securities of U.S. issuers when the
Sub-Adviser perceives an opportunity for capital growth from such securities, or
so that the Portfolio may receive a competitive return on its uninvested cash.
The Portfolio's investments in debt securities will be made in securities of
U.S. and foreign companies, the U.S. Government, foreign governments, and U.S.
and foreign governmental agencies and instrumentalities and other governmental
entities. The Portfolio may invest up to 25% of its assets in securities of
issuers in a single industry. The Portfolio does not presently intend to invest
more than 5% of its assets in debt securities rated less than investment grade.
When the Portfolio invests in such securities, investment income may increase
and may constitute a larger portion of the return on the Portfolio's
investments, and the Portfolio may not participate in market advances or
declines to the extent that it would if it were fully invested. Although the
Portfolio may engage in repurchase agreements, it does not presently intend to
do so.
CERTAIN PORTFOLIO POLICIES AND TECHNIQUES
FUTURES CONTRACTS, RELATED OPTIONS AND OTHER DERIVATIVE INSTRUMENTS.
Subject to certain limitations, each Portfolio, except the Money Market
Portfolio, may engage in hedging strategies involving futures contracts and
related options, forward currency contracts, and interest rate swaps, caps and
floors. A put option gives the holder the right, upon payment of a premium, to
deliver a specified amount of a security to the writer of the option on or
before a fixed date at a predetermined price. A call option gives the holder the
right, upon payment of a premium, to call upon the writer to deliver a specified
amount of a security on or before a fixed date at a predetermined price. A
Portfolio may engage in hedging strategies to attempt to reduce the overall
level of investment risk that normally would be expected to be associated with
the Portfolio's securities, and to attempt to protect the Portfolio against
market movements that might adversely affect the value of the Portfolio's
securities or the price of securities that the Portfolio is considering
purchasing. There can be no assurance, however, that the use of these
instruments by a Portfolio will assist it in achieving its investment objective.
Generally, the use of hedging strategies involves investment risks and
transaction costs to which the Portfolio would not be subject absent the use of
these strategies. If the Sub-Adviser engages in a hedging transaction intended
to protect a Portfolio against potential adverse movements in the securities,
foreign currency or interest rate markets using these instruments, and such
markets do not move in a direction adverse to the Portfolio, the Portfolio could
be left in a less favorable position than if such hedging strategy had not been
used. The use of hedging strategies involves special risks, which include: 1)
the risk that interest rates, securities prices and currency markets will not
move in the directions anticipated; 2) imperfect correlation between the price
of the hedging instruments and movements in the prices of the securities or
currencies underlying the hedging transaction; 3) the fact that skills needed to
use these strategies are different from those needed to select portfolio
securities; 4) the possible absence of a liquid secondary market for any
particular instrument at any time; and 5) the possible need to defer closing out
certain hedged positions to avoid adverse tax consequences. The loss from
investing in futures is potentially unlimited. Further information on these
instruments, hedging strategies and risk considerations relating to them is set
forth in the Statement of Additional Information.
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS. A Portfolio may invest in
repurchase and reverse repurchase agreements. A repurchase agreement involves
the purchase of a security by a Portfolio and a simultaneous agreement
(generally by a bank or dealer) to repurchase that security back
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from the Portfolio at a specified price and date or upon demand. This technique
offers a method of earning income on idle cash. The repurchase agreement is
effectively secured by the value of the underlying security. A risk associated
with repurchase agreements is the failure of the seller to repurchase the
securities as agreed, which may cause a Portfolio to suffer a loss if the market
value of such securities declines before they can be liquidated on the open
market. In the event of bankruptcy or insolvency of the seller, a Portfolio may
encounter delays and incur costs in liquidating the underlying security.
Repurchase agreements not terminable within seven days are considered illiquid
securities and are subject to the limit stated below.
When a Portfolio invests in a reverse repurchase agreement, it sells a
portfolio security to another party, such as a bank or broker-dealer, in return
for cash, and agrees to buy the security back at a future date and price.
Reverse repurchase agreements may be used to provide cash to satisfy unusually
heavy redemption requests or for other temporary or emergency purposes without
the necessity of selling portfolio securities or to earn additional income on
portfolio securities, such as Treasury bills and notes. Reverse repurchase
agreements may expose a Portfolio to greater fluctuations in the value of its
assets.
ILLIQUID SECURITIES. A Portfolio may invest up to 15% (10% for the Money
Market Portfolio) of its net assets in securities that are considered illiquid
because of the absence of a readily available market or due to legal or
contractual restrictions on resale. However, certain restricted securities that
are not registered for sale to the general public but that can be resold to
institutional investors ('Rule 144A Securities') may not be considered illiquid,
provided that a dealer or institutional trading market exists. The institutional
trading market is relatively new and liquidity of a Portfolio's investments
could be impaired if such trading does not further develop or declines. The
Sub-Adviser will determine the liquidity of Rule 144A Securities under
guidelines approved by the Board of Directors of the Fund.
WHEN-ISSUED SECURITIES. A Portfolio may purchase new issues of U.S.
Government securities on a 'when-issued' basis. However, a Portfolio does not
intend to invest more than 20% of its assets in when-issued securities. Because
actual payment for and delivery of when-issued securities generally take place
15 to 45 days after the purchase date, a Portfolio that purchases when-issued
securities bears the risk that interest rates and the security's value at the
time of delivery may have changed prior to delivery of the when-issued security.
FIXED-INCOME INVESTING. The performance of the Bond Portfolio and the
Money Market Portfolio, and the debt component of other Portfolios, depends
primarily on interest rate changes, the average weighted maturity of that
Portfolio and the quality of securities held. The debt components of a Portfolio
will tend to decrease in value when interest rates rise and increase when
interest rates fall. The Portfolio may vary the average maturities of its
portfolio of debt securities based on the portfolio manager's analysis of
interest rate trends and other factors. Generally, shorter term securities are
less sensitive to interest rate changes, but longer term securities offer higher
yields. The Portfolio's share price and yield will also depend, in part, on the
quality of its investment in debt securities. For example, while U.S. Government
securities generally are of high quality, government securities that are not
backed by the full faith and credit of the United States and other debt
securities, including those of foreign governments, may be affected by changes
in the creditworthiness of the issuer of the security. The extent that such
changes are reflected in a Portfolio's share price will depend upon the extent
of the Portfolio's investment in such securities.
ZERO COUPON, PAY-IN-KIND AND STEP COUPON SECURITIES. The Growth and Bond
Portfolios may invest in zero coupon bonds or 'strips.' However, the Growth
Portfolio does not presently intend to do so, and the Bond Portfolio does not
intend to invest more than 10% of its assets in zero coupon bonds or 'strips'.
Zero coupon bonds do not make regular interest payments; rather, they are sold
at a discount from face value. Principal and accreted discount (representing
interest accrued but not paid) are paid at maturity. 'Strips' are debt
securities that are stripped of their interest after the securities are issued,
but otherwise are comparable to zero coupon bonds. The market value of 'strips'
and zero
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coupon bonds generally fluctuates in response to changes in interest rates to a
greater degree than interest-paying securities of comparable term and quality.
The Portfolios may also invest in pay-in-kind and step coupon securities. For a
description of these securities, see 'Zero Coupon, Pay-In-Kind and Step Coupon
Securities' in the Statement of Additional Information.
SPECIAL SITUATIONS (ALL PORTFOLIOS EXCEPT THE MONEY MARKET PORTFOLIO). The
Portfolios may invest in 'special situations' from time to time. A special
situation arises when, in the opinion of the portfolio manager, the securities
of a particular issuer will be recognized and appreciate in value due to a
specific development with respect to that issuer. Developments creating a
special situation might include, among others, a new product or process, a
management change, a technological breakthrough, or other extraordinary
corporate event, or differences in market supply of and demand for the security.
Investment in special situations may carry an additional risk of loss in the
event that the anticipated development does not occur or does not attract the
expected attention. The impact of this strategy on a Portfolio will depend on a
Portfolio's size and the extent of the holdings of the special situation issuer
relative to its total assets.
LENDING AND BORROWING. Each Portfolio may lend its portfolio securities to
qualified institutional buyers for the purpose of realizing additional income.
Such loans must be continuously secured by liquid assets at least equal to the
market value of the securities loaned and may not together with any other
outstanding loans exceed 25% of a Portfolio's total assets. Securities lending
may involve some credit risk to a Portfolio if the borrower defaults and the
Portfolio is delayed or prevented from recovering the collateral or is otherwise
required to cover a transaction in the security loaned. The Portfolios do not
presently intend to lend securities or make any other loans valued at more than
5% of their respective total assets. To secure borrowings, a Portfolio may not
mortgage or pledge its securities in amounts that exceed 15% of its net assets,
at the time the loan or borrowing is made. If portfolio securities are loaned,
collateral values will be continuously maintained at no less than 100% by
marking-to-market daily. If a material event is to be voted upon affecting a
Portfolio's investment in securities which are on loan, the Portfolio will take
such action as may be appropriate in order to vote its shares.
Each Portfolio may borrow money from or lend money to other funds that
permit such transactions and are also advised by the Sub-Adviser and if the
Portfolio seeks and obtains permission to do so from the SEC. There is no
assurance that such permission would be granted. The Portfolios may also borrow
money from banks. Any such loans or borrowings are expected to be short-term in
nature and used for temporary or emergency purposes, such as to provide cash for
redemptions, and will not exceed 25% of a Portfolio's net assets at the time the
loan or borrowing is made.
FOREIGN INVESTMENTS AND SPECIAL RISKS. This discussion applies only to the
Growth, Bond and Global Portfolios because the Money Market Portfolio's current
investment policies do not permit investment in foreign securities. The Growth
and Bond Portfolios may each invest up to 25% of net assets at the time of
purchase in the securities of foreign issuers and obligors.
Investments may be made in both domestic and foreign companies. In
selecting investments in foreign securities for the Portfolios, the Sub-Adviser
considers a variety of factors which may include the political and economic
conditions in a country, the prospect for changes in the value of its currency
and the liquidity of the investment in that country's securities markets. If
appropriate and available, the Sub-Adviser may purchase foreign securities
through dollar-denominated American Depositary Receipts ('ADRs'), European
Depositary Receipts ('EDRs'), Global Depositary Receipts ('GDRs') and other
types of receipts or shares evidencing ownership of the underlying foreign
securities. While ADRs are dollar-denominated receipts that are issued by
domestic banks and traded in the United States, EDRs are typically issued by
European banks, and GDRs may be issued by either domestic or foreign banks. In
addition, the Portfolios may invest indirectly in foreign securities through
foreign investment funds or trusts (including passive foreign investment
companies).
Investing in foreign securities involves opportunities and risks that
differ from those involved with investing solely in U.S. markets. The
Sub-Adviser believes that there is substantial opportunity from a
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professionally managed portfolio of securities selected from the U.S. and
foreign markets. This investment framework seeks to take advantage of the
investment opportunities created by the global economy. Accordingly, an investor
may benefit from worldwide access to investment opportunities, without being
constrained by the location of a company's headquarters or the trading market
for its shares.
At the same time, these opportunities involve considerations and risks that
may not be encountered in U.S. investments. For example, changes in currency
exchange rates and exchange rate controls may affect the value of foreign
securities and the value of their dividend or interest payments, and therefore a
Portfolio's share prices and returns. Foreign companies generally are subject to
tax laws and accounting, auditing, and financial reporting standards, practices
and requirements that differ from those applicable to U.S. companies. There is
generally less publicly available information about foreign companies and less
securities and other governmental regulation and supervision of foreign
companies, stock exchanges and securities brokers and dealers. A Portfolio may
encounter difficulties in enforcing obligations in foreign countries and
negotiating favorable brokerage commission rates. Securities of some foreign
companies are less liquid, and their prices more volatile, than securities of
comparable U.S. companies. Security trading practices abroad may offer less
protection to investors such as the Portfolios than the practices of domestic
securities trading. Custody charges are generally higher for foreign securities
than for domestic securities.
The considerations noted above may be intensified in the case of
investments in developing countries or countries with limited or developing
capital markets. In particular, developing countries may have relatively
unstable governments, economies based on only a few industries and securities
markets that trade a small number of securities. Securities of issuers located
in developing countries may have limited marketability and may be subject to
more abrupt or erratic price fluctuations.
At times, securities held by a Portfolio may be listed on foreign exchanges
or traded in foreign markets which are open on days (such as Saturday) when a
Portfolio does not compute its price or accept orders for the purchase,
redemption or exchange of its shares. As a result, the net asset value of a
Portfolio may be significantly affected by trading on days when shareholders
cannot make transactions.
In addition, with respect to some foreign countries, there is the
possibility of expropriation or confiscatory taxation; limitations on the
removal of securities, property or other assets of the Portfolios; political or
social instability or war; or diplomatic developments which could affect U.S.
investments in those countries. These latter considerations generally are more
of a concern in developing countries. Developing countries may also have
economies that are based on only a few industries. Although investments in
companies domiciled in developing countries may be subject to potentially
greater risk than investments in developed countries, the Portfolios will not
invest in any securities of issuers located in developing countries if the
Sub-Adviser determines these securities to be speculative.
To the extent a Portfolio invests in international foreign securities
markets, changes in the Portfolio's share price, particularly with respect to
the Global Portfolio, may have a reduced correlation with movements in the U.S.
markets. A Portfolio's share price reflects the movements of both the prices of
securities in which the Portfolio is invested and the currencies in which the
investments are denominated. Because the foreign securities in which a Portfolio
may invest include those that are denominated in foreign currencies, or that
otherwise have values that depend on the performance of foreign currencies
relative to the U.S. dollar, the relative strength of the U.S. dollar may be, to
that extent, an important factor in the performance of a Portfolio. In an effort
to manage exchange rate risks, a Portfolio may enter into foreign currency
exchange contracts (agreements to exchange one currency for another at a future
date). A Portfolio may exchange foreign currencies for U.S. dollars and for
other foreign currencies in the normal course of business, and may purchase and
sell currencies through currency exchange contracts in order to fix a price for
securities they have agreed to buy or sell. The Sub-Adviser may also seek to
hedge some or all of a Portfolio's investments denominated in foreign
11
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currency against a decline in the value of that currency relative to U.S.
dollars, by entering into contracts to exchange that currency for U.S. dollars
(not exceeding the value of the Portfolio's assets denominated in that
currency), or by participating in options or futures contracts with respect to
such currency. This type of hedge may minimize the effect of currency
appreciation as well as depreciation, but does not protect against a decline in
the security's value relative to other securities denominated in that currency.
A Portfolio may also enter into foreign currency exchange contracts to
shift exposure to currency exchange rate changes from one foreign currency to
another. This technique is known as cross-hedging. For example, if the
Sub-Adviser believed that a particular currency may decline relative to the U.S.
dollar, a Portfolio could enter into a contract to sell that currency (up to the
value of the Portfolio's assets denominated in that currency) in exchange for
another currency that the Sub-Adviser expects to remain stable or to appreciate
relative to the U.S. dollar. As a non-fundamental operating policy, a Portfolio
will not enter into currency exchange contracts if, as a result, more than 10%
of its assets would be committed to the consummation of cross-hedge contracts,
and will instruct its custodian bank to set aside high-grade, liquid assets to
cover the Portfolio's purchase obligations under this type of contract.
Generally, the use of hedging strategies involves investment risks and
transaction costs to which a Portfolio would not be subject absent the use of
these strategies. If the Sub-Adviser engages in a hedging transaction intended
to protect a Portfolio against potential adverse movements in the securities,
foreign currency or interest rate markets using these hedging instruments, and
such markets do not move in a direction adverse to the Portfolio, the Portfolio
could be left in a less favorable position than if such hedging strategy had not
been used. The use of hedging strategies involves special risks, which include:
1) the risk that interest rates, securities prices and currency markets will not
move in the directions anticipated; 2) imperfect correlation between the price
of the hedging instruments and movements in the prices of the securities or
currencies underlying the hedging transaction; 3) the fact that the skills
needed to use these strategies are different from those needed to select
portfolio securities; 4) the possible absence of a liquid secondary market for
any particular instrument at any time; and 5) the possible need to defer closing
out certain hedged positions to avoid adverse tax consequences. See the
Statement of Additional Information for further information concerning these
risks.
OTHER INVESTMENT POLICIES AND RESTRICTIONS
The Portfolios are subject to certain other investment policies and
restrictions which are described in the Statement of Additional Information,
some of which are fundamental policies of the Portfolios and as such may not be
changed without the approval of the shareholders of the Portfolios.
PORTFOLIO TURNOVER
A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding certain
short-term securities) for a year and dividing it by the monthly average of the
market value of such securities during the year. See 'Financial Highlights' for
each Portfolio on pages 1-4 for more information on historical turnover rates.
The Money Market Portfolio does not have a stated portfolio turnover rate, as
securities of the type in which it invests are excluded in the usual calculation
of that rate. The Growth Portfolio and the Bond Portfolio may engage frequently
in short-term trading. High turnover and short-term trading involve
correspondingly greater commission expenses and transaction costs for the Growth
Portfolio and to a lesser extent, higher transaction costs for the Bond
Portfolio. The Global Portfolio's annual turnover is not expected to exceed
200%, although the rate of portfolio turnover will not be a limiting factor when
changes are deemed to be appropriate. The Global Portfolio may engage in
short-term trading. High turnover and short-term trading involve correspondingly
higher transaction costs which are ultimately borne by the Policyholders. See
'Portfolio Transactions and Brokerage' in the Statement of Additional
Information.
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MANAGEMENT OF THE FUND
Overall responsibility for management and supervision of the Fund rests
with the Fund's Board of Directors. There are currently five Directors, three of
whom are not 'interested persons' of the Fund within the meaning of that term
under the 1940 Act. The Board meets regularly four times each year and at other
times as necessary. By virtue of the functions performed by WRL as Investment
Adviser and Janus Capital Corporation as Sub-Adviser, the Fund requires no
employees other than its executive officers, none of whom devotes full time to
the affairs of the Fund. These officers are employees of WRL and receive no
compensation from the Fund. The Statement of Additional Information contains the
names of and general background information regarding each Director and
executive officer of the Fund.
INVESTMENT ADVISER
WRL, a life insurance company located at 201 Highland Avenue, Largo,
Florida 34640, serves as the Fund's Investment Adviser. The Investment Adviser
is a wholly-owned subsidiary of First AUSA Life Insurance Company ('First
AUSA'), a stock life insurance company which is wholly-owned by AEGON USA, Inc.
('AEGON'). AEGON is a financial services holding company whose primary emphasis
is on life and health insurance and annuity and investment products. AEGON is a
wholly-owned indirect subsidiary of AEGON nv, a Netherlands corporation, which
is a publicly traded international insurance group. The Investment Adviser has
served as the investment adviser to the Fund since its inception in 1986.
Subject to the supervision and direction of the Fund's Board of Directors,
the Investment Adviser is responsible for managing the Portfolios in accordance
with the Portfolios' stated investment objectives and policies. As compensation
for its services to the Portfolios, the Investment Adviser receives monthly
compensation at the annual rate of 0.50% of the average daily net assets of the
Money Market Portfolio and the Bond Portfolio, and 0.80% of the average daily
net assets of the Growth Portfolio and the Global Portfolio. For the fiscal year
ended December 31, 1994, the Fund paid WRL advisory fees of 0.50%, 0.50%, 0.80%
and 0.80% of the average daily net assets of the Bond Portfolio, Money Market
Portfolio, Growth Portfolio and the Global Portfolio, respectively.
The Investment Adviser is responsible for providing investment advisory
services and furnishes or makes available to the Portfolios the services of
executive and management personnel to supervise the performance of all
administrative, recordkeeping, regulatory reporting and compliance services,
including the supervision of the Portfolios' custodian. The Investment Adviser
also assists the Portfolio in maintaining communications and relations with the
shareholders of the Portfolios, including assisting in the preparation of
reports to shareholders. The Investment Adviser may incur and will pay certain
additional expenses, including legal and accounting fees, in connection with the
formation and maintenance of the Portfolios, including the preparation and
filing, when appropriate, of all documents, including registration statements,
post-effective amendments and any qualification under state securities laws
required in connection with the Portfolios' offering of shares. The Investment
Adviser will also pay all reasonable compensation and related expenses of the
officers and Directors of the Fund, except for such Directors who are not
interested persons (as that term is defined in the 1940 Act) of the Investment
Adviser, and the rental of offices. The Portfolios pay all other expenses
incurred in their operations, including general administrative expenses.
Accounting services are provided for the Portfolios by the Investment Adviser.
The Investment Adviser has voluntarily undertaken, until at least April 30,
1996, to pay expenses on behalf of the Portfolios to the extent normal operating
expenses (including investment advisory fees but excluding interest, taxes,
brokerage fees, commissions and extraordinary charges) exceed, as a percentage
of each Portfolio's average daily net assets, 0.70% for the Money Market
Portfolio, 0.70% for the Bond Portfolio, 1.00% for the Growth Portfolio and
1.00% for the Global Portfolio. For the fiscal year ended December 31, 1994, the
actual expenses of the Money Market Portfolio, the Bond Portfolio, the Growth
Portfolio and the Global Portfolio, as a percentage of each Portfolio's average
daily net assets, were 0.60%, 0.59%, 0.84% and 1.01%, respectively.
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THE SUB-ADVISER
Janus Capital Corporation, located at 100 Fillmore Street, Suite 300,
Denver, Colorado 80206, serves as the Sub-Adviser to the Portfolios. Thomas H.
Bailey is the President of Janus Capital Corporation. Kansas City Southern
Industries, Inc. ('KCSI') owns 83% of the Sub-Adviser. The Sub-Adviser provides
investment management and related services to other mutual funds, and
individual, corporate, charitable and retirement accounts. See 'Management of
the Fund-The Sub-Adviser' in the Statement of Additional Information for a more
detailed description of the previous experience of Janus Capital Corporation as
an investment adviser.
Thomas F. Marsico has served as portfolio manager for the Growth Portfolio
since its inception. Mr. Marsico also serves as portfolio manager of other
mutual funds. Mr. Marsico is an Executive Vice President of Janus Investment
Fund and has been a Vice President of the Sub-Adviser since 1986.
Ronald V. Speaker has served as portfolio manager for the Bond Portfolio
since 1988. Mr. Speaker also serves as portfolio manager of other mutual funds.
Mr. Speaker is also an Executive Vice President of Janus Investment Fund and
Janus Aspen Series and previously served as a securities analyst and research
associate of the Sub-Adviser (from 1986).
Helen Y. Hayes has served as portfolio manager of the Global Portfolio
since its inception. Ms. Hayes also serves as a portfolio manager of other
mutual funds. Ms. Hayes is also an Executive Vice President of Janus Investment
Fund and Janus Aspen Series. Ms. Hayes has been employed by the Sub-Adviser
since 1987.
The Sub-Adviser provides investment advisory assistance and portfolio
management advice to the Investment Adviser for all Portfolios. Subject to
review and supervision by the Investment Adviser and the Board of Directors of
the Fund, the Sub-Adviser is responsible for the actual management of the
Portfolios and for making decisions to buy, sell or hold any particular
security, and it places orders to buy or sell securities on behalf of the
Portfolios. The Sub-Adviser bears all of its expenses in connection with the
performance of its services, such as compensating and furnishing office space
for its officers and employees connected with investment and economic research,
trading and investment management of the Portfolios.
For its services, the Sub-Adviser receives monthly compensation from the
Investment Adviser at the annual rate of 0.40% of the average daily net assets
of the Growth and Global Portfolios and 0.25% of the average daily net assets of
the Money Market and Bond Portfolios.
The Sub-Adviser is also responsible for selecting the broker-dealers who
execute the portfolio transactions for the Portfolios. The Sub-Adviser is
authorized to consider sales of the Policies or Annuity Contracts described in
the accompanying prospectus by a broker-dealer as a factor in the selection of
broker-dealers to execute portfolio transactions. In placing portfolio business
with all dealers, the Sub-Adviser seeks best execution of each transaction and
all brokerage placement must be consistent with the Rules of Fair Practice of
the National Association of Securities Dealers, Inc. In addition, the Sub-
Adviser may occasionally place portfolio business with broker-dealers affiliated
with the Investment Adviser or the Sub-Adviser; in such event, the Sub-Adviser
always will seek best execution.
DIVIDENDS AND DISTRIBUTIONS
The Portfolios intend to distribute substantially all of the net investment
income, if any. Dividends from investment income of the Money Market Portfolio
normally are declared daily and reinvested monthly in additional shares of the
Portfolio at net asset value. Dividends from investment income, if any, of the
Bond Portfolio, Growth Portfolio and Global Portfolio normally are declared and
paid semi-annually in additional shares of the Portfolios at net asset value.
Distributions of net realized capital gains from security transactions and net
gains from foreign currency transactions, if any, normally are declared and paid
in additional shares of the Portfolios at the end of the fiscal year.
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TAXES
Each Portfolio has qualified and expects to continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended ('Code'). As such, a Portfolio is not subject to Federal income
tax on that part of its investment company taxable income (consisting generally
of net investment income, net gains from certain foreign currency transactions,
and net short-term capital gain, if any) and any net capital gain (the excess of
net long-term capital gain over net short-term capital loss) that it distributes
to its shareholders. It is each Portfolio's intention to distribute all such
income and gains.
Shares of each Portfolio are offered only to the Separate Accounts (which
are insurance company separate accounts that fund the Policies and the Annuity
Contracts). Under the Code, no tax is imposed on an insurance company with
respect to income of a qualifying separate account properly allocable to the
value of eligible variable annuity or variable life insurance contracts. For a
discussion of the taxation of life insurance companies and the Separate
Accounts, as well as the tax treatment of the Policies and Annuity Contracts and
the holders thereof, see 'Federal Tax Matters' included in the respective
prospectuses for the Policies and the Annuity Contracts.
Each Portfolio intends to comply with the diversification requirements
imposed by section 817(h) of the Code and the regulations thereunder. These
requirements are in addition to the diversification requirements imposed on each
Portfolio by Subchapter M and the 1940 Act. These requirements place certain
limitations on the assets of each separate account that may be invested in
securities of a single issuer, and, because section 817(h) and the regulations
thereunder treat each Portfolio's assets as assets of the related separate
account, these limitations also apply to each Portfolio's assets that may be
invested in securities of a single issuer. Specifically, the regulations provide
that, except as permitted by the 'safe harbor' described below, as of the end of
each calendar quarter or within 30 days thereafter no more than 55% of the
Portfolio's total assets may be represented by any one investment, no more than
70% by any two investments, no more than 80% by any three investments, and no
more than 90% by any four investments.
Section 817(h) provides, as a safe harbor, that a separate account will be
treated as being adequately diversified if the diversification requirements
under Subchapter M are satisfied and no more than 55% of the value of the
account's total assets are cash and cash items, government securities, and
securities of other regulated investment companies. For purposes of section
817(h), all securities of the same issuer, all interests in the same real
property project, and all interests in the same commodity are treated as a
single investment. In addition, each U.S. Government agency or instrumentality
is treated as a separate issuer, while a particular foreign government and its
agencies, instrumentalities, and political subdivisions all will be considered
the same issuer. Failure of a Portfolio to satisfy the section 817(h)
requirements would result in taxation of the Separate Accounts, the insurance
companies, the Policies, and the Annuity Contracts, and tax consequences to the
holders thereof, other than as described in the respective prospectuses for the
Policies and the Annuity Contracts.
The foregoing is only a summary of some of the important Federal income tax
considerations generally affecting a Portfolio and its shareholders; see the
Statement of Additional Information for a more detailed discussion. Prospective
investors are urged to consult their tax advisors.
PURCHASE AND REDEMPTION OF SHARES
Shares of a Portfolio are sold and redeemed at their net asset value next
determined after receipt of a purchase order or notice of redemption in proper
form. Shares are sold and redeemed without the imposition of any sales
commission or redemption charge. However, certain sales and other charges may
apply to the Policies and the Annuity Contracts. Such charges are described in
the respective prospectuses for the Policies and the Annuity Contracts.
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VALUATION OF SHARES
A Portfolio's net asset value per share is ordinarily determined, once
daily, as of the close of the regular session of business on the New York Stock
Exchange ('Exchange') (usually 4:00 p.m., Eastern time), on each day the
Exchange is open, and at such other times as the Fund may determine.
Net asset value of a Growth Portfolio, a Bond Portfolio and a Global
Portfolio share is computed by dividing the value of the net assets of each
Portfolio by the total number of shares outstanding in each Portfolio.
The Board of Directors has determined that the most appropriate method for
valuing the securities of the Money Market Portfolio is the amortized cost
method. Under this method, the net asset value of Money Market Portfolio shares
is expected to remain at a constant $1.00 per share, although there can be no
assurance that the Money Market Portfolio will be able to maintain a stable net
asset value. (See the Statement of Additional Information for details concerning
the valuation method, including the conditions under which it may be used.)
Except for money market instruments maturing in 60 days or less, securities
held by the Bond, Growth and Global Portfolios are valued at market value.
Securities for which market values are not readily available are valued at fair
value as determined in good faith by the Advisers under the supervision of the
Fund's Board of Directors. Money market instruments maturing in 60 days or less
are valued on the amortized cost basis. (See the Statement of Additional
Information for details.)
THE FUND AND ITS SHARES
The Fund was incorporated under the laws of the State of Maryland on August
21, 1985 and is registered with the SEC as a diversified, open-end, management
investment company.
The Fund offers its shares only for purchase by the Separate Accounts of
Life Companies to fund benefits under variable life insurance or variable
annuity contracts issued by the Life Companies. Because Fund shares are sold to
Separate Accounts established to receive and invest premiums received under
variable life insurance policies and purchase payments received under the
variable annuity contracts, it is conceivable that, in the future, it may become
disadvantageous for variable life insurance Separate Accounts and variable
annuity Separate Accounts to invest in the Fund simultaneously. Neither the Life
Companies nor the Fund currently foresees any such disadvantages or conflicts,
either to variable life insurance policyowners or to variable annuity
contractowners. After being notified by one or more of the Life Companies of a
potential or existing conflict, the Fund's Board of Directors will determine if
a material conflict exists and what action, if any, should be taken in response
thereto. Such action could include the sale of Fund shares by one or more of the
Separate Accounts, which could have adverse consequences. Material conflicts
could result from, for example, (1) changes in state insurance laws, (2) changes
in Federal income tax laws, or (3) differences in voting instructions between
those given by variable life insurance policyowners and those given by variable
annuity contractowners. If the Board of Directors were to conclude that separate
funds should be established for variable life and variable annuity separate
accounts, the affected Life Companies will bear the attendant expenses, but
variable life insurance policyowners and variable annuity contractowners would
no longer have the economies of scale typically resulting from a larger combined
fund.
The Fund offers a separate class of Common Stock for each portfolio. All
shares of the Portfolios and of each of the other portfolios have equal voting
rights, except that only shares of a particular portfolio will be entitled to
vote on matters concerning only that portfolio. Each issued and outstanding
share of a Portfolio is entitled to one vote and to participate equally in
dividends and distributions declared by that Portfolio and, upon liquidation or
dissolution, to participate equally in the net assets of such Portfolio
remaining after satisfaction of outstanding liabilities. The shares of each
Portfolio, when issued, will be fully paid and nonassessable, have no
preference, preemptive, conversion, exchange or similar rights, and will be
freely transferable. Shares do not have cumulative voting rights and the holders
of more than 50% of the shares of the Fund voting for the election of directors
can elect all of
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<PAGE>
the directors of the Fund if they choose to do so, and in such event holders of
the remaining shares would not be able to elect any directors.
Only the Separate Accounts of the Life Companies may hold shares of the
Fund and are entitled to exercise the rights directly as described above. If and
to the extent required by law, Life Companies will vote the Fund's shares held
in the Separate Accounts, including Fund shares which are not attributable to
Policyholders, at meetings of the Fund in accordance with instructions received
from Policyholders having voting interests in the corresponding sub-accounts of
the Separate Accounts. Except as required by the 1940 Act, the Fund does not
hold regular or special shareholder meetings. If the 1940 Act or any regulation
thereunder should be amended, or if present interpretation thereof should
change, and as a result it is determined that the Life Companies are permitted
to vote Fund shares in their own right, they may elect to do so. The rights of
Policyholders are described in more detail in the prospectuses or plan documents
for the Policies and the Annuity Contracts, respectively.
PERFORMANCE INFORMATION
The Fund may, from time to time, include quotations of a Portfolio's total
return or yield in connection with the total return for the appropriate Separate
Account in advertisements, sales literature or reports to Policyholders or to
prospective investors. Total return and yield quotations for a Portfolio reflect
only the performance of a hypothetical investment in the Portfolio during the
particular time period shown as calculated based on the historical performance
of the Portfolio during that period. SUCH QUOTATIONS DO NOT IN ANY WAY INDICATE
OR PROJECT FUTURE PERFORMANCE. Quotations of total return and yield will not
reflect charges or deductions against the Separate Accounts or charges and
deductions against the Policies or the Annuity Contracts. Where relevant, the
prospectuses for the Policies and the Annuity Contracts contain additional
performance information.
The total return of a Portfolio refers to the average annual percentage
change in value of an investment in the Portfolio held for various periods of
time, including, but not limited to, one year, five years, ten years and since
the Portfolio began operations, as of a stated ending date. When a Portfolio has
been in operation for these periods, the total return for such periods will be
provided if performance information is quoted. Total return quotations for a
Portfolio are expressed as average annual compound rates of return for each of
the periods quoted, reflect the deduction of a proportionate share of a
Portfolio's investment advisory fees and Portfolio expenses, and assume that all
dividends and capital gains distributions during the period are reinvested in
the Portfolio when made.
The Fund may, from time to time, disclose in advertisements, sales
literature and reports to Policyholders or to prospective investors, total
returns for a Portfolio for periods in addition to those required to be
presented, or disclose other nonstandardized data such as cumulative total
returns, actual year-by-year returns, or any combination thereof.
The Fund may also, from time to time, compare performance information for a
Portfolio in advertisements, sales literature and reports to Policyholders or to
prospective investors to: (1) the Standard & Poor's Index of 500 Common Stocks,
the Dow Jones Industrial Average or other widely recognized indices; (2) other
mutual funds whose performance is reported by Lipper Analytical Services, Inc.,
('Lipper'), Variable Annuity Research & Data Service ('VARDS') and Morningstar,
Inc. ('Morningstar') or reported by other services, companies, individuals or
other industry or financial publications of general interest, such as FORBES,
MONEY, THE WALL STREET JOURNAL, BUSINESS WEEK, BARRON'S, CHANGING TIMES and
FORTUNE, which rank and/or rate mutual funds by overall performance or other
criteria; and (3) the Consumer Price Index. Lipper, VARDS and Morningstar are
widely quoted independent research firms which rank mutual funds according to
overall performance, investment objective, and assets. Unmanaged indices may
assume the reinvestment of dividends but usually do not reflect any 'deduction'
for the expense of operating or managing a fund. In connection with a ranking, a
Portfolio will also provide additional information with respect to the ranking,
including the particular category to which it relates, the number of funds in
the category, the period and criteria on which the ranking is based, and the
effect of fee waivers and/or expense reimbursements.
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<PAGE>
The Money Market Portfolio yield quotation refers to the income generated
by a hypothetical investment in the Portfolio over a specified seven-day period
if that level of income were generated for 52 consecutive weeks and expressed as
an annual percentage rate of return. The quotation of compound effective yield
for the Money Market Portfolio refers to the same calculation adjusted to
reflect the compounding effect of earnings on reinvested dividends. For the
seven-day period ended December 31, 1994, the Money Market Portfolio yield was
4.80% and was equivalent to a compound effective yield of 4.92%.
The Bond Portfolio yield quotation refers to the income generated by a
hypothetical investment in the Portfolio over a specified thirty-day period
expressed as a percentage rate of return for that period. The yield is
calculated by dividing the net investment income per share for the period by the
price per share on the last day of that period.
(See the Statement of Additional Information for more information about the
Portfolios' performance.)
GENERAL INFORMATION
REPORTS TO SHAREHOLDERS
The fiscal year of the Portfolios ends on December 31 of each year. The
Fund will send to the Portfolios' Policyholders, at least semi-annually, reports
showing the Portfolios' compositions and other information. An annual report,
containing financial statements, audited by the Fund's independent accountants,
will be sent to Policyholders each year.
CUSTODIAN AND DIVIDEND DISBURSING AGENT
Investors Bank & Trust Company ('IBT'), 89 South Street, Boston,
Massachusetts 02111 acts as Custodian and Dividend Disbursing Agent of the
Portfolios' assets.
ADDITIONAL INFORMATION
The telephone number or the address of the Fund appearing on the first page
of this Prospectus should be used for requests for additional information.
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WRL SERIES FUND, INC.
GROWTH PORTFOLIO
MONEY MARKET PORTFOLIO
BOND PORTFOLIO
GLOBAL PORTFOLIO
OFFICE OF THE FUND:
WRL Series Fund, Inc.
201 Highland Avenue
Largo, Florida 34640
(800) 851-9777
(813) 585-6565
INVESTMENT ADVISER:
Western Reserve Life Assurance Co. of Ohio
201 Highland Avenue
Largo, FL 34640
SUB-ADVISER:
Janus Capital Corporation
Suite 300
100 Fillmore Street
Denver, CO 80206
CUSTODIAN:
Investors Bank & Trust Company
89 South Street
Boston, MA 02111
INDEPENDENT ACCOUNTANTS:
Price Waterhouse LLP
1055 Broadway
Kansas City, MO 64105
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING OF ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR
AN OFFER TO ANY PERSON IN ANY STATE OR JURISDICTION OF THE UNITED STATES
OR ANY COUNTRY WHERE SUCH OFFER WOULD BE UNLAWFUL.
WRL00001-05/95
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