As filed with the Securities and Exchange Commission on December 4, 1998
Registration File Nos. ________/811-4420
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-6
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FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
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WRL SERIES LIFE ACCOUNT
(Exact Name of Trust)
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
(Name of Depositor)
570 Carillon Parkway
St. Petersburg, Florida 33716
(Complete Address of Depositor's Principal Executive Offices)
Thomas E. Pierpan, Esq.
Vice President, Assistant Secretary and Associate General Counsel
Western Reserve Life Assurance Co. of Ohio
570 Carillon Parkway
St. Petersburg, Florida 33716
(Name and Complete Address of Agent for Service)
Copies to:
Stephen E. Roth, Esq.
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
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Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the Registration Statement.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
hereby elects to register an indefinite amount of securities being offered.
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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Company
LOGO
P R O S P E C T U S
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MAY 1, 1999
================================================
WRL FREEDOM NAVIGATOR
issued by
Western Reserve Life Assurance Co.
of Ohio
================================================
A MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
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CONSIDER CAREFULLY THE RISK
FACTORS BEGINNING ON PAGE __
OF THIS PROSPECTUS.
An investment in this Policy is
not a bank deposit. The Policy
THE SECURITIES AND EXCHANGE is not insured or guaranteed by
COMMISSION HAS NOT APPROVED the Federal Deposit Insurance
OR DISAPPROVED THESE SECURITIES Corporation or any other
OR PASSED UPON THE ADEQUACY government agency.
OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY A prospectus for the WRL
IS A CRIMINAL OFFENSE. Series Fund, Inc. must
accompany this prospectus.
Please read both documents
before investing and save them
for future reference.
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TABLE OF CONTENTS
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Glossary ......................................................................1
Policy Summary.................................................................4
Risk Summary...................................................................9
Portfolio Annual Expense Table................................................
Western Reserve and the Fixed Account.........................................13
Western Reserve......................................................13
The Fixed Account Options............................................13
The Standard Fixed Account..................................13
The Fixed Dollar Cost Averaging ("Fixed DCA") Account.......13
The Separate Account and the Portfolios.......................................14
The Separate Account.................................................14
WRL Series Fund, Inc.................................................15
Addition, Deletion, or Substitution of Investments...................17
Your Right to Vote Portfolio Shares..................................18
The Policy....................................................................18
Purchasing a Policy..................................................18
When Insurance Coverage Takes Effect.................................19
Ownership Rights.....................................................20
Changing the Owner...................................................20
Choosing the Beneficiary.............................................20
Changing the Beneficiary.............................................20
Assigning the Policy.................................................20
Canceling a Policy...................................................21
Premiums .....................................................................21
Initial Premium......................................................21
Additional Premiums..................................................22
Allocating Premiums..................................................22
Policy Values.................................................................24
Cash Value...........................................................24
Net Surrender Value..................................................24
Subaccount Value.....................................................24
Unit Value...........................................................25
Fixed Account Value..................................................25
Transfers.....................................................................26
General ............................................................26
Standard Dollar Cost Averaging.......................................27
Asset Rebalancing Program............................................27
Standard Fixed Account Transfers.....................................28
Charges and Deductions........................................................28
Premium Deductions...................................................29
Daily Charge.........................................................29
Monthly Deduction....................................................29
Cost of Insurance Charge....................................31
Surrender Charge.....................................................31
Transfer Charge......................................................32
Portfolio Expenses...................................................32
Guaranteed Minimum Death Benefit Rider...............................32
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Death Benefit.................................................................32
Death Benefit Proceeds...............................................32
Death Benefit........................................................33
Effects of Partial Withdrawals on the Death Benefit..................34
Guaranteed Minimum Death Benefit Rider...............................34
Changing the Specified Amount........................................35
Payment Options......................................................35
Surrenders and Partial Withdrawals............................................
Surrenders...........................................................35
Partial Withdrawals..................................................35
Loans .....................................................................36
General..............................................................36
Interest Rate Charged................................................37
Loan Reserve Interest Rate Credited..................................37
Preferred Loans......................................................37
Effect of Policy Loans...............................................38
Policy Lapse..................................................................38
Lapse................................................................38
Federal Income Tax Considerations.............................................39
Tax Treatment of Policy Benefits.....................................40
Other Policy Information......................................................42
Our Right to Contest the Policy......................................42
Suicide Exclusion....................................................42
Misstatement of Age or Gender........................................42
Modifying the Policy.................................................42
Payments We Make.....................................................43
Reports to Owners....................................................43
Records..............................................................43
Policy Termination...................................................44
Supplemental Benefits (Riders).......................................44
Extended Maturity Date......................................44
Accelerated Death Benefit...................................44
Guaranteed Minimum Death Benefit............................
Performance Data..............................................................44
Hypothetical illustrations based on adjusted historic
Portfolio performance..............................................45
Additional Information........................................................45
Sale of the Policies.................................................45
Legal Matters........................................................46
Legal Proceedings....................................................46
Year 2000 Matters....................................................46
Financial Statements.................................................47
Additional Information about Western Reserve.........................47
Western Reserve's Directors and Officers.............................47
Additional Information about the Separate Account....................49
Illustrations.................................................................50
Index to Financial Statements.................................................51
Western Reserve Life Assurance Co. of Ohio...........................51
ii
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GLOSSARY
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age The age of the person insured on his or her last
birthday before the Policy Date, plus the number of
completed years since the Policy Date.
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beneficiary(ies) The person or persons you select to receive the death
benefit from this policy. You name primary beneficiary
and any contingent beneficiaries.
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Cash Value The sum of your Policy's value in the subaccounts and
and the fixed account. If there is a Policy loan
outstanding, the Cash Value includes any amounts held in
the company's general account to secure the Policy loan.
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company (we, Western Reserve Life Assurance Co. of Ohio
us, our) ("Western Reserve").
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Daily Charge The amount we deduct each Valuation Date from assets in
the subaccounts as part of the calculation of the unit
value for each subaccount.
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death benefit The amount we will pay to the beneficiary on the
proceeds Insured's death. We will reduce the death benefit
proceeds by the amount of any outstanding loan amount
(including any interest you owe on the Policy loan(s)),
and plus any due and unpaid monthly deduction.
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fixed account A set of options to which you may allocate premiums and
options Cash Value. We guarantee that any amounts you allocate
to the fixed account options will earn interest at a
declared rate. The fixed account options are the
standard fixed account and the Fixed Dollar Cost
Averaging Account ("Fixed DCA Account").
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free look period The period during which you may return the Policy and
receive a refund as described in this prospectus. The
length of the free look period varies by state. The
free look period is listed in the Policy.
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Fund(s) The WRL Series Fund, Inc., an investment company
registered with the U.S. Securities and Exchange
Commission, and other registered investment companies
that may be added to the Policy.
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in force While coverage under the Policy is active and the
Insured's life remains insured.
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initial premium The amount you must pay before insurance coverage begins
under this Policy. The initial premium is shown on the
schedule page of your Policy.
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Insured(s) The person or persons whose lives are insured by this
Policy. Joint Insureds must be spouses.
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Joint and Last A Policy that pays the death benefit to the beneficiary
Survivor Policy on the death of the last-to-die of the two named
Insureds.
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1
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lapse When life insurance coverage ends because you do not
have enough Cash Value in the Policy to pay the monthly
deduction, the surrender charges and any outstanding
loan amount (including any interest you owe on Policy
loan(s)), and you have not made a sufficient payment by
the end of a grace period. The Policy will not lapse if
you have purchased the Guaranteed Minimum Death Benefit
rider and the rider is in effect.
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loan amount The total amount of all outstanding Policy loans,
including both principal and interest due.
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maturity date The Policy anniversary when the younger Insured reaches
age 100 and life insurance coverage under this Policy
ends. You may continue coverage, at your option, under
the Policy's extended maturity date benefit provision.
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Monthiversary The same date each month as the Policy Date. If there
is no Valuation Date in the calendar month that
coincides with the Policy Date, the Monthiversary is the
next Valuation Date.
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Monthly Policy The charge deducted from the Cash Value (less the loan
Charge amount) on each Monthiversary.
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Net Surrender The amount we will pay you if you surrender the Policy
Value while it is in force. The Net Surrender Value on the
date you surrender is equal to: the Cash Value, minus
any surrender charge, and minus any outstanding loan
amount (including any interest you owe on Policy
loan(s)).
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Office Our administrative office at 4333 Edgewood Road NE,
Cedar Rapids, Iowa 52499-0001. Our phone number is
1-800-525-6205.
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Policy Date The date when our underwriting process is complete, full
life insurance coverage goes into effect, we issue the
Policy, and we begin to deduct the Monthly Policy
Charge. The Policy Date is shown on the schedule page of
your Policy. It is also the date when, depending on your
state of residence,we allocate your premium (plus
interest) either to the Reallocation Account or to the
subaccounts and fixed account options you selected on
your application. The free look period begins on the
Policy Date. We measure Policy months, years, and
anniversaries from the Policy Date.
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premiums All payments you make under the Policy other than loan
repayments.
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Reallocation The standard fixed account.
Account
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Reallocation The date shown on the schedule page of your Policy when
Date we reallocate any premium (plus interest) held in the
Reallocation Account to the subaccounts and fixed
account options you selected on your application. We
place your premium in the Reallocation Account only if
your state requires us to return the full premium in the
event you exercise your free look right. In all other
states, the Reallocation Date is the Policy Date.
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separate WRL Series Life Account. It is a separate investment
account account that is divided into subaccounts. We established
the separate account to receive and invest premiums
under the Policy and other variable life insurance
policies we issue.
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2
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Specified The death benefit we will pay under the Policy, as shown
Amount on the Policy's schedule page, provided the Policy is in
force and has not lapsed. The Specified Amount varies by
the Insured's age, gender and risk class. Any partial
withdrawal proportionately decreases the Specified
Amount.
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subaccount A subdivision of the separate account that invests
exclusively in shares of one investment portfolio of the
Fund.
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Surrender If, during the first 9 Policy years, you fully surrender
Charge the Policy, a Surrender Charge will be taken from the
Cash Value.
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termination When the Insured's life (or surviving Insured under the
Joint Policy) is no longer insured under the Policy.
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Valuation Each day the New York Stock Exchange is open for
Date trading, except days when a subaccount's corresponding
Portfolio does not value its shares.
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Valuation The period beginning at the end of one Valuation Date
Period and continuing to the end of the next Valuation Date.
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written notice The written notice you must sign and send us to request
or exercise your rights as owner under the Policy. To be
complete, it must: (1) be in a form we accept,
(2) contain the information and documentation that we
determine in our sole discretion is necessary for us to
take the action you request or for you to exercise the
right specified, and (3) be received at our Office.
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You, your (the The person entitled to exercise all rights as owner
owner) under the Policy.
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3
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POLICY SUMMARY WRL FREEDOM NAVIGATOR
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THE POLICY IN GENERAL
The WRL Freedom Navigator is a modified single premium variable life
insurance policy. You may buy it as individual or as joint and last
survivor life insurance.
The Policy is designed to be long-term in nature in order to provide
significant life insurance benefits for the Insured(s) named in the
Policy. You should consider the Policy in conjunction with other
insurance you own. The Policy is not suitable as a short-term savings
vehicle.
[GRAPHIC OMITTED]
PREMIUMS
/bullet/ If the Insured qualifies for simplified underwriting,
conditional life insurance coverage begins as soon as you
complete an application and pay an initial premium of at least
$20,000. Once we determine that the Insured meets our
underwriting requirements, full insurance coverage begins and
we will issue your Policy, and we will begin to deduct monthly
and daily insurance charges from your premium. This date is
the Policy Date. On that date, we will allocate your premium
(plus interest) to either the Reallocation Account or to the
subaccounts and fixed account options, depending on the state
in which you live.
/bullet/ If the Insured qualifies for simplified underwriting, the
maximum premium you can pay at the time of your application
is:
- $50,000 (for Ages 35-49)
- $100,000 (for Ages 50-80)
Other limits apply for joint policies and policies with full
underwriting.
/bullet Once we issue your Policy, the FREE LOOK PERIOD begins. You
may return the Policy during this period and receive a refund.
Depending on your state of residence, we will place your
premium (plus interest) in the Reallocation Account during the
free look period. See p. ___.
/bullet/ We will accept additional premiums only in certain limited
circumstances.
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4
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DEDUCTIONS FROM PREMIUM BEFORE WE PLACE IT
IN SUBACCOUNT AND/OR FIXED ACCOUNT OPTIONS
/bullet/ From the initial premium: NONE
/bullet/ From additional premiums: NONE
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INVESTMENT OPTIONS FIXED ACCOUNT OPTIONS
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You may direct the money in your You may also direct the money in your
Policy to any of the subaccounts Policy to the two fixed account
of the separate account. options.
THE MONEY YOU PLACE IN THE SUBACCOUNTS
IS NOT GUARANTEED. THE VALUE OF EACH Money you place in the standard fixed
SUBACCOUNT WILL INCREASE OR DECREASE, account option will earn interest at
DEPENDING ON INVESTMENT PERFORMANCE. a current interest rate declared from
YOU COULD LOSE SOME OR ALL OF YOUR time to time. The interest rate will
MONEY. equal at least 3%.
Each subaccount invests exclusively in
one investment portfolio of the Fund. To elect fixed dollar cost averaging,
The Portfolios available to you are: you must select it on your
application and put your entire
initial premium in the Fixed Dollar
/bullet/ Aggressive Growth Cost Averaging Account (Fixed DCA
/bullet/ Bond Account). Money you place in the
/bullet/ Emerging Growth Fixed DCA Account will earn interest
/bullet/ Global at an annual rate of at least 3%.
/bullet/ Growth & Income Money will be transferred out of the
/bullet/ Growth Fixed DCA Account in equal monthly
installments and placed in the
/bullet/ Money Market subaccounts and standard fixed option
/bullet/ Real Estate Securities of your choice.
/bullet/ Strategic Total Return
/bullet/ Tactical Asset Allocation
/bullet/ Third Avenue Value
/bullet/ U.S. Equity
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5
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CASH VALUE
/bullet/ The sum of your Policy's value in the subaccounts and the
fixed account. If there is a loan outstanding, the Cash Value
includes any amounts held in the company's general account to
secure Policy loans.
/bullet/ Cash Value varies from day to day, depending on the investment
experience of the subaccounts you choose, the interest
credited to the fixed account options, the charges deducted
and any other Policy transactions (such as transfers,
withdrawals, and Policy loans).
/bullet/ Cash Value is the starting point for calculating important
values under the Policy, such as Net Surrender Value and the
death benefit.
/bullet/ There is no guaranteed minimum Cash Value. The Policy may
lapse if you do not have sufficient Cash Value in the Policy
to pay the Monthly Policy Charge(s), the surrender charges
and/or any outstanding loan amount (including interest you owe
on any Policy loan(s)). The Policy will not lapse if you have
purchased the Guaranteed Minimum Death Benefit rider and the
rider is in effect.
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TRANSFERS
/bullet/ You can transfer Cash Value among the subaccounts and the
standard fixed account. We reserve the right to charge a $10
transfer processing fee for each transfer after the 12th
transfer in a Policy year.
/bullet/ Policy loans reduce the amount of Cash Value available for
transfers.
/bullet/ Dollar cost averaging and asset rebalancing programs are
available.
/bullet/ Transfers from the standard fixed account may be made no later
than 30 days after each Policy anniversary and are limited to
the greater of:
- 25% of the value in the standard fixed account OR
- the amount transferred from the fixed account in the prior
Policy year.
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TRANSFERS
/bullet/ You can transfer Cash Value among the subaccounts and the
standard fixed account. We reserve the right to charge a $10
transfer processing fee for each transfer after the 12th
transfer in a Policy year.
/bullet/ Policy loans reduce the amount of Cash Value available for
transfers.
/bullet/ Dollar cost averaging and asset rebalancing programs are
available.
/bullet/ Transfers from the standard fixed account may be made no later
than 30 days after each Policy anniversary and are limited to
the greater of:
- 25% of the value in the standard fixed account OR
- the amount transferred from the fixed account in the prior
Policy year.
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6
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CHARGES AND DEDUCTIONS
/bullet/ On the Policy Date and on each Monthiversary, we deduct the
Monthly Policy Charge from your Cash Value (reduced by the
loan amount). The Monthly Policy Charge pays for policy
administrative expenses and the cost of providing death
benefits under the Policy. The Monthly Policy Charge will vary
with the gender of the Insured, the number of Insureds, and
the number of Policy years you have owned the Policy.
/bullet/ On each Valuation Date, we will deduct a Daily Charge from the
unit value of each subaccount, at an annual rate equal to
0.50%.
/bullet/ Each Portfolio assesses management fees and operating expenses
from the money you place with the Portfolio, at the rate shown
in the Portfolio Annual Expenses Table. See also the Fund
prospectus.
/bullet/ The company reserves the right to charge a maximum monthly
Cost of Insurance Charge. See page __. Currently, we do not
assess a Cost of Insurance Charge.
/bullet/ A declining surrender charge of up to 9.75% of each premium
will apply to a full surrender or a lapse occurring during the
first 9 Policy years.
/bullet/ If you select the Guaranteed Minimum Death Benefit rider at
application, we will deduct .02% each month from your Cash
Value on each Monthiversary.
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LOANS
/bullet/ You may take a loan against the Policy for amounts up to 90%
of the Cash Value, less any surrender charges and any
outstanding loan amount.
/bullet/ We currently charge 6.0% interest annually, payable in
arrears, on any outstanding loan amount; a lower rate applies
to preferred loans.
/bullet/ We currently permit preferred loans to be taken anytime. Under
this provision, you may borrow an amount equal to the Cash
Value less total premiums paid, and less any outstanding loan
amount. We currently charge a 3.0% preferred loan rate.
/bullet/ The amount borrowed is secured by a transfer of a portion of
Cash Value to a loan reserve account that is part of our
general account. You will earn 3.0% interest on amounts in the
loan reserve account.
/bullet/ Federal income taxes and a penalty tax may apply to loans you
make against the Policy.
/bullet/ If you take a loan, we will terminate any Guaranteed Minimum
Death Benefit rider.
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7
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DEATH BENEFIT
/bullet/ So long as the Policy does not lapse, the death benefit is the
greater of:
/arrow/ a variable death benefit, or
/arrow/ the current Specified Amount, on the date of
death of the Insured (last Insured to die,
if a Joint Policy).
/bullet/ We will reduce the death benefit proceeds by the amount of any
outstanding loan amount (including any interest you owe on
Policy loan(s)), and any due and unpaid monthly deduction.
/bullet/ The variable death benefit is equal to the Cash Value
multiplied by the appropriate limitation percentage. See the
table on page ___.
/bullet/ You may not decrease or increase the Specified Amount.
/bullet/ The death benefit should be income tax free to the
beneficiary.
/bullet/ The death benefit is available in a lump sum or a variety of
payout options.
/bullet/ If you purchase the GUARANTEED MINIMUM DEATH BENEFIT RIDER and
the rider is in effect, then, if the Net Surrender Value on
any Monthiversary is not sufficient to cover the Monthly
Policy Charge on such day, then coverage will be provided as
indicated below, and no grace period will begin, provided no
Policy loans have been taken under the Policy.
If a death benefit is payable due to the provisions
of this rider, then the following minimum death
benefit is appicable:
(1) During the first 15 Policy years, or before
the Policy anniversary next following the
Insured's (younger Joint Insured, if under
a Joint Policy) 75th birthday, if sooner,
the minimum death benefit will be as
described directly above.
(2) After the first 15 Policy years, or on or
after the Policy anniversary next following
the Insured's (younger Joint Insured, if a
Joint Policy) 75th birthday, if sooner, the
minimum death benefit payable will be the
initial premium, reduced by any partial
withdrawals. However, in no event will this
minimum death benefit ever be less than
$1,000.
If you take a Policy loan, the Guaranteed Death Benefit rider
will terminate and your Policy could lapse.
/bullet/ A partial withdrawal will reduce the Specified Amount by the
amount of the withdrawal times the ratio of the initial
Specified Amount to the initial premium.
8
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PARTIAL WITHDRAWALS AND SURRENDERS
/bullet/ You can take one withdrawal of Cash Value every 12 months
after the first Policy year.
/bullet/ The amount of the withdrawal is limited to your Policy's
earnings which we compute as:
the Cash Value, MINUS any outstanding Policy loans,
MINUS any interest you owe on Policy loans, and MINUS
total premiums paid.
/bullet/ There is no surrender charge on partial withdrawals.
/bullet/ A partial withdrawal reduces the current Specified Amount (the
minimum death benefit) by:
Amount of withdrawal X initial Specified Amount
------------------------
initial premium
/bullet/ A partial withdrawal does not void a Guaranteed Minimum Death
Benefit rider, but it reduces the death benefit we would pay,
as described above. In no event will any partial withdrawal
reduce the minimum death benefit below $1,000.
/bullet/ Federal income taxes and a penalty tax may apply to partial
withdrawals and surrenders.
/bullet/ You may fully surrender the Policy at any time. You will
receive the Net Surrender Value (Cash Value, minus any
surrender charges, minus any Policy loans outstanding, and
minus any interest you owe on Policy loans).
9
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RISK SUMMARY
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INVESTMENT If you direct us to invest your Cash Value in one or
RISK more subaccounts, you will be subject to the risk
that investment performance will be unfavorable and
that the Cash Value of your Policy will decrease. If
you select the fixed account options, you are credited
with a declared rate of interest, but you assume a
risk that the rate may decrease, although it will
never be lower than a guaranteed minimum annual
effective rate of 3.0%. Because charges continue to be
deducted from Cash Value, if investment results are
sufficiently unfavorable, the Net Surrender Value of
your Policy may fall to zero. In that case, if the
Guaranteed Minimum Death Benefit rider is not in
effect, the Policy will lapse without value and
insurance coverage will no longer be in effect, unless
you make an additional payment sufficient to prevent a
lapse. On the other hand, if investment experience is
sufficiently favorable and you have kept the Policy in
force for a substantial time, you may be able to draw
upon Cash Value, through withdrawals and Policy loans.
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RISK OF LAPSE If the Net Surrender Value of your Policy (that is,
the Cash Value, minus surrender charges and minus
outstanding loan amounts) is too low to pay the
Monthly Policy Charge, loan charges and rider fees
when due, and if a Guaranteed Minimum Death Benefit
rider is not in effect, the Policy will be in default
and a grace period will begin. There is a risk that if
withdrawals, loans and monthly deductions reduce your
Net Surrender Value to too low an amount and/or if the
investment experience of your selected subaccounts is
unfavorable, then the Policy could lapse. In that
case, you will have a 61-day grace period to make a
sufficient payment. If a sufficient payment is not
paid before the grace period ends, your Policy will
end without value, insurance coverage will no longer
be in effect, and you will receive no benefits.
You may not reinstate this Policy after it has lapsed.
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TAX RISKS We expect that the Policy will be deemed a life
(INCOME TAX insurance contract under Federal tax law, so that the
AND MEC) death benefit paid to the beneficiary will not be
subject to Federal income tax. However, the Policy
may be treated as a modified endowment contract
("MEC") under Federal tax laws. As a result, partial
withdrawals, surrenders and loans under a Policy that
is a MEC will be taxable as ordinary income to the
extent there are earnings in the Policy. In addition,
a 10% penalty tax may be imposed on partial
withdrawals, surrenders and loans taken before you
reach age 59 1/2. You should consult a qualified tax
advisor for assistance in all tax matters involving
your Policy.
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LIMITS ON The Policy permits you to take only one partial
WITHDRAWALS withdrawal in any twelve month period, after the first
Policy year has been completed. The amount you may
withdraw is limited to earnings. We calculate earnings
as Cash Value, reduced by any outstanding loan amount
(including any interest due on Policy loans) and any
premiums paid.
A partial withdrawal will reduce the Specified Amount
(and the minimum death benefit under a Guaranteed
Minimum Death Benefit rider) by:
Amount of withdrawal X initial Specified Amount
------------------------
initial Premium
This reduction may be significant. However, in no
event will any withdrawal reduce the minimum death
benefits under a Guaranteed Minimum Death Benefit
rider below $1,000.
Federal income taxes and a penalty tax may apply to
partial withdrawals and surrenders.
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EFFECTS OF A Policy loan, whether or not repaid, will affect Cash
POLICY LOANS Value over time because we subtract the amount of the
loan from the subaccounts and fixed account options as
collateral. We then credit a fixed interest rate of
3.0% to the loan collateral. As a result, the loan
collateral does not participate in the investment
results of the subaccounts nor does it receive the
current interest rates credited to the fixed account
options. The longer the loan is outstanding, the
greater the effect is likely to be. Depending on the
investment results of the subaccounts and the interest
rates credited to the fixed account, the effect could
be favorable or unfavorable.
A Policy loan affects the death benefit because a loan
terminates a Guaranteed Minimum Death Benefit rider.
In addition, a Policy loan reduces the death benefit
proceeds and Net Surrender Value by the amount of the
outstanding loan, plus any interest you owe on Policy
loans.
A Policy loan could make it more likely that a Policy
would terminate. There is a risk if the loan reduces
your Net Surrender Value to too low an amount and
investment experience is unfavorable, that the Policy
will lapse, resulting in adverse tax consequences. You
will have a 61-day grace period to submit a sufficient
payment to avoid the Policy's termination without
value and the end of insurance coverage.
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11
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COMPARISON Like fixed benefit life insurance, the Policy offers a
WITH OTHER death benefit and provides a Cash Value, loan
INSURANCE privileges and a value on surrender. However, the
POLICIES Policy differs from a fixed benefit policy because it
allows you to place your premium in investment
subaccounts. The amount and duration of life insurance
protection and of the Policy's Cash Value will vary
with the investment performance of the assets you
place in the subaccounts. In addition, the Cash Value
and Net Surrender Values will always vary with the
investment experience of your selected subaccounts.
As you consider purchasing this Policy, keep in mind
that it may not be to your advantage to replace
existing insurance with the Policy.
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ILLUSTRATIONS The hypothetical illustrations in this prospectus or
used in connection with the purchase of a Policy are
based on hypothetical rates of return. These rates are
not guaranteed, and are provided only to illustrate
how the Specified Amount, Policy charges and
hypothetical rates of return affect death benefit
levels, Cash Value and Net Surrender Value of the
Policy. We may also illustrate Policy values based on
the adjusted historical performance of the Portfolios
since the Portfolios' inception, reduced by Policy and
subaccount charges. The hypothetical and adjusted
historic Portfolio rates illustrated should not be
considered to represent past or future performance.
There is the risk that actual rates of return may be
higher or lower than those illustrated, so that the
values under your Policy will be different from those
in the illustrations.
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<PAGE>
PORTFOLIO ANNUAL EXPENSE TABLE
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This table shows the fees and expenses charged by the Portfolios. More detail
concerning the Portfolio's fees and expenses is contained in the prospectus for
the Fund.
ANNUAL PORTFOLIO OPERATING EXPENSES
(As a percentage of average Portfolio assets AFTER fee waivers and expense
reimbursements)*
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT OTHER EXPENSES ANNUAL
PORTFOLIO FEES (AFTER REIMBURSEMENT) EXPENSES
- --------- ---------- --------------------- --------
<S> <C> <C> <C>
Aggressive Growth 0.80% 0.18% 0.98%
Emerging Growth 0.80% 0.14% 0.94%
Growth 0.80% 0.08% 0.88%
Global 0.80% 0.19% 0.99%
Bond 0.45% 0.14% 0.59%
Strategic Total Return 0.80% 0.11% 0.91%
Growth & Income 0.75% 0.25% 1.00%
Money Market 0.40% 0.12% 0.52%
Tactical Asset Allocation 0.80% 0.10% 0.90%
U.S. Equity 0.80% 0.25% 1.05%
Third Avenue 0.80% 0.13% 0.93%
Real Estate Securities 0.80% 0.20% 1.00%
</TABLE>
* Effective January 1, 1997, the Fund adopted a Plan of Distribution
("Distribution Plan") pursuant to Rule 12b-1 under the Investment
Company Act of 1940 and pursuant to the Distribution Plan, entered into
a Distribution Agreement with InterSecurities, Inc. ("ISI"), principal
underwriter for the Fund. Under the Distribution Plan, the Fund, on
behalf of the Portfolios, is authorized to pay to various service
providers, as direct payment for expenses incurred in connection with
the distribution of a Portfolio's shares, up to a maximum rate of 0.15%
(fifteen one-hundredths of one percent) on an annualized basis of the
average daily net assets. This fee is measured and accrued daily and
paid monthly. ISI has determined that it will not seek payment by the
Fund of distribution expenses incurred with respect to any Portfolio
during the fiscal year ending December 31, 1999. We will notify you in
advance if ISI decides to seek reimbursement.
The purpose of the preceding Table is to assist the Owner in
understanding the various costs and expenses that an Owner will bear directly
and indirectly. The Table reflects charges and expenses of the Portfolios of the
Fund for the fiscal year ended December 31, 1998. Expenses of the Fund may be
higher or lower in the future. For more information on the charges described in
this Table, see the Fund prospectus which accompanies this prospectus.
WRL Investment Management, Inc. has undertaken, until at least April
30, 1999, to pay Fund expenses on behalf of the Portfolios to the extent normal
operating expenses of a Portfolio exceed a stated percentage of each Portfolio's
average daily net assets. The expense limitation for the Aggressive Growth,
Emerging Growth, Growth, Global, Strategic Total Return, Growth & Income,
Tactical Asset Allocation, and Third Avenue Value Portfolios is 1.00% of the
average daily net assets; 0.70% of the average daily net assets for the Bond and
Money Market Portfolios; and 1.30% of the average daily net assets of the U.S.
Equity Portfolio. See the Fund's prospectus for a description of the expense
limitation applicable to each Portfolio.
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<PAGE>
WESTERN RESERVE AND THE FIXED ACCOUNT
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WESTERN RESERVE
Western Reserve Life Assurance Co. of Ohio is the insurance company
issuing the Policy. Western Reserve was incorporated under Ohio law on October
1, 1957. We have established the separate account to support the investment
options under this Policy and under other variable life insurance policies we
issue. Our general account supports the fixed account options under the Policy.
THE FIXED ACCOUNT OPTIONS
The fixed account is part of Western Reserve's general account. We use
general account assets to support our insurance and annuity obligations other
than those funded by separate accounts. Subject to applicable law, Western
Reserve has sole discretion over the investment of the fixed account's assets.
Western Reserve bears the full investment risk for all amounts contributed to
the fixed account. Western Reserve guarantees that the amounts allocated to the
fixed account options will be credited interest daily at a net effective
interest rate of at least 3%. We will determine any interest rate credited in
excess of the guaranteed rate at our sole discretion.
THE STANDARD FIXED ACCOUNT. Money you place in the standard fixed
account option will earn interest compounded daily at a current interest rate in
effect at the time of your allocation. The interest rate is guaranteed never to
be less than 3% per year. We may declare current interest rates from time to
time. We may declare more than one interest rate for different money based upon
the date of allocation or transfer to the standard fixed account.
THE FIXED DOLLAR COST AVERAGING ("FIXED DCA") ACCOUNT. To be eligible
for dollar cost averaging, you must elect the Fixed DCA Account on your
application and put your entire initial premium in the Fixed DCA Account. Money
you place in the Fixed DCA Account will earn interest at rates we declare from
time to time. Money will be transferred out of the Fixed DCA Account in equal
monthly installments with the first transfer starting on the first Monthiversary
after the Reallocation Date. Interest accrued on the premiums will be
transferred in the last month of the Fixed DCA Account term. Money in the Fixed
DCA Account may be transferred entirely to other subaccounts or the standard
fixed account after one month.
There is no charge for participating in the Fixed DCA Account.
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<PAGE>
We reserve the right to stop offering the Fixed DCA Account at any time
for any reason. We may offer a higher 30-day interest rate guaranteed for one
month. If you exercise your free look right, the portion of the initial premium
held in the Fixed DCA Account will be credited with interest at the rate we then
credit to the standard fixed account.
Fixed Dollar Cost /bullet/ we receive written notice from you
Averaging will end if: instructing us to cancel the
program.
/bullet/ you elect to participate in the
Asset Rebalancing Program, or
/bullet you elect to participate in any
asset allocation service provided
by a third party.
THE FIXED ACCOUNT OPTIONS HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION AND THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION
HAS NOT REVIEWED THE DISCLOSURE IN THIS PROSPECTUS RELATING TO THE FIXED ACCOUNT
OPTIONS.
THE SEPARATE ACCOUNT AND THE PORTFOLIOS
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THE SEPARATE ACCOUNT
The separate account is divided into subaccounts, each of which invests
in shares of a specific Portfolio of the WRL Series Fund, Inc. These subaccounts
buy and sell Portfolio shares at net asset value without any sales charge. Any
dividends and distributions from a Portfolio are reinvested at net asset value
in shares of that Portfolio.
Income, gains, and losses credited to, or charged against, a subaccount
of the separate account reflect the subaccount's own investment experience and
not the investment experience of our other assets. The separate account's assets
may not be used to pay any of our liabilities other than those arising from the
Policies. If the separate account's assets exceed the required reserves and
other liabilities, we may transfer the excess to our general account.
The separate account may include other subaccounts that are not
available under the Policies and are not discussed in this prospectus. We may
substitute another subaccount, portfolio or insurance company separate account
under the Policies if, in our judgment, investment in a subaccount or portfolio
would no longer be possible or becomes inappropriate to the purposes of the
Policies, or if investment in another subaccount or insurance company separate
account is in the best interest of owners. No substitution shall take place
without notice to owners and prior approval of the Securities and Exchange
Commission and insurance company regulators, to the extent required by the 1940
Act and applicable law.
WRL SERIES FUND, INC.
The separate account invests in shares of the WRL Series Fund, Inc., a
series mutual fund that is registered with the Commission as an open-end
management investment
15
<PAGE>
company. Such registration does not involve supervision of the management or
investment practices or policies of the Fund by the Commission.
Currently, the Portfolios of the Fund corresponding to the subaccounts
of the separate account are: Aggressive Growth Portfolio, Emerging Growth
Portfolio, Growth Portfolio, Global Portfolio, Strategic Total Return Portfolio,
Bond Portfolio, Growth & Income Portfolio, Money Market Portfolio, Tactical
Asset Allocation Portfolio, U.S. Equity Portfolio, Third Avenue Value Portfolio,
and Real Estate Securities Portfolio. Each Portfolio's assets are held separate
from the assets of the other Portfolios, and each Portfolio has investment
objectives and policies that are different from those of the other Portfolios.
Thus, each Portfolio operates as a separate investment fund, and the income or
losses of one Portfolio generally have no effect on the investment performance
of any other Portfolio. Pending any prior approval by a state insurance
regulatory authority, certain subaccounts and corresponding Portfolios may not
be available to residents of some states.
Each Portfolio's investment objective(s) and policies are summarized
below. THERE IS NO ASSURANCE THAT ANY OF THE PORTFOLIOS WILL ACHIEVE ITS STATED
OBJECTIVE(S). You can find more detailed information about the Portfolios,
including a description of risks, in the prospectus for the Fund. You should
read the Fund prospectus carefully.
PORTFOLIO INVESTMENT OBJECTIVE
- --------- --------------------
AGGRESSIVE /arrow/ Portfolio seeks long-term capital appreciation by
GROWTH investing in a diversified, actively managed portfolio
of equity securities.
EMERGING /arrow/ Portfolio seeks capital appreciation by investing
GROWTH primarily in common stocks of small and medium sized
companies.
GROWTH /arrow/ Portfolio seeks growth of capital by investing primarily
in common stocks listed on a national securities exchange
or traded on NASDAQ.
GLOBAL /arrow/ Portfolio seeks long-term growth of capital in a manner
consistent with preservation of capital, primarily
through investments in common stocks of foreign and
domestic issuers.
STRATEGIC /arrow/ Portfolio seeks to provide current income, long-term
TOTAL growth of income and capital appreciation by investing
RETURN primarily in a blend of equity and fixed-income
securities, including common stocks, income producing
securities convertible into common stocks, and
fixed-income securities.
BOND /arrow/ Portfolio seeks the highest possible current income
within the confines of the primary goal of insuring the
protection of capital by investing at least 65%, and
usually a higher percentage, of its assets in debt
securities issued by the U.S. Government and its agencies
and instrumentalities and in other medium to high-quality
debt securities.
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<PAGE>
PORTFOLIO INVESTMENT OBJECTIVE
- --------- --------------------
GROWTH & /arrow/ Portfolio seeks total return by investing in securities
INCOME that have defensive characteristics. Portfolio will
invest primarily in a diversified portfolio of equity and
debt securities with an emphasis on sector investing.
MONEY /arrow/ Portfolio seeks to obtain maximum current income
MARKET consistent with preservation of principal and maintenance
of liquidity. The Portfolio maintains a dollar-weighted
average portfolio maturity of not more than 90 days by
investing in U.S. dollar-denominated securities which
have effective maturities of not more than 13 months and
present minimal credit risks.
TACTICAL /arrow/ Portfolio seeks preservation of capital and competitive
ASSET investment returns by investing primarily in stocks,
ALLOCATION United States Treasury bonds, notes and bills, and money
market funds.
U.S. EQUITY /arrow/ Portfolio seeks long-term growth of capital by investing
primarily in equity securities of U.S. companies.
THIRD /arrow/ Portfolio seeks long-term capital appreciation by
AVENUE investing primarily in a portfolio of equity securities
VALUE of well-financed companies believed to be priced below
their private market values and debt securities providing
strong protective covenants and high, effective yields.
REAL ESTATE /arrow/ Portfolio seeks long-term total return from investments
SECURITIES primarily in equity securities of real estate companies.
Total return will consist of realized and unrealized
capital gains and losses plus income.
WRL Investment Management, Inc. ("WRL Management"), located at 570
Carillon Parkway, St. Petersburg, Florida 33716, a wholly-owned subsidiary of
Western Reserve, serves as investment adviser to the Fund and manages the Fund
in accordance with policies and guidelines established by the Fund's Board of
Directors. For certain Portfolios, WRL Management has engaged investment
sub-advisers to provide portfolio management services. WRL Management and each
investment sub-adviser are registered investment advisers under the Investment
Advisers Act of 1940, as amended. See the Fund prospectus for more information
regarding WRL Management and the investment sub-advisers.
In addition to the separate account, shares of the Fund are also sold
to other separate accounts established by Western Reserve or its affiliates to
support variable annuity contracts and variable life insurance policies. It is
possible 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. Although neither Western Reserve nor the Fund currently
foresees any such disadvantages, either to variable life insurance policyowners
or to variable annuity contract owners, the Fund's Board of Directors will
monitor events in order to identify any material conflicts between the interests
of such variable life insurance policyowners and variable annuity contract
owners, and will determine what action, if any, it should take. Such action
could include the sale of Fund shares by one or more of the
17
<PAGE>
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 contract owners.
If the Fund's Board of Directors were to conclude that separate funds
should be established for variable life insurance and variable annuity separate
accounts, Western Reserve will bear the attendant expenses, but variable life
insurance policyowners and variable annuity contract owners would no longer have
the economies of scale resulting from a larger combined fund.
ADDITION, DELETION, OR SUBSTITUTION OF INVESTMENTS
We reserve the right to transfer separate account assets to another
separate account that we determine to be associated with the class of contracts
to which the Policy belongs. We also reserve the right, subject to compliance
with applicable law, to make additions to, deletions from, or substitutions for
the investments that are held by any subaccount or that any subaccount may
purchase. We will only make any such addition, deletion or substitution of
shares of another Portfolio of the Fund or of another open-end, registered
investment company, if the shares of a Portfolio are no longer available for
investment, or if in our judgement further investment in any Portfolio would
become inappropriate in view of the purposes of the separate account. We will
not add, delete or substitute any shares attributable to your interest in a
subaccount without notice to and prior approval of the Commission, to the extent
required by the 1940 Act or other applicable law. Nothing contained herein shall
prevent the separate account from purchasing other securities for other
Portfolios or classes of policies, or from permitting a conversion between
Portfolios or classes of policies on the basis of requests made by Owners.
Western Reserve also reserves the right to establish additional
subaccounts of the separate account, each of which would invest in a new
Portfolio of the Fund, or in shares of another investment company, with a
specified investment objective. We may establish new subaccounts when, in our
sole discretion, marketing, tax or investment conditions warrant. We will make
any new subaccounts available to existing Owners on a basis we determine.
Western Reserve may also eliminate one or more subaccounts if, in our sole
discretion, marketing, tax, or investment conditions warrant.
In the event of any such substitution or change, Western Reserve may
make such changes in this and other policies as may be necessary or appropriate
to reflect such substitution or change. If we deem it to be in the best
interests of persons having voting rights under the Policies, and when permitted
by law, the separate account may be (1) operated as a management company under
the 1940 Act, (2) deregistered under the 1940 Act in the event such registration
is no longer required, (3) managed under the direction of a committee, or (4)
combined with one or more other separate accounts, or subaccounts.
PLEASE READ THE ATTACHED FUND PROSPECTUS TO OBTAIN MORE COMPLETE INFORMATION
REGARDING THE PORTFOLIOS.
18
<PAGE>
YOUR RIGHT TO VOTE PORTFOLIO SHARES
Even though we are the legal owner of the Portfolio shares held in the
subaccounts, and have the right to vote on all matters submitted to shareholders
of the Portfolios, we will vote our shares only as Policy owners instruct, so
long as such action is required by law.
Before a vote of a Portfolio's shareholders occurs, you will receive
voting materials from us. We will ask you to instruct us on how to vote and to
return your proxy to us in a timely manner. You will have the right to instruct
us on the number of Portfolio shares that corresponds to the amount of Cash
Value you have in that Portfolio (as of a date set by the Portfolio) divided by
$100.
If we do not receive voting instructions on time from some owners, we
will vote those shares in the same proportion as the timely voting instructions
we receive. Should Federal securities laws, regulations and interpretations
change, we may elect to vote Portfolio shares in our own right. If required by
state insurance officials, or if permitted under Federal regulation, we may
disregard certain owner voting instructions. If we ever disregard voting
instructions, we will send you a summary in the next annual report to Policy
owners advising you of the action and the reasons we took such action.
THE POLICY
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PURCHASING A POLICY
To purchase a Policy, a prospective owner must submit a completed
application and an initial premium to us at our Office. You may also send the
application and initial premium to us through any licensed life insurance agent
who is also a registered representative of a broker-dealer having a selling
agreement with AFSG Securities Corporation, the principal underwriter for the
Policy. We determine the Specified Amount for a Policy based on the initial
premium paid and other characteristics of the proposed Insured(s), such as age,
gender and risk class. We base the minimum initial premium for your Policy on
the Guideline Single Premium established under Federal tax laws given the age,
gender, and risk class of the Insured. We currently require a minimum initial
premium of $20,000.
We use different underwriting standards (simplified, expanded) in
relation to the Policy. We can provide you with details as to these underwriting
standards when you apply for a Policy. We must receive evidence of insurability
that satisfies our underwriting standards before we will issue a Policy.
Generally, for simplified underwriting we will issue a Policy for Insured(s)
between the ages of 35 to 80 for a single life policy, and between the ages of
45 to 80 for a joint and survivor life policy. For expanded underwriting, we
will issue a Policy for Insured(s) between the ages of 18 to 34 and 81 to 90 for
a single life policy, and between the ages of 81 to 90 for a joint and survivor
life policy. We reserve the right to reject an application for any reason
permitted by law.
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<PAGE>
WHEN INSURANCE COVERAGE TAKES EFFECT
Full insurance coverage under the Policy will take effect only if the
proposed Insured(s) is alive and in the same condition of health as described in
the application when the Policy is delivered to the Owner, and if the initial
premium is paid.
CONDITIONAL INSURANCE COVERAGE. If the Insured qualifies for simplified
underwriting, conditional insurance coverage begins as soon as you complete an
application and pay an initial premium of at least $20,000. If the Insured does
not qualify for simplified underwriting, conditional insurance coverage begins
on the date all medical tests and exams are completed. Conditional insurance
coverage is void if the check or draft you gave us to pay the initial premium is
not honored when we first present it for payment.
The amount of conditional /bullet/ the Specified Amount applied for, or
insurane coverage is the /bullet/ $300,000
lesser of:
reduced by all amounts payable under all
other life insurance or accidental death
benefits that the Insured has in force or
pending with us.
Conditional life insurance coverage is void if the application contains
any material misrepresentation. Benefits will also be denied if any proposed
Insured commits suicide.
Conditional life insurance coverage terminates automatically, and
without notice, on the earliest of:
/bullet/ the date we notify you that the application is declined and
the initial premium is returned; or
/bullet/ the date we determine the Insured has satisfied our
underwriting requirements (the Policy Date); or
/bullet/ 10 days following our offer of insurance, on any person
proposed under a different plan or at an increased premium or
different rate class; or
/bullet/ at the end of the fraction of a year which the payment bears
to the premium required to provide one month of insurance in
the amount described above; or
/bullet/ 60 days from the beginning of conditional insurance coverage.
FULL INSURANCE COVERAGE. Once we determine that the Insured meets our
underwriting requirements, full insurance coverage begins, we issue the Policy,
and we begin to deduct monthly and daily insurance charges from your premium.
This date is the Policy Date. On the Policy Date, we will allocate your premium
(plus interest) to the subaccounts and fixed account options you elected on your
application, provided you live in a state that does not require a refund of full
premium during the free look period. If your state requires us to return the
premium in the event you exercise your free look right, we will place your
premium (plus interest) in the Reallocation Account until the Reallocation Date.
See Reallocation Account, page __.
OWNERSHIP RIGHTS
The Policy belongs to the Owner named in the application. The Owner may
exercise all of the rights and options described in the Policy. The Owner is the
Insured unless the
full
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application specifies a different person as the Insured. If the Owner dies
before the Insured and no contingent owner is named, then ownership of the
Policy will pass to the Owner's estate. The Owner may exercise certain rights
described below.
CHANGING THE /bullet/ Change the Owner by providing written notice to us at
OWNER any time while the Insured is alive and the Policy is
in force.
/bullet/ Change is effective as of the date that the written
notice is signed.
/bullet/ Changing the Owner does not automatically change the
beneficiary.
/bullet/ Changing the Owner may have tax consequences.
/bullet/ We are not liable for payments we made before we
received the written notice.
CHOOSING THE /bullet/ The Owner designates the beneficiary (the person to
BENEFICIARY receive the death benefit when the Insured dies) in
the application.
/bullet/ If you designate more than one beneficiary, then each
beneficiary shares equally in any death benefit
proceeds unless the beneficiary designation states
otherwise.
/bullet/ If the beneficiary dies before the Insured, then any
contingent beneficiary becomes the beneficiary.
/bullet/ If both the beneficiary and contingent beneficiary
die before the Insured, then the death benefit will
be paid to the Owner or the Owner's estate upon the
Insured's death.
CHANGING THE /bullet/ Change the beneficiary by providing us with a written
BENEFICIARY notice.
/bullet/ Change is effective as of the date the Owner signs
the written notice.
/bullet/ We are not liable for any payments we made before we
received the written notice.
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<PAGE>
ASSIGNING THE /bullet/ The Owner may assign Policy rights while the Insured
POLICY is alive.
/bullet/ The Owner retains any ownership rights that are not
assigned.
/bullet/ Assignee may not change the Owner or the beneficiary,
and may not elect or change an optional method of
payment. Any amount payable to the assignee will be
paid in a lump sum.
/bullet/ Claims under any assignment are subject to proof of
interest and the extent of the assignment.
/bullet/ We are not:
/arrow/ bound by any assignment unless we receive a
written notice of the assignment
/arrow/ responsible for the validity of any
assignment
/arrow/ liable for any payment we made before we
received written notice of the assignment
/arrow/ any assignment which results in adverse tax
consequences to the Owner, Insured(s) or
beneficiary(ies).
CANCELING A POLICY
You may cancel a Policy during the "free-look period" by returning it
to Western Reserve at 4333 Edgewood Road NE, Cedar Rapids, Iowa 52499, or to the
agent who sold it. The free-look period expires 10 days after you receive the
Policy. The free-look period is longer if required by state law. If you decide
to cancel the Policy during the free-look period, we will treat the Policy as if
it had never been issued. Within seven calendar days after we receive the
returned Policy, we will refund an amount equal to the sum of:
/bullet/ the total amount of monthly deductions made and any
other charges imposed on amounts allocated to the
subaccounts and the fixed account options; PLUS
/bullet/ the value of amounts allocated to the subaccounts and
the fixed account options on the date we (or our
agent) receive the returned Policy.
If any state law prohibits the calculation above, we will refund the
total of all premiums paid for the Policy. See Allocating Premiums, p. ___.
PREMIUMS
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INITIAL PREMIUM
The initial premium for a given Specified Amount depends on a number of
factors including the age, gender, and risk class of the proposed Insured(s).
FOR A GIVEN INITIAL PREMIUM, WE WILL SPECIFY THE EXACT SPECIFIED AMOUNT THAT YOU
MUST PURCHASE. For joint and
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survivor life policies, we will provide the Specified Amount at the time of
application based upon the specific ages, gender, and risk classes of the
proposed Insureds.
We currently require a minimum initial premium of $20,000. The current
underwriting requirements and maximum initial premium amounts are set forth in
Appendix __. We reserve the right to modify these requirements and premium
amounts at any time.
We will credit interest on your initial premium from the date we
receive payment. Interest will be credited at the current standard fixed account
rate. Interest is guaranteed to equal at least 3% annually.
TAX-FREE EXCHANGES (1035 EXCHANGES). We will accept as part of your
initial premium money from one contract that qualified for a tax-free exchange
under Section 1035 of the Internal Revenue Code. If you contemplate such an
exchange, you should consult a competent tax advisor to learn the potential tax
effects of such a transaction.
Subject to our underwriting requirements, we will permit you to make
one additional cash payment within three business days of our receipt of the
proceeds from the 1035 exchange before we determine your Policy's Specified
Amount.
ADDITIONAL PREMIUMS
You will have LIMITED FLEXIBILITY TO ADD ADDITIONAL PREMIUMS to the
Policy since we require that the initial premium equal the maximum amount that
can be applied to the Policy at issue. In general, you may not pay any
additional premiums on the Policy for several years in order for the Policy to
continue to qualify as a life insurance contract as defined in Federal tax laws
and regulations. At the time the Policy allows for the payment of additional
premiums, we reserve the right to limit or refund any premium if:
/bullet/ the amount is below our current minimum additional premium
requirement; OR
/bullet/ the premium would increase the death benefit by more than the
amount of the premium; OR
/bullet/ accepting the premium would disqualify the Policy as a life
insurance contract as defined in Federal tax laws and
regulations.
You may pay premiums by any method we deem acceptable. We will treat
any payment you make as a loan repayment unless you clearly mark it as a
premium.
ALLOCATING PREMIUMS
When you apply for a Policy, you must instruct us to allocate your
premium to one or more subaccounts of the separate account and to the fixed
account options according to the following rules:
/bullet/ allocation percentages must be in whole numbers;
/bullet/ you must put your entire initial premium into the Fixed DCA
Account at the time of your application;
/bullet/ if you select standard dollar cost averaging, you must have at
least $5,000 in the standard fixed account.
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You can change the allocation instructions for additional premiums
without charge at any time by providing us with written notification (or any
other notification we deem satisfactory). Any allocation change will be
effective on the date we record the change. We reserve the right to limit the
number of premium allocation changes.
Investment returns from amounts allocated to the subaccounts will vary
with the investment experience of these subaccounts and will be reduced by
Policy charges. YOU BEAR THE ENTIRE INVESTMENT RISK FOR AMOUNTS YOU ALLOCATE TO
THE SUBACCOUNTS.
REALLOCATION ACCOUNT. If your state requires us to return your initial
premium in the event you exercise your free-look right, we will allocate the
initial premium (plus interest) on the Policy Date to the Reallocation Account.
While held in the Reallocation Account, your premium (plus interest) will earn
interest at the current rates for the standard fixed account. The premium will
remain in the Reallocation Account for the length of your state's free look
period plus five days.
The following chart shows by state the number of days from the Policy
Date that your premium (plus interest) will remain in the Reallocation Account.
STATES REQUIRING FULL REFUND OF PREMIUM
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TIME PREMIUM IS IN TIME PREMIUM IS
STATE REALLOCATION ACCOUNT STATE IN REALLOCATION ACCOUNT
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CO # 20 days NC * # 15 days
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CT 15 days ND 15 days
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DC * 15 days NY 15 days
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GA 15 days OK * 15 days
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IL 15 days PA * 15 days
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IN # 15 days SC * 15 days
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MA # 15 days TX 15 days
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MD # 15 days UT * 15 days
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MI *# 15 days VT * 15 days
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MN 15 days VA 15 days
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MO * 15 days WV 15 days
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* The period is 50 days from the application date or 15 days from your
receipt of the Policy, whichever is later.
# If the Policy is a replacement, the period is 25 days.
In the states listed above, on the first Valuation Date on or after the
Reallocation Date, we will reallocate all cash value from the Reallocation
Account to the subaccounts and fixed account options you selected on the
application. If you requested either Fixed DCA or
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Standard Dollar Cost Averaging, we will reallocate the Cash Value to either the
Fixed DCA Account or the standard fixed account, respectively, on the
Reallocation Date.
In all other states, the Reallocation Date is the same as the Policy
Date and we will allocate your premium (plus interest) on the Policy Date to the
subaccounts and the fixed account options in accordance with the instructions
you gave us on your application.
POLICY VALUES
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CASH VALUE
CASH VALUE: /bullet/ serves as the starting point for calculating
values under a Policy
/bullet/ equals the sum of all values in each subaccount
and the fixed account options
/bullet/ is determined on the Policy Date and on each
Valuation Date
/bullet/ has no guaranteed minimum amount and may be more
or less than premiums paid.
NET SURRENDER VALUE
The Net Surrender Value is the amount we pay when you surrender your
Policy. We determine the Net Surrender Value at the end of the Valuation Period
when we receive your written surrender request.
NET SURRENDER /bullet/ the Cash Value as of such date; MINUS
VALUE ON ANY
VALUATION DATE /bullet/ any surrender charge as of such date; MINUS
EQUALS:
/bullet/ any outstanding Policy loan(s); MINUS
/bullet/ any interest you owe on any Policy loan(s).
SUBACCOUNT VALUE
Each subaccount's value is the Cash Value in that subaccount. At the
end of any Valuation Period, the subaccount's value is equal to the number of
units that the Policy has in the subaccount, multiplied by the unit value of
that subaccount.
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THE NUMBER OF /bullet/ the initial units purchased on the Policy Date;
UNITS IN ANY PLUS
SUBACCOUNT ON
ANY VALUATION /bullet/ units purchased with additional premium(s); PLUS
DATE EQUALS:
/bullet/ units purchased via transfers from another
subaccount or the fixed account; MINUS
/bullet/ units redeemed to pay for monthly deductions;
MINUS
/bullet/ units redeemed to pay for partial withdrawals;
MINUS
/bullet/ units redeemed as part of a transfer to another
subacccount or the fixed account.
Every time you allocate or transfer money to or from a subaccount, we
convert that dollar amount into units. We determine the number of units we
credit to, or subtract from, your Policy by dividing the dollar amount by the
unit value for that subaccount at the end of the Valuation Period.
UNIT VALUE
We determine a unit value for each subaccount to reflect how investment
results affect the Policy values. Unit values will vary among subaccounts. The
unit value of each subaccount was originally established at $10 per unit. The
unit value may increase or decrease from one Valuation Period to the next.
THE UNIT VALUE /bullet/ the total value of the assets held in the
OF ANY subaccount, determined by multiplying the number
SUBACCOUNT AT of shares of the designated Portfolio owned by
THE END OF A the subaccount times the Portfolio's net asset
VALUATION value per share; MINUS
PERIOD
IS CALCULATED AS: /bullet/ a charge equal to the daily net assets of the
subaccount multiplied by the daily equivalent of
the Daily Charge; MINUS
/bullet/ the accrued amount of reserve for any taxes or
other economic burden resulting from applying
tax laws that we determine to be properly
attributable to the subaccount; AND THE RESULT
DIVIDED BY
/bullet/ the number of outstanding units in the
subaccount.
FIXED ACCOUNT VALUE
On the Policy Date, the fixed account value is equal to the premiums
allocated to the fixed account, less the portion of the first monthly deduction
taken from the fixed account.
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THE FIXED ACCOUNT /bullet/ the premium(s) allocated to the fixed account;
VALUE AT THE END OF PLUS
ANY VALUATION
PERIOD IS EQUAL TO: /bullet/ any amounts transferred to the fixed account;
PLUS
/bullet/ interest credited to the fixed account; MINUS
/bullet/ amounts charged to pay for monthly deductions;
MINUS
/bullet/ amounts withdrawn from the fixed account; MINUS
/bullet/ amounts transferred from the fixed account to a
subaccount.
TRANSFERS
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GENERAL
You may make transfers among the subaccounts or from the subaccounts to
the fixed account. We determine the amount you have available for transfers at
the end of the Valuation Period when we receive your transfer request. WE MAY
MODIFY OR REVOKE THE TRANSFER PRIVILEGE AT ANY TIME. The following features
apply to transfers under the Policy:
/check mark/ You may make an unlimited number of transfers in a Policy
year.
/check mark/ You may request transfers in writing (in a form we
accept), or by telephone.
/check mark/ There is no minimum amount that must be transferred.
/check mark/ There is no minimum amount that must remain in a
subaccount after a transfer.
/check mark/ We reserve the right to deduct a $10 charge from the
amount transferred for the 13th and each additional
transfer in a Policy year.
/check mark/ We consider all transfers made in any one day to be a
single transfer.
/check mark/ Transfers resulting from loans, Standard or Fixed Dollar
Cost Averaging, the Asset Rebalancing Program, and
exercising exchange privileges are NOT treated as
transfers for the purpose of the transfer charge.
Your Policy as applied for and issued, will automatically receive
telephone transfer privileges unless you provide other instructions. The
telephone transfer privileges allow you to give authority to the registered
representative or agent of record for your Policy to make telephone transfers
and to change the allocation of future payments among the subaccounts and the
fixed account on your behalf according to your instructions. To make a telephone
transfer, you may call 1-800-525-6205.
Please note the following regarding telephone transfers:
/arrow/ We are not liable for any loss, damage, cost or expense from
complying with telephone instructions we reasonably believe to
be authentic. You bear the risk of any such loss.
/arrow/ We will employ reasonable procedures to confirm that telephone
instructions are genuine.
/arrow/ Such procedures may include requiring forms of personal
identification prior to acting upon telephone instructions,
providing written confirmation of transactions to Owners,
and/or tape recording telephone instructions received from
Owners.
/arrow/ If we do not employ reasonable confirmation procedures, we may
be liable for losses due to unauthorized or fraudulent
instructions.
The corresponding portfolio of any subaccount determines its net asset
value per each share once daily, as of the close of the regular business session
of the New York Stock Exchange ("NYSE") (usually 4:00 p.m. Eastern time), which
coincides with the end of each Valuation Period. Therefore, we will process any
transfer request we receive after the close
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<PAGE>
of the regular business session of the NYSE, on any day the NYSE is open, using
the net asset value for each share of the applicable Portfolio determined as of
the close of the next regular business session of the NYSE.
STANDARD DOLLAR COST AVERAGING
Dollar cost averaging is an investment strategy designed to reduce the
investment risks associated with market fluctuations. The strategy spreads the
allocation of your premium into the subaccounts over a period of time. This
allows you to potentially reduce the risk of investing most of your premium into
the subaccounts at a time when prices are high. The success of this strategy is
not assured and depends on market trends. You should carefully consider your
financial ability to continue the program over a long enough period of time to
purchase units when their value is low as well as when it is high.
Under Standard Dollar Cost Averaging, we automatically transfer a set
dollar amount from the standard fixed account to one or more subaccounts that
you choose. We will make the transfers monthly as of the end of the Valuation
Date starting on the first Monthiversary after the Reallocation Date.
TO START STANDARD /arrow/ you must request Standard Dollar Cost Averaging
DOLLAR COST on your application
AVERAGING:
/arrow/ you must have at least $5,000 in the standard
fixed account
/arrow/ each transfer under dollar cost averaging must be
at least $500.
There is no charge for Standard Dollar Cost Averaging.
STANDARD DOLLAR /arrow/ we receive your request to cancel your
COST AVERAGING participation;
WILL TERMINATE IF:
/arrow/ the value in the standard fixed account is
depleted;
/arrow/ you elect to participate in Asset Rebalancing
Program; OR
/arrow/ you elect to participate in any asset allocation
services provided by a third party.
We may modify, suspend, or discontinue Standard Dollar Cost Averaging
at any time.
ASSET REBALANCING PROGRAM
We also offer an Asset Rebalancing Program under which you may transfer
amounts periodically to maintain a particular percentage allocation among the
subaccounts. Cash Value
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<PAGE>
allocated to each subaccount will grow or decline in value at different rates.
The Asset Rebalancing Program automatically reallocates the Cash Value in the
subaccounts at the end of each period to match your Policy's currently effective
premium allocation schedule. Cash Value in the standard fixed account, the
Standard Dollar Cost Averaging Program, and the Fixed DCA Account are not
available for this program.
To participate in the Asset Rebalancing Program, you must complete an
asset rebalancing request form and submit it to us before the maturity date.
You may elect asset rebalancing to occur on each quarterly, semi-annual
or annual anniversary of the Policy Date. You may modify your allocations
quarterly. Once we receive the asset rebalancing request form, we will effect
the initial rebalancing of Cash Value on the next such anniversary, in
accordance with the Policy's current premium allocation schedule. We will credit
the amounts transferred at the unit value next determined on the dates the
transfers are made. If a day on which rebalancing would ordinarily occur falls
on a day on which the NYSE is closed, rebalancing will occur on the next day the
NYSE is open. There is no charge for the Asset Rebalancing Program.
ASSET REBALANCING /arrow/ you elect to participate in the Fixed DCA
WILL CEASE IF: Account;
/arrow/ you elect to participate in the Standard Dollar
Cost Averaging program;
/arrow/ we receive your request to discontinue
participation;
/arrow/ you make a transfer to or from any subaccount
other than under a scheduled rebalancing; OR
/arrow/ you elect to participate in any asset allocation
services provided by a third party.
We may modify, suspend, or discontinue the Asset Rebalancing Program at
any time.
STANDARD FIXED ACCOUNT TRANSFERS
You may make one transfer per Policy year from the standard fixed
account. The transfer must be made no later than 30 days after your Policy
anniversary. You must send us a written notice so that we receive it no later
than 30 days after a Policy anniversary. We will make the transfer on the date
we receive the written notice. We reserve the right to limit the maximum amount
you may transfer to the greater of:
/arrow/ 25% of the amount in the standard fixed account, or
/arrow/ the amount transferred from the standard fixed account in
the immediately prior Policy year (excluding transfers
from the Fixed DCA Account).
CHARGES AND DEDUCTIONS
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This section describes the charges and deductions that we make under
the Policy to compensate for: (1) the services and benefits we provide; (2) the
costs and expenses we incur; and (3) the risks we assume.
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<PAGE>
SERVICES AND /bullet/ the death benefit, cash and loan benefits
BENEFITS WE PROVIDE: under the Policy
/bullet/ investment options, including premium
allocations
/bullet/ administration of elective options
/bullet/ the distribution of reports to Owners
COSTS AND EXPENSES /bullet/ costs associated with processing and
WE INCUR: underwriting applications, issuing and
administering the Policy (including any
Policy riders)
/bullet/ overhead and other expenses for providing
services and benefits, sales and marketing
expenses
/bullet/ other costs of doing business, such as
collecting premiums, maintaining records,
processing claims, effecting transactions,
and paying Federal, state and local
premium and other taxes and fees
RISKS WE ASSUME: /bullet/ that the charges we may deduct may be
insufficient to meet our actual claims
because Insureds die sooner than we
estimate
/bullet/ that the costs of providing the services
and benefits under the Policies may exceed
the charges we are allowed to deduct
PREMIUM DEDUCTIONS
We deduct no charges from premiums before allocating the premiums to
the separate account and the fixed account options according to your
instructions.
DAILY CHARGE
Each Valuation Date, we deduct a Daily Charge at the annual rate of
0.50% from assets in the subaccounts as part of the calculation of the unit
value for each subaccount.
MONTHLY DEDUCTION
We deduct a monthly deduction from the Cash Value on the Policy Date
and on each Monthiversary (the same day of each succeeding month as the Policy
Date, or, if there is no comparable Valuation Date, the next Valuation Date).
We will deduct this charge from each account in accordance with the current
allocation instructions. If the value of any account is insufficient to pay that
account's portion of the monthly deduction, we will take the monthly deduction
on a pro-rata basis from all accounts (I.E., in the same proportion that the
value in each subaccount and the fixed account bears to the total Cash Value on
the Monthiversary).
The monthly deduction is equal to:
/arrow/ The Monthly Policy Charge based on the separate account's
assets; PLUS
/arrow/ The Monthly Policy Charge based on the fixed account's assets;
PLUS
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/arrow/ The monthly Cost of Insurance Charge for the Policy, if any;
PLUS
/arrow/ The monthly charge for any benefits provided by riders
attached to the Policy (currently, only the Guaranteed Minimum
Death Benefit rider).
MONTHLY POLICY CHARGE. The Monthly Policy Charge, based on the separate
account's assets, is equal to: (1) the separate account monthly deduction charge
(see table below) divided by 12; multiplied by (2) the sum of the subaccount
values on the Monthiversary.
The Monthly Policy Charge, based on the fixed account's assets, is
equal to: (1) the fixed account monthly deduction charge (see table below)
divided by 12; multiplied by (2) the fixed account value on the Monthiversary,
minus any outstanding loan amount.
The Monthly Policy Charge for each Policy varies based on the Policy
year, gender, and whether the Policy is issued on a single life basis or a joint
and last survivor basis.
The Monthly Policy Charge and the Daily Charge for single life and
joint and survivor life Policies are as follows:
<TABLE>
<CAPTION>
SINGLE LIFE POLICY MALE/UNISEX FEMALE
-------------------------------------------------------------------------
POLICY YEARS POLICY YEARS POLICY YEARS POLICY YEARS
1-10 11+ 1-10 11+
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Daily Charge
(from unit value) .50% .50% .50% .50%
------------------------------------------------------------------------------------------------
Monthly
Separate account Deduction Charge
charges (as a % of
(annualized rate) separate account
assets) 2.00% 1.00% 1.85% .85%
------------------------------------------------------------------------------------------------
TOTAL 2.50% 1.50% 2.35% 1.35%
- ----------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Monthly
Fixed account Deduction Charge
charges (as a % of fixed
(annualized rate) account assets) 2.00% 1.00% 1.85% .85%
------------------------------------------------------------------------------------------------
TOTAL 2.00% 1.00% 1.85% .85%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
JOINT & SURVIVOR LIFE POLICY POLICY YEARS 1-
10 POLICY YEARS 11+
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Daily Charge (from unit
value) .50% .50%
-------------------------------------------------------------------------------
Separate account charges Monthly Deduction Charge (as
(annualized rate) a % of separate account
assets) 1.50% .50%
---------------------------------------------------------------------------------
TOTAL 2.00% 1.00%
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Fixed account charges Monthly Deduction Charge
(annualized rate) (as a % of fixed account assets) 1.50% .50%
-------------------------------------------------------------------------------
TOTAL 1.50% .50%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
COST OF INSURANCE CHARGE. We reserve the right to assess a monthly Cost
of Insurance Charge. The charge would depend on a number of variables (age,
gender, risk class) that would cause it to vary from Policy to Policy and from
Monthiversary to Monthiversary. If applicable, we would calculate the Cost of
Insurance Charge each month for the Specified Amount at issue. We do not
currently assess this charge, and we do not intend to assess this charge.
However, if we begin to assess this charge in the future, we will waive
surrender charges upon any surrender of the Policy. See Surrender Charge,
p.___.
The guaranteed maximum monthly Cost of Insurance Rates are based on the
gender, age, plan of insurance, and risk class of the Insured(s). Any change in
the current rates will not exceed those shown in your Policy's Table of
Guaranteed Maximum Life Insurance Rates.
We currently place Insureds into standard (tobacco) and select
(non-tobacco) risk classes. The guaranteed rates are based on the 1980
Commissioners' Standard Ordinary Mortality Tables, Male or Female, Tobacco or
Non-Tobacco Mortality Rates ("1980 CSO Tables"). Cost of Insurance rates for an
Insured in a non-tobacco class are less than or equal to rates for an Insured of
the same age and gender in a tobacco class.
The Policies are based on mortality tables that distinguish between men
and women. As a result, the Policy may pay different benefits to men and women
of the same age and risk class. We also offer Policies based on unisex mortality
tables if required by state law.
SURRENDER CHARGE
If you surrender your Policy during the first 9 years, we deduct a
surrender charge from your Cash Value and pay the remaining Cash Value to you.
The payment you receive is called the Net Surrender Value. We reduce the
surrender charge at older ages in compliance with state laws. We calculate the
surrender charge as a percentage of premium(s) paid based on the following
schedule:
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CONTINGENT CONTINGENT
DURING SURRENDER CHARGE DURING SURRENDER CHARGE
POLICY (AS A PERCENTAGE OF POLICY (AS A PERCENTAGE OF
YEAR PREMIUM(S) PAID) YEAR PREMIUM(S) PAID)
------ ------------------- ------ ------------------
1 9.75% 6 7%
2 9.50% 7 6%
3 9.25% 8 4%
4 9% 9 2%
5 8% 10 0%
------ ------------------- ------ ------------------
If we begin to assess a Cost of Insurance Charge on Policies as noted
above, we will waive all future surrender charges.
TRANSFER CHARGE
The first 12 transfers during each Policy year are free. We currently
assess a transfer charge of $10 for the 13th and each additional transfer during
a Policy year. For the purposes of assessing the transfer charge, each written
request for transfers is considered to be one transfer, regardless of the number
of subaccounts affected by the transfer. We deduct the transfer charge from the
amount being transferred. Transfers due to loans, any dollar cost averaging, or
asset rebalancing do not count as transfers for the purpose of assessing this
charge.
PORTFOLIO EXPENSES
The value of the net assets of each subaccount reflects the investment
advisory fees and other expenses incurred by the corresponding Portfolio in
which the subaccount invests. See the Portfolio Annual Expenses Table in this
prospectus, and the Fund prospectus for further information on these fees and
expenses.
GUARANTEED MINIMUM DEATH BENEFIT RIDER
If you select the Guaranteed Minimum Death Benefit rider at
application, we will deduct .02% each month from your Cash Value on each
Monthiversary.
DEATH BENEFIT
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DEATH BENEFIT PROCEEDS
As long as the Policy is in force, we will pay the death benefit
proceeds on an individual Policy once we receive satisfactory proof of the
Insured's death. For Policies issued on a joint and survivor basis, we will pay
death benefit proceeds on the death of the last Insured. We may require return
of the Policy. We will pay the death benefit proceeds to the primary
beneficiary(ies) or a contingent beneficiary. If each beneficiary dies before
the Insured and there is no contingent beneficiary, we will pay the death
benefit proceeds to the Owner or the Owner's estate. We will pay the death
benefit proceeds in a lump sum or under a payment option. See Payment Options.
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DEATH BENEFIT /bullet/ the death benefit (described below); MINUS
PROCEEDS EQUAL:
/bullet/ any past due monthly deductions if the Insured
dies during the grace period (See Policy Lapse);
MINUS
/bullet/ any outstanding Policy loan on the date of
death; MINUS
/bullet/ any interest you owe on Policy loan(s).
If all or part of the death benefit proceeds are paid in one sum, we
will pay interest on this sum as required by applicable state law from the date
we receive due proof of the Insured's death to the date we make payment.
We may further adjust the amount of the death benefit proceeds under
certain circumstances. See Our Right to Contest the Policy; and Misstatement of
Age or Gender.
DEATH BENEFIT
The Policy provides a death benefit. The death benefit is determined as
of the date of death of the Insured (the last of Insureds to die, if a Joint
Policy).
THE DEATH BENEFIT /bullet/ a variable death benefit; OR
IS THE GREATER OF:
/bullet/ the current Specified Amount.
The variable death benefit is equal to the Cash Value on the date of
death multiplied by the applicable limitation percentage. The limitation
percentage is a percentage based on the age of the Insured at the beginning of
each Policy year. The following table indicates the applicable limitation
percentages for different ages:
AGE OF INSURED
(YOUNGER INSURED, IF
JOINT POLICY) LIMITATION PERCENTAGE
-------------------- --------------------------------------
40 and under 250%
41 to 45 250% minus 7% for each age over age 40
46 to 50 215% minus 6% for each age over age 45
51 to 55 185% minus 7% for each age over age 50
56 to 60 150% minus 4% for each age over age 55
61 to 65 130% minus 2% for each age over age 60
66 to 70 120% minus 1% for each age over age 65
71 to 75 115% minus 2% for each age over age 70
76 to 90 105%
91 to 94 105% minus 1% for each age over age 90
95 and above 100%
-------------------- --------------------------------------
EFFECTS OF PARTIAL WITHDRAWALS ON THE DEATH BENEFIT
A partial withdrawal will reduce the Specified Amount by an amount
equal to the amount of the partial withdrawal multiplied by the ratio of the
initial Specified Amount to the initial premium. For an example, see "Partial
Withdrawals," page ___.
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<PAGE>
GUARANTEED MINIMUM DEATH BENEFIT RIDER
If you purchase the Guaranteed Minimum Death Benefit rider at the time
you apply for the Policy, and if the rider is in effect upon the Insured's
(younder Insured, if a Joint Policy) date of death, we guarantee to provide a
death benefit as follows:
/arrow/ If the Net Surrender Value on any Monthiversary is not
sufficient to cover the Monthly Policy Charge on such day,
then coverage will be provided as indicated below, and no
grace period will begin, provided no Policy loans have been
taken under the Policy;
/arrow/ If a death benefit is payable due to the provisions of this
rider, then the following minimum death benefit is applicable;
/arrow/ During the first fifteen Policy years, or before the Policy
anniversary next following the Insured's (younger Joint
Insured, if under a Joint Policy) 75th birthday, if sooner,
the minimum death benefit payable will be described as under
Death Benefit, page __;
/arrow/ After the first fifteen Policy years, or on or after the
Policy anniversary next following the Insured's (younger Joint
Insured, if under a Joint Policy) 75th birthday, if sooner,
the minimum death benefit payable will be the initial premium,
reduced by any partial withdrawals.
However, in no event will this minimum death benefit ever be less than $1,000.
CHANGING THE SPECIFIED AMOUNT
You may not increase or decrease the Specified Amount on your Policy.
However, a partial withdrawal will reduce the Specified Amount and the amount
payable under the Guaranteed Minimum Death Benefit rider. If you need a higher
Specified Amount, you must apply for a second policy.
PAYMENT OPTIONS
There are several ways of receiving proceeds under the death benefit
and surrender provisions of the Policy, other than in a lump sum. Information
concerning these settlement options is available on request. None of these
options vary with the investment performance of a separate account.
SURRENDERS AND PARTIAL WITHDRAWALS
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SURRENDERS
You may make a written request to surrender your Policy for its Net
Surrender Value as calculated at the end of the Valuation Date on which we
receive your request. The
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<PAGE>
Insured must be alive and the Policy must be in force when you make your written
request. A surrender is effective as of the date when we receive your written
request. You will incur a surrender charge if you surrender the Policy during
the first 9 Policy years. See Charges and Deductions. Once you surrender your
Policy, all coverage and other benefits under it cease and cannot be reinstated.
We will pay you the Net Surrender Value in a lump sum within seven days unless
you request other arrangements. A surrender may have tax consequences. See
Federal Tax Considerations.
PARTIAL WITHDRAWALS
After the first Policy year, you may request a partial withdrawal of a
portion of your Cash Value subject to certain conditions.
PARTIAL /arrow/ You must make your partial withdrawal request to us
WITHDRAWAL in writing.
CONDITIONS:
/arrow/ Only one partial withdrawal is allowed during a
12-month period.
/arrow/ The most you can request is the excess of the Cash
Value MINUS total outstanding loans, MINUS any
interest you owe on Policy loans, and MINUS total
premiums paid.
/arrow/ You can specify the subaccount(s) and the standard
fixed account from which to make the withdrawal,
otherwise we will deduct the amount from the
separate account and the fixed account in
accordance with the current allocation
instructions.
/arrow/ We generally will pay a partial withdrawal request
within seven days following the Valuation Date we
receive the request. There is no charge for a
partial withdrawal.
A partial withdrawal will reduce the Cash Value by the amount of the
partial withdrawal. A partial withdrawal will reduce the Specified Amount by an
amount equal to the amount of the partial withdrawal multiplied by the ratio of
the initial Specified Amount to the initial premium.
An example of a partial withdrawal's effect on the Specified Amount is
shown below. A partial withdrawal will also reduce the Guaranteed Minimum Death
Benefit by an amount equal to amount of the partial withdrawal multiplied by the
ratio of the initial Specified Amount to the initial premium.
In no event will any withdrawal reduce the Specified Amount below
$1,000.
Example: A Policy with a Specified Amount of $200,000 on a male
standard (age 35) has a Guideline Single Premium of $48,920. The ratio of the
initial Specified Amount to the initial premium is 4.09 (I.E., 200,000 divided
by 48,920). If a $19,000 partial withdrawal is taken after the first Policy
year, the Specified Amount will be reduced by $77,710 (I.E., 4.09 multiplied by
$19,000).
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<PAGE>
LOANS
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GENERAL
After the Policy Date as long as the Policy remains in force, you may
borrow money from us using the Policy as the only security for the loan. Taking
a loan will terminate the Guaranteed Minimum Death Benefit rider, if any. See
Guaranteed Minimum Death Benefit rider, page ___. A loan that is taken from, or
secured by, a Policy may have tax consequences. See Federal Tax Considerations.
POLICY LOANS ARE /bullet/ you must borrow at least $500;
SUBJECT TO CERTAIN
CONDITIONS: /bullet/ the maximum amount you may borrow is 90% of the
Cash Value, less any surrender charge and any
outstanding loan amount.
When you take a loan, we will withdraw an amount equal to the requested
loan from each of the subaccounts and the fixed account based on your current
premium allocation instructions (unless you specify otherwise). We will transfer
that amount to the loan reserve. The loan reserve is the portion of the fixed
account used as collateral for a Policy loan.
We normally pay the amount of the loan within seven days after we
receive a proper loan request. We may postpone payment of loans under certain
conditions. See Payments We Make.
You can repay a loan at any time while the Policy is in force. WE WILL
CONSIDER ANY PAYMENTS YOU MAKE ON THE POLICY AS LOAN REPAYMENTS UNLESS THE
PAYMENTS ARE CLEARLY SPECIFIED AS PREMIUMS.
At each Policy anniversary, we will compare the amount of the
outstanding loan to the amount in the loan reserve. We will also make this
comparison any time you repay all or part of the loan, or make a request to
borrow an additional amount. At each such time, if the amount of the outstanding
loan exceeds the amount in the loan reserve, we will withdraw the difference
from the subaccounts and the standard fixed account and transfer it to the loan
reserve, in the same manner as when a loan is made. If the amount in the loan
reserve exceeds the amount of the outstanding loan, we will withdraw the
difference from the loan reserve and transfer it to the subaccounts and the
standard fixed account in the same manner as current premiums are allocated. No
charge will be imposed for these transfers, and these transfers are NOT treated
as transfers in calculating the transfer charge. We reserve the right to require
a transfer to the fixed account if the loans were originally transferred from
the fixed account.
INTEREST RATE CHARGED
The annual interest rate you will pay on a standard Policy loan is 6.0%
and is payable in arrears on each Policy anniversary. Loan interest that is
unpaid when due will be added to the amount of the loan on each Policy
anniversary and will bear interest at the same rate.
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<PAGE>
LOAN RESERVE INTEREST RATE CREDITED
We will credit the amount in the loan reserve with interest at an
effective annual rate of 3.0%. We may credit a higher rate, but we are not
obligated to do so.
PREFERRED LOANS
At any time after the Policy Date, you may borrow against the Policy up
to an amount that is equal to the Cash Value, MINUS total premiums paid, LESS
any outstanding loan amount. Such a loan is called a preferred loan. We
currently charge interest on a preferred loan at an annual rate of 3.0%, payable
in arrears. Any existing loan, other than a preferred loan, is not eligible for
a preferred loan rate. Amounts in the loan reserve securing preferred loans
accrue interest at the same 3.0% annual rate as other loans. Consult a tax
advisor before taking a preferred loan because such a loan may have adverse tax
consequences. We reserve the right to modify or discontinue the preferred loan
feature.
EFFECT OF POLICY LOANS
A Policy loan affects the Policy, because we reduce the death benefit
proceeds and Net Surrender Value under the Policy by the amount of any
outstanding loan plus interest you owe on the loans. Repaying the loan causes
the death benefit proceeds and Net Surrender Value to increase by the amount of
the repayment. As long as a loan is outstanding, we hold an amount equal to the
loan in the loan reserve. This amount is not affected by the separate account's
investment performance and may not be credited with the interest rates accruing
on the fixed account options. Amounts transferred from the separate account to
the loan reserve will affect the value in the separate account because we credit
such amounts with an interest rate declared by us rather than a rate of return
reflecting the investment performance of the separate account. A Policy loan
will cause a Guaranteed Minimum Death Benefit rider to terminate.
There are risks involved in taking a Policy loan, a few of which
include the potential for a Policy to lapse if projected earnings, taking into
account outstanding loans, are not achieved. A Policy loan may also have
possible adverse tax consequences that could occur if a Policy lapses with loans
outstanding. See Risks, page ___.
We will notify you (and any assignee of record) if the sum of your
loans plus any interest you owe on the loans is more than the Net Surrender
Value. If you do not submit a sufficient payment within 61 days from the date of
the notice, your Policy may lapse.
We will accept policy exchanges under Section 1035 of the Internal
Revenue Code where the policy from another company has an outstanding Policy
loan of no more than 40% of the policy's cash value transferred to our Policy.
We intend to treat these as preferred loan amounts.
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<PAGE>
POLICY LAPSE
- --------------------------------------------------------------------------------
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LAPSE
Your Policy may lapse (terminate without value) if the Net Surrender
Value on any Monthiversary is less than the monthly deductions due on that day.
The monthly deductions may exceed the Net Surrender Value if:
/bullet/ we begin to impose monthly Cost of Insurance Charges, OR
/bullet/ the sum of all outstanding Policy loans plus accrued loan
interest exceeds the Net Surrender Value.
If the Net Surrender Value is not enough to pay the monthly deductions,
we will mail a notice to your last known address and any assignee of record. The
notice will specify the minimum payment required and the final date by which we
must receive the payment to keep the Policy from lapsing. We generally require
that you make the payment within 61 days after the date of the notice. This
61-day period is called the GRACE PERIOD. If we do not receive the specified
minimum payment by the end of the grace period, all coverage under the Policy
will terminate without value.
You may not reinstate this Policy after it has lapsed.
If you purchase the Guaranteed Minimum Death Benefit rider, then no
grace period will begin (and the Policy will not lapse) if there have been no
Policy loans. See Guaranteed Minimum Death Benefit rider, page ___.
FEDERAL INCOME TAX CONSIDERATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following summary provides a general description of the Federal
income tax considerations associated with a Policy and does not purport to be
complete or to cover all situations. THIS DISCUSSION IS NOT INTENDED AS TAX
ADVICE. Please consult counsel or other qualified tax advisors for more complete
information. We base this discussion on our understanding of the present Federal
income tax laws as they are currently interpreted by the Internal Revenue
Service (the "IRS"). Federal income tax laws and the current interpretations by
the IRS may change.
TAX STATUS OF THE POLICY. A Policy must satisfy certain requirements
set forth in the Internal Revenue Code (Code) in order to qualify as a life
insurance contract for Federal income tax purposes and to receive the tax
treatment normally accorded life insurance contracts under Federal tax law. The
manner in which these requirements are to be applied to certain innovative
features of the Policy are not directly addressed by the Code or the limited
guidance as to how these requirements are to be applied. Nevertheless, we
believe that a Policy should satisfy the applicable Code requirements. Because
of the absence of pertinent interpretations of the Code requirements, there is,
however, some uncertainty about the application of such requirements to the
Policy, particularly in the case of Policies
39
<PAGE>
insuring more than one person. If it is subsequently determined that a Policy
does not satisfy the applicable requirements, we may take appropriate steps to
bring the Policy into compliance with such requirements and we reserve the right
to restrict Policy transactions in order to do so.
In certain circumstances, owners of variable life insurance contracts
have been considered for Federal income tax purposes to be the owners of the
assets of the separate account supporting their contracts due to their ability
to exercise investment control over those assets. Where this is the case, the
contract owners have been currently taxed on income and gains attributable to
the separate account assets. There is little guidance in this area, and some
features of the Policies, such as your flexibility to allocate premiums and Cash
Values, have not been explicitly addressed in published rulings. While we
believe that the Policy does not give you investment control over separate
account assets, we reserve the right to modify the Policy as necessary to
prevent you from being treated as the owner of the separate account assets
supporting the Policy.
In addition, the Code requires that the investments of the separate
account be "adequately diversified" in order to treat the Policy as a life
insurance contract for Federal income tax purposes. We intend that the separate
account, through the portfolios, will satisfy these diversification
requirements.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS
IN GENERAL. We believe that the death benefit under a Policy should be
excludible from the beneficiary's gross income. Federal, state and local
transfer, and other tax consequences of ownership or receipt of Policy proceeds
depend on your circumstances and the beneficiary's circumstances. A tax advisor
should be consulted on these consequences.
Generally, you will not be deemed to be in constructive receipt of the
Cash Value until there is a distribution. When distributions from a Policy
occur, or when loans are taken out from or secured by (E.G., by assignment), a
Policy, the tax consequences depend on whether the Policy is classified as a
"Modified Endowment Contract".
MODIFIED ENDOWMENT CONTRACTS. Under the Code, certain life insurance
contracts are classified as "Modified Endowment Contracts" ("MECs") and receive
less favorable tax treatment than other life insurance contracts. IN MOST
SITUATIONS, THE POLICIES WILL BE CLASSIFIED AS MECS. There are, however, certain
limited situations where a Policy may not be classified as a MEC. If you do not
want your Policy to be classified as a MEC, a tax advisor should be consulted to
determine the circumstances, if any, under which your Policy would not be
classified as a MEC.
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<PAGE>
DISTRIBUTIONS FROM MODIFIED ENDOWMENT CONTRACTS. Policies classified as
MECs are subject to the following tax rules:
/bullet/ All distributions (that is, payout from the Policy), including
distributions upon surrender and partial withdrawals, will be
treated as ordinary income subject to tax up to an amount
equal to the excess (if any) of the unloaned Cash Value (net
surrender value for surrenders) immediately before the
distribution plus prior distributions over the Owner's total
investment in the Policy at that time. "Total investment in
the Policy" means the aggregate amount of any premiums or
other considerations paid for a Policy, plus any previously
taxed distributions, minus any credited dividends.
/bullet/ Loans taken from or secured by (E.G., by assignment) such a
Policy are treated as distributions and taxed accordingly.
/bullet/ A 10 percent additional income tax is imposed on the amount
included in income except where the distribution or loan is
made when you have attained age 59 1/2 or are disabled, or
where the distribution is part of a series of substantially
equal periodic payments for your life (or life expectancy) or
the joint lives (or joint life expectancies) of you the
beneficiary.
DISTRIBUTIONS FROM POLICIES THAT ARE NOT MODIFIED ENDOWMENT CONTRACTS.
Distributions from a Policy that is not a MEC are generally treated first as a
recovery of your investment in the Policy, and as taxable income after the
recovery of all investment in the Policy. However, certain distributions which
must be made in order to enable the Policy to continue to qualify as a life
insurance contract for Federal income tax purposes if Policy benefits are
reduced during the first 15 Policy years may be treated in whole or in part as
ordinary income subject to tax.
Loans from or secured by a Policy that is not a MEC are not treated as
distributions.
Finally, neither distributions from nor loans from or secured by a
Policy that is not a MEC are subject to the 10 percent additional tax.
DEDUCTIBILITY OF POLICY LOAN INTEREST. In general, interest you pay on
a loan from a Policy will not be deductible. Before taking out a Policy loan,
you should consult a tax advisor as to the tax consequences.
MULTIPLE POLICIES. All MECs that we issue (or that our affiliates
issue) to the same Owner during any calendar year are treated as one MEC for
purposes of determining the amount includible in the Owner's income when a
taxable distribution occurs.
BUSINESS USES OF THE POLICY. The Policy may be used in various
arrangements, including nonqualified deferred compensation or salary continuance
plans, split dollar insurance plans, executive bonus plans, retiree medical
benefit plans and others. The tax consequences of such plans and business uses
of the Policy may vary depending on the particular facts and circumstances of
each individual arrangement and business uses of the
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<PAGE>
Policy. Therefore, if you are contemplating using the Policy in any arrangement
the value of which depends in part on its tax consequences, you should be sure
to consult a tax advisor as to tax attributes of the arrangement.
POSSIBLE TAX LAW CHANGES. While the likelihood of legislative changes
is uncertain, there is always a possibility that the tax treatment of the Policy
could change by legislation or otherwise. It is even possible that any
legislative change could be retroactive (effective prior to the date of the
change). Consult a tax advisor with respect to legislative developments and
their effect on the Policy.
OTHER POLICY INFORMATION
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OUR RIGHT TO CONTEST THE POLICY
In issuing this Policy, we rely on all statements made by or for the
Insured in the application or in a supplemental application. Therefore, if you
make any material misrepresentation of a fact in the application (or any
supplemental application), then we may contest the Policy's validity or may
resist a claim under the Policy.
In the absence of fraud, we cannot bring any legal action to contest
the validity of the Policy after the Policy has been in force during the
Insured's lifetime for two years from the Policy Date, or if reinstated, for two
years from the date of reinstatement.
SUICIDE EXCLUSION
If the Insured (either Insured if a Joint Policy) commits suicide,
while sane or insane, within two years of the Policy Date, the Policy will
terminate and our liability is limited to an amount equal to the premiums paid,
less any loans and less any partial withdrawals paid. We will pay this amount to
the beneficiary in one sum.
MISSTATEMENT OF AGE OR GENDER
If the age or gender of the Insured (either Insured if a Joint Policy)
was stated incorrectly in the application or any supplemental application, the
death benefit will be adjusted based on what the initial premium would have
purchased based on the Insured(s) correct age and gender.
MODIFYING THE POLICY
Only our President or Secretary may modify this Policy or waive any of
our rights or requirements under this Policy. Any modification or waiver must be
in writing. No agent may bind us by making any promise not contained in this
Policy.
Upon notice to the Owner, we may modify the Policy to:
/arrow/ conform the Policy, our operations, or the separate account's
operations to the requirements of any law (or regulation
issued by a government agency) to which the Policy, our
company or the separate account is subject;
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/arrow/ assure continued qualification of the Policy as a life
insurance contract under the Federal tax laws; or
/arrow/ reflect a change in the separate account's operation.
If we modify the Policy, we will make appropriate endorsements to the
Policy. If any provision of the Policy conflicts with the laws of a jurisdiction
that govern the Policy, we will amend the provision to conform with such laws.
PAYMENTS WE MAKE
We usually pay the amounts of any surrender, partial withdrawal, death
benefit proceeds, or settlement options within seven business days after we
receive all applicable written notices and/or due proofs of death. However, we
can postpone such payments if:
/bullet/ the NYSE is closed, other than customary weekend and holiday
closing, or trading on the NYSE is restricted as determined by
the Securities and Exchange Commission (Commission); OR
/bullet/ the Commission permits, by an order, the postponement for the
protection of Owners; OR
/bullet/ the Commission determines that an emergency exists that would
make the disposal of securities held in the separate account
or the determination of their value not reasonably
practicable.
If you have submitted a recent check or draft, we have the right to
defer payment of surrenders, partial withdrawals, death benefit proceeds, or
payments under a settlement option until such check or draft has been honored.
REPORTS TO OWNERS
At least once each year, or more often as required by law, we will mail
to Owners at their last known address a report showing the following information
as of the end of the report period:
/check mark/ the current Cash Value
/check mark/ the current Net Surrender Value
/check mark/ the current death benefit
/check mark/ any outstanding loans
/check mark/ any activity since the last report
/check mark/ projected values
/check mark/ investment experience of each subaccount
/check mark/ any other information required by law
You may request additional copies of reports, but we may charge a fee
for such additional copies. In addition, we will send written confirmations of
any premium payments and other financial transactions you request. We also will
send copies of the annual and semi-annual report to shareholders for each
Portfolio in which you are indirectly invested.
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RECORDS
We will maintain all records relating to the separate account and the
fixed account.
POLICY TERMINATION
Your Policy will terminate on the earliest of:
/bullet/ the maturity date /bullet/ the end of the grace period
/bullet/ the date the Insured dies (or /bullet/ the date the Policy is
the last of the joint Insureds surrendered
dies)
SUPPLEMENTAL BENEFITS (RIDERS)
The following supplemental benefits (riders) are available and may be
added to a Policy. Monthly charges for these are deducted from Cash Value as
part of the Monthly Policy Charge. The riders available with the Policies
provide fixed benefits that do not vary with the investment experience of the
separate account.
EXTENDED MATURITY DATE. You may request that we extend the Policy's
maturity date (when the Insured (younger Insured, if a Joint Policy) is 100
years old) to the next Policy anniversary. Your request must be in writing and
we must receive it at least 90 days before the scheduled maturity date. If you
want to extend the maturity date beyond the next Policy anniversary, you must
submit an additional written request within 90 days before that Policy
anniversary. Interest on any outstanding loan will continue to accrue during the
period for which the maturity date is extended. All benefits and charges will
continue as set forth in the Policy. Charges and cost of insurance rates for
ages 99 and above will be those in effect at age 99. The tax consequences of
extending the Policy's maturity date beyond age 100 are unclear. A tax advisor
should be consulted before extending the Policy's maturity date.
ACCELERATED DEATH BENEFIT. This rider allows us to pay the death
benefit once we receive satisfactory proof that the Insured has incurred a
condition resulting from illness which a medical doctor has determined will
reduce life expectancy to one year or less.
GUARANTEED MINIMUM DEATH BENEFIT. This rider is described in the Death
Benefit Section. See page ___.
PERFORMANCE DATA
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We are a member of the Insurance Marketplace Standards Association
("IMSA"), and so we may include the IMSA logo and information about IMSA
membership in our advertisements. Companies that belong to IMSA subscribe to a
set of ethical standards covering the various aspects of sales and service for
individually sold life insurance and annuities.
HYPOTHETICAL ILLUSTRATIONS BASED ON ADJUSTED HISTORIC PORTFOLIO PERFORMANCE
In order to demonstrate how the actual investment experience of the
Portfolios could have affected the death benefit, Cash Value and Net Surrender
Value of the Policy, we will
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provide hypothetical illustrations using the actual investment experience of
each Portfolio since its inception. THESE HYPOTHETICAL ILLUSTRATIONS ARE
DESIGNED TO SHOW THE PERFORMANCE THAT COULD HAVE RESULTED IF THE POLICY HAD BEEN
IN EXISTENCE DURING THE PERIOD ILLUSTRATED.
The values we illustrate for death benefit, Cash Value and Net
Surrender Value take into account all charges and deductions from the Policy,
the separate account and the Portfolios.
In preparing the illustrations, we have deducted the Monthly Policy
Charge and the Daily Charge as if the Policy had been in existence. We have
assumed for purposes of deducting the Monthly Policy Charge that the actual
historic rate of return in each calendar year was uniformly earned throughout
that year. The actual performance of the Portfolios, however, varied each day
and that could have affected the charges deducted and the performance
illustrated.
For each Portfolio, the illustrations below show an initial premium of
$100,000 and a Specified Amount of $174,000 for a male age 65, non-smoker,
select risk class.
The following example shows how the hypothetical net return of the
Growth Portfolio would have affected benefits for a Policy dated January 1,
1988. This example assumes that the Net Premiums and related Cash Values were in
the subaccount for the entire period and that the values were determined on the
first Valuation Date following January 1st of each year.
GROWTH PORTFOLIO
Male Issue Age 65 $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
-------------------- --------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1988 .................... $108,292 $106,728 $ 98,542 $ 96,978
1989*.................... 121,348 118,047 111,848 108,547
1990*.................... 164,546 158,840 155,296 149,590
1991*.................... 154,230 148,163 145,230 139,163
1992*.................... 227,470 217,423 219,470 209,423
1993*.................... 218,142 207,431 211,142 200,431
1994*.................... 214,810 203,235 208,810 197,235
1995*.................... 189,855 178,789 185,855 174,789
1996*.................... 248,282 232,819 246,282 230,819
1997*.................... 266,059 248,569 266,059 248,569
1998*.................... 279,984 260,815 279,984 260,815
</TABLE>
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The following example shows how the hypothetical net return of the Bond
Portfolio would have affected benefits for a Policy dated January 1, 1988. This
example assumes that the Net Premiums and related Cash Values were in the
subaccount for the entire period and that the values were determined on the
first Valuation Date following January 1st of each year.
BOND PORTFOLIO
Male Issue Age 65 $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
-------------------- --------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1988 .................... $ 93,097 $ 91,515 $ 83,347 $ 81,765
1989*.................... 96,692 93,098 87,192 83,598
1990*.................... 108,638 102,487 99,388 93,237
1991*.................... 112,928 104,483 103,928 95,483
1992*.................... 128,432 116,671 120,432 108,671
1993*.................... 134,958 120,627 127,958 113,627
1994*.................... 146,868 129,258 140,868 123,258
1995*.................... 133,420 115,356 129,420 111,356
1996*.................... 159,674 135,438 157,674 133,438
1997*.................... 154,370 128,784 154,370 128,784
1998*.................... 167,215 136,962 167,215 136,962
</TABLE>
The following example shows how the hypothetical net return of the
Money Market Portfolio would have affected benefits for a Policy dated January
1, 1988. This example assumes that the Net Premiums and related Cash Values were
in the subaccount for the entire period and that the values were determined on
the first Valuation date following January 1st of each year.
MONEY MARKET PORTFOLIO
Male Issue Age 65 $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
-------------------- --------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1988 .................... $103,142 $101,570 $ 93,392 $ 91,820
1989*.................... 106,466 103,139 96,966 93,639
1990*.................... 111,825 106,493 102,575 97,243
1991*.................... 116,671 109,177 107,671 100,177
1992*.................... 119,296 109,585 111,296 101,585
1993*.................... 119,550 107,558 112,550 100,558
1994*.................... 118,954 104,393 112,954 98,393
1995*.................... 119,647 101,989 115,647 97,989
1996*.................... 122,547 100,985 120,547 98,985
1997*.................... 125,095 99,140 125,095 99,140
1998*.................... 129,261 97,946 129,261 97,946
</TABLE>
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The following example shows how the hypothetical net return of the
Global Portfolio would have affected benefits for a Policy dated January 1,
1994. This example assumes that the Net Premiums and related Cash Values were in
the subaccount for the entire period and that the values were determined on the
first Valuation Date following January 1st of each year.
GLOBAL PORTFOLIO
Male Issue Age 65 $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
-------------------- --------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1994 .................... $130,990 $129,476 $121,240 $119,726
1995*.................... 127,946 125,398 118,446 115,898
1996*.................... 153,485 149,335 144,235 140,085
1997*.................... 187,474 181,526 178,474 172,526
1998*.................... 219,542 211,516 211,542 203,516
</TABLE>
The following example shows how the hypothetical net return of the
Emerging Growth Portfolio would have affected benefits for a Policy dated
January 1, 1995. This example assumes that the Net Premiums and related Cash
Values were in the subaccount for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
EMERGING GROWTH PORTFOLIO
Male Issue Age 65 $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
-------------------- --------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1995 .................... $ 90,369 $ 88,785 $ 80,619 $ 79,035
1996*.................... 130,027 125,730 120,527 116,230
1997*.................... 148,469 142,426 139,219 133,176
1998*.................... 176,471 168,430 167,471 159,430
</TABLE>
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The following example shows how the hypothetical net return of the
Stategic Total Return Portfolio would have affected benefits for a Policy dated
January 1, 1995. This example assumes that the Net Premiums and related Cash
Values were in the subaccount for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
STRATEGIC TOTAL RETURN PORTFOLIO
Male Issue Age 65 $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
-------------------- --------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1995 .................... $ 97,169 $ 95,590 $ 87,419 $ 85,840
1996*.................... 118,326 114,572 108,826 105,072
1997*.................... 130,607 124,970 121,357 115,720
1998*.................... 155,953 147,995 146,953 138,995
</TABLE>
The following example shows how the hypothetical net return of the
Aggressive Growth Portfolio would have affected benefits for a Policy dated
January 1, 1996. This example assumes that the Net Premiums and related Cash
Values were in the subaccount for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
AGGRESSIVE GROWTH PORTFOLIO
Male Issue Age 65 $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
-------------------- --------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1996 ................... $136,435 $134,936 $126,685 $125,186
1997*.................... 144,932 142,480 135,432 132,980
1998*.................... 176,334 172,525 167,084 163,275
</TABLE>
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The following example shows how the hypothetical net return of the
Balanced Portfolio would have affected benefits for a Policy dated January 1,
1996. This example assumes that the Net Premiums and related Cash Values were in
the subaccount for the entire period and that the values were determined on the
first Valuation Date following January 1st of each year.
BALANCED PORTFOLIO
Male Issue Age 65 $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
-------------------- --------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1996 .................... $116,950 $115,402 $107,200 $105,652
1997*.................... 124,538 121,540 115,038 112,040
1998*.................... 143,759 139,048 134,509 129,798
</TABLE>
The following example shows how the hypothetical net return of the
Growth & Income Portfolio would have affected benefits for a Policy dated
January 1, 1996. This example assumes that the Net Premiums and related Cash
Values were in the subaccount for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
GROWTH & INCOME PORTFOLIO
Male Issue Age 65 $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
-------------------- --------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1996 .................... $122,662 $121,127 $112,912 $111,377
1997*.................... 130,813 127,972 121,313 118,472
1998*.................... 159,379 154,904 150,129 145,654
</TABLE>
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The following example shows how the hypothetical net return of the
Tactical Asset Allocation Portfolio would have affected benefits for a Policy
dated January 1, 1996. This example assumes that the Net Premiums and related
Cash Values were in the subaccount for the entire period and that the values
were determined on the first Valuation Date following January 1st of each year.
TACTICAL ASSET ALLOCATION PORTFOLIO
Male Issue Age 65 $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
-------------------- --------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1996 .................... $117,889 $116,343 $108,139 $106,593
1997*.................... 129,560 126,555 120,060 117,055
1998*.................... 147,210 142,679 137,960 133,429
</TABLE>
The following example shows how the hypothetical net return of the U.S.
Equity Portfolio would have affected benefits for a Policy dated January 1,
1998. This example assumes that the Net Premiums and related Cash Values were in
the subaccount for the entire period and that the values were determined on the
first Valuation Date following January 1st of each year.
U.S. EQUITY PORTFOLIO
Male Issue Age 65 $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
-------------------- --------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1998 .................... $123,738 $122,206 $113,988 $112,456
</TABLE>
The following example shows how the hypothetical net return of the Real
Estate Securities Portfolio would have affected benefits for a Policy dated
January 1, 1998. This example assumes that the Net Premiums and related Cash
Values were in the subaccount for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
REAL ESTATE SECURITIES
Male Issue Age 65 $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
-------------------- --------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1998 .................... $ $ $ $
</TABLE>
50
<PAGE>
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SALE OF THE POLICIES
The Policy will be sold by individuals who are licensed as our life
insurance agents and who are also registered representatives of broker-dealers
having written sales agreements for the Policy with AFSG Securities Corporation
(AFSG), the principal underwriter of the Policy. AFSG is located at 4425 North
River Blvd., NE, Cedar Rapids, Iowa 52402 is registered with the SEC under the
Securities Exchange Act of 1934 as a broker-dealer, and is a member of the
National Association of Securities Dealers, Inc. The maximum sales commission
payable to Western Reserve agents or other registered representatives will be
approximately 7% of the initial premium. In addition, certain production,
persistency and managerial bonuses may be paid.
LEGAL MATTERS
Sutherland Asbill & Brennan LLP of Washington, D.C. has provided advice
on certain matters relating to the Federal securities laws. All matters of Ohio
law pertaining to the Policy have been passed upon by Thomas E. Pierpan, Vice
President, Assistant Secretary and Associate General Counsel of Western Reserve.
LEGAL PROCEEDINGS
Like other life insurance companies, we are involved in lawsuits. We
are not aware of any class action lawsuits naming us as a defendant or involving
the separate account. In some lawsuits involving other insurers, substantial
damages have been sought and/or material settlement payments have been made. We
believe that there are no pending or threatened lawsuits that will adversely
impact us or the separate account.
YEAR 2000 MATTERS
We have in place a Year 2000 Assessment and Planning Project (the
"Plan") to review and analyze existing hardware and software systems, and voice
and data communications systems, to determine if they are Year 2000 compatible.
The Plan provides for a management process which ensures that when a particular
system, or software application, is determined to be "non-compliant," the proper
steps are in place to either remedy the ""non-compliance" or cease using the
particular system or software. The Plan also requires the Chief Information
Officer to report to the Board of Directors on a regular and routine basis the
status of efforts under the Plan. We also have engaged the services of a
third-party provider that specializes in Year 2000 issues.
The Plan has four specific objectives:
/bullet/ develop an inventory of all applications;
/bullet/ evaluate those applications to determine the most prudent
manner to move them to Year 2000 compliance, if necessary;
/bullet/ estimate budgets, resources and schedules for moving the
applications to Year 2000 compliance; and
51
<PAGE>
/bullet/ define testing and deployment requirements to successfully
manage the changes of any codes.
As of the date of this prospectus, we have identified and made
available what we believe are the appropriate resources of hardware, people and
dollars, including engaging outside third parties, to ensure that the Plan will
be completed.
Resolving the Year 2000 computer problem is complex and multifaceted.
We cannot know conclusively whether a response plan is successful until the Year
2000 arrives (or an earlier date if the systems or equipment address Year 2000
data prior to the Year 2000). Even with the appropriate and diligent pursuit of
a well-conceived response plan, including testing procedures, there is no
certainty that any company will achieve complete success. Also, the actions (or
failure to act) of third parties beyond our knowledge or control may affect our
ability to function unaffected to and through the Year 2000. See the Portfolios'
prospectus for information on their preparation for Year 2000.
FINANCIAL STATEMENTS
This prospectus does not include financial statements of the separate
account because, as of the date of this prospectus, the relevant subaccounts of
the separate account had not yet commenced operations, had no assets, and had
incurred no liabilities. Our financial statements appear on the following pages.
Our financial statements should be distinguished from the separate account's
financial statements and you should consider our financial statements only as
bearing upon our ability to meet our obligations under the Policies.
ADDITIONAL INFORMATION ABOUT WESTERN RESERVE
Western Reserve is a stock life insurance company that is wholly-owned
by First AUSA Life Insurance Company, which, in turn, is wholly-owned by AEGON
USA, Inc. Western Reserve's home office is located at 570 Carillon Parkway, St.
Petersburg, Florida 33716-1202.
Western Reserve was incorporated in 1957 under the laws of Ohio and is
subject to regulation by the Insurance Department of the State of Ohio, as well
as by the insurance departments of all other states and jurisdictions in which
it does business. Western Reserve is licensed to sell insurance in 49 states and
in the District of Columbia. Western Reserve submits annual statements on its
operations and finances to insurance officials in all states and jurisdictions
in which it does business. The Policy described in this prospectus has been
filed with, and where required, approved by, insurance officials in those
jurisdictions in which it is sold.
WESTERN RESERVE'S DIRECTORS AND OFFICERS
Western Reserve is governed by a board of directors. The following
table sets forth the name, address and principal occupation during the past five
years of each of Western Reserve's directors.
52
<PAGE>
<TABLE>
<CAPTION>
BOARD OF DIRECTORS
POSITION WITH WESTERN PRINCIPAL OCCUPATION
NAME AND ADDRESS RESERVE DURING PAST 5 YEARS
- --------------------------------------------------------------------------------------------
<S> <C> <C>
John R. Kenney Chairman of the Board, Chairman of the Board and
570 Carillon Parkway Chief Executive Officer and President of WRL Series
St. Petersburg, Florida 33716 President Fund, Inc. (1993-present);
Chairman of the Board of
IDEX Series Fund (1990-
present) and Chairman of the
Board, WRL Investment Services,
Inc. (1996-present);
Chairman of the Board of
WRL Investment Management,
Inc. (1996-present).
- --------------------------------------------------------------------------------------------
Patrick S. Baird Director Executive Vice President
4333 Edgewood Road, NE, (1995-present), Chief
Cedar Rapids, Iowa 52499 Operating Officer (1996-
present), Chief Financial
Officer (1992-1995), Vice
President and Chief Tax
Officer (1984-1995) of
AEGON USA.
- --------------------------------------------------------------------------------------------
Jack E. Zimmerman Director Trustee, IDEX Series Fund
507 St. Michel Circle, (1987-present); Retired from
Kettering, Ohio 45429 Martin Marietta (1993).
- --------------------------------------------------------------------------------------------
Lyman H. Treadway Director Retired Consultant.
30195 Chagrin Blvd.
Ste. 210N, Cleveland, Ohio
44124
- --------------------------------------------------------------------------------------------
James R. Walker Director Self-employed, Public
3320 Office Park Dr., Accountant (1996 --
Dayton, Ohio 45439 present); Partner, Walker-
Davis C.P.A.'s,Dayton,
Ohio (1990 -- 1995).
- --------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
The following table gives the name, address and principal occupation during the
past five years of the senior officers of Western Reserve (other than officers
listed above as directors).
SENIOR OFFICERS
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH WESTERN PRINCIPAL OCCUPATION
RESERVE DURING PAST 5 YEARS
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Alan M. Yaeger* Executive Vice President, Executive Vice President,
Actuary and Chief Financial WRL Series Fund, Inc. (1993
Officer - present); Director, WRL
Investment Management, Inc.
(1996 - present); Director,
WRL Investment Services,
Inc. (1996 - present).
- -----------------------------------------------------------------------------------------------
William H. Geiger* Senior Vice President, Vice President and Assistant
Secretary and General Secretary, IDEX Series Fund
Counsel (1990-present).
- -----------------------------------------------------------------------------------------------
G. John Hurley* Executive Vice President Director, WRL Series Fund,
Inc. (1994 - present);
Director, WRL Investment
Services, Inc. (1996 -
present); Director, WRL
Management Services, Inc.
(1996 - present); President,
Chief Executive Officer and
Trustee, IDEX Series Fund
(1990 - present).
- -----------------------------------------------------------------------------------------------
Allan J. Hamilton* Vice President, Treasurer and Treasurer and Chief Financial
Controller Officer, WRL Series Fund,
Inc. (1997 - present).
- -----------------------------------------------------------------------------------------------
<FN>
* Located at 570 Carillon Parkway, St. Petersburg, Florida 33716-1202.
</FN>
</TABLE>
Western Reserve holds the assets of the separate account physically
segregated and apart from the general account. Western Reserve maintains
records of all purchases and sale of Portfolio shares by each of the
subaccounts. A blanket bond issued to AEGON U.S. Holding Corporation ("AEGON
U.S.") in the amount of $5 million (subject to a $1 million deductible),
covering all of the employees of AEGON U.S. and its affiliates, including
Western Reserve. A Stockbrokers Blanket Bond, issued to AEGON U.S.A. Securities,
Inc. providing fidelity coverage, covers the activities of registered
representatives of AFSG to a limit of $12 million.
ADDITIONAL INFORMATION ABOUT THE SEPARATE ACCOUNT
Western Reserve established the separate account as a separate
investment account under Ohio law in 1985. Western Reserve owns the assets in
the separate account and is obligated to pay all benefits under the Policies.
The separate account is used to support other life insurance policies of Western
Reserve and its affiliates, AUSA and PFL, as well as for other purposes
permitted by law. The separate account is registered with the SEC as an unit
investment trust under the Investment Company Act of 1940 and qualifies as a
"separate account" within the meaning of the Federal securities laws.
54
<PAGE>
ILLUSTRATIONS
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following illustrations show how certain values under a sample
Policy would change with different rates of fictional investment performance
over an extended period of time. In particular, the illustrations show how the
Death Benefit, Cash Value, and Net Surrender Value under a Policy covering a
male Insured of age 65 on the Policy Date, would change over time if the single
premium was paid and the return on the assets in the subaccounts were a uniform
gross annual rate (before any expenses) of 0%, 6% or 12%. The tables also show
how the Policy would operate if the premium accumulated at 5% interest. The
values under the Policy will be different from those shown even if the returns
averaged 0%, 6% or 12%, but fluctuated over and under those averages throughout
the years shown.
THE HYPOTHETICAL INVESTMENT RETURNS ARE PROVIDED ONLY TO ILLUSTRATE THE
MECHANICS OF A HYPOTHETICAL POLICY AND DO NOT REPRESENT PAST OR FUTURE
INVESTMENT RATES OF RETURN. Actual rates of return for a particular Policy may
be more or less than the hypothetical investment rates of return. The actual
return on your Cash Value will depend on factors such as the amounts you
allocate to particular Portfolios, the amounts deducted for the Policy's monthly
and daily charges, the Portfolios' expense ratios, your Policy loan and
withdrawal history, and rates of inflation.
The illustrations assume that the assets in the Portfolios are subject
to an annual expense ratio of 0.___% of the average daily net assets. This
annual expense ratio is based on the average of the expense ratios of each of
the Portfolios for the last fiscal year and take into account current expense
reimbursement arrangements. For information on Portfolio expenses, see the Fund
prospectus.
The illustrations also reflect the Monthly Policy Charge and the Daily
Charge for the hypothetical Insured. Separate illustrations on each of the
following pages reflect our current Cost of Insurance Charges and the higher
guaranteed maximum Cost of Insurance that we may have the contractual right to
charge. The illustrations assume that no Policy loans have been taken and assume
no charges for federal or state taxes or charges for supplemental benefits.
After deducting Portfolio expenses, the illustrated gross annual
investment rates of return of 0%, 6% and 12% would correspond to approximate net
annual rates for the separate account of -1.45%, 4.55% and 10.55%, respectively.
[THE ILLUSTRATIONS ARE BASED ON WESTERN RESERVE'S GENDER DISTINCT RATES
FOR NON-TOBACCO USERS. UPON REQUEST, WESTERN RESERVE WILL FURNISH A COMPARABLE
ILLUSTRATION BASED UPON THE PROPOSED INSURED'S INDIVIDUAL CIRCUMSTANCES. SUCH
ILLUSTRATIONS MAY ASSUME DIFFERENT HYPOTHETICAL RATES OF RETURN THAN THOSE
ILLUSTRATED IN THE FOLLOWING ILLUSTRATIONS.]
55
<PAGE>
INDEX TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
Report of Independent Auditors dated February __, 1999.
Statutory-Basis Balance sheets at December 31, 1998 and 1997.
Statutory-Basis Statements of Operations for the years ended December 31, 1998,
1997 and 1996.
Statutory-Basis Statements of Changes in Capital and Surplus for the years ended
December 31, 1998, 1997, and 1996.
Statutory-Basis Statements of Cash Flows for the years ended December 31, 1998,
1997, and 1996.
Notes to Statutory-Basis Financial Statements
Statutory-Basis Financial Statement Schedules
56
<PAGE>
PART II.
OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that Section.
REPRESENTATION PURSUANT TO SECTION 26(E) (2) (A)
Western Reserve Life Assurance Co. of Ohio ("Western Reserve") hereby
represents that the fees and charges deducted under the Contracts, in the
aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by Western Reserve.
STATEMENT WITH RESPECT TO INDEMNIFICATION
Provisions exist under the Ohio General Corporation Law, the Second Amended
Articles of Incorporation of Western Reserve and the Amended Code of Regulations
of Western Reserve whereby Western Reserve may indemnify certain persons against
certain payments incurred by such persons. The following excerpts contain the
substance of these provisions.
OHIO GENERAL CORPORATION LAW
SECTION 1701.13 AUTHORITY OF CORPORATION.
(E)(1) A corporation may indemnify or agree to indemnify any person who was
or is a party or is threatened to be made a party, to any threatened, pending,
or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, other than an action by or in the right of the
corporation, by reason of the fact that he is or was a director, officer,
employee, or agent of the corporation, or is or was serving at the request of
the corporation as a director, trustee, officer, employee, or agent of another
corporation (including a subsidiary of this corporation), domestic or foreign,
nonprofit or for profit, partnership, joint venture, trust, or other enterprise,
against expenses, including attorneys' fees, judgments, fines, and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendre or its equivalent, shall not, of itself create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
(2) A corporation may indemnify or agree to indemnify any person who was or
is a party, or is threatened to be made a party to any threatened, pending, or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee, or agent of the corporation, or is or was serving at the
request of the corporation as a director, trustee, officer, employee, or agent
of another corporation, domestic or foreign, nonprofit or for profit,
partnership, joint venture, trust, or other enterprise, against expenses,
including attorneys' fees, actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any of the following:
II-1
<PAGE>
(a) Any claim, issue, or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the corporation unless, and only to the extent that the court of common
pleas, or the court in which such action or suit was brought determines upon
application that, despite the adjudication of liability, but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the court of common pleas or such other court
shall deem proper;
(b) Any action or suit in which the only liability asserted against a
director is pursuant to section 1701.95 of the Revised Code.
(3) To the extent that a director, trustee, officer, employee, or agent has
been successful on the merits or otherwise in defense of any action, suit, or
proceeding referred to in divisions (E)(1) and (2) of this section, or in
defense of any claim, issue, or matter therein, he shall be indemnified against
expenses, including attorneys' fees, actually and reasonably incurred by him in
connection therewith.
(4) Any indemnification under divisions (E)(1) and (2) of this section,
unless ordered by a court, shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
trustee, officer, employee, or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in divisions (E)(1) and (2)
of this section. Such determination shall be made as follows:
(a) By a majority vote of a quorum consisting of directors of the
indemnifying corporation who were not and are not parties to or threatened with
any such action, suit, or proceeding;
(b) If the quorum described in division (E)(4)(a) of this section is
not obtainable or if a majority vote of a quorum of disinterested directors so
directs, in a written opinion by independent legal counsel other than an
attorney, or a firm having associated with it an attorney, who has been retained
by or who has performed services for the corporation, or any person to be
indemnified within the past five years;
(c) By the shareholders;
(d) By the court of common pleas or the court in which such action,
suit, or proceeding was brought.
Any determination made by the disinterested directors under division
(E)(4)(a) or by independent legal counsel under division (E)(4)(b) of this
section shall be promptly communicated to the person who threatened or brought
the action or suit by or in the right of the corporation under division (E)(2)
of this section, and within ten days after receipt of such notification, such
person shall have the right to petition the court of common pleas or the court
in which such action or suit was brought to review the reasonableness of such
determination.
(5)(a) Unless at the time of a director's act or omission that is the
subject of an action, suit or proceeding referred to in divisions (E)(1) and (2)
of this section, the articles or the regulations of a corporation state by
specific reference to this division that the provisions of this division do not
apply to the corporation and unless the only liability asserted against a
director in an action, suit, or proceeding referred to in divisions (E)(1) and
(2) of this section is pursuant to section 1701.95 of the Revised Code,
expenses, including attorney's fees, incurred by a director in defending the
action, suit, or proceeding shall be paid by the corporation as they are
incurred, in advance of the final disposition of the action, suit, or proceeding
upon receipt of an undertaking by or on behalf of the director in which he
agrees to do both of the following:
(i) Repay such amount if it is proved by clear and convincing
evidence in a court of competent jurisdiction that his action or failure to act
involved an act or omission undertaken with
II-2
<PAGE>
deliberate intent to cause injury to the corporation or undertaken with reckless
disregard for the best interests of the corporation;
(ii) Reasonably cooperate with the corporation concerning the
action, suit, or proceeding.
(b) Expenses, including attorneys' fees incurred by a director,
trustee, officer, employee, or agent in defending any action, suit, or
proceeding referred to in divisions (E)(1) and (2) of this section, may be paid
by the corporation as they are incurred, in advance of the final disposition of
the action, suit, or proceeding as authorized by the directors in the specific
case upon receipt of an undertaking by or on behalf of the director, trustee,
officer, employee, or agent to repay such amount, if it ultimately is determined
that he is entitled to be indemnified by the corporation.
(6) The indemnification authorized by this section shall not be exclusive
of, and shall be in addition to, any other rights granted to those seeking
indemnification under the articles or the regulations or any agreement, vote of
shareholders or disinterested directors, or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
trustee, officer, employee, or agent and shall inure to the benefit of the
heirs, executors, and administrators of such a person.
(7) A corporation may purchase and maintain insurance or furnish similar
protection, including but not limited to trust funds, letters of credit, or
self-insurance on behalf of or for any person who is or was a director, officer,
employee, or agent of the corporation, or is or was serving at the request of
the corporation as a director, trustee, officer, employee, or agent of another
corporation, domestic or foreign, nonprofit or for profit, partnership, joint
venture, trust, or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section. Insurance may be purchased from or maintained
with a person in which the corporation has a financial interest.
(8) The authority of a corporation to indemnify persons pursuant to
divisions (E)(1) and (2) of this section does not limit the payment of expenses
as they are incurred, indemnification, insurance, or other protection that may
be provided pursuant to divisions (E)(5), (6), and (7) of this section.
Divisions (E)(1) and (2) of this section do not create any obligation to repay
or return payments made by the corporation pursuant to divisions (E)(5), (6), or
(7).
(9) As used in this division, references to "corporation" include all
constituent corporations in a consolidation or merger and the new or surviving
corporation, so that any person who is or was a director, officer, employee, or
agent of such a constituent corporation, or is or was serving at the request of
such constituent corporation as a director, trustee, officer, employee or agent
of another corporation, domestic or foreign, nonprofit or for profit,
partnership, joint venture, trust, or other enterprise, shall stand in the same
position under this section with respect to the new or surviving corporation as
he would if he had served the new or surviving corporation in the same capacity.
SECOND AMENDED ARTICLES OF INCORPORATION OF WESTERN RESERVE
ARTICLE EIGHTH
EIGHTH: (1) The corporation may indemnify or agree to indemnify any person
who was or is a party or is threatened to be made a party, to any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, other than an action by or in the right of the
corporation, by reason of the fact that he is or was a director, officer,
employee, or agent of the corporation, or is or was serving at the request of
the corporation as a director, trustee, officer, employee, or agent of another
corporation (including a subsidiary of this corporation), domestic or foreign,
nonprofit or for profit, partnership, joint venture, trust, or other enterprise,
against expenses, including attorneys'
II-3
<PAGE>
fees, judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit, or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendre or its equivalent, shall not, of
itself create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
(2) The corporation may indemnify or agree to indemnify any person who was
or is a party, or is threatened to be made a party to any threatened, pending,
or completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee, or agent of the corporation, or is or was serving at the
request of the corporation as a director, trustee, officer, employee, or agent
of another corporation (including a subsidiary of this corporation), domestic or
foreign, nonprofit or for profit, partnership, joint venture, trust, or other
enterprise against expenses, including attorneys' fees, actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation, except that no
indemnification shall be made in respect of any claim, issue, or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation unless, and only to
the extent that the court of common pleas, or the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability, but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses as the court of
common pleas or such other court shall deem proper.
(3) To the extent that a director, trustee, officer, employee, or agent has
been successful on the merits or otherwise in defense of any action, suit, or
proceeding referred to in sections (1) and (2) of this article, or in defense of
any claim, issue, or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him in connection
therewith.
(4) Any indemnification under sections (1) and (2) of this article, unless
ordered by a court, shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
trustee, officer, employee, or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in sections (1) and (2) of
this article. Such determination shall be made (a) by a majority vote of a
quorum consisting of directors of the indemnifying corporation who were not and
are not parties to or threatened with any such action, suit, or proceeding, or
(b) if such a quorum is not obtainable or if a majority vote of a quorum of
disinterested directors so directs, in a written opinion by independent legal
counsel other than an attorney, or a firm having associated with it an attorney,
who has been retained by or who has performed services for the corporation, or
any person to be indemnified within the past five years, or (c) by the
shareholders, or (d) by the court of common pleas or the court in which such
action, suit, or proceeding was brought. Any determination made by the
disinterested directors under section (4)(a) or by independent legal counsel
under section (4)(b) of this article shall be promptly communicated to the
person who threatened or brought the action or suit by or in the right of the
corporation under section (2) of this article, and within ten days after receipt
of such notification, such person shall have the right to petition the court of
common pleas or the court in which such action or suit was brought to review the
reasonableness of such determination.
(5) Expenses, including attorneys' fees incurred in defending any action,
suit, or proceeding referred to in sections (1) and (2) of this article, may be
paid by the corporation in advance of the final disposition of such action,
suit, or proceeding as authorized by the directors in the specific case upon
receipt of a written undertaking by or on behalf of the director, trustee,
officer, employee, or agent to repay such amount, unless it shall ultimately be
determined that he is entitled to be indemnified by the corporation as
authorized in this article. If a majority vote of a quorum of disinterested
directors so directs by resolution, said written undertaking need not be
submitted to the corporation. Such a determination
II-4
<PAGE>
that a written undertaking need not be submitted to the corporation shall in no
way affect the entitlement of indemnification as authorized by this article.
(6) The indemnification provided by this article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under the articles or the regulations or any agreement, vote of
shareholders or disinterested directors, or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
trustee, officer, employee, or agent and shall inure to the benefit of the
heirs, executors, and administrators of such a person.
(7) The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, or agent of the corporation,
or is or was serving at the request of the corporation as a director, trustee,
officer, employee, or agent of another corporation (including a subsidiary of
this corporation), domestic or foreign, nonprofit or for profit, partnership,
joint venture, trust, or other enterprise against any liability asserted against
him and incurred by him in any such capacity or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liability under this section.
(8) As used in this section, references to "the corporation" include all
constituent corporations in a consolidation or merger and the new or surviving
corporation, so that any person who is or was a director, officer, employee, or
agent of such a constituent corporation, or is or was serving at the request of
such constituent corporation as a director, trustee, officer, employee or agent
of another corporation (including a subsidiary of this corporation), domestic or
foreign, nonprofit or for profit, partnership, joint venture, trust, or other
enterprise shall stand in the same position under this article with respect to
the new or surviving corporation as he would if he had served the new or
surviving corporation in the same capacity.
(9) The foregoing provisions of this article do not apply to any proceeding
against any trustee, investment manager or other fiduciary of an employee
benefit plan in such person's capacity as such, even though such person may also
be an agent of this corporation. The corporation may indemnify such named
fiduciaries of its employee benefit plans against all costs and expenses,
judgments, fines, settlements or other amounts actually and reasonably incurred
by or imposed upon said named fiduciary in connection with or arising out of any
claim, demand, action, suit or proceeding in which the named fiduciary may be
made a party by reason of being or having been a named fiduciary, to the same
extent it indemnifies an agent of the corporation. To the extent that the
corporation does not have the direct legal power to indemnify, the corporation
may contract with the named fiduciaries of its employee benefit plans to
indemnify them to the same extent as noted above. The corporation may purchase
and maintain insurance on behalf of such named fiduciary covering any liability
to the same extent that it contracts to indemnify.
AMENDED CODE OF REGULATIONS OF WESTERN RESERVE
ARTICLE V
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Each Director, officer and member of a committee of this Corporation, and
tany person who may have served at the request of this Corporation as a
Director, officer or member of a committee of any other corporation in which
this Corporation owns shares of capital stock or of which this Corporation is a
creditor (and his heirs, executors and administrators) shall be indemnified by
the Corporation against all expenses, costs, judgments, decrees, fines or
penalties as provided by, and to the extent allowed by, Article Eighth of the
Corporation's Articles of Incorporation, as amended.
II-5
<PAGE>
RULE 484 UNDERTAKING
Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel, the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet
The Prospectus, consisting of 56 pages
The undertaking to file reports
Representation Pursuant to Section 26(e)(2)(A)
The statement with respect to indemnification
The Rule 484 undertaking
The signatures
Written consent of the following persons:
(a) Alan Yaeger
(b) Thomas E. Pierpan, Esq.
(c) Sutherland Asbill & Brennan LLP
(d) Ernst & Young LLP
(e) PricewaterhouseCoopers LLP
The following exhibits:
1. The following exhibits correspond to those required by paragraph A to the
instructions as to exhibits in Form N-8B-2:
A. (1) Resolution of the Board of Directors of Western Reserve
establishing the Series Account (1)
(2) Not Applicable
(3) Distribution of Policies:
(a) Master Service and Distribution Compliance Agreement (2)
(b) (i) Broker/Dealer Supervisory and Service Agreement (2)
(ii)Broker/Dealer Supervisory and Service Agreement (2)
(4) Not Applicable
(5) Specimen Flexible Premium Variable Life Insurance Policy
(a) Individual Policy Form (VL10)
(b) Joint Policy Form (JL10)
(6) (a) Second Amended Articles of Incorporation of Western
Reserve(2)
(b) Amended Code of Regulations (By-Laws) of Western Reserve(2)
(7) Not Applicable
(8) (a) Investment Advisory Agreement with the Fund(1)(b)
(b) Sub-Advisory Agreement(1)
(9) Not Applicable
(10) Application for Flexible Premium Variable Life Insurance
Policy (6)
II-6
<PAGE>
(11) Memorandum describing issuance, transfer and redemption
procedures (6)
2. See Exhibit 1.A.(4)
3. Opinion of Counsel as to the legality of the securities being
registered(6)
4. No financial statement will be omitted from the Prospectus pursuant to
Instruction 1(b) or (c) of Part I
5. Not Applicable
6. Opinion and consent of Alan Yaeger as to actuarial matters pertaining to
the securities being registered(6)
7. Thomas E. Pierpan, Esq.(6)
8. Consent of Sutherland Asbill & Brennan LLP(6)
9. Consent of Ernst & Young LLP(6)
10. Consent of PricewaterhouseCoopers LLP(6)
11. (a) Powers of Attorney(4)
(b) Power of Attorney - James R. Walker(5)
- ----------------------------------------
(1) This exhibit was previously filed on Post-Effective Amendment No. 28 to
Form S-6 Registration Statement dated April 28, 1997 (File No. 33-507) and
is incorporated herein by reference.
(2) This exhibit was previously filed on Post-Effective Amendment No. 11 to
Form N-4 Registration Statement dated April 20, 1998 (File No. 33-49556)
and is incorporated herein by reference.
(3) This exhibit was previously filed on Post-Effective Amendment No. 1 to
Form S-6 Registration Statement dated December 19, 1997 (File No.
333-23359) and is incorporated herein by reference.
(4) This exhibit was previously filed on Post-Effective Amendment No. 16 to
Form S-6 Registration Statement dated April 21, 1998 (File No. 33-31140)
and is incorporated herein by reference.
(5) This exhibit was previously filed on Post-Effective Amendment No. 13 to
Form S-6 Registration Statement dated December 24, 1996 (File No.
33-31140) and is incorporated herein by reference.
(6) To be filed by amendment.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
WRL Series Life Account has duly caused this Initial Registration Statement to
be signed on its behalf by the undersigned thereunto duly authorized, and its
seal to be hereunto affixed and attested, all in the City of Largo, County of
Pinellas, Florida on this 30th day of November 1998
(SEAL) WRL SERIES LIFE ACCOUNT
Registrant
WESTERN RESERVE LIFE ASSURANCE
CO. OF OHIO
Depositor
ATTEST:
/s/ THOMAS E. PIERPAN By: /s/ JOHN R. KENNEY
- --------------------- -------------------
Thomas E. Pierpan John R. Kenney
Vice President Chairman of the Board,
Chief Executive Officer
and President
Pursuant to the requirements of the Securities Act of 1933, this Initial
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE AND TITLE DATE
------------------- ----
/s/ JOHN R. KENNEY November 30, 1998
- -----------------------------
John R. Kenney, Chairman of the
Board, Chief Executive Officer
and President
/s/ ALLAN J. HAMILTON November 30, 1998
- -----------------------------
Allan J. Hamilton, Vice President,
Treasurer and Controller
/s/ ALAN M. YAEGER November 30, 1998
- -----------------------------
Alan M. Yaeger, Executive Vice
President, Actuary and Chief
Financial Officer
/s/ PATRICK S. BAIRD November 30, 1998
- -----------------------------
Patrick S. Baird, Director */
II-8
<PAGE>
/s/ JAMES R. WALKER November 30, 1998
- -----------------------------
James R. Walker, Director */
/s/ LYMAN H. TREADWAY November 30, 1998
- ------------------------------
Lyman H. Treadway, Director */
/s/ JACK E. ZIMMERMAN November 30, 1998
- ------------------------------
Jack E. Zimmerman, Director */
*/ /s/ THOMAS E. PIERPAN
- ------------------------------
Signed by: Thomas E. Pierpan
as Attorney-in-fact
II-9
<PAGE>
Exhibit Index
EXHIBIT DESCRIPTION
NO. OF EXHIBIT
- ------- -----------
1.A.(5)(a) Individual Specimen Flexible Variable Life Insurance Policy
1.A.(5)(b) Joint Specimen Flexible Variable Life Insurance Policy
Exhibit 1.A.(5)(a)
Individual Specimen Flexible Premium Variable Life Insurance Policy
<PAGE>
===============================================================================
WESTERN RESERVE LIFE Home Office: Columbus, Ohio
ASSURANCE CO. OF OHIO Administrative Office:
(A STOCK COMPANY) 4333 Edgewood Road, N.E.-Cedar Rapids, Iowa 52499
(319) 398-8511
===============================================================================
IN THIS POLICY the Primary Insured is named on the Policy Schedule page. The
Primary Insured will be referred to as YOU or YOUR. Western Reserve Life
Assurance Co. of Ohio will be referred to as WE, OUR or US.
IF YOU DIE before the Maturity Date and while this Policy is In Force, WE WILL
PAY the Death Benefit Proceeds to the Beneficiary upon receipt of due proof,
satisfactory to Us, of Your death. THE AMOUNT OF THE DEATH BENEFIT PROCEEDS WILL
INCREASE OR DECREASE DEPENDING ON THE INVESTMENT EXPERIENCE OF THE SUBACCOUNTS
IN THE SEPARATE ACCOUNT.
IF YOU ARE ALIVE on the Maturity Date and this Policy is In Force, WE WILL PAY
the Net Surrender Value as of the Maturity Date. CASH VALUES WILL INCREASE OR
DECREASE IN ACCORDANCE WITH THE POLICY VALUE PROVISIONS AND THE INVESTMENT
EXPERIENCE OF THE SUBACCOUNTS IN THE SEPARATE ACCOUNT. CASH VALUES ARE NOT
GUARANTEED AS TO DOLLAR AMOUNT.
THE PROVISIONS on the following pages are part of this Policy.
IN WITNESS WHEREOF, We have signed this Policy at Our Office in Cedar Rapids,
Iowa as of the Policy Date.
/s/ WILLIAM H. GEIGER /s/ JOHN R. KENNEY
Secretary President
===============================================================================
RIGHT TO EXAMINE POLICY
The Owner may cancel this Policy by returning it to Us at 4333 Edgewood
Road, N.W., Cedar Rapids, Iowa 52499 or to the representative through whom
it was purchased within 10 days after receipt. If the Policy is returned
within this period, it will be void from the beginning and a refund will be
made to the Owner. The refund will equal the sum of:
1. The difference between the Initial Premium paid and the amount allocated
to any Accounts under the Policy; plus
2. The total amount of monthly deductions made and any other charges
imposed on amounts allocated to the Accounts; plus
3. The value of amounts allocated to the Accounts on the date We or Our
agent receive the returned Policy.
If state law prohibits the calculation above, the refund will be the total
of all premiums paid for this Policy.
===============================================================================
Modified Single Premium Variable Life Insurance Policy
Death Benefit Proceeds Payable at Death of Insured Prior to Maturity Date
Net Surrender Value Payable at Maturity Date
Non-Participating - No Dividends
Some Benefits Reflect Investment Results
<PAGE>
===============================================================================
POLICY GUIDE
===============================================================================
<TABLE>
<CAPTION>
<S> <C> <C> <C>
POLICY SCHEDULE.............................. 3 DEATH BENEFIT PROVISIONS.................... 9
Death Benefit............................. 9
TABLE OF SURRENDER CHARGES................... 3 Specified Amount.......................... 9
Limitation Percentage..................... 10
TABLE OF GUARANTEED RATES.................... 4 Death Benefit Proceeds.................... 10
DEFINITIONS.................................. 5 PREMIUM PROVISIONS.......................... 10
Accounts................................... 5 Payment................................... 10
Age........................................ 5 Premiums.................................. 10
Anniversary................................ 5 Grace Period.............................. 11
Beneficiary................................ 5
Death Benefit Proceeds..................... 5 SEPARATE ACCOUNT PROVISIONS................. 11
Fixed Account.............................. 5 The Separate Account...................... 11
In Force................................... 5 Subaccounts............................... 11
Initial Premium............................ 5 Transfers................................. 12
Loan Reserve............................... 5 Addition, Deletion or Substitution of
Maturity Date.............................. 5 Investments............................. 12
Monthiversary.............................. 5 Change of Investment Objective............ 12
Net Surrender Value........................ 5 Unit Value................................ 13
Office..................................... 6
Policy Date................................ 6 POLICY VALUE PROVISIONS..................... 13
Reallocation Date.......................... 6 Allocation of Premiums.................... 13
SEC........................................ 6 Monthly Deductions........................ 14
Separate Account........................... 6 Monthly Policy Charge..................... 14
Series Fund(s)............................. 6 Monthly Cost of Insurance................. 14
Subaccount................................. 6 Monthly Cost of Insurance Rates........... 14
Termination................................ 6 Subaccount Value.......................... 15
Valuation Date............................. 6 Fixed Account Value....................... 15
Valuation Period........................... 6 Cash Value................................ 15
Written Notice............................. 6 Surrender................................. 16
Net Surrender Value....................... 16
GENERAL PROVISIONS........................... 7 Surrender Charge.......................... 16
The Policy................................. 7 Withdrawals............................... 16
Ownership.................................. 7 Continuation of Insurance................. 17
Beneficiary................................ 7 Insufficient Value........................ 17
Assignment................................. 7 Basis of Computations..................... 17
Incontestability........................... 7 Policy Loans.............................. 17
Suicide.................................... 8
Issue Age and Sex.......................... 8
Periodic Report............................ 8
Termination................................ 8
Policy Payment............................. 8
Optional Methods of Settlement............. 8
Payments and Transfers..................... 8
Extended Maturity Date..................... 9
Conversion Rights.......................... 9
Protection of Proceeds..................... 9
</TABLE>
Page 2
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
CEDAR RAPIDS, IOWA
POLICY SCHEDULE
- --------------------------------------------------------------------------------
PRIMARY INSURED: John Doe
ISSUE AGE AND SEX: 35 - MALE POLICY NUMBER: 01-12345678
SPECIFIED AMOUNT: $204,416 POLICY DATE: December 01, 1998
INITIAL PREMIUM: $50,000 REALLOCATION DATE: December 16, 1998
MATURITY DATE: December 01, 2063 REALLOCATION ACCOUNT: Fixed Account
RATE CLASS: Standard
SEPARATE ACCOUNT PROVISIONS
SEPARATE ACCOUNT: WRL SERIES LIFE ACCOUNT
ASSET BASED CHARGES POLICY YEARS
- -------------------
(Expressed as an Annual Percentage) 1-10 11 +
------ ------
SEPARATE ACCOUNT CHARGES
Daily Charge: .50% .50%
Monthly Deduction Charge: 2.00% 1.00%
FIXED ACCOUNT CHARGES
Monthly Deduction Charge: 2.00% 1.00%
DEFERRED SURRENDER CHARGES: Surrender Charges are the percentage shown below
times the Initial Premium.
------------------------------------------------
Surrender Surrender
Policy Year Charge Policy Year Charge
------------------------------------------------
At Issue 9.75%
1 9.75% 6 7.00%
2 9.50% 7 6.00%
3 9.25% 8 4.00%
4 9.00% 9 2.00%
5 8.00% 10+ 0.00%
------------------------------------------------
Page 3
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
CEDAR RAPIDS, IOWA
TABLE OF GUARANTEED MAXIMUM COST OF INSURANCE RATES
- -------------------------------------------------------------------------------
POLICY NUMBER: 01-12345678
Guaranteed Rate Basis for the Initial Specified Amount on Primary Insured
Commissioners 1980 Standard Ordinary Tobacco User and Non Tobacco User
Mortality Table
Male Lives
Tobacco User Classification
Annual Cost of Insurance Rates Per $1,000
(The monthly cost of insurance calculations will use one-twelfth
of these rates.)
- -------------------------------------------------------------------------------
Attained Age Annual Rate Attained Age Annual Rate
- -------------------------------------------------------------------------------
35 2.63 36 2.81
37 3.04 38 3.30
39 3.60 40 3.94
41 4.34 42 4.75
43 5.22 44 5.71
45 6.27 46 6.83
47 7.44 48 8.08
49 8.80 50 9.56
51 10.44 52 11.42
53 12.54 54 13.80
55 15.14 56 16.59
57 18.09 58 19.69
59 21.35 60 23.19
61 25.26 62 27.59
63 30.23 64 33.14
65 36.29 66 39.57
67 43.01 68 46.55
69 50.32 70 54.48
71 59.09 72 64.33
73 70.32 74 76.66
75 83.77 76 91.10
77 98.52 78 105.91
79 113.49 80 121.59
81 130.41 82 140.20
83 151.03 84 162.49
85 174.20 86 185.78
87 197.06 88 209.37
89 221.52 90 233.69
91 246.12 92 259.33
93 276.30 94 298.15
95 329.96 96 384.55
97 480.20 98 657.98
99 1000.00
- -------------------------------------------------------------------------------
Page 4
<PAGE>
DEFINITIONS
===============================================================================
ACCOUNTS Allocation options including the Fixed Account and the
Subaccounts of the Separate Account.
AGE Issue Age refers to the Age on the Insured's last birthday
prior to the Policy Date. Attained Age refers to the Issue Age
plus the number of completed policy years.
ANNIVERSARY The same day and month as the Policy Date for each succeeding
year the Policy remains In Force.
BENEFICIARY The person or persons specified by the Owner to receive the
Death Benefit Proceeds.
DEATH The amount payable upon Your death in accordance with the
BENEFIT Death Benefit Provisions.
PROCEEDS
FIXED ACCOUNT Allocation option(s) other than the Separate Account.
IN Condition under which the coverage is active and the Insured's
FORCE life remains insured.
INITIAL The amount which must be paid before coverage begins. The
PREMIUM amount is shown on the Policy Schedule page.
LOAN RESERVE A portion of the Fixed Account used as collateral for any
policy loan.
MATURITY The date when coverage under the Policy will terminate if the
DATE Primary Insured is living and the Policy is In Force, unless
extended in accordance with the Extended Maturity Date
provision.
MONTHIVERSARY The day of each month coinciding with the Policy Date. If there
is no day in a calendar month which coincides with the Policy
Date, the Monthiversary will be the first day of the next
month.
NET SURRENDER The amount payable upon surrender in accordance with the Policy
VALUE Value Provisions of this Policy.
Page 5
<PAGE>
OFFICE Refers to Our administrative office located in Cedar Rapids,
Iowa.
POLICY The date coverage is effective and monthly deductions commence
DATE under the Policy. Policy months, years and anniversaries are
measured from the Policy Date, as shown on the Policy Schedule
page.
REALLOCATION The date on which any premiums are reallocated from the
DATE Reallocation Account to the Accounts elected by the Owner on
the application. The Reallocation Date is shown on the
Policy Schedule page.
SEC The United States Securities and Exchange Commission.
SEPARATE A separate investment account shown on the Policy Schedule page
ACCOUNT which is composed of several subaccounts established to receive
and invest premiums under the Policy.
SERIES FUND(S) Designated mutual fund(s) from which each Subaccount of the
Separate Account will buy shares.
SUBACCOUNT A sub-division of the Separate Account. Each Subaccount invests
exclusively in the shares of a specified Series Fund portfolio.
TERMINATION Condition when the Insured's life is no longer insured under
the coverage provided.
VALUATION DATE Any day We are required by law to value the assets of the
Separate Account.
VALUATION The period commencing at the end of one Valuation Date and
PERIOD continuing to the end of the next succeeding Valuation Date.
WRITTEN NOTICE Written Notice means a notice by the Owner to Us requesting or
exercising a right of the Owner as provided in the Policy
provision of the General Provisions. In order for a notice to
be considered a Written Notice, it must: be in writing, signed
by the Owner; be in a form acceptable to Us; and contain the
information and documentation, as determined in Our sole
discretion, necessary for Us to take the action requested, or
for the Owner to exercise the right specified. A Written Notice
will not be considered complete until all necessary supporting
documentation required or requested by Us has been received by
Us at Our administrative Office.
Page 6
<PAGE>
GENERAL PROVISIONS
===============================================================================
THE POLICY This Policy is issued in consideration of the attached
application and payment of the Initial Premium. This Policy and
the attached application constitute the entire contract. All
statements in these applications, in the absence of fraud, will
be deemed representations and not warranties. No statement can
be used to void this Policy or be used in defense of a claim
unless it is contained in the written application. No policy
provision can be waived or changed except by endorsement. Such
endorsement must be signed by Our President or Secretary.
OWNERSHIP This Policy belongs to the Owner. The Owner, as named in the
application or as subsequently changed, may exercise all rights
under this Policy during Your lifetime including the right to
transfer ownership. If the Owner should die during Your
lifetime, ownership of this Policy will pass to the Owner's
estate if no contingent owner is named.
We will not be bound by any change in the ownership designation
unless it is made by Written Notice. The change will be
effective on the date the Written Notice is accepted by Us. If
We request, this Policy must be returned to Our administrative
Office for endorsement.
BENEFICIARY The Beneficiary, as named in the application or subsequently
changed, will receive the benefits payable at Your death. If
the Beneficiary dies before You, the Contingent Beneficiary, if
named, becomes the Beneficiary. If no Beneficiary or Contingent
Beneficiary survives You, the benefits payable upon Your death
will be paid to the Owner or the Owner's estate.
We will not be bound by any change in the Beneficiary
designation unless it is made by Written Notice. The change
will be effective on the date the Written Notice was signed;
however, no change will apply to any payment We made before the
Written Notice is received. If We request, this Policy must be
returned to Our Office for endorsement.
ASSIGNMENT This Policy may be assigned. We will not be bound by any
assignment unless made by Written Notice. The assignment will
be effective on the date the Written Notice is received at Our
Office and accepted by Us. We assume no responsibility for the
validity of any assignment.
INCONTESTABILITY This Policy shall be incontestable after it has been In Force,
while You are still alive, for two years from the Policy Date.
Page 7
<PAGE>
SUICIDE If You die by suicide, while sane or insane, within two years
from the Policy Date, this Policy shall terminate and Our total
liability, including all Riders attached to this Policy, will
be limited to the total premiums paid, less any loans and prior
withdrawals, during such period.
ISSUE AGE If Your date of birth or sex is not correctly stated, the death
AND SEX benefit will be adjusted based on what the Initial Premium
would have purchased based on Your correct date of birth and
sex.
PERIODIC We will send a periodic report to the Owner at least once each
REPORT policy year. The periodic report will show:
1. The current Cash Value; 4. Any current policy
2. The current Net Surrender Value; loans;
3. The current death benefit; 5. Activity since the
last report.
Additional activity within each Subaccount showing investment
experience will also be provided. The periodic report provided
nearest the end of the calendar year will show projected values
for the following year.
TERMINATION This Policy will terminate on the earliest of:
1. The Maturity Date; 3. The end of the grace period;
2. The date of Your death; 4. The date of surrender.
POLICY All proceeds to be paid upon Termination will be paid
PAYMENT in one sum unless an optional method of settlement is elected.
Instead of a single amount, the payee may elect to receive the
proceeds under the terms of the next provision.
OPTIONAL METHODS At the time that any proceeds are due in a single payment, if
OF SETTLEMENT requested in writing, We will inform the payee of all other
forms of settlement including annuities, with or without life
contingencies. Interest will be at an annual rate that We
decide, but not less than the rate required by law.
PAYMENTS AND All payments and transfers from the Subaccounts will be
TRANSFERS processed as provided in this Policy unless one of the
following situations exists:
1. The New York Stock Exchange is closed; or
2. The SEC requires that trading be restricted or declares an
emergency; or
3. The SEC allows Us to defer payments to protect Our
policyowners.
We reserve the right to defer the payment of any Fixed Account
values for the period permitted by law, but not for more than
six months.
Page 8
<PAGE>
EXTENDED The Owner may request that the Maturity Date shown on the
MATURITY Policy Schedule page be extended. The request must be in
DATE writing and received by Us at least 90 days, but no more than
180 days, prior to the scheduled Maturity Date. The Owner must
request that the Maturity Date be extended each Policy
Anniversary following the Maturity Date as shown on the Policy
Schedule page. Any Riders In Force on the scheduled Maturity
Date will terminate on that date and will not be extended.
Interest on any outstanding policy loan will continue to accrue
during the period for which the Maturity Date is extended.
If the Maturity Date is extended, on each Valuation Date the
Specified Amount will be adjusted to equal the Cash Value and
the Limitation Percentage will be 100%. No additional Premium
payments will be permitted except if required to prevent lapse
of this Policy. Future monthly deductions will be waived.
CONVERSION At any time upon written request within the first two policy
RIGHTS years, the Owner may elect to transfer all Subaccount values to
the Fixed Account without a transfer charge.
PROTECTION OF Unless the Owner directs by filing Written Notice, no
PROCEEDS Beneficiary may assign any payments under this Policy before
the same are due. To the extent permitted by law, no payments
under this Policy will be subject to the claims of creditors of
any Beneficiary.
DEATH BENEFIT PROVISIONS
===============================================================================
DEATH BENEFIT The death benefit is the greater of:
1. the Specified Amount; or
2. the Limitation Percentage times the Cash Value of this
Policy on the date of Your death.
SPECIFIED AMOUNT The Specified Amount is as shown on the Policy Schedule page,
adjusted for any withdrawals as provided in the Withdrawal
Provision of the Policy Value Provisions.
Page 9
<PAGE>
LIMITATION The Limitation Percentage is a percentage based on Your
PERCENTAGE Attained Age at the beginning of the policy year equal to:
-------------------------------------------------------------
Attained Age Limitation Percentage
--------------------------------------------------------------
40 and under 250%
41 through 45 250% minus 7% for each Age over Age 40
46 through 50 215% minus 6% for each Age over Age 45
51 through 55 185% minus 7% for each Age over Age 50
56 through 60 150% minus 4% for each Age over Age 55
61 through 65 130% minus 2% for each Age over Age 60
66 through 70 120% minus 1% for each Age over Age 65
71 through 75 115% minus 2% for each Age over Age 70
76 through 90 105%
91 through 94 105% minus 1% for each Age over Age 90
95 and over 100%
DEATH The Death Benefit Proceeds is the amount payable by Us under
BENEFIT this Policy upon Your death, provided this Policy has not
PROCEEDS terminated prior to Your death. Except as provided in the
Suicide section of the General Provisions, the Death Benefit
Proceeds will be equal to:
1. The death benefit; minus
2. Any monthly deductions due during the grace period; minus
3. Any outstanding policy loan; minus
4. Any accrued policy loan interest.
PREMIUM PROVISIONS
===============================================================================
PAYMENT The Initial Premium shown on the Policy Schedule page must be
paid on or before the Policy Date.
PREMIUMS While this Policy is In Force, additional premiums may be paid
at any time prior to the Maturity Date shown on the Policy
Schedule page. We reserve the right to limit or refund any
premium if:
1. The amount is below Our current minimum payment requirement;
or
2. The premium would increase the death benefit by more than
the amount of the premium; or
3. The premium would disqualify this Policy as a life insurance
contract as defined by the United States Internal Revenue
Code and applicable regulations.
Page 10
<PAGE>
GRACE PERIOD If the Net Surrender Value on any Monthiversary is not
sufficient to cover the monthly deductions on such day, We will
mail a notice to the last known address of the Owner and any
assignee of record. A grace period of 61 days after the mailing
date of the notice will be allowed for the payment. The notice
will specify the minimum payment and the final date on which
such payment must be received by Us to keep the Policy In
Force. The Policy will remain In Force during the grace period.
If the amount due is not received by Us within the grace
period, all coverage under the Policy will terminate without
value at the end of the grace period.
SEPARATE ACCOUNT PROVISIONS
===============================================================================
THE SEPARATE The variable benefits under this Policy are provided through
ACCOUNT the Separate Account as shown on the Policy Schedule page. The
assets of the Separate Account are Our property. Assets equal
to the reserve and other contractual liabilities under all
policies issued in connection with the Separate Account will
not be charged with liabilities arising out of any other
business We may conduct. If the assets of the Separate Account
exceed the liabilities arising under the policies supported by
the Separate Account, then the excess may be used to cover the
liabilities of Our general account. The assets of the Separate
Account shall be valued as often as any policy benefits vary,
but at least monthly.
SUBACCOUNTS The Separate Account has various Subaccounts with different
investment objectives. We reserve the right to add or remove
any Subaccount of the Separate Account. Income, if any, and any
gains or losses, realized or unrealized, from assets in each
Subaccount are credited to, or charged against, the amount
allocated to that Subaccount without regard to income, gains,
or losses in other Subaccounts. Any amount charged against the
investment base for federal or state income taxes will be
deducted from that Subaccount. The assets of each Subaccount
are invested in shares of a corresponding Series Fund
portfolio. The value of a portfolio share is based on the value
of the assets of the portfolio determined at the end of each
Valuation Period in accordance with applicable law.
Page 11
<PAGE>
TRANSFERS The Owner may transfer all or a portion of this Policy's value
in each Subaccount to other Subaccounts or the Fixed Account.
We reserve the right to charge a $10 fee for each transfer in
excess of twelve per policy year. This charge will be deducted
from the funds transferred. A request for a transfer must be
made in a form satisfactory to Us. The transfer will ordinarily
take effect on the first Valuation Date on or following the
date the request is received at Our Office.
ADDITION, We reserve the right to transfer assets of the Separate
DELETION OR Account, which We determine to be associated with the class of
SUBSTITUTION contracts to which this Policy belongs, to another Separate
OF INVESTMENTS Account. If this type of transfer is made, the term "Separate
Account", as used in this Policy, shall then mean the Separate
Account to which the assets were transferred. We also reserve
the right to add, delete, or substitute investments held by any
Subaccount.
We reserve the right, when permitted by law, to:
1. Deregister the Separate Account under the Investment Company
Act of 1940;
2. Manage the Separate Account under the direction of a
committee at any time;
3. Restrict or eliminate any voting privileges of owners or
other persons who have voting privileges as to the Separate
Account;
4. Combine the Separate Account or any Subaccount(s) with one
or more other Separate Accounts or Subaccounts;
5. Operate the Separate Account as a management investment
company;
6. Establish additional Subaccounts to invest in either a new
series of the Series Fund, or in shares of another
diversified, open-end registered investment company; and
7. Fund additional classes of variable life insurance contracts
through the Separate Account.
CHANGE OF We reserve the right to change the investment objective of a
INVESTMENT Subaccount. If required by law or regulation, an investment
OBJECTIVE objective of the Separate Account, or of a Series Fund
portfolio designated for a Subaccount, will not be materially
changed unless a statement of the change is filed with and
approved by the appropriate insurance official of the state of
Our domicile or deemed approved in accordance with such law or
regulation. If required, approval of or change of any
investment objective will be filed with the Insurance
Department of the state where this Policy is delivered.
Page 12
<PAGE>
UNIT VALUE Some of the policy values fluctuate with the investment results
of the Subaccounts. In order to determine how investment
results affect the policy values, a unit value is determined
for each Subaccount. The unit value of each Subaccount was
originally established at $10 per unit. The unit value may
increase or decrease from one Valuation Period to the next.
Unit values also will vary between Subaccounts. The unit value
of any Subaccount at the end of a Valuation Period is the
result of:
1. The total value of the assets held in the Subaccount. This
value is determined by multiplying the number of shares of
the designated Series Fund portfolio owned by the
Subaccount times the net asset value per share; minus
2. A charge equal to the daily net assets of the Sub-Account
multiplied by the daily equivalent of the Daily Charge. The
maximum annual factor for the Daily Charge is shown on the
Policy Schedule page; minus
3. The accrued amount of reserve for any taxes or other
economic burden resulting from the application of tax laws
that are determined by Us to be properly attributable to
the Subaccount; and the result divided by
4. The number of outstanding units in the Subaccount.
The use of the unit value in determining contract values is
described in the Policy Value Provisions.
POLICY VALUE PROVISIONS
================================================================================
ALLOCATION OF The premium will be allocated to the Accounts on the first
PREMIUM Valuation Date on or following the date the premium is received
at Our Office; except any premium or portion of premium
received prior to the Policy Date will be allocated on the
first Valuation Date on or following the Policy Date. Any
premium received prior to the Reallocation Date will be
allocated to the Reallocation Account. On the first Valuation
Date on or following the Reallocation Date, the values in the
Reallocation Account will be transferred in accordance with the
Owner's current premium allocation instructions.
We reserve the right to limit any allocation to any Account to
no less than 1%. No fractional percentages may be permitted.
The allocation may be changed by the Owner. The request for
change of allocations must be in a form satisfactory to Us. The
allocation change will be effective on the date the request for
change is recorded by Us.
Page 13
<PAGE>
MONTHLY On the Policy Date and on each Monthiversary thereafter, a
DEDUCTIONS monthly deduction for this Policy will be made from the
Policy's Cash Value in an amount equal to the sum of the
following:
1. The Monthly Policy Charge based on the assets of the
Separate Account; plus
2. The Monthly Policy Charge based upon the assets of the Fixed
Account; plus
3. The Monthly Cost of Insurance Charge for this Policy, if
any; plus 4. The Monthly Charge for benefits provided by
Riders attached to this Policy, if any.
Deductions will be withdrawn from each Account in accordance
with the Owner's current premium allocation. If the value of
any Account is insufficient to pay its part of the monthly
deduction, the monthly deduction will be taken on a pro rata
basis from all Accounts.
MONTHLY POLICY The Monthly Policy Charge applicable to the Separate Account is
CHARGE equal to:
1. The Separate Account Monthly Deduction Charge divided by 12;
multiplied by
2. The sum of the Subaccount Values on the Valuation Date of
each monthly deduction.
The Monthly Policy Charge applicable to the Fixed Account is
equal to:
1. The Fixed Account Monthly Deduction Charge divided by 12;
multiplied by
2. The Fixed Account value on the Valuation Date of each
monthly deduction, minus any outstanding loans.
The Separate Account and Fixed Account Monthly Deduction
Charges are shown on the Policy Schedule page.
MONTHLY COST OF We reserve the right to impose a maximum Monthly Cost of
INSURANCE Insurance Charge. This charge may not exceed the death benefit
minus the Cash Value, and the difference multiplied by the
appropriate monthly cost of insurance rate.
Currently we do not impose this charge. Should this charge be
imposed in the future, all future Deferred Surrender Charges
will be waived.
MONTHLY COST The Guaranteed Maximum Monthly cost of insurance rates are
OF INSURANCE based on the sex, Attained Age, plan of insurance and
RATES rating class of the person(s) insured. Any change in the
current cost of insurance rates will not exceed those shown in
the Table of Guaranteed Maximum Life Insurance Rates.
Page 14
<PAGE>
SUBACCOUNT At the end of any Valuation Period, the Subaccount value is
VALUE equal to the number of units that the Policy has in the
Subaccount, multiplied by the unit value of that Subaccount.
The number of units that the Policy has in each Subaccount is
equal to:
1. The initial units purchased on the Policy Date; plus
2. Units purchased as a result of any additional premiums; plus
3. Units purchased through transfers from another Account;
minus
4. Those units that are redeemed to pay for monthly deductions
as they are due; minus
5. Any units that are redeemed to pay for cash withdrawals;
minus
6. Any units that are redeemed as part of a transfer to another
Account.
FIXED ACCOUNT At the end of any Valuation Period, the Fixed Account value is
VALUE equal to:
1. The premiums allocated to the Fixed Account; plus
2. Any amounts transferred from a Subaccount to the Fixed
Account; plus
3. Total interest credited to the Fixed Account; minus
4. Any amounts charged to pay for monthly deductions as they
are due; minus
5. Any amounts withdrawn from the Fixed Account to pay for cash
withdrawals; minus
6. Any amounts transferred from the Fixed Account to a
Subaccount.
Interest on the Fixed Account will be compounded daily at a
minimum guaranteed effective annual interest rate of 3% per
year. We may declare from time to time various higher current
interest rates. Each payment or transfer to the Fixed Account
will be credited with the current interest rate at the time of
payment or transfer. In declaring any higher rates to be
applied to any Fixed Account values, We may include an expense
charge of up to 1% per year, however, in no event will any net
effective annual interest rate be less than 3%.
On transfers from the Fixed Account to a Subaccount, We reserve
the right to impose the following limitations:
1. Written Notice be received by Us within 30 days after an
Anniversary.
2. The transfer will take place on the date We receive such
Written Notice.
3. The maximum amount that may be transferred is the greater of
(a) 25% of the amount in the Fixed Account; or (b) the
amount transferred in the prior policy year from the Fixed
Account.
We further reserve the right to defer payment of any amounts
from the Fixed Account for no longer than six months after We
receive such Written Notice.
CASH VALUE At the end of any Valuation Period, the Cash Value of the
Policy is equal to the sum of the Subaccount values plus the
Fixed Account value.
Page 15
<PAGE>
SURRENDER While this Policy is In Force, the Owner may surrender this
Policy for the Net Surrender Value. Payment will usually be
made within seven days of Written Notice, subject to the Policy
Payment section of the General Provisions.
NET SURRENDER The Net Surrender Value is the amount payable upon surrender of
VALUE this Policy. The Net Surrender Value as of any date is equal
to:
1. the Cash Value as of such date; minus
2. any Surrender Charge as of such date; minus
3. any outstanding policy loan; minus
4. any accrued loan interest.
SURRENDER During the first 9 policy years, a Surrender Charge will be
CHARGE incurred upon surrender of this Policy. This charge will be
based upon the Deferred Surrender Charges shown on the Policy
Schedule page.
WITHDRAWALS Cash withdrawals may be made any time after the first policy
year and while this Policy is In Force. Only one withdrawal is
allowed during any 12 month period.
The maximum amount of withdrawal is:
1. the Cash Value as of the date of withdrawal; minus
2. the total premium paid; minus
3. any outstanding policy loans plus accrued loan interest.
When a withdrawal is made, the Cash Value will be reduced by
the amount of the withdrawal. The Specified Amount will also be
reduced by an amount equal to:
1. the initial Specified Amount; divided by
2. the Initial Premium; times
3. the amount of the withdrawal.
In no event will any withdrawal reduce the Specified Amount
below $1,000.
The Accounts from which the withdrawal will be made may be
specified in the Written Notice. If no Account is specified,
the withdrawal amount will be withdrawn from each Account in
accordance with the Owner's current allocation instructions.
Payment will usually be made within seven days of Written
Notice, subject to the Policy Payment section of the General
Provisions of this Policy.
Page 16
<PAGE>
CONTINUATION OF Subject to the Grace Period section of the Premium Provisions,
INSURANCE insurance coverage under this Policy will be continued In Force
until the Net Surrender Value is insufficient to cover the
monthly deductions. This provision shall not continue this
Policy beyond the Maturity Date shown on the Policy Schedule
page.
INSUFFICIENT If the Net Surrender Value on any Monthiversary is not
VALUE sufficient to cover the monthly deductions then due, this
Policy shall terminate subject to the Grace Period section of
the Premium Provisions.
BASIS OF Policy values and reserves are at least equal to those required
COMPUTATIONS by law. A detailed statement of the method of computation of
values and reserves has been filed with the insurance
department of the state in which this Policy was delivered.
POLICY During the continuance of this Policy, the Owner can borrow
LOANS against this Policy an amount which is not greater than 90% of
the Cash Value, minus:
1. any Surrender Charge as of such date; minus
2. any outstanding policy loans; minus
3. any accrued policy loan interest.
The amount of any policy loan may be limited to no less than
$500, except as noted below.
When a loan is made, an amount equal to the loan will be
withdrawn from the Accounts and transferred to the loan
reserve. The loan reserve is a portion of the Fixed Account
used as collateral for any policy loan. The Owner may specify
the Account or Accounts from which the withdrawal will be made.
If no Account is specified, the withdrawal will be made from
each Account in accordance with the Owner's current premium
allocation instructions.
The loan date is the date We process a loan request. Payment
will usually be made within seven days of the date We receive
proper loan request, subject to the Policy Payment section of
the General Provisions of this Policy. This Policy will be the
sole security for the loan.
While this Policy is In Force, any loan may be repaid.
Interest on any loan will be at the maximum policy loan rate of
6% payable in arrears. We reserve the right to charge a lower
loan rate on all or a portion of any loan. Interest is due at
each Anniversary. Interest not paid when due will be added to
the loan on each Anniversary.
Page 17
<PAGE>
At each Anniversary, We will compare the amount of the
outstanding loan to the amount in the loan reserve. We will
also make this comparison anytime the Owner repays all or part
of the loan. At each such time, if the amount of the
outstanding loan exceeds the amount in the loan reserve, We
will withdraw the difference from the Accounts and transfer it
to the loan reserve, in the same fashion as when a loan is
made. If the amount in the loan reserve exceeds the amount of
the outstanding loan, We will withdraw the difference from the
loan reserve and transfer it to the Accounts in accordance with
the Owner's current allocation instructions. However, We
reserve the right to require the transfer to the Fixed Account
if such loans were originally transferred from the Fixed
Account.
Page 18
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
Home Office: Columbus, Ohio
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499
-----------------------------------------------------------
Modified Premium Variable Life Insurance Policy
Death Benefit Proceeds Payable at Death of Insured Prior to Maturity Date
Net Surrender Value Payable at Maturity Date
Non-Participating - No Dividends
Some Benefits Reflect Investment Results
Exhibit 1.A.(5)(b)
Joint Specimen Flexible Variable Life Insurance Policy
<PAGE>
===============================================================================
WESTERN RESERVE LIFE Home Office: Columbus, Ohio
ASSURANCE CO. OF OHIO Administrative Office:
(A STOCK COMPANY) 4333 Edgewood Road, N.E.-Cedar Rapids, Iowa 52499
(319) 398-8511
===============================================================================
IN THIS POLICY, Western Reserve Life Assurance Co. of Ohio will be referred to
as WE, OUR or US.
WE WILL pay the Death Benefit Proceeds to the Beneficiary upon the death of the
Surviving Insured when We receive proof that both Joint Insureds died while this
Policy is In Force. THE AMOUNT OF THE DEATH BENEFIT PROCEEDS WILL INCREASE OR
DECREASE DEPENDING ON THE INVESTMENT EXPERIENCE OF THE SUBACCOUNTS IN THE
SEPARATE ACCOUNT.
WE WILL pay the Net Surrender Value to the Owner if at least one of the Joint
Insureds is alive on the Maturity Date and while this Policy is In Force. CASH
VALUES WILL INCREASE OR DECREASE IN ACCORDANCE WITH THE POLICY VALUE PROVISIONS
AND THE INVESTMENT EXPERIENCE OF THE SUBACCOUNTS IN THE SEPARATE ACCOUNT. CASH
VALUES ARE NOT GUARANTEED AS TO DOLLAR AMOUNT.
THE PROVISIONS on the following pages are part of this Policy.
IN WITNESS WHEREOF, We have signed this Policy at Our Office in Cedar Rapids,
Iowa as of the Policy Date.
/s/ WILLIAM H. GEIGER /s/ JOHN R. KENNEY
--------------------- ------------------
Secretary President
===============================================================================
RIGHT TO EXAMINE POLICY
The Owners may cancel this Policy by returning it to Us at 4333 Edgewood
Road, N.E., Cedar Rapids, Iowa 52499 or to the representative through whom
it was purchased within 10 days after receipt. If the Policy is returned
within this period, it will be void from the beginning and a refund will be
made to the Owners. The refund will equal the sum of:
1. The difference between the Single Premium paid and the amount allocated
to any Accounts under the Policy; plus
2. The total amount of monthly deductions made and any other charges
imposed on amounts allocated to the Accounts; plus
3. The value of amounts allocated to the Accounts on the date We or Our
agent receive the returned Policy.
If state law prohibits the calculation above, the refund will be the total
of all premiums paid for this Policy.
===============================================================================
Joint Survivorship Modified Single Premium Variable Life Insurance Policy
Death Benefit Proceeds Payable at Death of Surviving Insured Prior to
Maturity Date
Net Surrender Value Payable at Maturity Date
Non-Participating - No Dividends
Some Benefits Reflect Investment Results
<PAGE>
===============================================================================
POLICY GUIDE
===============================================================================
<TABLE>
<CAPTION>
<S> <C> <C> <C>
POLICY SCHEDULE.............................. 3 PREMIUM PROVISIONS.......................... 11
TABLE OF SURRENDER CHARGES................... 3 Payment................................... 11
TABLE OF GUARANTEED RATES.................... 4 Premiums.................................. 11
DEFINITIONS.................................. 5 Grace Period.............................. 11
Accounts................................... 5 SEPARATE ACCOUNT PROVISIONS................. 11
Age........................................ 5 The Separate Account...................... 11
Anniversary................................ 5 Subaccounts............................... 12
Beneficiary................................ 5 Transfers................................. 12
Death Benefit Proceeds..................... 5 Addition, Deletion or Substitution of
Fixed Account.............................. 5 Investments............................. 12
In Force................................... 5 Change of Investment Objective............ 13
Initial Premium............................ 5 Unit Value................................ 13
Joint Insureds............................. 5 POLICY VALUE PROVISIONS..................... 13
Loan Reserve............................... 5 Allocation of Premium..................... 13
Maturity Date.............................. 5 Monthly Deductions........................ 14
Monthiversary.............................. 6 Monthly Policy Charge..................... 14
Net Surrender Value........................ 6 Monthly Cost of Insurance................. 14
Office..................................... 6 Monthly Cost of Insurance Rates........... 15
Policy Date................................ 6 Subaccount Value.......................... 15
Reallocation Date.......................... 6 Fixed Account Value....................... 15
SEC........................................ 6 Cash Value................................ 16
Separate Account........................... 6 Surrender................................. 16
Series Fund(s)............................. 6 Net Surrender Value....................... 16
Subaccount................................. 6 Surrender Charge.......................... 16
Surviving Insured.......................... 6 Withdrawals............................... 16
Termination................................ 6 Continuation of Insurance................. 17
Valuation Date............................. 6 Insufficient Value........................ 17
Valuation Period........................... 7 Basis of Computations..................... 17
Written Notice............................. 7 Policy Loans.............................. 17
GENERAL PROVISIONS........................... 7 POLICY SPLIT OPTION....................... 18
The Policy................................. 7 Split Option.............................. 18
Ownership.................................. 7 Specified Amount.......................... 19
Beneficiary................................ 7 Cash Value................................ 19
Assignment................................. 8 Issue Limits andPremium Rate
Incontestability........................... 8 Classification.......................... 19
Suicide.................................... 8 Premiums.................................. 19
Issue Age and Sex.......................... 8 Policy Date............................... 19
Periodic Report............................ 8 Owner/Beneficiary......................... 19
Termination................................ 8
Policy Payment............................. 9
Optional Methods of Settlement............. 9
Payments and Transfers..................... 9
Extended Maturity Date..................... 9
Conversion Rights.......................... 9
Protection of Proceeds..................... 9
DEATH BENEFIT PROVISIONS..................... 10
Death Benefit.............................. 10
Specified Amount........................... 10
Limitation Percentage...................... 10
Death Benefit Proceeds..................... 10
</TABLE>
Page 2
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
CEDAR RAPIDS, IOWA
POLICY SCHEDULE
================================================================================
JOINT INSUREDS: John Doe
Jane Doe
POLICY NUMBER: 01-23456789 POLICY DATE: December 01, 1998
SPECIFIED AMOUNT: $243,440 REALLOCATION DATE: December 16, 1998
INITIAL PREMIUM: $ 50,000 MATURITY DATE: December 01, 2053
REALLOCATION ACCOUNT: Fixed Account
SEPARATE ACCOUNT PROVISIONS
SEPARATE ACCOUNT: WRL SERIES LIFE ACCOUNT
ASSET BASED CHARGES POLICY YEARS
- -------------------
(Expressed as an Annual Percentage) 1-10 11 +
----- ----
SEPARATE ACCOUNT CHARGES
Daily Charge: .50% .50%
Monthly Deduction Charge: 1.50% .50%
FIXED ACCOUNT CHARGES
Monthly Deduction Charge: 1.50% .50%
DEFERRED SURRENDER CHARGES: Surrender Charges are the percentage shown below
times the Initial Premium.
----------------------------------------------------
Surrender Surrender
Policy Year Charge Policy Year Charge
----------------------------------------------------
At Issue 9.75%
1 9.75% 6 7.00%
2 9.50% 7 6.00%
3 9.25% 8 4.00%
4 9.00% 9 2.00%
5 8.00% 10+ 0.00%
----------------------------------------------------
Page 3
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
CEDAR RAPIDS, IOWA
TABLE OF GUARANTEED MAXIMUM COST OF INSURANCE RATES
===============================================================================
POLICY NUMBER: 01-23456789
Guaranteed Rate Basis for Initial Specified Amount on Joint Insureds
Commissioners 1980 Standard Ordinary Tobacco User and Non-Tobacco User
Mortality Table
John Doe: Male Issue Age 45, Standard, Tobacco User Classification
Jane Doe: Female Issue Age 45, Standard, Tobacco User Classification
Annual Cost of Insurance Rates Per $1,000
(The monthly cost of insurance calculations will use one-twelfth
of these rates.)
------------------------------------------------------------------
Policy Year Annual Rate Policy Year Annual Rate
------------------------------------------------------------------
1 0.031 2 0.103
3 0.191 4 0.298
5 0.426 6 0.580
7 0.764 8 0.987
9 1.256 10 1.572
11 1.941 12 2.362
13 2.834 14 3.361
15 3.957 16 4.649
17 5.471 18 6.462
19 7.650 20 9.035
21 10.605 22 12.346
23 14.226 24 16.272
25 18.552 26 21.170
27 24.282 28 27.978
29 32.314 30 37.300
31 42.872 32 48.913
33 55.335 34 62.166
35 69.569 36 77.756
37 86.921 38 97.215
39 108.829 40 121.323
41 134.456 42 148.060
43 162.130 44 176.728
45 191.696 46 207.860
47 225.060 48 244.153
49 266.749 50 296.863
51 341.982 52 414.444
53 537.477 54 744.016
55 1000.00
------------------------------------------------------------------
Page 4
<PAGE>
DEFINITIONS
===============================================================================
ACCOUNTS Allocation options including the Fixed Account and
the Subaccounts of the Separate Account.
AGE Issue Age refers to the Age on each Joint Insured's
last birthday prior to the Policy Date. Attained Age
refers to the Issue Age plus the number of completed
policy years.
ANNIVERSARY The same day and month as the Policy Date for each
succeeding year the Policy remains In Force.
BENEFICIARY The person or persons specified by the Owner to
receive the Death Benefit Proceeds.
DEATH BENEFIT PROCEEDS The amount payable upon the death of the Surviving
Insured in accordance with the Death Benefit
Provisions.
FIXED ACCOUNT Allocation option(s) other than the Separate
Account.
IN FORCE Condition under which the coverage is active and the
Surviving Insured's life remains insured.
INITIAL PREMIUM The amount which must be paid before coverage
begins. The amount is shown on the Policy Schedule
page.
JOINT INSUREDS The persons whose lives are insured under this
Policy, as shown on the Policy Schedule pages.
LOAN RESERVE A portion of the Fixed Account used as collateral
for any policy loan.
MATURITY DATE The date when coverage under the Policy will
terminate if either Joint Insured is living and the
Policy is In Force, unless extended in accordance
with the Extended Maturity Date provision.
Page 5
<PAGE>
MONTHIVERSARY The day of each month coinciding with the Policy
Date. If there is no day in a calendar month which
coincides with the Policy Date, the Monthiversary
will be the first day of the next month.
NET SURRENDER The amount payable upon surrender in accordance with
VALUE the Policy Value Provisions of this Policy.
OFFICE Refers to Our administrative office located in Cedar
Rapids, Iowa.
POLICY DATE The date coverage is effective and monthly
deductions commence under the Policy. Policy months,
years and anniversaries are measured from the Policy
Date, as shown on the Policy Schedule page.
REALLOCATION The date on which any premiums are reallocated from
DATE the Reallocation Account to the Accounts elected by
the Owner on the application. The Reallocation
Account is shown on the Policy Schedule page.
SEC The United States Securities and Exchange
Commission.
SEPARATE A separate investment account shown on the Policy
ACCOUNT Schedule page which is composed of several
subaccounts established to receive and invest
premiums under the Policy.
SERIES FUND(S) Designated mutual fund(s) from which each
Subaccount of the Separate Account will buy shares.
SUBACCOUNT A sub-division of the Separate Account. Each
Subaccount invests exclusively in the shares of a
specified Series Fund portfolio.
SURVIVING INSURED The Joint Insured who remains alive after the other
Joint Insured has died.
TERMINATION Condition under which the insurance coverage is no
longer In Force under this Policy.
VALUATION DATE Any day We are required by law to value the assets
of the Separate Account.
Page 6
<PAGE>
VALUATION The period commencing at the end of one Valuation
PERIOD Date and continuingto the end of the next succeeding
Valuation Date.
WRITTEN NOTICE Written Notice means a notice by the Owners to Us
requesting or exercising a right of the Owners as
provided in the Policy provision of the General
Provisions. In order for a notice to be considered a
Written Notice, it must: be in writing, signed by
the Owners; be in a form acceptable to Us; and
contain the information and documentation, as
determined in Our sole discretion, necessary for Us
to take the action requested, or for the Owners to
exercise the right specified. A Written Notice will
not be considered complete until all necessary
supporting documentation required or requested by Us
has been received by Us at Our Administrative
Office.
GENERAL PROVISIONS
===============================================================================
THE POLICY This Policy is issued in consideration of the
attached application and payment of the Initial
Premium. This Policy and the attached application
constitute the entire contract. All statements in
these applications, in the absence of fraud, will be
deemed representations and not warranties. No
statement can be used to void this Policy or be used
in defense of a claim unless it is contained in the
written application. No policy provision can be
waived or changed except by endorsement. Such
endorsement must be signed by Our President or
Secretary.
OWNERSHIP This Policy belongs to the Owner. The Owner, as
named in the application or as subsequently changed,
may exercise all rights under this Policy while
either or both of the Joint Insureds is living. If
two Owners are named, this Policy will be owned
jointly and the consent of each Owner will be
required to exercise ownership rights under this
Policy.
We will not be bound by any change in the ownership
designation unless it is made by Written Notice. The
change will be effective on the date the Written
Notice is accepted by Us. If We request, this Policy
must be returned to Our Administrative Office for
endorsement.
BENEFICIARY The Beneficiary, as named in the application or
subsequently changed, will receive the benefits
payable upon the death of the Surviving Insured. If
the Beneficiary dies before the Surviving Insured,
the Contingent Beneficiary, if named, becomes the
Beneficiary. If no Beneficiary or Contingent
Beneficiary survives the Surviving Insured, the
benefits payable at the Surviving Insured's death
will be paid to the Owner or the Owner's estate.
Page 7
<PAGE>
We will not be bound by any change in the
Beneficiary designation unless it is made by Written
Notice. The change will be effective on the date the
Written Notice was signed; however, no change will
apply to any payment We made before the Written
Notice is received. If We request, this Policy must
be returned to Our Office for endorsement.
ASSIGNMENT This Policy may be assigned. We will not be bound by
any assignment unless made by Written Notice. The
assignment will be effective on the date the Written
Notice is received at Our Office and accepted by Us.
We assume no responsibility for the validity of any
assignment.
INCONTESTABILITY This Policy shall be incontestable after it has been
In Force, while either Joint Insured is still alive,
for two years from the Policy Date.
SUICIDE If either Joint Insured dies by suicide, while sane
or insane, within two years from the Policy Date,
this Policy shall terminate and Our total liability,
including all Riders attached to this Policy, will
be limited to the total premiums paid, less any
loans and prior withdrawals, during such period.
ISSUE AGE If either Joint Insured's date of birth or sex is
AND SEX not correctly stated, the death benefit will be
adjusted based on what the Initial Premium would
have purchased based on the correct date of birth
and sex.
PERIODIC REPORT We will send a periodic report to the Owner at least
once each policy year. The periodic report will
show:
1. The current Cash Value; 4. Any current
2. The current Net Surrender Value; policy loans;
3. The current death benefit; 5. Activity
since the
last report.
Additional activity within each Subaccount showing
investment experience will also be provided. The
periodic report provided nearest to the end of the
calendar year will show projected values for the
following year.
TERMINATION This Policy will terminate on the earliest of:
1. The Maturity Date; 3. The end of the
2. The date of the Surviving grace period;
Insured's death; 4. The date of
surrender.
Page 8
<PAGE>
POLICY PAYMENT All proceeds to be paid upon Termination will be
paid in one sum unless an optional method of
settlement is elected. Instead of a single amount,
the payee may elect to receive the proceeds under
the terms of the next provision.
OPTIONAL METHODS OF At the time that any proceeds are due in a single
SETTLEMENT payment, if requested in writing, We will inform the
payee of all other forms of a settlement
including annutiies, with or without life
contingencies. Interest will be at an annual rate
that We decide, but not less than the rate required
by law.
PAYMENTS AND All payments and transfers from the Subaccounts will
TRANSFERS be processed as provided in this Policy unless one
of the following situations exists:
1. The New York Stock Exchange is closed; or
2. The SEC requires that trading be restricted or
declares an emergency; or
3. The SEC allows Us to defer payments to protect
Our policyowners.
We reserve the right to defer the payment of any
Fixed Account values for the period permitted by
law, but not for more than six months.
EXTENDED MATURITY The Owners may request that the Maturity Date shown
DATE on the Policy Schedule page be extended. The request
must be in writing and received by Us at least 90
days, but no more than 180 days, prior to the
scheduled Maturity Date. The Owner must request that
the Maturity Date be extended each Policy
Anniversary following the Maturity Date as shown on
the Policy Schedule page. Any Riders In Force on the
scheduled Maturity Date will terminate on that date
and will not be extended. Interest on any
outstanding policy loan will continue to accrue
during the period for which the Maturity Date is
extended.
If the Maturity Date is extended on each Valuation
Date, the Specified Amount will be adjusted to equal
the Cash Value, and the Limitation Percentage will
be 100%. No additional Premium payments will be
permitted except if required to prevent lapse of
this Policy. Future monthly deductions will be
waived.
CONVERSION At any time upon written request within the first
RIGHTS two policy years, the Owner may elect to transfer
all Subaccount values to the Fixed Account
without a transfer charge.
PROTECTION OF Unless the Owner direct by filing Written Notice, no
PROCEEDS Beneficiary may assign any payments under this
Policy before the same are due. To the extent
permitted by law, no payments under this Policy will
be subject to the claims of creditors of any
Beneficiary.
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DEATH BENEFIT PROVISIONS
===============================================================================
DEATH BENEFIT The death benefit is the greater of:
1. the Specified Amount; or
2. the Limitation Percentage times the Cash Value
of this Policy on the date of the Surviving
Insured's death.
SPECIFIED AMOUNT The Specified Amount is as shown on the Policy
Schedule page, adjusted for any withdrawals as
provided in the Withdrawal Provision of the Policy
Value Provisions.
LIMITATION The Limitation Percentage is a percentage based on
PERCENTAGE the Attained Age of the younger Joint Insured at the
beginning of the policy year equal to:
<TABLE>
<CAPTION>
--------------------- ------------------------------------------
Attained Age Limitation Percentage
--------------------- ------------------------------------------
<S> <C>
40 and under 250%
41 through 45 250% minus 7% for each Age over Age 40
46 through 50 215% minus 6% for each Age over Age 45
51 through 55 185% minus 7% for each Age over Age 50
56 through 60 150% minus 4% for each Age over Age 55
61 through 65 130% minus 2% for each Age over Age 60
66 through 70 120% minus 1% for each Age over Age 65
71 through 75 115% minus 2% for each Age over Age 70
76 through 90 105%
91 through 94 105% minus 1% for each Age over Age 90
95 and over 100%
</TABLE>
DEATH BENEFIT PROCEEDS The Death Benefit Proceeds is the amount payable by
Us under this Policy provided this Policy has not
terminated prior to the Surviving Insured's death.
Except as provided in the Suicide section of the
General Provisions, the Death Benefit Proceeds will
be equal to:
1. The death benefit; minus
2. Any monthly deductions due during the grace
period; minus
3. Any outstanding policy loan; minus
4. Any accrued policy loan interest.
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<PAGE>
PREMIUM PROVISIONS
===============================================================================
PAYMENT The Initial Premium shown on the Policy Schedule
page must be paid on or before the Policy Date.
PREMIUMS While this Policy is In Force, additional premiums
may be paid at any time prior to the Maturity Date
shown on the Policy Schedule page. We reserve the
right to limit or refund any premium if:
1. The amount is below Our current minimum payment
requirement; or
2. The premium would increase the death benefit by
more than the amount of the premium; or
3. The premium would disqualify this Policy as a
life insurance contract as defined by the United
States Internal Revenue Code and applicable
regulations.
GRACE PERIOD If the Net Surrender Value on any Monthiversary is
not sufficient to cover the monthly deductions on
such day, We will mail a notice to the last known
address of the Owners and any assignee of record. A
grace period of 61 days after the mailing date of
the notice will be allowed for the payment. The
notice will specify the minimum payment and the
final date on which such payment must be received by
Us to keep the Policy In Force. The Policy will
remain In Force during the grace period. If the
amount due is not received by Us within the grace
period, all coverage under the Policy will terminate
without value at the end of the grace period.
SEPARATE ACCOUNT PROVISIONS
================================================================================
THE SEPARATE The variable benefits under this Policy are provided
ACCOUNT through the Separate Account as shown on the Policy
Schedule page. The assets of the Separate
Account are Our property. Assets equal to the
reserve and other contractual liabilities under all
policies issued in connection with the Separate
Account will not be charged with liabilities arising
out of any other business We may conduct. If the
assets of the Separate Account exceed the
liabilities arising under the policies supported by
the Separate Account, then the excess may be used to
cover the liabilities of Our general account. The
assets of the Separate Account shall be valued as
often as any policy benefits vary, but at least
monthly.
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<PAGE>
SUBACCOUNTS The Separate Account has various Subaccounts with
different investment objectives. We reserve the
right to add or remove any Subaccount of the
Separate Account. Income, if any, and any gains or
losses, realized or unrealized, from assets in each
Subaccount are credited to, or charged against, the
amount allocated to that Subaccount without regard
to income, gains, or losses in other Subaccounts.
Any amount charged against the investment base for
federal or state income taxes will be deducted from
that Subaccount. The assets of each Subaccount are
invested in shares of a corresponding Series Fund
portfolio. The value of a portfolio share is based
on the value of the assets of the portfolio
determined at the end of each Valuation Period in
accordance with applicable law.
TRANSFERS The Owner may transfer all or a portion of this
Policy's value in each Subaccount to other
Subaccounts or the Fixed Account. We reserve the
right to charge a $10 fee for each transfer in
excess of twelve per policy year. This charge will
be deducted from the funds transferred. A request
for a transfer must be made in a form satisfactory
to Us. The transfer will ordinarily take effect on
the first Valuation Date on or following the date
the request is received at Our Office.
ADDITION, DELETION OR We reserve the right to transfer assets of the
SUBSTITUTION OF Separate Account, which We determine to be
INVESTMENTS associated with the class of contracts to which this
Policy belongs, to another Separate Account. If this
type of transfer is made, the term "Separate
Account", as used in this Policy, shall then mean
the Separate Account to which the assets were
transferred. We also reserve the right to add,
delete, or substitute investments held by any
Subaccount.
We reserve the right, when permitted by law, to:
1. Deregister the Separate Account under the
Investment Company Act of 1940;
2. Manage the Separate Account under the direction
of a committee at any time;
3. Restrict or eliminate any voting privileges of
Owners or other persons who have voting
privileges as to the Separate Account;
4. Combine the Separate Account or any
Subaccount(s) with one or more other Separate
Accounts or Subaccounts;
5. Operate the Separate Account as a management
investment company;
6. Establish additional Subaccounts to invest in
either a new series of the Series Fund, or in
shares of another diversified, open-end
registered investment company; and
7. Fund additional classes of variable life
insurance contracts through the Separate
Account.
Page 12
<PAGE>
CHANGE OF We reserve the right to change the investment
INVESTMENT OBJECTIVE objective of a Subaccount. If required by law or
regulation, an investment objective of the Separate
Account, or of a Series Fund portfolio designated
for a Subaccount, will not be materially changed
unless a statement of the change is filed with and
approved by the appropriate insurance official of
the state of Our domicile or deemed approved in
accordance with such law or regulation. If required,
approval of or change of any investment objective
will be filed with the Insurance Department of the
state where this Policy is delivered.
UNIT VALUE Some of the policy values fluctuate with the
investment results of the Subaccounts. In order to
determine how investment results affect the policy
values, a unit value is determined for each
Subaccount. The unit value of each Subaccount was
originally established at $10 per unit. The unit
value may increase or decrease from one Valuation
Period to the next. Unit values also will vary
between Subaccounts. The unit value of any
Subaccount at the end of a Valuation Period is the
result of:
1. The total value of the assets held in the
Subaccount. This value is determined by
multiplying the number of shares of the
designated Series Fund portfolio owned by the
Subaccount times the net asset value per share;
minus
2. A charge equal to the daily net assets of the
Sub-Account multiplied by the daily equivalent
of the Daily Charge. The maximum annual factor
for the Daily Charge is shown on the Policy
Schedule page; minus
3. The accrued amount of reserve for any taxes or
other economic burden resulting from the
application of tax laws that are determined by
Us to be properly attributable to the
Subaccount; and the result divided by
4. The number of outstanding units in the
Subaccount.
The use of the unit value in determining contract
values is described in the Policy Value Provisions.
POLICY VALUE PROVISIONS
================================================================================
ALLOCATION OF The premium will be allocated to the Accounts on the
PREMIUM first Valuation Date on or following the date the
premium is received at Our Office; except
any premium or portion of premium received prior to
the Policy Date will be allocated on the first
Valuation Date on or following the Policy Date. Any
premium received prior to the Reallocation Date will
be allocated to the Reallocation Account. On the
first Valuation Date on or following the
Reallocation Date, the values in the Reallocation
Account will be transferred in accordance with the
Owners' current allocation premium instructions.
Page 13
<PAGE>
We reserve the right to limit any allocation to any
Account to no less than 1%. No fractional
percentages may be permitted. The allocation may be
changed by the Owners. The request for change of
allocations must be in a form satisfactory to Us.
The allocation change will be effective on the date
the request for change is recorded by Us.
MONTHLY On the Policy Date and on each Monthiversary
DEDUCTIONS thereafter, a monthly deduction for this Policy will
be made from the Policy's Cash Value in an
amount equal to the sum of the following:
1. The Monthly Policy Charge based on the assets of
the Separate Account; plus
2. The Monthly Policy Charge based upon the assets
of the Fixed Account; plus
3. The Monthly Cost of Insurance Charge for this
Policy, if any; plus
4. The Monthly Charge for benefits provided by
Riders attached to this Policy, if any.
Deductions will be withdrawn from each Account in
accordance with the Owners' current premium
allocation. If the value of any Account is
insufficient to pay its part of the monthly
deduction, the monthly deduction will be taken on a
pro rata basis from all Accounts.
MONTHLY POLICY The Monthly Policy Charge applicable to the Separate
CHARGE Account is equal to:
1. The Separate Account Monthly Deduction Charge
divided by 12; multiplied by
2. The sum of the Subaccount Values on the Valuation
Date of each monthly deduction.
The Monthly Policy Charge applicable to the Fixed
Account is equal to:
1. The Fixed Account Monthly Deduction Charge
divided by 12; multiplied by
2. The Fixed Account value on the Valuation Date of
each monthly deduction, minus any outstanding
loans.
The Separate Account and Fixed Account Monthly
Deduction Charges are shown on the Policy Schedule
page.
MONTHLY COST OF We reserve the right to impose a maximum Monthly
INSURANCE Cost of Insurance Charge. This charge may not exceed
the death benefit minus the Cash Value, and the
difference multiplied by the appropriate monthly
cost of insurance rate.
Currently we do not impose this charge. Should this
charge be imposed in the future, all future Deferred
Surrender Charges will be waived.
Page 14
<PAGE>
MONTHLY COST OF INSURANCE The Guaranteed Maximum Monthly cost of insurance
RATES rates are based on the sex, Attained Age, plan
of insurance and rating class of the person(s)
insured. Any change in the current cost of insurance
rates will not exceed those shown in the Table of
Guaranteed Maximum Life Insurance Rates.
SUBACCOUNT At the end of any Valuation Period, the Subaccount
VALUE value is equal to the number of units that the
Policy has in the Subaccount, multiplied by the
unit value of that Subaccount.
The number of units that the Policy has in each
Subaccount is equal to:
1. The initial units purchased on the Policy Date;
plus
2. Units purchased as a result of any additional
premiums; plus
3. Units purchased through transfers from another
Account; minus
4. Those units that are redeemed to pay for monthly
deductions as they are due; minus
5. Any units that are redeemed to pay for cash
withdrawals; minus
6. Any units that are redeemed as part of a transfer
to another Account.
FIXED ACCOUNT At the end of any Valuation Period, the Fixed
VALUE Account value is equal to:
1. The premiums allocated to the Fixed Account; plus
2. Any amounts transferred from a Subaccount to the
Fixed Account; plus
3. Total interest credited to the Fixed Account;
minus
4. Any amounts charged to pay for monthly deductions
as they are due; minus
5. Any amounts withdrawn from the Fixed Account to
pay for cash with-drawals; minus
6. Any amounts transferred from the Fixed Account to
a Subaccount.
Interest on the Fixed Account will be compounded
daily at a minimum guaranteed effective annual
interest rate of 3% per year. We may declare from
time to time various higher current interest rates.
Each payment or transfer to the Fixed Account will
be credited with the current interest rate at the
time of payment or transfer. In declaring any higher
rates to be applied to any Fixed Account values, We
may include an expense charge of up to 1% per year,
however, in no event will any net effective annual
interest rate be less than 3%.
On transfers from the Fixed Account to a Subaccount,
We reserve the right to impose the following
limitations:
1. Written Notice be received by Us within 30 days
after an Anniversary.
2. The transfer will take place on the date We
receive such Written Notice.
3. The maximum amount that may be transferred is
the greater of (a) 25% of the amount in the
Fixed Account; or (b) the amount transferred in
the prior policy year from the Fixed Account.
Page 15
<PAGE>
We further reserve the right to defer payment of any
amounts from the Fixed Account for no longer than
six months after We receive such Written Notice.
CASH VALUE At the end of any Valuation Period, the Cash Value
of the Policy is equal to the sum of the Subaccount
values plus the Fixed Account value.
SURRENDER While this Policy is In Force, the Owners may
surrender this Policy for the Net Surrender Value.
Payment will usually be made within seven days of
Written Notice, subject to the Policy Payment
section of the General Provisions.
NET SURRENDER The Net Surrender Value is the amount payable upon
VALUE surrender of this Policy. The Net Surrender Value as
of any date is equal to:
1. the Cash Value as of such date; minus
2. any Surrender Charge as of such date; minus
3. any outstanding policy loan; minus
4. any accrued loan interest.
SURRENDER During the first 9 policy years, a Surrender Charge
CHARGE will be incurred upon surrender of this Policy. This
charge will be based upon the Deferred Surrender
Charges shown on the Policy Schedule page.
WITHDRAWALS Cash withdrawals may be made any time after the
first policy year and while this Policy is In Force.
Only one withdrawal is allowed during any 12 month
period. The maximum amount of withdrawal is:
1. the Cash Value as of the date of withdrawal;
minus
2. the total premium paid; minus
3. any outstanding policy loans plus accrued loan
interest.
When a withdrawal is made, the Cash Value will be
reduced by the amount of the withdrawal. The
Specified Amount will also be reduced by an amount
equal to:
1. the initial Specified Amount; divided by
2. the Initial Premium; times
3. the amount of the withdrawal.
In no event will any withdrawal reduce the Specified
Amount below $1,000.
Page 16
<PAGE>
The Accounts from which the withdrawal will be made
may be specified in the Written Notice. If no
Account is specified, the withdrawal amount will be
withdrawn from each Account in accordance with the
Owners' current allocation instructions. Payment
will usually be made within seven days of Written
Notice, subject to the Policy Payment section of the
General Provisions of this Policy.
CONTINUATION OF Subject to the Grace Period section of the Premium
INSURANCE Provisions, insurance coverage under this Policy
will be continued In Force until the Net Surrender
Value is insufficient to cover the monthly
deductions. This provision shall not continue this
Policy beyond the Maturity Date shown on the Policy
Schedule page.
INSUFFICIENT If the Net Surrender Value on any Monthiversary is
VALUE not sufficient to cover the monthly deductions then
due, this Policy shall terminate subject to the
Grace Period section of the Premium Provisions.
BASIS OF Policy values and reserves are at least equal to
COMPUTATIONS those required by law. A detailed statement of the
method of computation of values and reserves has
been filed with the insurance department of the
state in which this Policy was delivered.
POLICY LOANS During the continuance of this Policy, the Owners
can borrow against this Policy an amount which is
not greater than 90% of the Cash Value, minus:
1. any Surrender Charge as of such date; minus
2. any outstanding policy loan; minus
3. any accrued policy loan interest.
The amount of any policy loan may be limited to no
less than $500, except as noted below.
When a loan is made, an amount equal to the loan
will be withdrawn from the Accounts and transferred
to the loan reserve. The loan reserve is a portion
of the Fixed Account used as collateral for any
policy loan. The Owners may specify the Account or
Accounts from which the withdrawal will be made. If
no Account is specified, the withdrawal will be made
from each Account in accordance with the Owners'
current premium allocation instructions.
While this Policy is In Force, any loan may be
repaid.
Interest on any loan will be at the maximum policy
loan rate of 6% payable in arrears. We reserve the
right to charge a lower loan rate on all or a
portion of any loan. Interest is due at each
Anniversary. Interest not paid when due will be
added to the loan on each Anniversary.
Page 17
<PAGE>
At each Anniversary, We will compare the amount of
the outstanding loan to the amount in the loan
reserve. We will also make this comparison anytime
the Owners repay all or part of the loan. At each
such time, if the amount of the outstanding loan
exceeds the amount in the loan reserve, We will
withdraw the difference from the Accounts and
transfer it to the loan reserve, in the same fashion
as when a loan is made. If the amount in the loan
reserve exceeds the amount of the outstanding loan,
We will withdraw the difference from the loan
reserve and transfer it to the Accounts in
accordance with the Owners' current allocation
instructions. However, We reserve the right to
require the transfer to the Fixed Account if such
loans were originally transferred from the Fixed
Account.
POLICY SPLIT OPTION
================================================================================
SPLIT OPTION Subject to our evidence of insurability
requirements, the Owners may request to split this
Policy, not including any Riders, and purchase two
permanent individual fixed account life insurance
policies offered by Us at the time of the request,
one on the life of each Joint Insured. The Owners
may request this Split Option by notifying Us at Our
Office in writing within 90 days following either:
1. The later of the enactment or the effective date
of a change in the federal estate tax laws that
would reduce or eliminate the unlimited marital
deduction; or
2. The date of entry of a final decree of divorce
with respect to the Joint Insureds; or
3. Written confirmation of a dissolution of a
business partnership of which the partners are
the Joint Insureds.
If more than one person owns this Policy, each Owner
must agree to the split.
SPECIFIED AMOUNT The initial Specified Amount for each new policy
cannot be greater than 50% of this Policy's
Specified Amount, not including the face amount of
any Riders.
CASH VALUE Cash value and indebtedness under this Policy will
be allocated equally to each of the new policies. If
one Joint Insured does not meet our insurability
requirements, We will pay the Owner one half of this
Policy's Net Surrender Value and issue only the
policy covering that Joint Insured who meets our
insurability requirements; or, the Owner may elect
to keep this Policy In Force on both Joint Insureds
and no new policies will be issued.
Page 18
<PAGE>
ISSUE LIMITS AND PREMIUM The new policies will be subject to our minimum and
RATE CLASSIFICATION maximum specified amounts and issue ages for the
plan of insurance selected.
If one of the Joint Insureds is older than the new
policy's maximum Issue Age at the time the Split
Option is requested, Our approval must be obtained
to exercise this Split Option.
PREMIUMS The premiums for the new policies wil be based on
each Joint Insured's Attained Age and premium rate
class as determined by current evidence of
insurability. Premiums are payable as of the policy
dates for each new policy.
POLICY DATE The policy date for each new policy will be the
Monthiversary following notification to Us to
execute this Split Option.
OWNER/BENEFICIARY The Owner and Beneficiary for the new policies will
be those named in this Policy, unless otherwise
specified.
Page 19
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
Home Office: Columbus, Ohio
Administrative Office:
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499
----------------------------------------------------------------------
Joint Survivorship Modified Single Premium Variable Life Insurance Policy
Death Benefit Proceeds Payable at Death of Surviving Insured Prior
to Maturity Date
Net Surrender Value Payable at Maturity Date
Non-Participating - No Dividends
Some Benefits Reflect Investment Results
