As filed with the Securities and Exchange Commission on July 12, 1999
Registration No. _______________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. ( )
POST-EFFECTIVE AMENDMENT NO. ( )
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 69 (X)
(Check appropriate box or boxes)
WRL SERIES ANNUITY ACCOUNT
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(Exact Name of Registrant)
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
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(Name of Depositor)
570 Carillon Parkway
St. Petersburg, Florida 33716
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(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code:
(727) 299-1800
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Thomas E. Pierpan, Esq.
Vice President, Assistant Vice President and Associate General Counsel
Western Reserve Life Assurance Co. of Ohio
570 Carillon Parkway
St. Petersburg, Florida 33716
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(Name and Address of Agent for Service)
Copy to:
Stephen E. Roth, Esq.
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2415
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Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the Registration Statement.
Title of securities being registered: Units of interest in the separate account
under flexible payment deferred variable annuity contracts.
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.
<PAGE>
PART A
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INFORMATION REQUIRED IN A PROSPECTUS
<PAGE>
WRL FREEDOM PREMIER(SM)
VARIABLE ANNUITY
Issued Through
WRL SERIES ANNUITY ACCOUNT
By
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
PROSPECTUS
, 1999
This prospectus gives you important information about the WRL Freedom
Premier,(SM) a flexible payment variable annuity. Please read this prospectus
and the fund prospectus before you invest and keep them for future reference.
This Contract is available to individuals as well as to certain groups and
individual retirement plans.
You can put your money into 24 investment choices: a fixed account and 23
subaccounts of the WRL Series Annuity Account. Money you put in a subaccount is
invested exclusively in a single mutual fund portfolio. Your investments in the
portfolios are NOT guaranteed. You could lose your money. Money you direct into
the fixed account earns interest at a rate guaranteed by Western Reserve.
The 23 portfolios we currently offer through the subaccounts under this
Contract are:
WRL SERIES FUND, INC.
<TABLE>
<S> <C>
WRL Janus Growth WRL Dean Asset Allocation
WRL Janus Global WRL C.A.S.E. Growth
WRL Alger Aggressive Growth WRL GE/Scottish Equitable International Equity
WRL VKAM Emerging Growth WRL GE U.S. Equity
WRL AEGON Balanced WRL Goldman Sachs Growth
WRL AEGON Bond WRL Goldman Sachs Small Cap
WRL LKCM Strategic Total Return WRL T. Rowe Price Dividend Growth
WRL Federated Growth & Income WRL T. Rowe Price Small Cap
WRL J.P. Morgan Money Market WRL Salomon All Cap
WRL J.P. Morgan Real Estate Securities WRL Pilgrim Baxter Mid Cap Growth
WRL Third Avenue Value WRL Dreyfus Mid Cap
WRL NWQ Value Equity
</TABLE>
If you would like more information about the WRL Freedom Premier,(SM) you
can obtain a free copy of the Statement of Additional Information (SAI) dated
, 1999. Please call us at 1-800-851-9777 or write us at: Western Reserve,
P.O. Box 9051, Clearwater, Florida 33758-9051. A registration statement,
including the SAI, has been filed with the Securities and Exchange Commission
(SEC) and is incorporated herein by reference. The SEC maintains a web site
(http://www.sec.gov) that contains the prospectus, the SAI, material
incorporated by reference and other information. The table of contents of the
SAI is included at the end of this prospectus.
PLEASE NOTE THAT THE CONTRACT AND THE FUND:
/bullet/ ARE NOT BANK DEPOSITS
/bullet/ ARE NOT FEDERALLY INSURED
/bullet/ ARE NOT ENDORSED BY ANY BANK OR GOVERNMENT AGENCY
/bullet/ ARE NOT GUARANTEED TO ACHIEVE THEIR GOAL
/bullet/ INVOLVE RISKS, INCLUDING POSSIBLE LOSS OF PREMIUM
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<S> <C>
DEFINITIONS OF SPECIAL TERMS ................................
SUMMARY .....................................................
ANNUITY CONTRACT FEE TABLE ..................................
EXAMPLES ....................................................
1. THE ANNUITY CONTRACT ..................................
Other Contracts .....................................
2. ANNUITY PAYMENTS (THE INCOME PHASE) ...................
The Contract ........................................
Annuity Payment Options Under the Contract ..........
Fixed Annuity Options ...............................
Variable Annuity Options ............................
Guaranteed Minimum Income Benefit Rider .............
3. PURCHASE ..............................................
Contract Issue Requirements .........................
Premium Payments ....................................
Initial Premium Requirements ........................
Additional Premium Payments .........................
Maximum Annual Premium Payments .....................
Allocation of Premium Payments ......................
Reallocation Account ................................
Annuity Value .......................................
Accumulation Units ..................................
4. INVESTMENT CHOICES ....................................
The Separate Account ................................
The Fixed Account ...................................
Transfers ...........................................
Dollar Cost Averaging Program .......................
Asset Rebalancing Program ...........................
Telephone or Fax Transactions .......................
Third Party Investment Services .....................
5. EXPENSES ..............................................
Mortality and Expense Risk Charge ...................
Administrative Charge ...............................
Guaranteed Minimum Income Benefit Rider Charge ......
Separate Account Annuitization Charge ...............
Annual Contract Charge ..............................
Transfer Charge .....................................
Loan Processing Fee .................................
Premium Taxes .......................................
Federal, State and Local Taxes ......................
Surrender Charge ....................................
Portfolio Management Fees ...........................
Reduced Charges and Expenses to Employees ...........
</TABLE>
i
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<TABLE>
<S> <C>
6. TAXES ..............................................................
Annuity Contracts in General .....................................
Qualified and Nonqualified Contracts .............................
Partial and Complete Surrenders -- Nonqualified Contracts ........
Multiple Contracts ...............................................
Diversification and Distribution Requirements ....................
Qualified Contracts ..............................................
Partial Surrenders -- 403(b) Contracts ...........................
Partial and Complete Surrenders ..................................
Taxation of Death Benefit Proceeds ...............................
Annuity Payments .................................................
Transfers, Assignments or Exchanges of Contracts .................
Possible Tax Law Changes .........................................
7. ACCESS TO YOUR MONEY ...............................................
Partial and Complete Surrenders ..................................
Delay of Payment and Transfers ...................................
Systematic Partial Surrenders ....................................
Contract Loans For Qualified Contracts ...........................
8. PERFORMANCE ........................................................
9. DEATH BENEFIT ......................................................
When We Pay A Death Benefit ......................................
When We Do Not Pay A Death Benefit ...............................
Amount of Standard Death Benefit .................................
Compounding Minimum Death Benefit ................................
Effect of Adjusted Partial Surrender on Certain Death Benefits ...
Alternate Payment Elections ......................................
10. OTHER INFORMATION ..................................................
Ownership ........................................................
Assignment .......................................................
Western Reserve Life Assurance Co. of Ohio .......................
The Separate Account .............................................
Voting Rights ....................................................
Distribution of the Contracts ....................................
Non-Participating Contract .......................................
Variations in Contract Provisions ................................
Year 2000 Readiness Disclosure ...................................
IMSA .............................................................
Legal Proceedings ................................................
Financial Statements .............................................
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION .............
APPENDIX A -- CONDENSED FINANCIAL INFORMATION ............................
APPENDIX B -- HISTORICAL PERFORMANCE DATA ................................
</TABLE>
ii
<PAGE>
DEFINITIONS OF SPECIAL TERMS
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<TABLE>
<S> <C>
accumulation The period between the Contract date and the maturity date while the
period Contract is in force.
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accumulation An accounting unit of measure used to calculate subaccount values during the
unit value accumulation period.
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annuitant The person named in the application, or as subsequently changed, to receive
annuity payments. The annuitant may be changed as provided in the
Contract's death benefit provisions and annuity provision.
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annuity value The sum of the separate account value and the fixed account value.
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annuity unit An accounting unit of measure used to calculate annuity payments from the
value subaccounts after the maturity date.
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age The issue age is the annuitant's age on his/her birthday immediately preced-
ing the Contract date. Attained age is the issue age plus the number of
completed Contract years. When we use the term "age" in this prospectus, it
has the same meaning as "attained age."
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beneficiary(ies) The person(s) entitled to receive the death benefit proceeds under the Contract.
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cash value The annuity value less any applicable premium taxes and any surrender charge.
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Code The Internal Revenue Code of 1986, as amended.
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Contract date The later of the date on which the initial premium payment is received and the
date that the properly completed application is received at Western Reserve's
administrative office. It is also the date when, depending on your state of
residence, we allocate your premium payment(s) either to the reallocation
account or to the fixed account and the subaccounts you selected on your
application. We measure Monthiversaries, Contract years and Contract an-
niversaries from the Contract date.
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fixed account An allocation option under the Contract, other than the separate account, that
provides for accumulation of premium payments, and options for annuity
payments on a fixed basis. The fixed account may not be available in all states.
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fixed account During the accumulation period, a Contract's value allocated to the fixed
value account.
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fund WRL Series Fund, Inc., an investment company which is registered with the
U.S. Securities and Exchange Commission. We reserve the right to add other
registered investment companies to the Contract in the future.
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in force Condition under which the Contract is active and the owner is entitled to
exercise all rights under the Contract.
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maturity date The date on which the accumulation period ends and annuity payments begin.
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Monthiversary The same day in the month as the Contract date. When there is no date in a
calendar month that coincides with the Contract date, the Monthiversary is the
first day of the next month.
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NYSE New York Stock Exchange.
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</TABLE>
1
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<TABLE>
<S> <C>
nonqualified Contracts issued other than in connection with retirement plans. Nonqualified
Contracts Contracts do not qualify for special federal income tax treatment under the
Code.
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owner (you, The person(s) entitled to exercise all rights under the Contract. The annuitant is
your) the owner unless the application states otherwise, or unless a change of
ownership is made at a later time.
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portfolio A separate investment portfolio of the fund.
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premium Amounts paid by an owner or on the owner's behalf to Western Reserve as
payments consideration for the benefits provided by the Contract. When we use the term
"premium payment" in this prospectus, it has the same meaning as "net
premium payment" in the Contract, which means the premium payment less
any applicable premium taxes.
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qualified Contracts issued in connection with retirement plans that qualify for special
Contracts federal income tax treatment under the Code.
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reallocation The fixed account or the WRL J.P. Morgan Money Market subaccount, as
account indicated on the schedule page of your Contract.
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reallocation date The date shown on the schedule page of your Contract when we reallocate all
annuity value held in the reallocation account to the fixed account and
subaccounts you selected. 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
Contract date.
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separate account WRL Series Annuity Account, a separate account composed of subaccounts
established to receive and invest premium payments not allocated to the fixed
account.
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separate account During the accumulation period, a Contract's value in the separate account,
value which equals the total value in each subaccount during the accumulation period.
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subaccount A subdivision of the separate account that invests exclusively in the shares of a
specified portfolio and supports the Contracts. Subaccounts corresponding to
each applicable portfolio hold assets under the Contract during the accumula-
tion period. Other subaccounts corresponding to each applicable portfolio will
hold assets after the maturity date if a variable annuity option is selected.
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surrender The termination of a Contract at the option of the owner.
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valuation date Each day on which the NYSE is open for trading, except when a subaccount's
corresponding portfolio does not value its shares. Western Reserve is open for
business on each day that the NYSE is open.
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valuation period The period of time over which we determine the change in the value of the
subaccounts in order to price accumulation units and annuity units. Each
valuation period begins at the close of normal trading on the NYSE (currently
4:00 p.m. Eastern time on each valuation date) and ends at the close of normal
trading of the NYSE on the next valuation date.
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</TABLE>
2
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SUMMARY
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THE SECTIONS IN THIS SUMMARY CORRESPOND TO SECTIONS IN THIS PROSPECTUS,
WHICH DISCUSS THE TOPICS IN MORE DETAIL. PLEASE READ THE ENTIRE PROSPECTUS
CAREFULLY.
1. THE ANNUITY CONTRACT
The WRL Freedom Premier(SM) is a flexible premium variable annuity contract
(the "Contract") offered by Western Reserve Life Assurance Co. of Ohio (Western
Reserve, we, us). It is a contract between you, as the owner, and Western
Reserve, a life insurance company. The Contract provides a way for you to
invest on a tax-deferred basis in the subaccounts of the separate account and
the fixed account. We intend the Contract to be used to accumulate money for
retirement or other long-term investment purposes.
The Contract allows you to direct your money into any of the 23
subaccounts. Each subaccount invests exclusively in a single portfolio of the
fund. The money you invest in the subaccounts will fluctuate daily based on the
portfolio's investment results. The value of your investment in the subaccounts
is not guaranteed and may increase or decrease. You bear the investment risk
for amounts you invest in the subaccounts.
You can also direct money to the fixed account. Amounts in the fixed
account earn interest annually at a fixed rate that is guaranteed by us never
to be less than 3%, and may be more. We guarantee the interest, as well as
principal, on money placed in the fixed account.
You can transfer money between any of the investment choices during the
accumulation period, subject to the limit on transfers from the fixed account.
The Contract also allows you to select a compounding minimum death benefit
(see page ) and a Guaranteed Minimum Income Benefit Rider (see page ).
The Contract, like all deferred annuity contracts, has two phases: the
"accumulation period" and the "income phase." During the accumulation period,
earnings accumulate on a tax-deferred basis and are taxed as income when you
take them out of the Contract. The income phase starts on the maturity date
when you begin receiving regular payments from your Contract. The money you can
accumulate during the accumulation period, as well as the Contract's annuity
payment option you choose, will determine the amount of any income payments you
receive during the income phase.
2. ANNUITY PAYMENTS (THE INCOME PHASE)
The Contract allows you to receive income under one of five annuity
payment options. You may choose from fixed payment options or variable payment
options. If you select a variable payment option, the dollar amount of the
payments you receive may go up or down depending on the investment results of
the portfolios you invest in at that time.
3
<PAGE>
3. PURCHASE
You can buy this Contract with $5,000 ($1,000 for traditional or Roth IRAs
and $50 for other qualified Contracts) under most circumstances. You can add as
little as $50 at any time during the accumulation period.
4. INVESTMENT CHOICES
You can invest your money in any of the 23 fund portfolios by directing it
to the corresponding subaccount. The portfolios are described in the fund
prospectus. The portfolios now available to you under the Contract are:
<TABLE>
<S> <C>
[ ] WRL Janus Growth [ ] WRL Dean Asset Allocation
[ ] WRL Janus Global [ ] WRL C.A.S.E. Growth
[ ] WRL Alger Aggressive Growth [ ] WRL GE/Scottish Equitable
[ ] WRL VKAM Emerging Growth International Equity
[ ] WRL AEGON Balanced [ ] WRL GE U.S. Equity
[ ] WRL AEGON Bond [ ] WRL Goldman Sachs Growth
[ ] WRL LKCM Strategic Total Return [ ] WRL Goldman Sachs Small Cap
[ ] WRL Federated Growth & Income [ ] WRL T. Rowe Price Dividend Growth
[ ] WRL J.P. Morgan Money Market [ ] WRL T. Rowe Price Small Cap
[ ] WRL J.P. Morgan Real Estate Securities [ ] WRL Salomon All Cap
[ ] WRL Third Avenue Value [ ] WRL Pilgrim Baxter Mid Cap Growth
[ ] WRL NWQ Value Equity [ ] WRL Dreyfus Mid Cap
</TABLE>
Depending upon market conditions, you can make or lose money in any of
these subaccounts. We reserve the right to offer other investment choices in
the future.
You can also allocate your premium payments to the fixed account.
5. EXPENSES
We do not take any deductions from premium payments at the time you buy
the Contract. You invest the full amount of each premium payment in one or more
of the investment choices.
We deduct a daily mortality and expense risk charge of 1.00% (1.25% if you
select the compounding minimum death benefit) and an administrative charge of
0.40% each year from the money you have invested in the subaccounts.
During the accumulation period, we deduct an annual Contract charge of $30
from the annuity value on each Contract anniversary and at the time of
surrender. We currently waive this charge if either your annuity value, or the
total premiums you have paid us, minus all partial surrenders, equals or
exceeds $50,000 on the Contract anniversary when this charge is payable.
We impose a $10 charge per transfer if you make more than 12 transfers
among the subaccounts per Contract year.
4
<PAGE>
We will deduct state premium taxes, which currently range from 0% to
3.50%, if you surrender the Contract, or partially surrender its value, or if
we pay out death benefit proceeds, or if you begin to receive regular annuity
payments. We only charge you premium taxes in those states that require us to
pay premium taxes.
If you make a partial surrender or fully surrender your Contract, we will
deduct a surrender charge for premium payments surrendered within seven years
after we receive the premium payment. This charge is 7% if the surrender occurs
within 24 months or less of our receipt of the premium payment, and then
declines gradually to 6% -- 25 through 36 months; 5% -- 37 through 48 months;
4% -- 49 through 60 months; 3% -- 61 through 72 months; 2% -- 73 through 84
months; and no surrender charge -- 85 months or more.
When we calculate surrender charges, we treat partial surrenders as coming
first from the oldest premium payment, then the next oldest and so forth. For
partial surrenders or systematic partial surrenders you make in any Contract
year, we may waive all or a portion of the surrender charge on partial
surrenders up to the maximum free amount. Partial surrenders in excess of the
maximum free amount will be subject to a surrender charge. We will deduct the
full surrender charge if you surrender your Contract completely. We waive this
charge under certain circumstances. See Expenses -- Surrender Charge for how we
calculate the surrender charge waived.
The portfolios deduct investment fees and expenses from amounts you have
invested in the portfolios. These charges range from 0.46% to 1.50% annually,
depending on the portfolio. See the fund prospectus and the Annuity Contract
Fee Table in this prospectus.
If you select the Guaranteed Minimum Income Benefit Rider, there is an
annual fee during the accumulation phase of 0.30% of the minimum annuitization
value which we deduct from your annuity value on each Contract anniversary and
on the termination date of the Rider. If you annuitize under the Rider, we will
assess a daily separate account annuitization charge at an annual rate of 2.50%
of the daily net assets in the subaccounts; this charge will be reflected in
your variable payments. The separate account annuitization charge is paid in
place of the mortality and expense risk charge and the administrative charge.
6. TAXES
The Contract's earnings are generally not taxed until you take them out.
For federal tax purposes, if you take money out during the accumulation period,
earnings come out first and are taxed as ordinary income. If you are younger
than 59-1/2 when you take money out, you may be charged a 10% federal penalty
tax on the earnings. The annuity payments you receive during the income phase
are considered partly a return of your original investment so that part of each
payment is not taxable as income until the "investment in the contract" has
been fully recovered. Different tax consequences may apply for a Contract used
in connection with a qualified plan.
7. ACCESS TO YOUR MONEY
You can take some or all of your money out anytime during the accumulation
period. However, you may not take a partial surrender if it reduces the cash
value below $5,000.
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No partial surrenders may be made from the fixed account without prior consent
from us. For qualified Contracts issued under Code Section 403(b), certain
restrictions will apply. Surrender charges may apply. You may also have to pay
federal income tax and a penalty tax on any money you take out.
Partial surrenders may reduce the death benefit (and certain values under
the Guaranteed Minimum Income Benefit Rider) by more than the amount withdrawn.
8. PERFORMANCE
The value of your Contract will vary up or down depending upon the
investment performance of the subaccounts you choose and will be reduced by
Contract fees and charges. We provide performance information in Appendix B and
in the SAI. Past performance does not guarantee future results.
9. DEATH BENEFIT
If you are both the owner and the annuitant and you die before the income
phase begins, your beneficiary will receive a death benefit.
If you name different persons as owner and annuitant, you can affect
whether the death benefit is payable and who will receive it. Use care when
naming owners, annuitants and beneficiaries, and consult your agent if you have
questions.
The death benefit will be the greatest of:
/bullet/ the annuity value of your Contract on the date we receive proof
of death and your beneficiary's election regarding payment;
/bullet/ the total premium payments you make to the Contract (less partial
surrenders);
/bullet/ the monthly step-up; or
/bullet/ if selected, the compounding minimum death benefit.
10. OTHER INFORMATION
RIGHT TO CANCEL PERIOD. You may return your Contract for a refund within
10 days after you receive it. In most states, the amount of the refund will be
the total premium payments we have received, plus (or minus) any gains (or
losses) in the amounts you invested in the subaccounts. If state law requires,
we will refund your original premium payment(s). In those states, we will place
your premium payment(s) in the reallocation account until the reallocation
date. We determine the value of the refund as of the date we receive the
returned Contract. We will pay the refund within 7 days after we receive your
written notice of cancellation and the returned Contract. The Contract will
then be deemed void. In some states you may have more than 10 days or receive a
different refund amount.
WHO SHOULD PURCHASE THE CONTRACT? We have designed this Contract for
people seeking long-term tax deferred accumulation of assets, generally for
retirement. This includes persons who have maximized their use of other
retirement savings methods, such as 401(k)
6
<PAGE>
plans and individual retirement accounts. The tax-deferred feature is most
attractive to people in high federal and state tax brackets. You should not buy
this Contract if you are looking for a short-term investment or if you cannot
take the risk of getting back less money than you put in.
ADDITIONAL FEATURES. This Contract has additional features that might
interest you. These include the following:
/bullet/ REDUCED MINIMUM INITIAL PREMIUM PAYMENT (FOR NONQUALIFIED
CONTRACTS) -- You may make a minimum initial premium payment of
$1,000, rather than $5,000, if you indicate on your application
that you anticipate making minimum monthly payments of at least
$100 by wire transfer.
/bullet/ SYSTEMATIC PARTIAL SURRENDERS -- You can arrange to have money
automatically sent to you while your Contract is in the
accumulation period. You may take systematic partial surrenders
monthly, quarterly, semi-annually or annually without paying
surrender charges. Amounts you receive may be included in your
gross income and, in certain circumstances, may be subject to
penalty taxes.
/bullet/ DOLLAR COST AVERAGING -- You can arrange to have a certain amount
of money automatically transferred monthly from one or any
combination of the fixed account, the WRL J.P. Morgan Money Market
or WRL AEGON Bond subaccounts to your choice of subaccounts.
Dollar cost averaging does not guarantee a profit and does not
protect against a loss if market prices decline.
/bullet/ ASSET REBALANCING -- We will, upon your request, automatically
transfer amounts periodically among the subaccounts on a regular
basis to maintain a desired allocation of the annuity value among
the various subaccounts.
/bullet/ TELEPHONE OR FAX TRANSACTIONS -- You may make transfers, partial
surrenders and/or change the allocation of additional premium
payments by telephone or fax.
/bullet/ NURSING CARE FACILITY WAIVER -- If you are confined to a nursing
care facility, you may take partial surrenders or surrender your
Contract completely without paying the surrender charge, under
certain circumstances.
/bullet/ MEDICALLY-RELATED SURRENDERS -- Under a terminal condition
endorsement, if certain medically-related circumstances occur,
we will allow you to fully or partially surrender your money
without a surrender charge.
/bullet/ CONTRACT LOANS -- If you own a qualified Contract, you can take
out Contract loans during the accumulation period, subject to
certain restrictions.
/bullet/ GUARANTEED MINIMUM INCOME BENEFIT RIDER -- You may add this Rider
for an additional charge. It assures you of a minimum level of
income in the future, provided you satisfy certain conditions and
annuitize under the options available in the Rider.
/bullet/ COMPOUNDING MINIMUM DEATH BENEFIT -- You may add this feature for
an additional charge. This feature ensures that any death benefit
payable on the death
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of the annuitant will be no less than total premium payments, plus
interest at an effective annual rate of 6% (in most states) from the
date of the premium payment to date of death, less any adjusted partial
surrender, including interest on the surrender at the same rate from the
date of partial surrender to the date of death, but interest is not
credited after your 81st birthday.
These features may not be available in all states and may not be suitable
for your particular situation.
Certain states place restrictions on access to the fixed account, on the
death benefit calculation and on other features of the Contract. Consult your
agent and the Contract for details.
11. INQUIRIES
If you need more information, please contact us at:
Western Reserve Life
Annuity Department
P.O. Box 9051
Clearwater, FL 33758-9051
1-800-851-9777
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ANNUITY CONTRACT FEE TABLE
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<TABLE>
<CAPTION>
OWNER TRANSACTION EXPENSES
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<S> <C>
Sales Load On Premium Payments .......... None
Maximum Surrender Charge(1)(2)
(as a % of premium payments) ......... 7%
Transfer Charge ......................... $10 After 12 Per Year
Loan Processing Fee(3) .................. $30 Per Loan
Guaranteed Minimum Income
Benefit Rider Charge during the
accumulation period
(optional)(4)(5) ..................... 0.30%
===============================================================
ANNUAL CONTRACT CHARGE(2)(6) ............ $30 Per Contract Year
</TABLE>
<TABLE>
<CAPTION>
SEPARATE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE DURING
THE ACCUMULATION PERIOD)
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<S> <C>
UNDER STANDARD DEATH BENEFIT:
Mortality and Expense Risk Charge(5) ......... 1.00%
Administrative Charge(5) ..................... 0.40%
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TOTAL SEPARATE ACCOUNT
ANNUAL EXPENSES ........................... 1.40%
WITH COMPOUNDING MINIMUM DEATH BENEFIT
ADDED:
Mortality and Expense Risk Charge(5) ......... 1.25%
Administrative Charge ........................ 0.40%
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TOTAL SEPARATE ACCOUNT ANNUAL
EXPENSES .................................. 1.65%
</TABLE>
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PORTFOLIO ANNUAL EXPENSES(7)
(as a percentage of average net assets and after expense reimbursements)
<TABLE>
<CAPTION>
TOTAL PORTFOLIO
MANAGEMENT ANNUAL
PORTFOLIO FEES OTHER EXPENSES EXPENSES
<S> <C> <C> <C>
WRL SERIES FUND, INC.(8)(9)
WRL Janus Growth(10) 0.78% 0.05% 0.83%
WRL Janus Global(11) 0.80% 0.15% 0.95%
WRL Alger Aggressive Growth 0.80% 0.11% 0.91%
WRL VKAM Emerging Growth 0.80% 0.09% 0.89%
WRL AEGON Balanced 0.80% 0.11% 0.91%
WRL AEGON Bond 0.45% 0.09% 0.54%
WRL LKCM Strategic Total Return 0.80% 0.06% 0.86%
WRL Federated Growth & Income 0.75% 0.15% 0.90%
WRL J.P. Morgan Money Market 0.40% 0.06% 0.46%
WRL J.P. Morgan Real Estate Securities(12) 0.80% 0.20% 1.00%
WRL Third Avenue Value 0.80% 0.20% 1.00%
WRL NWQ Value Equity 0.80% 0.09% 0.89%
WRL Dean Asset Allocation 0.80% 0.06% 0.86%
WRL C.A.S.E. Growth 0.80% 0.20% 1.00%
WRL GE/Scottish Equitable International Equity 1.00% 0.50% 1.50%
WRL GE U.S. Equity 0.80% 0.25% 1.05%
WRL Goldman Sachs Growth(13)(14) 0.90% 0.10% 1.00%
WRL Goldman Sachs Small Cap(13) 0.90% 0.10% 1.00%
WRL T. Rowe Price Dividend Growth(13)(14) 0.90% 0.10% 1.00%
WRL T. Rowe Price Small Cap(13) 0.75% 0.25% 1.00%
WRL Salomon All Cap(13)(14) 0.90% 0.10% 1.00%
WRL Pilgrim Baxter Mid Cap Growth(13)(14) 0.90% 0.10% 1.00%
WRL Dreyfus Mid Cap(13)(15) 0.85% 0.15% 1.00%
</TABLE>
9
<PAGE>
(1) The surrender charge decreases based on the number of years since each
premium payment was made, from 7% in the first two years after the premium
payment was made to 0% in the eighth year after the premium payment was
made. To calculate surrender charges, the first premium payment made is
considered to come out first. This charge is waived under certain
circumstances.
(2) We may reduce or waive the surrender charge and the annual Contract charge
for Contracts sold to groups of employees with the same employer,
including our directors, officers and full-time employees, or other groups
where sales to the group reduce our administrative expenses.
(3) Loans are available for qualified Contracts only.
(4) This Rider is optional. You may add this Rider when we issue the Contract,
or within each 30-day period following each Contract anniversary. If you
add it, we will impose during the accumulation period an annual Rider
charge equal to 0.30% of the minimum annuitization value on each Contract
anniversary and on the termination date of the Rider (which includes Rider
upgrades). We may change the Rider percentage in the future if you choose
to upgrade the minimum annuitization value, or for future issues of the
Rider, but the charge will never exceed 0.50% annually. If the annuity
value on any Contract anniversary exceeds the Rider fee threshold times
the minimum annuitization value, we will waive the Rider fee otherwise
payable on that Contract anniversary.
If you later choose to annuitize under this Rider, we will impose a daily
separate account annuitization charge equal to an annual rate of 2.50% of
the daily net asset values in the subaccounts in place of the mortality
and expense risk and administrative charges. We may change this charge in
the future if you choose to upgrade the minimum annuitization value, or
for future issues of the Rider, but it will never be greater than 3.50%.
(5) These charges apply to each subaccount. They do not apply to the fixed
account. The mortality and expense risk charge of 1.00% applies when you
have selected the standard death benefit. If you select the compounding
minimum death benefits, then the mortality and expense risk charge will
increase to 1.25%. These charges apply during the accumulation period.
After the maturity date, we will charge an annual separate account
annuitization charge of 1.40% in place of the mortality and expense risk
and administrative charges. If you select the Guaranteed Minimum Income
Benefit Rider, and you choose to annuitize under the Rider, then we will
impose a daily separate account annuitization charge equal to an annual
rate of 2.50% of the daily net asset values in the subaccounts, in place
of the mortality and expense risk and administrative charges.
(6) We currently waive this charge if either the annuity value, or the total
premium payments, minus all partial surrenders, equals or exceeds $50,000
on the Contract anniversary when the charge is payable.
(7) The fee table information relating to the portfolios is for 1998 and was
provided to Western Reserve by the fund. Western Reserve has not
independently verified such information.
(8) Effective January 1, 1997, the fund's Board authorized the fund to charge
each portfolio of the fund an annual Rule 12b-1 fee of up to 0.15% of each
portfolio's average daily net assets. However, the fund will not deduct
the fee from any portfolio before April 30, 2000. You will receive advance
written notice if a Rule 12b-1 fee is deducted. See the fund prospectus
for more details.
(9) WRL Investment Management, Inc. ("WRL Management"), the investment adviser
of the fund, has undertaken, until at least April 30, 2000, to pay
expenses on behalf of the portfolios of the fund, to the extent normal
total operating expenses of a portfolio exceed the following percentage of
a portfolio's average daily net assets: 0.70% for WRL AEGON Bond and WRL
J.P. Morgan Money Market; 1.00% for WRL Alger Aggressive Growth, WRL Janus
Growth, WRL Janus Global, WRL VKAM Emerging Growth, WRL LKCM Strategic
Total Return, WRL Federated Growth & Income, WRL J.P. Morgan Real Estate
Securities, WRL Third Avenue Value, WRL NWQ Value Equity, WRL Dean Asset
Allocation, WRL C.A.S.E. Growth, WRL Goldman Sachs Growth, WRL Goldman
Sachs Small Cap, WRL T. Rowe Price Small Cap, WRL T. Rowe Price Dividend
Growth, WRL Salomon All Cap, WRL Pilgrim Baxter Mid Cap Growth, WRL
Dreyfus Mid Cap, and WRL AEGON Balanced; 1.50% for WRL GE/Scottish
Equitable International Equity; and 1.30% for WRL GE U.S. Equity. In 1998,
WRL Management reimbursed WRL J.P. Morgan Real Estate Securities in the
amount of $28,275, WRL Third Avenue Value in the amount of $14,229 and WRL
GE/Scottish Equitable International Equity in the amount of $127,763.
Without such reimbursements, the total annual expenses during 1998 for WRL
J.P. Morgan Real Estate Securities, WRL
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Third Avenue Value and WRL GE/Scottish Equitable International Equity would
have been 3.34%, 1.13%, and 1.96%, respectively. See the fund prospectus
for a description of the expense limitations that apply to each portfolio
of the fund.
(10) WRL Janus Growth's advisory fee reflects 0.80% of the average daily net
assets for the period prior to May 1, 1998, and 0.775% of the first $3
billion of average daily net assets and 0.75% of the average daily net
assets in excess of $3 billion for the period May 1, 1998 to December 31,
1998. WRL Management currently waives 0.025% of its advisory fee for the
first $3 billion of the portfolio's average daily net assets (net fee --
0.775%); and 0.05% for the portfolio's average daily net assets above $3
billion (net fee -- 0.75%). This waiver is voluntary and may be terminated
at any time upon 90 days' written notice to the fund.
(11) For WRL Janus Global, WRL Management will waive 0.025% of its advisory fee
once portfolio average daily net assets reach $2 billion (net fee --
0.775%.) This waiver is voluntary and may be terminated at any time upon
90 days' written notice to the fund.
(12) Because WRL J.P. Morgan Real Estate Securities commenced operations on May
1, 1998, the percentages set forth as "Other Expenses" and "Total
Portfolio Annual Expenses" are annualized.
(13) Because WRL Goldman Sachs Growth, WRL Goldman Sachs Small Cap, WRL T. Rowe
Price Dividend Growth, WRL T. Rowe Price Small Cap, WRL Salmon All Cap,
WRL Pilgrim Baxter Mid Cap Growth and WRL Dreyfus Mid Cap commenced
operations on May 1, 1999, the percentages set forth as "Other Expenses"
and "Total Portfolio Annual Expenses" are estimates.
(14) As compensation for its services to the portfolios, WRL Management
receives monthly compensation at 0.90% for the first $100 million of the
portfolio's average daily net assets; and 0.80% for the portfolio's
average daily net assets above $100 million.
(15) As compensation for its services to the portfolios, WRL Management
receives monthly compensation at 0.85% for the first $100 million of the
portfolio's average daily net assets; and 0.80% for the portfolio's
average daily net assets above $100 million.
EXAMPLES
You would pay the following expenses on a $1,000 investment, assuming a
hypothetical 5% annual return on assets, and assuming the entire $1,000 is
invested in the subaccount listed.
The expenses reflect both mortality and expense risk and administrative
charges totaling 1.65% of account value (assuming that the compounding minimum
death benefit has been added) plus the the Guaranteed Minimum Income Benefit
Rider charge of 0.30% of minimum annuitization value (MAV).
11
<PAGE>
<TABLE>
<CAPTION>
IF THE CONTRACT IS ANNUITIZED* AT
IF THE CONTRACT IS SURRENDERED THE END OF THE APPLICABLE
AT THE END OF THE APPLICABLE TIME PERIOD OR IF THE CONTRACT
SUBACCOUNTS TIME PERIOD IS NOT SURRENDERED OR ANNUITIZED
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- --------- ---------- -------- --------- --------- ---------
WRL Janus Growth $ $ $ $ $ $ $ $
WRL Janus Global
WRL Alger Aggressive Growth
WRL VKAM Emerging Growth
WRL AEGON Balanced
WRL AEGON Bond
WRL LKCM Strategic Total Return
WRL Federated Growth & Income
WRL J.P. Morgan Money Market
WRL J.P. Morgan Real Estate Securities
WRL Third Avenue Value
WRL NWQ Value Equity
WRL Dean Asset Allocation
WRL C.A.S.E. Growth
WRL GE/Scottish Equitable
International Equity
WRL GE U.S. Equity
WRL Goldman Sachs Growth N/A N/A N/A N/A
WRL Goldman Sachs Small Cap N/A N/A N/A N/A
WRL T. Rowe Price Dividend Growth N/A N/A N/A N/A
WRL T. Rowe Price Small Cap N/A N/A N/A N/A
WRL Salomon All Cap N/A N/A N/A N/A
WRL Pilgrim Baxter Mid Cap Growth N/A N/A N/A N/A
WRL Dreyfus Mid Cap N/A N/A N/A N/A
</TABLE>
* You cannot annuitize your Contract before your Contract's fifth anniversary.
The tables above will help you understand the costs of investing in the
subaccounts. The table reflects the 1998 expenses of the portfolios and the
subaccount fees and charges. The "Other Expenses" and "Total Portfolio Annual
Expenses" for WRL J.P. Morgan Real Estate Securities, are annualized and for
the WRL Goldman Sachs Growth, WRL Goldman Sachs Small Cap, WRL T. Rowe Price
Dividend Growth, WRL T. Rowe Price Small Cap, WRL Salomon All Cap, WRL Pilgrim
Baxter Mid Cap Growth and WRL Dreyfus Mid Cap, are estimates. The tables do not
reflect premium taxes which may range up to 3.5%, depending on the
jurisdiction.
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES PAID MAY BE GREATER OR LESS THAN THOSE SHOWN. THE
ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND DOES NOT REPRESENT PAST OR FUTURE
ANNUAL RETURNS. ACTUAL RETURNS MAY BE GREATER OR LESS THAN THE ASSUMED RATE.
The examples above assume that no transfer charges have been assessed. In
addition, the $30 annual Contract charge is reflected as a charge of %,
based on an average annuity value of $ . The Guaranteed Minimum Income
Benefit Rider charge has been calculated assuming a Rider charge of 0.30% of
MAV and assuming an MAV annual growth rate of 6%.
We have included in Appendix A a financial history of the accumulation
unit values for the subaccounts that reflect the cost of the standard death
benefit (total separate account
12
<PAGE>
annual expenses of 1.40%). We will determine separate sets of accumulation unit
values that reflect the cost of the compounding minimum death benefit (total
separate account expenses of 1.65%).
1. THE ANNUITY CONTRACT
This prospectus describes the WRL Freedom Premier(SM) Variable Annuity
Contract offered by Western Reserve.
An annuity is a contract between you, the owner, and an insurance company
(in this case Western Reserve), where the insurance company promises to pay the
annuitant an income in the form of annuity payments. These payments begin after
the maturity date. (See Section 2.) Until the maturity date, your annuity is in
the accumulation period and the earnings are tax deferred. Tax deferral means
you generally are not taxed on your annuity until you take money out of your
annuity. After the maturity date, your annuity switches to the income phase.
The Contract is a flexible premium variable annuity. You can use the
Contract to accumulate funds for retirement or other long-term financial
planning purposes.
It is a "flexible premium" Contract because after you purchase it, you can
generally make additional investments of $50 or more, until the maturity date.
But you are not required to make any additional investments.
The Contract is a "variable" annuity because the value of your Contract
can go up or down based on the performance of your investment choices. If you
select the variable annuity portion of the Contract, the amount of money you
are able to accumulate in your Contract during the accumulation period depends
upon the performance of your investment choices. The amount of annuity payments
you receive during the income phase from the variable annuity portion of your
Contract also depends upon the investment performance of your investment
choices for the income phase.
The Contract also contains a fixed account. The fixed account offers an
interest rate that is guaranteed by Western Reserve to equal at least 3% per
year. There may be different interest rates for each payment or transfer you
direct to the fixed account which are greater than the guaranteed rate. The
interest rates we set will be credited for periods of at least one year
measured from each payment or transfer date.
Massachusetts, New Jersey, Oregon, Pennsylvania and Washington State
residents: The fixed account is NOT available to you. You may not direct any
money to the fixed account or transfer any money to the fixed account.
OTHER CONTRACTS
We offer other variable annuity contracts which also invest in the same
portfolios of the fund. These contracts may have different charges that could
affect subaccount performance, and may offer different benefits more suitable
to your needs. To obtain more information about these contracts, contact your
agent, or call us at 1-800-851-9777.
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<PAGE>
2. ANNUITY PAYMENTS (THE INCOME PHASE)
THE CONTRACT
You choose the date when annuity payments under the Contract start. This
is the maturity date. You can change this date by giving us 30 days written
notice. The maturity date cannot be earlier than the end of the fifth Contract
year. The maturity date cannot be later than the Contract month following the
month in which the annuitant reaches age 95. The maturity date may be earlier
for qualified Contracts.
ELECTION OF ANNUITY PAYMENT OPTION. Before the maturity date, if the
annuitant is alive, you may choose an annuity payment option or change your
option. If you do not choose an annuity option by the maturity date, we will
make payments under Option D (see below) as a Variable Life Income with 10
years of guaranteed payments. You cannot change the annuity payment option
after the maturity date.
If you choose a variable payment option, you must specify how you want the
annuity proceeds divided among the subaccounts as of the maturity date. If you
do not specify, we will allocate the annuity proceeds in the same proportion as
the annuity value is allocated among the investment options on the maturity
date. After the maturity date, you may make transfers among the subaccounts,
but you may not make transfers from or to the fixed account. During the income
phase, we may limit transfers to one per Contract year.
Unless you specify otherwise, the annuitant named on the application will
receive the annuity payments. You can change the annuitant or add a joint
annuitant at any time before the maturity date, so long as we agree. If you do
not choose an annuitant, we will consider you to be the annuitant.
If you have added the Guaranteed Minimum Income Benefit Rider to your
Contract and choose to annuitize under the Rider, then you must select one of
the annuity payment options contained in the Rider.
SUPPLEMENTAL CONTRACT. Once you annuitize and if you have selected a fixed
annuity payment option, the Contract will end and we will issue a supplemental
Contract to describe the terms of the option you selected. The supplemental
Contract will name who will receive the annuity payments and describe when the
annuity payments will be made.
ANNUITY PAYMENT OPTIONS UNDER THE CONTRACT
The Contract provides five annuity payment options that are described
below. You may choose any annuity payment option under your Contract. You can
choose to receive payments monthly, quarterly, semi-annually, or annually.
We will use your "annuity proceeds" to provide these payments. The
"annuity proceeds" is your annuity value on the maturity date, less any premium
tax that may apply. If your annuity payment would be less than $20, then we
will pay you the annuity proceeds in one lump sum.
14
<PAGE>
FIXED ANNUITY INCOME PAYMENTS. If you choose annuity payment Option A, B
or C, the dollar amount of each annuity payment will be fixed on the maturity
date and guaranteed by us. The payment amount will depend on three things:
/bullet/ The amount of the annuity proceeds on the maturity date;
/bullet/ The interest rate we credit on those amounts (we guarantee a
minimum annual interest rate of 3%); and
/bullet/ The specific payment option you choose.
VARIABLE ANNUITY INCOME PAYMENTS. If you choose variable annuity payment
Option D or E, the dollar amount of the first variable payment will be
determined in accordance with the annuity payment rates set forth in the
applicable table contained in the Contract. The dollar amount of each
additional variable payment will vary based on the investment performance of
the subaccount(s) you invest in and the Contract's assumed investment return of
5%. The dollar amount of each variable payment after the first may increase,
decrease or remain constant. If, after all charges are deducted, the actual
investment performance exactly matches the Contract's assumed investment return
of 5% at all times, then the dollar amount of the next variable annuity payment
will remain equal. If actual investment performance, after all charges are
deducted, exceeds the assumed investment return, then the amount of the
variable annuity payments would increase. But, if actual investment
performance, less charges, is lower than the 5% assumed investment return, then
the amount of the variable annuity payments would decrease. The portfolio in
which you are invested must grow at a rate at least equal to the 5% assumed
investment return (plus the mortality and expense risk and administrative
charges of 1.40% annually, or 1.65% if you select the compounding minimum death
benefit) in order to avoid a decrease in the dollar amount of variable annuity
payments. For more information on how variable annuity income payments are
determined, see the SAI.
The annuity payment options are explained below. Options A, B, and C are
fixed only. Options D and E are variable only.
FIXED ANNUITY OPTIONS
PAYMENT OPTION A -- FIXED INSTALLMENTS. We will pay the annuity in equal
payments over a fixed period of 5, 10, 15, or 20 years or any other fixed
period acceptable to Western Reserve.
PAYMENT OPTION B -- LIFE INCOME: FIXED PAYMENTS.
/bullet/ NO PERIOD CERTAIN -- We will make level payments only during
the annuitant's lifetime; or
/bullet/ 10 OR 20 YEARS CERTAIN -- We will make level payments for the
longer of the annuitant's lifetime or 10 or 20 years; or
/bullet/ GUARANTEED RETURN OF ANNUITY PROCEEDS -- We will make level
payments for the longer of the annuitant's lifetime or until the
total dollar amount of payments we made to you equals the
annuity proceeds.
PAYMENT OPTION C -- JOINT AND SURVIVOR LIFE INCOME: FIXED PAYMENTS. We
will make level payments during the joint lifetime of the annuitant and a
co-annuitant of your choice. Payments will be made as long as either person is
living.
15
<PAGE>
VARIABLE ANNUITY OPTIONS
PAYMENT OPTION D -- VARIABLE LIFE INCOME. The annuity proceeds are used to
purchase annuity units of the subaccounts you select. You may choose between:
/bullet/ NO PERIOD CERTAIN -- We will make variable payments only during
the annuitant's lifetime; or
/bullet/ 10 YEARS CERTAIN -- We will make variable payments for the
longer of the annuitant's lifetime or 10 years.
PAYMENT OPTION E -- VARIABLE JOINT AND SURVIVOR LIFE INCOME. We will make
variable payments during the joint lifetime of the annuitant and a co-annuitant
of your choice. Payments will be made as long as either person is living.
Other annuity payment options may be arranged by agreement with us.
NOTE CAREFULLY:
If:
/bullet/ you choose Life Income with No Period Certain or a Joint and
Survivor Life Income (fixed or variable); and
/bullet/ the annuitant(s) dies before the due date of the second annuity
payment;
Then:
/bullet/ we may make only one annuity payment.
If:
/bullet/ you choose Fixed Installments, Life Income with 10 or 20 Years
Certain, Life Income with Guaranteed Return of Annuity Proceeds,
or Variable Life Income with 10 Years Certain; and
/bullet/ the person receiving payments dies prior to the end of the
guaranteed period;
Then:
/bullet/ the remaining guaranteed payments will be continued to that
person's beneficiary, or their value (determined at the date of
death) may be paid in a single sum.
We will not pay interest on amounts represented by uncashed annuity
payment checks if the postal or other delivery service is unable to deliver
checks to the payee's address of record. The payee is responsible to keep
Western Reserve informed of the payee's current address of record.
16
<PAGE>
GUARANTEED MINIMUM INCOME BENEFIT RIDER
The Guaranteed Minimum Income Benefit Rider (the "Rider") assures you of a
minimum level of income in the future by guaranteeing a minimum annuitization
value (discussed below) after 10 years. You may elect to purchase this Rider,
which guarantees the total amount you will have to apply ("minimum
annuitization value") to a variable annuity payment option specified in the
Rider, and which guarantees a minimum dollar payment once you begin receiving
payments. By electing this Rider, you are guaranteed a minimum level of income
in the future based on the minimum annuitization value, while you remain
invested in the subaccounts.
MINIMUM ANNUITIZATION VALUE. The minimum annuitization value is:
/bullet/ the annuity value on the date the Rider is issued, plus
/bullet/ any additional premiums paid after the Rider is issued,
/bullet/ minus an adjustment for any partial surrenders made after the
date the Rider is issued,
/bullet/ accumulated at the annual growth rate.
The annual growth rate is currently 6% per year. For Contracts issued in a
few states, this rate will be less than 6%. We may, at our discretion, change
the rate in the future, but the rate will never be less than 3% per year. Once
the Rider is added to your Contract, the annual growth rate, the Rider charge,
the Rider charge waiver threshold, the separate account annuitization charge
and the waiting period before you can annuitize under the Rider will not vary
during the life of the Rider. Partial surrenders may reduce the minimum
annuitization value on a basis greater than dollar-for-dollar. See the SAI for
more information.
The minimum annuitization value is used to calculate the annuity payments
and fees under the Rider and adjustments to partial surrenders. This value does
not establish or guarantee an annuity value or guarantee performance of any
subaccount. IF YOU CHOOSE TO ANNUITIZE UNDER THE RIDER, WE WILL USE YOUR
MINIMUM ANNUITIZATION VALUE (LESS ANY OUTSTANDING LOAN AMOUNT AND ANY LOAN
INTEREST YOU OWE) -- NOT YOUR CURRENT ANNUITY VALUE -- TO DETERMINE THE AMOUNT
OF YOUR VARIABLE ANNUITY PAYMENTS UNDER THE RIDER. The minimum annuitization
value may not be used to annuitize with any of the annuity payment options
under the Contract.
ANNUITY PAYMENT OPTIONS. The variable annuity payment options available
under the Rider are:
/bullet/ LIFE INCOME -- An election may be made for "No Period Certain"
or "10 Years Certain." In the event of the death of the
annuitant prior to the end of the chosen period certain, the
remaining period certain payments will be continued to the
beneficiary.
/bullet/ JOINT AND FULL SURVIVOR -- An election may be made for "No
Period Certain" or "10 Years Certain." Payments will be made as
long as either the annuitant
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<PAGE>
or joint annuitant is living. In the event of the death of both the
annuitant and joint annuitant prior to the end of the chosen period
certain, the remaining period certain payments will be continued to
the beneficiary.
MINIMUM ANNUITIZATION VALUE UPGRADE. You can elect, in writing, to upgrade
the minimum annuitization value to the current annuity value within 30 days
after any Contract anniversary before your 85th birthday (earlier if required
by state law).
If you elect to upgrade, the current Rider will terminate and a new Rider
will be issued with a new rider date, new waiting period before you can
annuitize under the rider, and new guaranteed benefits and charges. The
benefits and charges under the new rider may differ from the previous Rider's
benefits and charges prior to upgrading.
CONDITIONS TO ANNUITIZE UNDER THE GUARANTEED MINIMUM INCOME BENEFIT
RIDER. You can only annuitize using the Rider within 30 days after the end of
the waiting period (currently the tenth Contract anniversary after you select
the Rider) or on a later Contract anniversary. In the case of an upgrade of the
minimum annuitization value, you can only annuitize at the end of the new
rider's waiting period (currently the tenth Contract anniversary following the
upgrade) or on a later Contract anniversary. We may, at our discretion, change
the waiting period before you can annuitize under the Rider. You cannot,
however, annuitize the Rider after the 30-day period following the Contract
anniversary after your 94th birthday (earlier if required by state law).
NOTE CAREFULLY -- You may not annuitize at any time other than indicated above
under the Rider.
GUARANTEED MINIMUM INCOME BENEFIT. We guarantee that future annuity
payments under the Rider to be never less than the initial variable annuity
payment. See the SAI for information concerning the calculation of the initial
variable annuity payment. We will also "stabilize" the payments (hold them
constant) during each Contract year. During the first Contract year after you
annuitize the Rider, each payment will equal the initial payment. On each
Contract anniversary thereafter, the variable annuity payment will increase or
decrease (but never below the initial payment) depending on the performance of
the subaccounts you selected, and then be held constant at that amount for that
Contract year. The payment on each Contract anniversary will equal the greater
of the initial payment or the payment supportable by the annuity units in the
subaccounts. See the SAI for additional information concerning payments.
RIDER CHARGE. Prior to annuitization, a Rider charge, currently 0.30%
annually of the minimum annuitization value, is deducted from the annuity value
on each Contract anniversary and on the termination date of the Rider. We may
change the Rider charge percentage in the future if you choose to upgrade the
minimum annuitization value, or for future issues of the Rider, but it will
never be greater than 0.50% annually. We deduct the Rider charge from the fixed
account and from each subaccount in proportion to the amount of annuity value
in each account.
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<PAGE>
We will waive the Rider charge on any Contract anniversary if the annuity
value exceeds the Rider charge waiver threshold (currently 2.0) times the
minimum annuitization value. We may, at our discretion, change the Rider charge
waiver threshold in the future if you choose to upgrade the minimum
annuitization value, or for future issues of the Rider, but it will never be
greater than 2.5 times the minimum annuitization value.
SEPARATE ACCOUNT ANNUITIZATION CHARGE. If you annuitize under the Rider, a
daily separate account annuitization charge, equal to an annual rate of 2.50%
of the daily net asset values in the subaccounts, is reflected in the amount of
the variable payments you receive. We may change the separate account
annuitization charge in the future, if you choose to upgrade the minimum
annuitization value or for future issues of the Rider, but it will never be
greater than 3.50%. The separate account annuitization charge is deducted in
place of the Contract's mortality and expense risk charge and the
administrative charge.
TERMINATION. The Rider is irrevocable. You have the option not to
annuitize under the Rider but you will not receive a refund of any charges you
have paid and you will not be able to use the minimum annuitization value. The
Rider will terminate upon the earliest of the following:
/bullet/ annuitization (once the guaranteed minimum payments begin);
/bullet/ the date you elect to upgrade (although a new irrevocable rider
will be issued);
/bullet/ the date your Contract terminates;
/bullet/ 30 days following the Contract anniversary after your 94th
birthday (earlier if required by state law); or
/bullet/ the date you change the annuitant (although a new irrevocable
rider will be issued).
THE GUARANTEED MINIMUM INCOME BENEFIT RIDER DOES NOT ESTABLISH OR
GUARANTEE ANNUITY VALUE OR GUARANTEE PERFORMANCE OF ANY SUBACCOUNT. Because
this Rider is based on conservative actuarial factors, the level of lifetime
income that it guarantees may be less than the level that might be provided by
application of the annuity value at the Contract's applicable annuity factors.
Therefore, the Guaranteed Minimum Income Benefit Rider should be regarded as a
safety net.
3. PURCHASE
CONTRACT ISSUE REQUIREMENTS
We will issue a Contract IF:
/bullet/ we receive information needed to issue the Contract;
/bullet/ we receive a minimum initial premium payment; and
/bullet/ the annuitant is age 85 or younger.
PREMIUM PAYMENTS
You should make checks or drafts for premium payments payable only to
"Western Reserve Life" and send them to our administrative office. Your check
or draft must be honored in order for us to pay any associated payments and
benefits due under the Contract.
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INITIAL PREMIUM REQUIREMENTS
The initial premium payment for nonqualified Contracts must be at least
$5,000. However, you may make a minimum initial premium payment of $1,000,
rather than $5,000, if you indicate on your application that you anticipate
making minimum monthly payments of at least $100 by electronic funds transfer.
For traditional or Roth IRAs the minimum initial premium payment is $1,000 and
for qualified Contracts other than traditional or Roth IRAs, the minimum
initial premium payment is $50.
We will credit your initial premium payment to your Contract within two
business days after the day we receive it and your complete Contract
information. If we are unable to credit your initial premium payment, we will
contact you within five business days and explain why. We will also return your
initial premium payment at that time unless you tell us to keep it. We will
credit your initial premium payment as soon as we receive all necessary
application information.
The date on which we credit your initial premium payment to your Contract
is the Contract date. The Contract date is used to determine Contract years,
Contract months and Contract anniversaries.
If you wish to make payments by bank wire, you should instruct your bank
to wire federal funds to us. Please contact us at 1-800-851-9777 for complete
wire instructions.
We may reject any application or premium payments for any reason permitted
by law.
ADDITIONAL PREMIUM PAYMENTS
You are not required to make any additional premium payments. However, you
can make additional premium payments as often as you like during the lifetime
of the annuitant and prior to the maturity date. Additional premium payments
must be at least $50 ($100 monthly in the case of nonqualified Contracts with a
$1,000 initial premium payment and $1,000 if by wire). We will credit
additional premium payments to your Contract as of the business day we receive
your premium payment and required information.
MAXIMUM ANNUAL PREMIUM PAYMENTS
We allow premium payments up to a total of $1,000,000 in any Contract year
without prior approval.
ALLOCATION OF PREMIUM PAYMENTS
When you purchase a Contract, we will allocate your premium payment to the
investment choices you selected on your application, or we will place your
premium payment(s) in the realloation account until the reallocation date. Your
allocation must be in whole percentages which total 100%. We will allocate
additional premium payments as you selected on your application, unless you
request a different allocation.
Unless we consent otherwise, we will restrict allocations and transfers to
the fixed account if the fixed account value following the allocation or
transfer would exceed $500,000.
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You may change allocations for future additional premium payments by
sending written instructions or by telephone, subject to the limitations
described below under Telephone or Fax Transactions. The allocation change will
apply to premium payments received after the date we receive the change
request.
You should review periodically how your payments are divided among the
subaccounts because market conditions and your overall financial objectives may
change.
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 on the
Contract date to the reallocation account. The schedule page of your Contract
will specify whether the reallocation account is the fixed account or the WRL
J.P. Morgan Money market subaccount. While held in the reallocation account,
your premium will either earn interest at the current rates for the fixed
account or be credited with gains and losses of the WRL J.P. Morgan Money
Market subaccount. The premium will remain in the reallocation account for the
number of days in your state's free look period plus five days. Please contact
your agent for details concerning the free look period for your state.
On the first valuation date on or after the reallocation date, we will
reallocate all annuity value from the reallocation account to the fixed account
and/or subaccounts you selected on the application.
For states which do not require full refund of the initial premium, the
reallocation date is the same as the Contract date and we will allocate your
initial premium, plus interest, on the Contract date to the fixed account
and/or subaccounts in accordance with the instructions you gave us on your
application.
ANNUITY VALUE
You should expect your annuity value to change from valuation period to
valuation period to reflect the investment performance of the portfolios, the
interest credited to your value in the fixed account, and the fees and charges
we deduct. A valuation period begins at the close of business on each business
day and ends at the close of business on the next succeeding business day. A
business day is any day the NYSE is open. Our business day closes when the NYSE
closes, usually 4:00 p.m. Eastern time. We observe the same holidays as the
NYSE.
ACCUMULATION UNITS
We measure the value of your Contract during the accumulation period by
using a unit called an accumulation unit. During the income phase, we call the
unit an annuity unit. When you direct money into a subaccount, we credit your
Contract with accumulation units for that subaccount. We determine how many
accumulation units to credit by dividing the dollar amount you direct to the
subaccount by the subaccount's accumulation unit value as of the end of the
business day. If you partially surrender or transfer out of a subaccount, or
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if we assess a transfer or annual Contract charge, we subtract accumulation
units from the subaccounts using the same method.
Each subaccount's accumulation unit value was set at $10 when the
subaccount started. We recalculate the accumulation unit value for each
subaccount at the close of each business day. The new value reflects the
investment performance of the underlying portfolio and the daily deduction of
the mortality and expense risk charge and the administrative charge. For a
detailed discussion of how we determine accumulation unit values, see the SAI.
We will determine separate sets of accumulation unit values that reflect
the cost of the standard death benefit and the compounding minimum death
benefit.
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4. INVESTMENT CHOICES
THE SEPARATE ACCOUNT
The separate account currently consists of 23 subaccounts.
THE FUND. Each subaccount invests exclusively in one portfolio of the
fund. The portfolios and their sub-adviser(s) are listed below.
<TABLE>
<CAPTION>
SUB-ADVISER PORTFOLIO
<S> <C>
JANUS CAPITAL CORPORATION WRL Janus Growth
WRL Janus Global
FRED ALGER MANAGEMENT, INC. WRL Alger Aggressive Growth
VAN KAMPEN ASSET MANAGEMENT INC. WRL VKAM Emerging Growth
AEGON USA INVESTMENT MANAGEMENT, INC. WRL AEGON Balanced
WRL AEGON Bond
LUTHER KING CAPITAL MANAGEMENT CORPORATION WRL LKCM Strategic Total Return
FEDERATED INVESTMENT COUNSELING WRL Federated Growth & Income
J.P. MORGAN INVESTMENT MANAGEMENT INC. WRL J.P. Morgan Money Market
WRL J.P. Morgan Real Estate Securities
EQSF ADVISERS, INC. WRL Third Avenue Value
NWQ INVESTMENT MANAGEMENT COMPANY, INC. WRL NWQ Value Equity
DEAN INVESTMENT ASSOCIATES WRL Dean Asset Allocation
C.A.S.E. MANAGEMENT, INC. WRL C.A.S.E. Growth
SCOTTISH EQUITABLE INVESTMENT MANAGEMENT WRL GE/Scottish Equitable International Equity
LIMITED AND GE INVESTMENT MANAGEMENT
INCORPORATED
GE INVESTMENT MANAGEMENT INCORPORATED WRL GE U.S. Equity
GOLDMAN SACHS ASSET MANAGEMENT WRL Goldman Sachs Growth
WRL Goldman Sachs Small Cap
T. ROWE PRICE ASSOCIATES, INC. WRL T. Rowe Price Dividend Growth
WRL T. Rowe Price Small Cap
SALOMON BROTHERS ASSET MANAGEMENT INC. WRL Salomon All Cap
PILGRIM BAXTER & ASSOCIATES, LTD. WRL Pilgrim Baxter Mid Cap Growth
THE DREYFUS CORPORATION WRL Dreyfus Mid Cap
</TABLE>
The general public may not purchase these portfolios. Their investment
objectives and policies may be similar to other portfolios and mutual funds
managed by the same investment adviser or manager that are sold directly to the
public. You should not expect that the investment results of the other
portfolios and mutual funds will be comparable to those portfolios offered by
this prospectus.
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THERE IS NO ASSURANCE THAT A PORTFOLIO WILL ACHIEVE ITS STATED
OBJECTIVE(S). MORE DETAILED INFORMATION, INCLUDING AN EXPLANATION OF EACH
PORTFOLIO'S INVESTMENT OBJECTIVE, MAY BE FOUND IN THE FUND'S CURRENT
PROSPECTUS. YOU SHOULD READ THE FUND PROSPECTUS CAREFULLY BEFORE YOU INVEST.
THE FIXED ACCOUNT
Premium payments allocated and amounts transferred to the fixed account
become part of the general account of Western Reserve. Interests in the general
account have not been registered under the Securities Act of 1933 (the "1933
Act"), nor is the general account registered as an investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"). Accordingly,
neither the general account nor any interests therein are generally subject to
the provisions of the 1933 or 1940 Acts. Western Reserve has been advised that
the staff of the SEC has not reviewed the disclosures in this prospectus which
relate to the fixed account.
We guarantee that the interest credited to the fixed account will not be
less than 3% per year. We have no formula for determining fixed account current
interest rates. We establish the interest rate, at our sole discretion, for
each premium payment or transfer into the fixed account. Rates are guaranteed
for at least one year.
If you select the fixed account, your money will be placed with the other
general assets of Western Reserve. All assets in our general account are
subject to the general liabilities of our business operations. The amount of
money you are able to accumulate in the fixed account during the accumulation
period depends upon the total interest credited. The amount of annuity payments
you receive during the income phase under a fixed annuity option will remain
level for the entire income phase. You may not transfer money between the fixed
account and the subaccounts during the income phase.
When you request a transfer or partial surrender from the fixed account,
we will account for it on a first-in, first-out ("FIFO") basis, for purposes of
crediting your interest. This means that we will take the deduction from the
oldest money you have put in the fixed account. You may not make partial
surrenders from the fixed account unless we consent.
Unless we otherwise consent, we will restrict allocations and transfers to
the fixed account if the fixed account value following the allocation or
transfer would exceed $500,000.
Massachusetts, New Jersey, Oregon, Pennsylvania and Washington State
residents: The fixed account is NOT available to you. You may not direct any
money to the fixed account or transfer any of your Contract's value into the
fixed account.
TRANSFERS
During the accumulation period, you or your agent/registered
representative of record may make transfers from any subaccount as often as you
wish. However, we will not permit you to make transfers if you have elected
dollar cost averaging, asset rebalancing or systematic partial surrenders.
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Transfers from the fixed account are allowed only once each Contract year.
The amount that may be transferred is the greater of (1) 25% of the dollar
amount in the fixed account, or (2) the amount you transferred out of the fixed
account in the previous Contract year.
During the income phase of your Contract, you may transfer values from one
subaccount to another. No transfers may be made to or from the fixed account.
The minimum amount that can be transferred during this phase is the lesser of
$10 of monthly income, or the entire monthly income of the variable annuity
units in the subaccount from which the transfer is being made.
Massachusetts, New Jersey, Oregon, Pennsylvania and Washington State
residents: You may NOT transfer any of your Contract's value into the fixed
account.
Transfers may be made by telephone or fax, subject to limitations
described below under Telephone or Fax Transactions.
If you make more than 12 transfers from the subaccounts in any Contract
year, we will charge you $10 for each additional transfer you make during that
year. Currently, there is no charge for transfers from the fixed account.
The Contract's transfer privilege is not intended to afford owners a way
to speculate on short-term movements in the market. Excessive use of the
transfer privilege can potentially disrupt the management of the portfolios and
increase transaction costs. Accordingly, we have established a policy of
limiting excessive transfer activity. We will limit transfer activity to two
substantive transfers (at least 30 days apart) from each portfolio, except from
WRL J.P. Morgan Money Market, during any 12-month period. We interpret
"substantive" to mean either a dollar amount large enough to have a negative
impact on a portfolio's operations, or a series of movements between
portfolios. We will not limit non-substantive transfers.
We may, at any time, no longer permit transfers, modify our procedures, or
limit the number of transfers we permit. Ordinarily, we will execute transfers
and determine all values in connection with transfers at the end of the
business day during which we receive the transfer request.
DOLLAR COST AVERAGING PROGRAM
Dollar cost averaging allows you to transfer systematically a specific
amount each month from the fixed account, the WRL J.P. Morgan Money Market
subaccount, the WRL AEGON Bond subaccount or any combination of these accounts,
to a different subaccount. You may specify the dollar amount to be transferred
monthly; however, you must transfer at least $100 monthly. To qualify, a
minimum of $5,000 must be in each subaccount from which we make transfers.
There is no charge for this program. These transfers do count towards the 12
free transfers allowed during each Contract year.
If you make dollar cost averaging transfers from the fixed account, each
month you may transfer no more than 1/10th of the dollar amount in the fixed
account on the date you start dollar cost averaging.
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By transferring a set amount on a regular schedule instead of transferring
the total amount at one particular time, you may reduce the risk of investing
in the portfolios only when the price is high. Dollar cost averaging does not
guarantee a profit and it does not protect you from loss if market prices
decline.
If you establish dollar cost averaging from the fixed account, we may
credit higher interest rates for those dollar cost averaging amounts. We call
these "enhanced" fixed account interest rates, and they will apply only to
those amounts dollar cost averaged from the fixed account. These enhanced
interest rates will apply temporarily for varying time periods. If you
discontinue the dollar cost averaging program before its completion, then the
interest credited on amounts in the dollar cost averaging fixed account may be
adjusted downward, but not below the minimum guaranteed effective fixed account
annual interest rate of 3%.
We reserve the right to discontinue offering dollar cost averaging 30 days
after we send notice to you. Dollar cost averaging is not available if you have
elected the asset rebalancing program or systematic partial surrenders.
ASSET REBALANCING PROGRAM
During the accumulation period you can instruct us to rebalance
automatically the amounts in your subaccounts to maintain your desired asset
allocation. This feature is called asset rebalancing and can be started and
stopped at any time free of charge. However, we will not rebalance if you are
in the dollar cost averaging program, if you take systematic partial
surrrenders, or if you request any other transfer. Asset rebalancing ignores
amounts in the fixed account. You can choose to rebalance monthly, quarterly,
semi-annually, or annually.
To qualify for asset rebalancing, a minimum annuity value of $5,000 for an
existing Contract, or a minimum initial premium payment of $5,000, for a new
Contract, is required. Asset rebalancing does not guarantee gains, nor does it
assure that any subaccount will not have losses.
Each reallocation which occurs under asset rebalancing will be counted
towards the 12 free transfers allowed during each Contract year.
We reserve the right to discontinue, modify or suspend the asset
rebalancing program at any time.
TELEPHONE OR FAX TRANSACTIONS
You may make transfers, request partial surrenders and change the
allocation of additional premium payments by telephone. Telephone withdrawals
are not allowed in the following situations:
/bullet/ for qualified retirement accounts (except IRAs);
/bullet/ if the amount you want to withdraw is greater than $50,000; or
/bullet/ if the address of record has been changed within the past 10
days.
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Upon instructions from you, the registered representative/agent of record
for your Contract may also make telephone transfers or partial surrenders for
you. If you do not want the ability to make transfers by telephone, you should
notify us in writing.
You may make telephone transfers or request partial surrenders by calling
our toll-free number: 1-800-851-9777. You will be required to provide certain
information for identification purposes when you request a transaction by
telephone. Western Reserve may also require written confirmation of your
request. Western Reserve will not be liable for following telephone requests
that it believes are genuine.
You may also fax your transfer request to us at 727-299-1648. We will not
be responsible for transmittal problems which are not reported to us within
five business days. Any reports must be accompanied by proof of the faxed
transmittal.
Telephone requests must be received before 4:00 p.m. Eastern time to
assure same-day pricing of the transaction. Western Reserve may discontinue
this option at any time.
THIRD PARTY INVESTMENT SERVICES
Western Reserve or an affiliate may provide administrative or other
support services to independent third parties you authorize to conduct
transfers on your behalf, or who provide recommendations as to how your
subaccount values should be allocated. This includes, but is not limited to,
transferring subaccount values among subaccounts in accordance with various
investment allocation strategies that these third parties employ. Such
independent third parties may or may not be appointed Western Reserve agents
for the sale of Contracts.
WESTERN RESERVE DOES NOT ENGAGE ANY THIRD PARTIES TO OFFER INVESTMENT
ALLOCATION SERVICES OF ANY TYPE, SO THAT PERSONS OR FIRMS OFFERING SUCH
SERVICES DO SO INDEPENDENT FROM ANY AGENCY RELATIONSHIP THEY MAY HAVE WITH
WESTERN RESERVE FOR THE SALE OF CONTRACTS. WESTERN RESERVE THEREFORE TAKES NO
RESPONSIBILITY FOR THE INVESTMENT ALLOCATIONS AND TRANSFERS TRANSACTED ON YOUR
BEHALF BY SUCH THIRD PARTIES OR ANY INVESTMENT ALLOCATION RECOMMENDATIONS MADE
BY SUCH PARTIES.
Western Reserve does not currently charge you any additional fees for
providing these support services. Western Reserve reserves the right to
discontinue providing administrative and support services to owners utilizing
independent third parties who provide investment allocation and transfer
recommendations.
5. EXPENSES
Unless we indicate otherwise, the expenses described below apply only
during the accumulation period.
There are charges and expenses associated with your Contract that reduce
the return on your investment in the Contract.
MORTALITY AND EXPENSE RISK CHARGE
We charge a fee as compensation for bearing certain mortality and expense
risks under the Contract. Examples of our risks include a guarantee of annuity
rates, the death benefits,
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<PAGE>
certain Contract expenses, and assuming the risk that the current charges will
be insufficient in the future to cover costs of administering the Contract. The
mortality and expense risk charge is equal, on an annual basis, to 1.00% of the
average daily net assets that you have invested in each subaccount. If you add
the compounding minimum death benefit, the mortality and expense risk charge
increases to 1.25%. This charge is deducted from the subaccounts during the
accumulation period. During the income phase, we charge an annual separate
account annuitization charge of 1.40% in place of the mortality and expense
risk and administrative charges. If you annuitize under the Guaranteed Minimum
Income Benefit Rider, we charge a separate account annuitization charge,
currently 2.50%, not to exceed 3.50%, in place of the mortality and expense
risk and administrative charges.
If this charge does not cover our actual costs, we absorb the loss.
Conversely, if the charge more than covers actual costs, the excess is added to
our surplus. We expect to profit from this charge. We may use any profits to
cover distribution costs.
ADMINISTRATIVE CHARGE
We deduct an annual administrative charge to cover the costs of
administering the Contracts. This charge is assessed daily and is equal to
0.40% per year of the average daily net assets that you have invested in each
subaccount. This charge is deducted from the subaccounts during the
accumulation period.
GUARANTEED MINIMUM INCOME BENEFIT RIDER CHARGE
Prior to annuitization, a Rider charge, currently 0.30% annually of the
minimum annuitization value, is deducted from the annuity value on each
Contract anniversary and on the termination date of the Rider. We may change
the Rider charge percentage in the future if you choose to upgrade the minimum
annuitization value, or for future issues of the Rider, but it will never be
greater than 0.50% annually. We deduct the Rider charge from the fixed account
and from each subaccount in proportion to the amount of annuity value in each
account.
We will waive the Rider charge on any Contract anniversary if the annuity
value exceeds the Rider charge waiver threshold (currently 2.0) times the
minimum annuitization value. We may, at our discretion, change the Rider charge
waiver threshold in the future if you choose to upgrade the minimum
annuitization value, or for future issues of the Rider, but it will never be
greater than 2.5 times the minimum annuitization value.
SEPARATE ACCOUNT ANNUITIZATION CHARGE
If you annuitize under the Rider, a daily separate account annuitization
charge, equal to an annual rate of 2.50% of the daily net asset values in the
subaccounts, is reflected in the amount of the variable payments you receive.
We may change the separate account annuitization charge in the future if you
choose to upgrade the minimum annuitization value, or for future issues of the
Rider, but it will never be greater than 3.50%. The separate account
annuitization charge is deducted in place of the Contract's mortality and
expense risk charge and the administrative charge.
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ANNUAL CONTRACT CHARGE
We deduct an annual Contract charge of $30 from your annuity value on each
Contract anniversary and at surrender. We deduct this charge to cover our costs
of administering the Contracts. We currently waive this charge if either the
annuity value, or the total premium payments, minus all partial surrenders,
equals or exceeds $50,000 on the Contract anniversary for which the charge is
payable.
TRANSFER CHARGE
You are allowed to make 12 free transfers per Contract year. If you make
more than 12 transfers per Contract year, we charge $10 for each additional
transfer. We deduct the charge from the amount transferred. Dollar cost
averaging and asset rebalancing transfers are considered transfers. All
transfer requests made on the same day are treated as a single request. We
deduct the charge to compensate us for the cost of processing the transfer.
LOAN PROCESSING FEE
If you take a Contract loan, we will impose a $30 loan processing fee.
This fee covers loan processing and other expenses associated with establishing
and administering the loan reserve. Only qualified Contracts can take Contract
loans.
PREMIUM TAXES
Some states assess premium taxes on the premium payments you make.
Currently, we do not deduct these taxes at the time you make a premium payment.
However, we will deduct the total amount of premium taxes, if any, from the
annuity value when:
/bullet/ you elect to begin receiving annuity payments;
/bullet/ you surrender the Contract;
/bullet/ you request a partial surrender; or
/bullet/ a death benefit is paid.
Generally, premium taxes range from 0% to 3.50%, depending on the state.
FEDERAL, STATE AND LOCAL TAXES
We may in the future deduct charges from the Contract for any taxes we
incur because of the Contract. However, no deductions are being made at the
present time.
SURRENDER CHARGE
During the accumulation period, you may surrender part or all of the
annuity value. We impose a surrender charge to help us recover sales expenses,
including broker-dealer compensation and printing, sales literature and
advertising costs. We deduct this charge from your annuity value at the time
you request the partial or complete surrender.
If you take a partial surrender or if you surrender your Contract
completely, we will deduct a surrender charge of up to 7.0% of premium payments
surrendered within seven
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years after we receive a premium payment. To calculate surrender charges, we
treat surrenders as coming first from the oldest premium payment, then the next
oldest and so forth.
The following schedule shows the surrender charges that apply during the
seven years following each premium payment:
NUMBER OF MONTHS SINCE SURRENDER
PREMIUM PAYMENT DATE CHARGE
12 or less 7%
13 through 24 7%
25 through 36 6%
37 through 48 5%
49 through 60 4%
61 through 72 3%
73 through 84 2%
85 or more 0%
Keep in mind that partial and complete surrenders may be taxable, and if
made before age 59-1/2, may be subject to a 10% federal penalty tax. For tax
purposes, partial and complete surrenders are considered to come from earnings
first.
There are two ways that you may make a partial surrender and we will not
deduct the full surrender charge:
1. PARTIAL SURRENDERS UP TO THE FREE AMOUNT. During any Contract year, you
may request a partial surrender and we will not impose a surrender charge on
any amount up to the maximum free amount. For the first partial surrender under
the Contract, the maximum free amount you can partially surrender without a
surrender charge is equal to (A) earnings in the Contract, plus (B) 10% of
premiums. For all subsequent partial surrenders, the maximum free amount you
can partially surrender without a surrender charge is (A) plus (B), adjusted to
reflect prior partial surrenders, according to the following formula:
(A) is equal to:
i. the annuity value on the date of the partial surrender; plus
ii. any amounts previously surrendered under Part B below; plus
iii. any amounts previously surrendered that were subject to surrender
charges; minus
iv. the total of all premiums you have paid.
and
(B) is equal to:
i. 10% of the annuity value on the date of the partial surrender; minus
ii. any amounts you partially surrendered under (B)i. above during the
Contract year in which you requested the partial surrender.
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Unless we otherwise consent, the minimum amount available each time you
request a partial surrender is $500.
For example, assume that you make a $100,000 premium payment to your
Contract at issue and make no more premium payments. Also assume at the end of
the 13th Contract month there is an annuity value of $108,000 before a partial
surrender of $11,000 is taken out surrender charge free ($8,000 is surrender
charge free under item (A) ($108,000 - $100,000 = $8,000), and $3,000 is
surrender charge free under item (B) ($100,000 x 10% = $10,000 maximum amount
under (B)). If, at the end of the 19th Contract month, there is an annuity
value of $106,000 before a partial surrender of $20,000 is taken out, the
surrender charge on this partial surrender will be calculated as follows:
(A)i. -- $106,000 is the annuity value on the date of the partial
surrender; and is added to
(A)ii. -- $3,000 is the amount of the surrender that occurred in the 13th
month surrendered under Part B of the formula (see paragraph
above); plus
(A)iii. -- $0 are amounts previously surrendered that were subject to
surrender charges; minus
(A)iv. -- $100,000 is the total of all premiums paid.
The total for (A) is: $106,000 + $3,000 + $0 - $100,000 = $9,000
AND
(B)i. -- $9,700 is 10% of the remaining annuity value following the
determination of Part A above on the date of partial surrender
[$106,000 - $9,000 = $97,000 (remaining annuity value) x 10% =
$9,700]; minus
(B)ii. -- $3,000 is the amount partially surrendered under (B)i. above
during the Contract year in which the current partial surrender
is requested.
The total for (B) is: $9,700 - $3,100 = $6,700.
The maximum amount of this partial surrender available without a surrender
charge is $9,000 (A) + $6,700 (B) = $15,700.
The portion of this partial surrender which is subject to a surrender
charge is $20,000 - $15,700 = $4,300.
The surrender charge is calculated to be $323.66 (7% of $4,624).
The total amount we will deduct from your annuity value for the surrender
will be $20,323.66 which includes the surrender charge. You will receive
$20,000.
2. SYSTEMATIC PARTIAL SURRENDERS. During any Contract year, you may make a
systematic partial surrender on a monthly, quarterly, semi-annual or annual
basis without a
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surrender charge. Systematic partial surrenders must be at least $50. The
amount of the systematic partial surrender may not exceed 10% of the annuity
value at the time the surrender is made, divided by the number of surrenders
made per calendar year. We reserve the right to discontinue systematic partial
surrenders if any surrender would reduce your annuity value below $5,000.
You may elect to begin or discontinue systematic partial surrenders at any
time. However, we must receive written notice at least 30 days prior to the
date systematic partial surrenders are to be discontinued. (See Systematic
Partial Withdrawals on p. .)
NURSING CARE FACILITY WAIVER. If your Contract contains a nursing care
facility waiver endorsement, we will waive the surrender charge, provided:
/bullet/ you (or any joint owner) have been confined to a nursing care
facility for 30 consecutive days or longer;
/bullet/ your confinement began after the Contract date; and
/bullet/ you provide us with satisfactory written evidence of your
confinement, including dates, at the time you make each request
for partial surrender or complete surrender.
We will waive the surrender charge under the endorsement only for partial
and complete surrenders made during your confinement or within two months after
your confinement ends. This endorsement is not available in all states.
TERMINAL CONDITION WAIVER. If your Contract contains a terminal condition
waiver endorsement, we will waive the surrender charge upon a complete or
partial surrender, provided:
/bullet/ you (or any joint owner) provide a written statement acceptable
to us and signed by a physician;
/bullet/ the written statement provides the physician's diagnosis and
prognosis of your (or any joint owner's) non-correctable medical
condition; and
/bullet/ the written statement says with reasonable medical certainty
that the non-correctable medical condition will result in death
within 12 months from the date of the written statement, taking
into consideration ordinary and reasonable medical care, advice
and treatment available in the same or similar communities.
We will waive all surrender charges upon receipt of a complete or partial
surrender request if you include such a written statement from a physician with
your request. The minimum amount that you may partially surrender under this
endorsement is $1,000. If you request a complete surrender, or a partial
surrender for an amount that reduces the annuity value below the minimum
balance required under your Contract, we will pay you the Contract's complete
annuity value and your Contract will terminate.
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PORTFOLIO MANAGEMENT FEES
The value of the assets in each subaccount is reduced by the fees and
expenses paid by the portfolios. A description of these expenses is found in
the Annuity Contract Fee Table section of this prospectus and in the fund
prospectus.
REDUCED CHARGES AND EXPENSES TO EMPLOYEES
We may reduce or waive the surrender charge and annual Contract charge for
Contracts sold to large groups of full-time employees of the same employer,
including directors, officers and full-time employees of Western Reserve or its
affiliates, or other groups where sales to the group reduce our administrative
expenses.
6. TAXES
NOTE: Western Reserve has prepared the following information on federal
income taxes as a general discussion of the subject. It is not intended as tax
advice to any individual. You should consult your own tax advisor about your
own circumstances. We believe that the Contract qualifies as an annuity
contract for federal income tax purposes and the following discussion assumes
it so qualifies. We have included an additional discussion regarding taxes in
the SAI.
ANNUITY CONTRACTS IN GENERAL
Deferred annuity contracts are a way of setting aside money for future
needs like retirement. Congress recognized how important saving for retirement
is and provided special rules in the Code for annuities.
Simply stated, these rules provide that you will not be taxed on the
earnings, if any, on the money held in your annuity Contract until you take the
money out. This is referred to as tax deferral. There are different rules as to
how you will be taxed depending on how you take the money out and the type of
Contract -- qualified or nonqualified (discussed below).
You will not be taxed on increases in the value of your Contract until a
distribution occurs - either as a partial or complete surrender or as annuity
payments.
When a non-natural person (e.g., corporation or certain other entities
other than tax-qualified trusts) owns a nonqualified Contract, the Contract
will generally not be treated as an annuity for tax purposes.
QUALIFIED AND NONQUALIFIED CONTRACTS
If you purchase the Contract under an individual retirement annuity, a
403(b) plan, 457 plan, or pension or profit sharing plan, your Contract is
referred to as a qualified Contract.
If you purchase the Contract as an individual and not under a qualified
Contract, your Contract is referred to as a nonqualified Contract.
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Because variable annuity contracts provide tax-deferral whether purchased
as a qualified Contract or nonqualified Contract, you should consider whether
the features and benefits unique to variable annuities are appropriate for your
needs when purchasing a qualified Contract.
A qualified Contract may be used in connection with the following plans:
/bullet/ INDIVIDUAL RETIREMENT ANNUITY (IRA): A traditional IRA allows
individuals to make contributions, which may be deductible, to
the Contract. A Roth IRA also allows individuals to make
contributions to the Contract, but it does not allow a deduction
for contributions. Roth IRA distributions may be tax-free if the
owner meets certain rules.
/bullet/ TAX-SHELTERED ANNUITY (403(B) PLAN): A 403(b) plan may be made
available to employees of certain public school systems and
tax-exempt organizations and permits contributions to the
Contract on a pre-tax basis.
/bullet/ CORPORATE PENSION, PROFIT-SHARING AND H.R. 10 PLANS: Employers
and self-employed individuals can establish pension or
profit-sharing plans for their employees or themselves and make
contributions to the Contract on a pre-tax basis.
/bullet/ DEFERRED COMPENSATION PLAN (457 PLAN): Certain governmental and
tax-exempt organizations can establish a plan to defer
compensation on behalf of their employees through contributions
to the Contract.
There are limits on the amount of annual contributions you can make to
these plans. Other restrictions may apply. The terms of the plan may limit your
rights under a qualified Contract. You should consult your legal counsel or tax
advisor if you are considering purchasing a Contract for use with any
retirement plan. We have provided more detailed information on these plans and
the tax consequences associated with them in the SAI.
PARTIAL AND COMPLETE SURRENDERS -- NONQUALIFIED CONTRACTS
If you make a partial surrender from your Contract, the Code treats that
surrender as first coming from earnings and then from your premium payments.
When you make a partial surrender you are taxed on the amount of the surrender
that is earnings. When you make a complete surrender you are generally taxed on
the amount that your surrender proceeds exceeds your premiums paid. Different
rules apply for annuity payments.
The Code also provides that surrendered earnings may be subject to a
penalty. The amount of the penalty is equal to 10% of the amount that is
includable in income. Some surrenders will be exempt from the penalty. They
include any amounts:
/bullet/ paid on or after the taxpayer reaches age 59- 1/2;
/bullet/ paid after the taxpayer dies;
/bullet/ paid if the taxpayer becomes totally disabled (as that term is
defined in the Code);
/bullet/ paid in a series of substantially equal payments made annually
(or more frequently) under a lifetime annuity;
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/bullet/ paid under an immediate annuity; or
/bullet/ which come from premium payments made prior to August 14, 1982.
MULTIPLE CONTRACTS
All nonqualified, deferred annuity Contracts entered into after October
21, 1988 that we issue (or our affiliates issue) to the same owner during any
calendar year are to be treated as one annuity contract for purposes of
determining the amount includable in an individual's gross income. There may be
other situations in which the Treasury may conclude that it would be
appropriate to aggregate two or more annuity contracts purchased by the same
owner. You should consult a competent tax advisor before purchasing more than
one Contract or other annuity contracts.
DIVERSIFICATION AND DISTRIBUTION REQUIREMENTS
The Code provides that the underlying investments for a nonqualified
variable annuity must satisfy certain diversification requirements in order to
be treated as an annuity contract. A nonqualified Contract must meet certain
distribution requirements upon an owner's death in order to be treated as an
annuity contract. A qualified Contract (except a Roth IRA) must also meet
certain distribution requirements during the owner's life. These
diversification and distribution requirements are discussed in the SAI. We may
modify the Contract to attempt to maintain favorable tax treatment.
QUALIFIED CONTRACTS
The above information describing the taxation of nonqualified Contracts
does not apply to qualified Contracts. There are special rules that govern
qualified Contracts, including rules restricting when amounts can be paid from
the Contracts and providing that a penalty tax may be assessed on amounts
partially surrendered from the Contract prior to the date you reach age 59-1/2,
unless you meet one of the exceptions to this rule. We have provided more
information in the SAI.
PARTIAL SURRENDERS -- 403(B) CONTRACTS
The Code limits the partial surrenders of premium payments from certain
403(b) Contracts. Partial surrenders generally can only be made when an owner:
/bullet/ reaches age 59-1/2;
/bullet/ leaves his/her job;
/bullet/ dies;
/bullet/ becomes disabled (as that term is defined in the Code); or
/bullet/ in the case of hardship. However, in the case of hardship, the
owner can only partially surrender the premium payments and not
any earnings.
PARTIAL AND COMPLETE SURRENDERS
In the case of a partial surrender, systematic partial surrender, or
complete surrender distributed to a participant or beneficiary under a
qualified Contract (other than a Roth IRA
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or a qualified Contract under Section 457 of the Code as to which there are
special rules), a ratable portion of the amount received is taxable, generally
based on the ratio of the investment in the Contract to the total annuity
value. The "investment in the contract" generally equals the portion, if any,
of any premium payments paid by or on behalf of an individual under a Contract
which is not excluded from the individual's gross income. For Contracts issued
in connection with qualified plans, the "investment in the contract" can be
zero.
Generally, in the case of a partial surrender, systematic partial
surrender, or complete surrender under a nonqualified Contract before the
maturity date, amounts received are first treated as taxable income to the
extent that the annuity value immediately before the partial surrender,
systematic partial surrender, or complete surrender exceeds the "investment in
the contract" at that time. Any additional amount partially surrendered,
applied to a systematic partial surrender or complete surrender is not taxable.
In the event of a partial surrender or systematic partial surrender from, or
complete surrender of, a nonqualified Contract, we will withhold for tax
purposes the minimum amount required by law, unless the owner affirmatively
elects, before payments begin, to have either nothing withheld or a different
amount withheld.
Loans and pledges or assignment of nonqualified Contracts are taxed in the
same manner as partial surrenders from such Contracts.
TAXATION OF DEATH BENEFIT PROCEEDS
We may distribute amounts from the Contract because of the death of an
owner or the annuitant. Generally, such amounts are includable in the income of
the recipient:
/bullet/ if distributed in a lump sum, these amounts are taxed in the
same manner as a complete surrender; or
/bullet/ if distributed under an annuity payment option, these amounts
are taxed in the same manner as annuity payments.
For these purposes, the "investment in the contract" is not affected by
the owner's or annuitant's death. That is, the "investment in the contract"
remains generally the total premium payments, less amounts received which were
not includable in gross income.
ANNUITY PAYMENTS
Although the tax consequences may vary depending on the annuity payment
option you select, in general, for nonqualified and certain qualified
Contracts, only a portion of the annuity payments you receive will be
includable in your gross income.
The excludable portion of each annuity payment you receive generally will
be determined as follows:
/bullet/ Fixed payments -- by dividing the "investment in the contract"
on the maturity date by the total expected value of the annuity
payments for the term of the payments. This is the percentage of
each annuity payment that is excludable.
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/bullet/ Variable payments -- by dividing the "investment in the
contract" on the maturity date by the total number of expected
periodic payments. This is the amount of each annuity payment
that is excludable.
The remainder of each annuity payment is includable in gross income. Once
the "investment in the contract" has been fully recovered, the full amount of
any additional annuity payments is includable in gross income.
If we permit you to select more than one annuity payment option, special
rules govern the allocation of the Contract's entire "investment in the
contract" to each such option, for purposes of determining the excludable
amount of each payment received under that option. We advise you to consult a
competent tax advisor as to the potential tax effects of allocating amounts to
any particular annuity payment option.
If, after the maturity date, annuity payments stop because of an
annuitant's death, the excess (if any) of the "investment in the contract" as
of the maturity date over the aggregate amount of annuity payments received
that was excluded from gross income is generally allowable as a deduction for
your last tax return.
TRANSFERS, ASSIGNMENTS OR EXCHANGES OF CONTRACTS
If you transfer your ownership or assign a Contract, designate an
annuitant or other beneficiary who is not also the owner, select certain
maturity dates, or change annuitants, you may trigger certain income or gift
tax consequences that are beyond the scope of this discussion. If you
contemplate any such transfer, assignment, selection, or change, you should
contact a competent tax advisor with respect to the potential tax effects of
such a transaction.
POSSIBLE TAX LAW CHANGES
Although the likelihood of legislative change is uncertain, there is
always the possibility that the tax treatment of the Contracts could change by
legislation or otherwise. You should consult a tax advisor with respect to
legislative developments and their effect on the Contract.
7. ACCESS TO YOUR MONEY
PARTIAL AND COMPLETE SURRENDERS
You can have access to the money in your Contract in several ways:
/bullet/ by making either a partial or complete surrender; or
/bullet/ by taking annuity payments.
If you want to surrender your Contract completely, you will receive the
cash value, which equals the annuity value of your Contract, minus:
/bullet/ any surrender charges;
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/bullet/ any premium taxes; and
/bullet/ the annual Contract charge.
No partial surrender is permitted if it would reduce the cash value below
$5,000. You may not make partial surrenders from the fixed account unless we
consent. Unless you tell us otherwise, we will take the partial surrender from
each of the investment choices in proportion to the cash value.
Remember that any partial surrender you make will reduce the annuity
value, and might reduce the amount of the death benefit. See Section 9, Death
Benefit, for more details.
Under some circumstances, a partial surrender will reduce the death
benefit (and the minimum annuitization value under the Guaranteed Minimum
Income Benefit Rider) by more than the dollar amount of the partial surrender.
Income taxes, federal tax penalties and certain restrictions may apply to
any full or partial surrender you make.
We must receive a properly completed surrender request which must contain
your original signature. If you live in a community property state, your spouse
must also sign the surrender request. We will accept fax or telephone requests
for partial surrenders as long as the surrender proceeds are being sent to the
address of record. The maximum amount you may request by fax or telephone is
$50,000.
When we incur extraordinary expenses, such as overnight mail expenses, for
expediting delivery of your partial or complete surrender payment, we will
deduct that charge from the payment. We charge $20 for an overnight delivery.
For your protection, we will require a signature guarantee for:
/bullet/ all requests for full or partial surrenders over $100,000; or
/bullet/ where the partial or full surrender proceeds will be sent to an
address other than the address of record.
All signature guarantees must be made by:
/bullet/ a national or state bank;
/bullet/ a member firm of a national stock exchange; or
/bullet/ any institution that is an eligible guarantor under SEC rules
and regulations.
Notarization is not an acceptable form of signature guarantee.
If the Contract's owner is not an individual, additional information may
be required. If you own a qualified Contract, the Code may require your spouse
to consent to any surrender. Other restrictions will apply to Section 403(b)
qualified Contracts and Texas Optional Retirement Program Contracts. For more
information, call us at 1-800-851-9777.
DELAY OF PAYMENT AND TRANSFERS
Payment of any amount due from the separate account for a surrender, a
death benefit, or the death of the owner of a nonqualified Contract, will
generally occur within seven
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business days from the date all required information is received by us. We may
be permitted to defer such payment from the separate account if:
/bullet/ the NYSE is closed for other than usual weekends or holidays or
trading on the Exchange is otherwise restricted; or
/bullet/ an emergency exists as defined by the SEC or the SEC requires
that trading be restricted; or
/bullet/ the SEC permits a delay for the protection of owners.
In addition, transfers of amounts from the subaccounts may be deferred
under these circumstances.
Pursuant to the requirements of certain state laws, we reserve the right
to defer payment of transfers, complete and partial surrenders and loan amounts
from the fixed account for up to six months.
SYSTEMATIC PARTIAL SURRENDERS
You can elect to receive regular payments from your Contract by using
systematic partial surrenders. You can withdraw up to 10% of your cash value
annually (or up to 10% of your initial premium payment if a new Contract), in
equal monthly, quarterly, semi-annual or annual payments of at least $50. Your
initial premium payment, if a new Contract, or your annuity value, if an
existing Contract, must equal at least $25,000. We will not process a
systematic partial surrender if the cash value for the entire Contract would be
reduced below $5,000. No systematic partial surrenders are permitted from the
fixed account.
You may stop systematic partial surrenders at any time. We reserve the
right to discontinue offering systematic partial surrenders 30 days after we
send you written notice. Systematic partial surrenders are not available if you
have elected the dollar cost averaging or asset rebalancing program.
Income taxes, federal tax penalties and other restrictions may apply to
any systematic partial surrender you receive.
CONTRACT LOANS FOR QUALIFIED CONTRACTS
You can take Contract loans during the accumulation period when the
Contract:
/bullet/ is used in connection with a Tax Sheltered Annuity Plan under
Section 403(b) of the Code;
/bullet/ is purchased by a pension, profit-sharing, or other similar
plan under Section 401(a) of the Code (including Section 401(k)
plans); and
/bullet/ has been in force for at least 10 days.
The maximum amount you may borrow against the Contract is the lesser of:
/bullet/ 50% of the annuity value; or
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/bullet/ $50,000 reduced by the highest outstanding loan balance during
the one year period immediately prior to the loan date. However,
if the annuity value is less than $20,000, the maximum you may
borrow against the Contract is the lesser of 80% of the annuity
value or $10,000.
The minimum loan amount is $1,000 (unless otherwise required by state
law). You are responsible for requesting and repaying loans that comply with
applicable tax requirements, and other laws, such as the Employment Retirement
Income Security Act of 1974 ("ERISA"). Accordingly, you should consult a
competent tax advisor before requesting a Contract loan.
The loan amount will be withdrawn from your investment choices and
transferred to the loan reserve. The loan reserve is part of the fixed account
and used as collateral for all Contract loans. We reserve the right to postpone
distributing the loan amount from the fixed account for up to six months, if
required.
On each Contract anniversary we will compare the amount of the Contract
loan to the amount in the loan reserve. If all Contract loans and unpaid
accrued interest due on the loan exceed the amount in the loan reserve, we will
withdraw the difference and transfer it to the loan reserve. If the amount of
the loan reserve exceeds the amount of the outstanding Contract loan, we will
withdraw the difference from the loan reserve and transfer it in accordance
with your current premium payment allocation. We reserve the right to transfer
the excess to the fixed account if the amount used to establish the loan
reserve was transferred from the fixed account.
If all Contract loans and unpaid interest due on the loan exceeds the cash
value, we will mail to your last known address and to any assignee of record a
notice stating the amount due in order to reduce the loan amount so that the
loan no longer exceeds the cash value. If the excess amount is not paid within
31 days after we mail the notices, the Contract will terminate without value.
You can repay any Contract loan in full:
/bullet/ while the Contract is in force, and
/bullet/ during the accumulation period.
NOTE CAREFULLY: If you do not repay your Contract loan, we will subtract
the amount of the unpaid loan balance plus interest from:
/bullet/ the amount of any death proceeds; or
/bullet/ the amount we pay upon partial or complete surrender; or
/bullet/ the amount we apply on the maturity date to provide annuity
payments; or
/bullet/ the minimum annuitization value if you selected the Guaranteed
Minimum Income Benefit Rider and elect to annuitize under the
Rider.
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You must pay interest on the loan at the rate of 6% per year. We deduct
interest in arrears. Amounts in the loan reserve will earn interest at a
minimum guaranteed effective annual interest rate of 3%. Principal and interest
must be repaid:
/bullet/ in level quarterly or monthly payments over a 5-year period; or
/bullet/ over a 10, 15 or 20-year period, if the loan is used to buy
your principal residence.
An extended repayment period cannot go beyond the year you turn 70-1/2.
If:
/bullet/ a repayment is not received within 31 days from the original
due date;
Then:
/bullet/ a distribution of all Contract loans and unpaid accrued
interest, and any applicable charges, including any surrender
charge, will take place.
This distribution will be reported as taxable to the Internal Revenue
Service, may be subject to income and penalty tax, and may cause the Contract
not to qualify under Section 403(b) of the Code.
You may fax your loan request to us at 727-299-1620.
The loan date is the date we process the loan request. We charge a $30 fee
to cover loan processing and expenses associated with establishing and
administering the loan reserve. We reserve the right to limit the number of
Contract loans to one per Contract year.
Contract loans may not be available in all states.
8. PERFORMANCE
We periodically advertise performance of the subaccounts and investment
portfolios. We may disclose at least four different kinds of performance.
First, we may disclose standard total return figures for the subaccounts
that reflect the deduction of all charges under the Contract, including the
mortality and expense risk charges, the administrative charge, the annual
Contract charge, the charge for the Guaranteed Minimum Death Benefit Rider and
the surrender charge. THESE FIGURES ARE BASED ON THE ACTUAL HISTORICAL
PERFORMANCE OF THE SUBACCOUNTS SINCE THEIR INCEPTION.
Second, we may disclose total return figures on a non-standard basis. This
means that the data may be presented for different time periods and different
dollar amounts. The data will not be reduced by the surrender charge currently
assessed under the Contract. We will only disclose non-standard performance
data if it is accompanied by standard total return data.
Third, we may present historic performance data for the portfolios since
their inception reduced by some or all fees and charges under the Contract.
Such adjusted historic
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performance includes data that precedes the inception dates of the subaccounts,
but is designed to show the performance that would have resulted if the
Contract had been available during that time.
Fourth, we may include in our advertising and sales materials, tax
deferred compounding charts and other hypothetical illustrations, which may
include comparisons of currently taxable and tax deferred investment programs,
based on selected tax brackets.
The fund prospectus presents the total return of certain existing
SEC-registered funds that are managed by sub-advisers to the portfolios. These
funds have investment objectives, policies and strategies that are
substantially similar to those of certain portfolios. We call the funds the
"Similar Sub-Advised Funds." None of the fees and charges under the Contract
has been deducted from the performance data of the Similar Sub-Advised Funds.
If Contract fees and charges were deducted, the investment returns would be
lower. Similar Sub-Advised Funds are not available for investment under the
Contract.
Appendix B contains performance information that you may find useful. It
is divided into various parts, depending upon the type of performance
information shown. Future performance will vary and future results will not be
the same as the results shown.
9. DEATH BENEFIT
We will pay a death benefit to the beneficiary, under certain
circumstances, if you are both the owner and the annuitant, and you die during
the accumulation period. (If you are not the annuitant, a death benefit may or
may not be paid. See below.) The beneficiary may choose an annuity payment
option, or may choose to receive a lump sum.
WHEN WE PAY A DEATH BENEFIT
BEFORE THE MATURITY DATE. We will pay a death benefit to your beneficiary
IF:
/bullet/ you are both the annuitant and the owner of the Contract; and
/bullet/ you die before the maturity date.
If the only beneficiary is your surviving spouse, then he or she may elect
to continue the Contract as the new annuitant and owner, instead of receiving
the death benefit.
Distribution requirements apply to the annuity value upon the death of any
owner or annuitant. These restrictions are detailed in the SAI.
AFTER THE MATURITY DATE. The death benefit payable, if any, on or after
the maturity date depends on the annuity payment option selected.
If:
/bullet/ you are not the annuitant; and
/bullet/ you die on or after the maturity date; and
/bullet/ the entire interest in the Contract has not been paid to you;
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Then:
/bullet/ any remaining value in the Contract will be distributed at
least as rapidly as under the method of distribution being used
as of the date of the owner's death.
WHEN WE DO NOT PAY A DEATH BENEFIT
NO DEATH BENEFIT IS PAID IN THE FOLLOWING CASES:
If:
/bullet/ you are not the annuitant; and
/bullet/ the annuitant dies prior to the maturity date;
Then:
/bullet/ you will become the new annuitant and the Contract will
continue.
If:
/bullet/ you are not the annuitant; and
/bullet/ you die prior to the maturity date;
Then:
/bullet/ if there is a surviving joint owner, then that person becomes
the new owner.
/bullet/ the new owner generally must surrender the Contract for the
annuity value within five years of your death.
NOTE CAREFULLY: If the owner does not name a successor owner, the owner's
estate will become the new owner. If no probate estate is opened because the
owner has precluded the opening of a probate estate by means of a trust or
other instrument, unless we receive written notice of the trust as a successor
owner signed prior to the owner's death, that trust may not exercise ownership
rights to the Contract. It may be necessary to open a probate estate in order
to exercise ownership rights to the Contract if no successor owner is named in
a written notice received by us.
AMOUNT OF STANDARD DEATH BENEFIT
Death benefit provisions may differ from state to state. The death benefit
may be paid as a lump sum or as annuity payments. If the annuitant dies during
the accumulation period, the standard death benefit will be the greatest of:
/bullet/ ANNUITY VALUE -- on the date we receive proof of death and the
beneficiary's election regarding payment;
/bullet/ RETURN OF PREMIUM -- total premium payments, less partial
surrenders; or
/bullet/ MONTHLY STEP-UP -- on each Monthiversary before the annuitant's
81st birthday, a new "stepped-up" death benefit is determined.
The stepped-up death benefit is equal to:
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/bullet/ the highest annuity value on any Monthiversary before the
annuitant's 81st birthday, increased for any premium payments
you have made and decreased for any adjusted partial
surrenders we have paid to you, following the Monthiversary
on which the highest annuity value occurs.
COMPOUNDING MINIMUM DEATH BENEFIT
On the Contract application, you may select the compounding minimum death
benefit to the Contract for an additional fee. You may not select it after the
Contract is issued.
This feature provides the greater of:
/bullet/ the standard death benefit; or
/bullet/ the compounding minimum death benefit. This benefit equals
total premium payments, plus interest at an effective annual
rate of 6% (in most states) from the date of the premium payment
to the date of death, less any adjusted partial surrender,
including interest on the surrender at the same rate from the
date of partial surrender to the date of death, but interest is
not credited after your 81st birthday. When you add this
feature, the mortality and expense risk charge will increase to
1.25%.
EFFECT OF ADJUSTED PARTIAL SURRENDER ON CERTAIN DEATH BENEFITS
When you request a partial surrender, we will reduce certain death
benefits under the Contract by an "adjusted partial surrender." Adjusted
partial surrenders will reduce:
/bullet/ the compounding minimum death benefit, if selected; and
/bullet/ the monthly step-up death benefit.
If the compounding minimum death benefit or the monthly step-up death
benefit is greater than the annuity value prior to surrender, the adjusted
partial surrender may be more than the amount of your request.
It is also possible that if a death benefit is paid after you have made a
partial surrender, then the total amount paid as the death benefit could be
less than the total premium payments.
A partial surrender will reduce the compounding minimum death benefit, if
selected, and the monthly step-up death benefit, by the amount of the partial
surrender times the ratio of:
/bullet/ the amount of the compounding death benefit (and/or monthly
step-up death benefit) immediately before the partial surrender,
to
/bullet/ the annuity value immediately before the partial surrender.
We have also included a more detailed explanation of this adjustment in
the SAI.
Partial surrenders will also be adjusted to reduce certain benefits under
the Guaranteed Minimum Income Benefit Rider. See the SAI for details.
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ALTERNATE PAYMENT ELECTIONS
The beneficiary may elect to receive the death benefit in a lump sum
payment, or (if not your surviving spouse) to receive payment:
1. within 5 years of the date of the annuitant's death;
2. over a specific number of years, not to exceed the beneficiary's life
expectancy, with payments starting within one year of the annuitant's
death; or
3. under a life annuity payout option, with payments starting within one
year of the annuitant's death.
If the beneficiary chooses 1 or 2 above, this Contract remains in effect
and remains in the accumulation period until it terminates at the end of the
elected period. The death benefit becomes the new annuity value. If the
beneficiary chooses 3 above, the Contract remains in effect, but moves into the
annuity phase with the beneficiary receiving payments under a life annuity
payout option. Special restrictions apply to 1 above. See the SAI for more
details.
10. OTHER INFORMATION
OWNERSHIP
You, as owner of the Contract, exercise all rights under the Contract. You
can change the owner at any time by notifying us in writing. An ownership
change may be a taxable event.
ASSIGNMENT
You can also assign the Contract any time during your lifetime. Western
Reserve will not be bound by the assignment until we receive written notice of
the assignment. Western Reserve will not be liable for any payment or other
action we take in accordance with the Contract before we receive notice of the
assignment. An assignment may be a taxable event. There may be limitations on
your ability to assign a qualified Contract.
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
Western Reserve was incorporated under the laws of Ohio on October 1,
1957. It is engaged in the business of writing life insurance policies and
annuity contracts. Western Reserve is wholly-owned by First AUSA Life Insurance
Company, a stock life insurance company which is wholly-owned by AEGON USA,
Inc. ("AEGON USA"), which conducts most of its operations through subsidiary
companies engaged in the insurance business or in providing non-insurance
financial services. All of the stock of AEGON USA is indirectly owned by AEGON
N.V. of the Netherlands, the securities of which are publicly traded. AEGON
N.V., a holding company, conducts its business through subsidiary companies
engaged primarily in the insurance business. Western Reserve is licensed in the
District of Columbia, Guam, Puerto Rico and in all states except New York.
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THE SEPARATE ACCOUNT
Western Reserve established a separate account, called the WRL Series
Annuity Account, under the laws of the State of Ohio on April 12, 1988. The
separate account is divided into subaccounts, each of which invests exclusively
in shares of a mutual fund portfolio. Currently, there are 23 subaccounts
offered through this Contract. Western Reserve may add, delete or substitute
subaccounts or investments held by the subaccounts, and reserves the right to
change the investment objective of any subaccount, subject to applicable law as
described in the SAI. In addition, the separate account may be used for other
variable annuity contracts issued by Western Reserve.
The separate account is registered with the SEC as a unit investment trust
under the 1940 Act. However, the SEC does not supervise the management, the
investment practices, or the policies of the separate account or Western
Reserve.
The assets of the separate account are held in Western Reserve's name on
behalf of the separate account and belong to Western Reserve. However, the
assets underlying the Contracts are not chargeable with liabilities arising out
of any other business Western Reserve may conduct. The income, gains and
losses, realized and unrealized, from the assets allocated to each subaccount
are credited to and charged against that subaccount without regard to the
income, gains and losses from any other of our accounts or subaccounts.
Information about the separate account can be reviewed and copied at the
SEC's Public Reference Room in Washington, D.C. You may obtain information
about the operation of the public reference room by calling the SEC at
1-800-SEC-0330. In addition, the SEC maintains a web site (http://www.sec.gov)
that contains other information regarding the separate account.
VOTING RIGHTS
Western Reserve will vote all shares of the portfolios in accordance with
instructions we receive from you and other owners that have voting interests in
the portfolios. We will send you and other owners written requests for
instructions on how to vote those shares. When we receive those instructions,
we will vote all of the shares in proportion to those instructions. We will
vote shares for which no timely instructions were received in the same
proportion as the voting instructions we received. However, if we determine
that we are permitted to vote the shares in our own right, we may do so. Each
person having a voting interest will receive proxy material, reports, and other
materials relating to the appropriate portfolio. More information on voting
rights is provided in the SAI.
DISTRIBUTION OF THE CONTRACTS
AFSG Securities Corporation ("AFSG") is the principal underwriter of the
Contracts. Like Western Reserve, it is an indirect wholly-owned subsidiary of
AEGON USA. It is located at 4333 Edgewood Road N.E., Cedar Rapids, IA
52499-0001. AFSG is registered as a broker/dealer under the Securities Exchange
Act of 1934. It is a member of the National Association of Securities Dealers,
Inc.
46
<PAGE>
Commissions of up to 6% of premium payments will be paid to broker/dealers
who sell the Contracts under agreements with AFSG. These commissions are not
deducted from premium payments. In addition, certain production, persistency
and managerial bonuses may be paid. Western Reserve may also pay compensation
to banks and other financial institutions for their services in connection with
the sale and servicing of the Contracts.
NON-PARTICIPATING CONTRACT
The Contract does not participate or share in the profits or surplus
earnings of Western Reserve. No dividends are payable on the Contract.
VARIATIONS IN CONTRACT PROVISIONS
Certain provisions of the Contracts may vary from the descriptions in this
prospectus in order to comply with different state laws. See your Contract for
variations since any such state variations will be included in your Contract or
in riders or endorsements attached to your Contract.
Massachusetts, New Jersey, Oregon, Pennsylvania and Washington State
residents: The fixed account is NOT available to you. You may not direct any
money to the fixed account or transfer any money to the fixed account.
YEAR 2000 READINESS DISCLOSURE [TO BE UPDATED]
In May 1996, Western Reserve adopted and presently has in place a Year
2000 Project Plan (the "Plan") to review and analyze existing hardware and
software systems, as well as voice and data communications systems, to
determine if they are year 2000 compliant. As of March 1, 1999, substantially
all of Western Reserve's mission-critical systems are year 2000 compliant. The
Plan remains on track as we continue with the validation of our mission-critical
and non-mission-critical systems, including revalidation testing in 1999. In
addition, we have undertaken aggressive initiatives to test all systems that
interface with any third parties and other business partners. All of these
steps are aimed at allowing current operations to remain unaffected by the Year
2000 date change.
As of the date of this prospectus, Western Reserve has identified and made
available what it believes are the appropriate resources of hardware, people,
and dollars, including the engagement of outside third parties, to ensure that
the Plan will be completed.
The actions taken by management under the Plan are intended to reduce
significantly Western Reserve's risk of a material business interruption based
on the Year 2000 issues. It should be noted that the Year 2000 computer
problem, and its resolution, is complex and multifaceted, and any company's
success cannot be conclusively known until the Year 2000 is reached. In spite
of its efforts or results, our ability to function unaffected to and through
the Year 2000 may be adversely affected by actions, or failure to act, of third
parties beyond our knowledge or control.
This statement is a Year 2000 Readiness Disclosure pursuant to Section
3(9) of the YEAR 2000 INFORMATION AND READINESS DISCLOSURE ACT, 15 U.S.C.
Section 1 (1998).
47
<PAGE>
IMSA
We are a charter member of the Insurance Marketplace Standards Association
("IMSA"). IMSA is an independent, voluntary organization of life insurance
companies. It promotes high ethical standards in the sales, advertising and
servicing of individual life insurance and annuity products. Companies must
undergo a rigorous self and independent assessment of their practices to become
a member of IMSA. The IMSA logo in our sales literature shows our ongoing
commitment to these standards.
LEGAL PROCEEDINGS
Western Reserve, like other life insurance companies, is 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. Although the outcome of any litigation cannot be
predicted with certainty, we believe that at the present time there are no
pending or threatened lawsuits that are reasonably likely to have a material
adverse impact on the separate account, AFSG or Western Reserve.
FINANCIAL STATEMENTS
The financial statements of Western Reserve and the separate account are
included in the SAI.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
Definitions of Special Terms
The Contract -- General Provisions
Certain Federal Income Tax Consequences
Investment Experience
Historical Performance Data
Published Ratings
Administration
Records and Reports
Distribution of the Contracts
Other Products
Custody of Assets
Legal Matters
Independent Accountants
Other Information
Financial Statements
Inquiries and requests for an SAI should be directed to:
Western Reserve Life:
Attention: Annuity Department
P.O. Box 9051
Clearwater, Florida 33758-9051
1-800-851-9777
48
<PAGE>
APPENDIX A
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The accumulation unit values and the number of accumulation units
outstanding for each subaccount from the date of inception are shown in the
following tables. The subaccounts that deduct a separate account annual expense
of 1.65% have not yet commenced operations. Therefore, there is no history of
accumulation unit values for these subaccounts.
<TABLE>
<CAPTION>
WRL JANUS GROWTH SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
------------- ------------- --------------
<S> <C> <C> <C>
12/3/92(1)-12/31/92 $10.000 $10.240
12/31/93 $10.240 $10.500
12/31/94 $10.500 $ 9.493
12/31/95 $ 9.493 $13.771
12/31/96 $13.771 $16.019
12/31/97 $16.019 $18.568
12/31/98 $18.568 $30.116
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
WRL AEGON BOND SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
------------- ------------- --------------
<S> <C> <C> <C>
12/3/92(1)-12/31/92 $10.000 $10.140
12/31/93 $10.140 $11.330
12/31/94 $11.330 $10.400
12/31/95 $10.400 $12.613
12/31/96 $12.613 $12.455
12/31/97 $12.455 $13.407
12/31/98 $13.407 $14.452
</TABLE>
<TABLE>
<CAPTION>
WRL J.P. MORGAN MONEY MARKET SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
------------- ------------- --------------
<S> <C> <C> <C>
12/3/92(1)-12/31/92 $10.000 $10.010
12/31/93 $10.010 $10.110
12/31/94 $10.110 $10.319
12/31/95 $10.319 $10.728
12/31/96 $10.728 $11.119
12/31/97 $11.119 $11.546
12/31/98 $11.546 $11.989
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
WRL JANUS GLOBAL SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
------------- ------------- --------------
<S> <C> <C> <C>
12/3/92(1)-12/31/92 $10.000 $10.151
12/31/93 $10.151 $13.520
12/31/94 $13.520 $13.364
12/31/95 $13.364 $16.217
12/31/96 $16.217 $20.427
12/31/97 $20.427 $23.921
12/31/98 $23.921 $30.669
</TABLE>
<TABLE>
<CAPTION>
WRL VKAM EMERGING GROWTH SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
------------- ------------- --------------
<S> <C> <C> <C>
3/1/93(1)-12/31/93 $10.000 $12.350
12/31/94 $12.350 $11.286
12/31/95 $11.286 $16.337
12/31/96 $16.337 $19.152
12/31/97 $19.152 $22.938
12/31/98 $22.938 $31.063
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
WRL LKCM STRATEGIC TOTAL RETURN SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
------------- ------------- ---------------
<S> <C> <C> <C>
3/1/93(1)-12/31/93 $10.000 $11.240 198,616
12/31/94 $11.240 $11.027 426,111
12/31/95 $11.027 $13.555 493,315
12/31/96 $13.555 $15.372 636,842
12/31/97 $15.372 $18.471 816,107
12/31/98 $18.471 $19.969 875,748
</TABLE>
<TABLE>
<CAPTION>
WRL ALGER AGGRESSIVE GROWTH SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
------------- ------------- --------------
<S> <C> <C> <C>
3/1/94(1)-12/31/94 $10.000 $ 9.782
12/31/95 $ 9.782 $13.313
12/31/96 $13.313 $14.500
12/31/97 $14.500 $17.766
12/31/98 $17.766 $26.048
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
WRL AEGON BALANCED SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
------------- ------------- ---------------
<S> <C> <C> <C>
3/1//94(1)-12/31/94 $10.000 $ 9.339
12/31/95 $ 9.339 $11.032
12/31/96 $11.032 $12.045
12/31/97 $12.045 $13.909
12/31/98 $13.909 $14.666
</TABLE>
<TABLE>
<CAPTION>
WRL FEDERATED GROWTH & INCOME SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
------------- ------------- --------------
<S> <C> <C> <C>
3/1/94(1)-12/31/94 $10.000 $ 9.453
12/31/95 $ 9.453 $11.676
12/31/96 $11.676 $12.853
12/31/97 $12.853 $15.799
12/31/98 $15.799 $16.055
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
WRL DEAN ASSET ALLOCATION SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
------------- ------------- --------------
<S> <C> <C> <C>
1/3/95(1)-12/31/95 $10.000 $11.843
12/31/96 $11.843 $13.363
12/31/97 $13.363 $15.363
12/31/98 $15.363 $16.411
</TABLE>
<TABLE>
<CAPTION>
WRL NWQ VALUE EQUITY SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
------------ ------------- ---------------
<S> <C> <C> <C>
5/1/96(1)-12/31/96 $10.000 $11.213
12/31/97 $11.213 $13.827
12/31/98 $13.827 $12.983
</TABLE>
<TABLE>
<CAPTION>
WRL C.A.S.E. GROWTH SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
------------ ------------- ---------------
<S> <C> <C> <C>
5/1/96(1)-12/31/96 $10.000 $10.773
12/31/97 $10.773 $12.220
12/31/98 $12.220 $12.348
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
WRL GE/SCOTTISH EQUITABLE INTERNATIONAL EQUITY SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
------------ ------------- ---------------
<S> <C> <C> <C>
1/2/97(1)-12/31/97 $10.000 $10.601
12/31/98 $10.601 $11.797
</TABLE>
<TABLE>
<CAPTION>
WRL GE U.S. EQUITY SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
------------ ------------- ---------------
<S> <C> <C> <C>
1/2/97(1)-12/31/97 $10.000 $12.526
12/31/98 $12.526 $15.177
</TABLE>
<TABLE>
<CAPTION>
WRL THIRD AVENUE VALUE SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
------------ ------------- ---------------
<S> <C> <C> <C>
1/2/98(1)-12/31/98 $10.000 $9.187
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
WRL J.P. MORGAN REAL ESTATE SECURITIES SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
------------ ------------- ---------------
<S> <C> <C> <C>
5/1/98(1)-12/31/98 $10.000 $8.427
</TABLE>
(1) Commencement of operations of these subaccounts.
Because the WRL Goldman Sachs Growth, WRL Goldman Sachs Small Cap, WRL T.
Rowe Price Dividend Growth, WRL T. Rowe Price Small Cap, WRL Salomon All Cap,
WRL Pilgrim Baxter Mid Cap Growth and WRL Dreyfus Mid Cap subaccounts did not
commence operations until May 1, 1999, there is no condensed financial
information for these subaccounts for the year ended December 31, 1998.
56
<PAGE>
APPENDIX B
HISTORICAL PERFORMANCE DATA
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STANDARDIZED PERFORMANCE DATA
We may advertise historical yields and total returns for the subaccounts
of the separate account. These figures are based on historical earnings and
will be calculated according to guidelines from the SEC. They do not indicate
future performance.
WRL J.P. MORGAN MONEY MARKET SUBACCOUNT. The yield of the WRL J.P. Morgan
Money Market subaccount is the annualized income generated by an investment in
the subaccount over a specified seven-day period. The yield is calculated by
assuming that the income generated for that seven-day period, not including
capital changes or income other than investment income, is generated each
seven-day period over a 52-week period and is shown as a percentage of the
investment. The effective yield is calculated similarly but we assume that the
income earned is reinvested. The effective yield will be slightly higher than
the yield because of the compounding effect of this assumed reinvestment. For
the seven days ended December 31, 1998, the yield of the WRL J.P. Morgan Money
Market subaccount was 3.54%, and the effective yield was 3.61%.
OTHER SUBACCOUNTS. The yield of a subaccount of the separate account,
other than the WRL J.P. Morgan Money Market subaccount, refers to the
annualized income generated by an investment under a Contract in the subaccount
over a specified 30-day period. The yield is calculated by assuming that the
income generated by the investment during that 30-day period is generated each
30-day period over a 12-month period and is shown as a percentage of the
investment.
The total return of a subaccount assumes that an investment has been held
in the subaccount for various periods of time including a period measured from
the date the subaccount began operations. When a subaccount has been in
operation for 1, 5, and 10 years, the total return for these periods will be
provided. The total return quotations will represent the average annual
compounded rates of return of investment of $1,000 in the subaccount as of the
last day of each period.
The yield and total return calculations for a subaccount are not reduced
by any premium taxes. For additional information regarding yields and total
returns, please refer to the SAI.
Based on the method of calculation described in the SAI, the standard
average annual total returns for periods from inception of the subaccounts to
December 31, 1998, and for the one and five year periods ended December 31,
1998 are shown in Table 1 below. Total returns shown reflect deductions of
1.00% for the mortality and expense risk charge, 0.40% for the administrative
charge, $30 for the annual Contract charge and the applicable surrender charge.
(Based on an average Contract size of $______, the annual Contract charge
translates into a charge of _____%.) Total returns shown in Table 2 reflect the
standard total
57
<PAGE>
returns of Table 1, adjusted to deduct of 1.25% for the mortality and expense
risk charge (assuming addition of the compounding minimum death benefit), 0.40%
for the administrative charge, 0.30% for the Guaranteed Minimum Income Benefit
Rider, and $30 for the annual Contract charge. The Guaranteed Minimum Income
Benefit Rider charge has been calculated assuming a Rider charge of 0.30% of
minimum annuitization value ("MAV") and assuming an MAV annual growth rate of
6%. Total returns also assume a complete surrender of the Contract at the end
of the period; therefore, the surrender charge is deducted.
<TABLE>
<CAPTION>
TABLE 1
STANDARD AVERAGE ANNUAL TOTAL RETURNS OF THE SUBACCOUNTS
(ASSUMING SURRENDER AND STANDARD DEATH BENEFIT)
(TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES: 1.40%)
1 YEAR 5 YEARS INCEPTION OF THE SUBACCOUNT
ENDED ENDED SUBACCOUNT TO INCEPTION
SUBACCOUNT 12/31/98 12/31/98 12/31/98 DATE
- ---------- -------- -------- ---------------- ----------
<S> <C> <C> <C> <C>
WRL Janus Growth
WRL Janus Global
WRL AEGON Bond
WRL AEGON Balanced
WRL Alger Aggressive Growth
WRL VKAM Emerging Growth
WRL LKCM Strategic Total Return
WRL Federated Growth & Income
WRL J.P. Morgan Money Market*
WRL J.P. Morgan Real Estate Securities**
WRL Third Avenue Value**
WRL NWQ Value Equity
WRL Dean Asset Allocation
WRL C.A.S.E. Growth
WRL GE/Scottish Equitable International Equity
WRL GE U.S. Equity
WRL Goldman Sachs Growth N/A N/A
WRL Goldman Sachs Small Cap N/A N/A
WRL T. Rowe Price Dividend Growth N/A N/A
WRL T. Rowe Price Small Cap N/A N/A
WRL Salomon All Cap N/A N/A
WRL Pilgrim Baxter Mid Cap Growth N/A N/A
WRL Dreyfus Mid Cap N/A N/A
</TABLE>
* Yield more closely reflects the current earnings of the WRL J.P. Morgan
Money Market subaccount than its total return.
** One year data has not been annualized.
58
<PAGE>
<TABLE>
<CAPTION>
TABLE 2
STANDARD AVERAGE ANNUAL TOTAL RETURNS OF THE SUBACCOUNTS
(ASSUMES SURRENDER AND SELECTION OF
COMPOUNDING MINIMUM DEATH BENEFIT AND
GUARANTEED MINIMUM INCOME BENEFIT RIDER)
(TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES: 1.65%)
1 YEAR 5 YEARS INCEPTION OF THE SUBACCOUNT
ENDED ENDED SUBACCOUNT TO INCEPTION
SUBACCOUNT 12/31/98 12/31/98 12/31/98 DATE
- ---------- -------- -------- ---------------- ----------
<S> <C> <C> <C> <C>
WRL Janus Growth
WRL Janus Global
WRL AEGON Bond
WRL AEGON Balanced
WRL Alger Aggressive Growth
WRL VKAM Emerging Growth
WRL LKCM Strategic Total Return
WRL Federated Growth & Income
WRL J.P. Morgan Money Market*
WRL J.P. Morgan Real Estate Securities**
WRL Third Avenue Value**
WRL NWQ Value Equity
WRL Dean Asset Allocation
WRL C.A.S.E. Growth
WRL GE/Scottish Equitable International Equity
WRL GE U.S. Equity
WRL Goldman Sachs Growth N/A N/A
WRL Goldman Sachs Small Cap N/A N/A
WRL T. Rowe Price Dividend Growth N/A N/A
WRL T. Rowe Price Small Cap N/A N/A
WRL Salomon All Cap N/A N/A
WRL Pilgrim Baxter Mid Cap Growth N/A N/A
WRL Dreyfus Mid Cap N/A N/A
</TABLE>
* Yield more closely reflects the current earnings of the WRL J.P. Morgan
Money Market subaccount than its total return.
** One year data has not been annualized.
59
<PAGE>
NON-STANDARDIZED PERFORMANCE DATA
In addition to the standard data discussed above, similar performance data
for other periods may also be shown.
We may from time to time also advertise or disclose average annual total
return or other performance data in non-standard formats for the subaccounts.
The non-standard performance data may make different assumptions regarding the
amount invested, the time periods shown, or the effect of partial surrenders or
annuity payments.
All non-standard performance data will be advertised only if the standard
performance data is also disclosed. For additional information regarding the
calculation of other performance data, please refer to the SAI.
Based on the method of calculation described in the SAI, the non-standard
average annual total returns for periods from inception of the subaccounts to
December 31, 1998, and for the one and five year periods ended December 31,
1998 are shown in Table 3 below. Total returns shown reflect deductions of
1.00% for the mortality and expense risk charge, 0.40% for the administrative
charge and $30 for the annual Contract charge. (Based on an average Contract
size of $______, the annual Contract charge translates into a charge of ___%.)
Total returns shown in Table 4 reflect the non-standard total returns of Table
3 adjusted to deduct 1.25% for the mortality and expense risk charge (assuming
addition of the compounding minimum death benefit), 0.40% for the
administrative charge, 0.30% for the Guaranteed Minimum Income Benefit Rider,
and $30 for the annual Contract charge. The Guaranteed Minimum Income Benefit
Rider charge has been calculated assuming a Rider charge of 0.30% of MAV and
assuming an MAV annual growth rate of 6%. Total returns also assume that the
Contract is not surrendered and therefore the surrender charge is not deducted.
60
<PAGE>
The non-standardized average annual total return figures shown in Tables 3
and 4 are based on the assumption that the Contract is not surrendered, and
therefore the surrender charge is not imposed.
<TABLE>
<CAPTION>
TABLE 3
NON-STANDARD AVERAGE ANNUAL TOTAL RETURNS
(ASSUMES NO SURRENDER AND STANDARD DEATH BENEFIT)
(TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES: 1.40%)
1 YEAR 5 YEARS INCEPTION OF THE SUBACCOUNT
ENDED ENDED SUBACCOUNT TO INCEPTION
SUBACCOUNT 12/31/98 12/31/98 12/31/98 DATE
- ---------- -------- -------- ---------------- ----------
<S> <C> <C> <C> <C>
WRL Janus Growth
WRL Janus Global
WRL AEGON Bond
WRL AEGON Balanced
WRL Alger Aggressive Growth
WRL VKAM Emerging Growth
WRL LKCM Strategic Total Return
WRL Federated Growth & Income
WRL J.P. Morgan Money Market*
WRL J.P. Morgan Real Estate Securities**
WRL Third Avenue Value**
WRL NWQ Value Equity
WRL Dean Asset Allocation
WRL C.A.S.E Growth
WRL GE/Scottish Equitable International Equity
WRL GE U.S. Equity
WRL Goldman Sachs Growth N/A N/A
WRL Goldman Sachs Small Cap N/A N/A
WRL T. Rowe Price Dividend Growth N/A N/A
WRL T. Rowe Price Small Cap N/A N/A
WRL Salomon All Cap N/A N/A
WRL Pilgrim Baxter Mid Cap Growth N/A N/A
WRL Dreyfus Mid Cap N/A N/A
</TABLE>
* Yield more closely reflects the current earnings of the WRL J.P. Morgan
Money Market subaccount than its total return.
** One year data has not been annualized.
61
<PAGE>
<TABLE>
<CAPTION>
TABLE 4
NON-STANDARD AVERAGE TOTAL RETURNS
(ASSUMES NO SURRENDER AND SELECTION OF
COMPOUNDING MINIMUM DEATH BENEFIT AND
GUARANTEED MINIMUM INCOME BENEFIT RIDER)
(TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES: 1.65%)
1 YEAR 5 YEARS INCEPTION OF THE SUBACCOUNT
ENDED ENDED SUBACCOUNT TO INCEPTION
SUBACCOUNT 12/31/98 12/31/98 12/31/98 DATE
- ---------- -------- -------- ---------------- ----------
<S> <C> <C> <C> <C>
WRL Janus Growth
WRL Janus Global
WRL AEGON Bond
WRL AEGON Balanced
WRL Alger Aggressive Growth
WRL VKAM Emerging Growth
WRL LKCM Strategic Total Return
WRL Federated Growth & Income
WRL J.P. Morgan Money Market*
WRL J.P. Morgan Real Estate Securities**
WRL Third Avenue Value**
WRL NWQ Value Equity
WRL Dean Asset Allocation
WRL C.A.S.E. Growth
WRL GE/Scottish Equitable International Equity
WRL GE U.S. Equity
WRL Goldman Sachs Growth N/A N/A
WRL Goldman Sachs Small Cap N/A N/A
WRL T. Rowe Price Dividend Growth N/A N/A
WRL T. Rowe Price Small Cap N/A N/A
WRL Salomon All Cap N/A N/A
WRL Pilgrim Baxter Mid Cap Growth N/A N/A
WRL Dreyfus Mid Cap N/A N/A
</TABLE>
* Yield more closely reflects the current earnings of the WRL J.P. Morgan
Money Market subaccount than its total return.
** One year data has not been annualized.
62
<PAGE>
ADJUSTED HISTORICAL PERFORMANCE DATA. We may disclose historic performance
data for the portfolios since their inception reduced by some or all of the
fees and charges under the Contract. Such adjusted historic performance
includes data that precedes the inception dates of the subaccounts. This data
is designed to show the performance that would have resulted if the Contract
had been in existence during that time, based on the portfolio's performance.
This data assumes that the subaccount was in existence for the same period as
the portfolio with a level of charges equal to those currently assessed under
the Contract. This data is not intended to indicate future performance.
As shown in Table 5 and Table 6 below, we may disclose average annual
total returns for the portfolios reduced by all charges under the Contract, as
if the Contract had been in existence since the inception of the portfolio.
Such fees and charges include the 1.00% mortality and expense risk charge, the
administrative charge of 0.40% and the annual Contract charge of $30. Total
returns shown in Table 6 reflect deductions of 1.25% for the mortality and
expense risk charge (assuming addition of the compounding minimum death
benefit), 0.40% for the administrative charge, 0.30% for the Guaranteed Minimum
Income Benefit Rider and $30 for the annual Contract charge. (Based on an
average Contract size of $____, the annual Contract charge translates into a
charge of ____%.) The Guaranteed Minimum Income Benefit Rider charge has been
calculated assuming a Rider charge of 0.30% of MAV and assuming an MAV annual
growth rate of 6%. Tables 5 and 6 assumes a complete surrender of the Contract
at the end of the period, and therefore the surrender charge is deducted.
Tables 7 and 8 assumes that the Contract is not surrendered, and therefore the
surrender charge is not deducted.
63
<PAGE>
The following information is also based on the method of calculation
described in the SAI. The adjusted historical average annual total returns for
periods ended 12/31/98 were as follows:
<TABLE>
<CAPTION>
TABLE 5
ADJUSTED HISTORICAL AVERAGE ANNUAL TOTAL RETURNS
(ASSUMES SURRENDER AND STANDARD DEATH BENEFIT)
(TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES: 1.40%)
CORRESPONDING
10 YEARS PORTFOLIO
PORTFOLIO 1 YEAR 5 YEARS OR INCEPTION INCEPTION DATE
- --------- ------ ------- ------------ --------------
<S> <C> <C> <C> <C>
WRL Janus Growth*/dagger/ 10/2/86
WRL Janus Global 12/3/92
WRL AEGON Bond*/dagger/ 10/2/86
WRL AEGON Balanced 3/1/94
WRL Alger Aggressive Growth 3/1/94
WRL VKAM Emerging Growth 3/1/93
WRL LKCM Strategic Total Return 3/1/93
WRL Federated Growth & Income 3/1/94
WRL J.P. Morgan Money Market*/dagger/ 10/2/86
WRL J.P. Morgan Real Estate Securities** N/A 5/1/98
WRL Third Avenue Value** N/A 1/2/98
WRL NWQ Value Equity N/A 5/1/96
WRL Dean Asset Allocation N/A 1/3/95
WRL C.A.S.E. Growth* N/A 5/1/95
WRL GE/Scottish Equitable International Equity N/A 1/2/97
WRL GE U.S. Equity N/A 1/2/97
WRL Goldman Sachs Growth N/A N/A 5/1/99
WRL Goldman Sachs Small Cap N/A N/A 5/1/99
WRL T. Rowe Price Dividend Growth N/A N/A 5/1/99
WRL T. Rowe Price Small Cap N/A N/A 5/1/99
WRL Salomon All Cap N/A N/A 5/1/99
WRL Pilgrim Baxter Mid Cap Growth N/A N/A 5/1/99
WRL Dreyfus Mid Cap N/A N/A 5/1/99
</TABLE>
* The calculation of total return performance for the WRL Janus Growth, WRL
AEGON Bond and WRL J.P. Morgan Money Market subaccounts prior to December
31, 1992 and the WRL C.A.S.E. Growth subaccount prior to May 1, 1996
reflects deductions for the mortality and expense risk charge on a monthly
basis, rather than a daily basis. The monthly deduction is made at the
beginning of each month and generally approximates the performance that
would have resulted if the subaccounts had actually been in existence since
the inception of the portfolios. Yield more closely reflects current
earnings of the WRL J.P. Morgan Money Market subaccount than its total
return.
** One year data has not been annualized.
/dagger/ Ten Year Date
64
<PAGE>
<TABLE>
<CAPTION>
TABLE 6
ADJUSTED HISTORICAL AVERAGE ANNUAL TOTAL RETURNS
(ASSUMES SURRENDER AND SELECTION OF
COMPOUNDING MINIMUM DEATH BENEFIT AND
GUARANTEED MINIMUM INCOME BENEFIT RIDER)
(TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES: 1.65%)
CORRESPONDING
10 YEARS PORTFOLIO
PORTFOLIO 1 YEAR 5 YEARS OR INCEPTION INCEPTION DATE
- --------- ------ ------- ------------ --------------
<S> <C> <C> <C> <C>
WRL Janus Growth*/dagger/ 10/2/86
WRL Janus Global 12/3/92
WRL AEGON Bond*/dagger/ 10/2/86
WRL AEGON Balanced 3/1/94
WRL Alger Aggressive Growth 3/1/94
WRL VKAM Emerging Growth 3/1/93
WRL LKCM Strategic Total Return 3/1/93
WRL Federated Growth Income 3/1/94
WRL J.P. Morgan Money Market*/dagger/ 10/2/86
WRL J.P. Morgan Real Estate Securities** N/A 5/1/98
WRL Third Avenue Value** N/A 1/2/98
WRL NWQ Value Equity N/A 5/1/96
WRL Dean Asset Allocation N/A 1/3/95
WRL C.A.S.E. Growth* N/A 5/1/95
WRL GE/Scottish Equitable International Equity N/A 1/2/97
WRL GE U.S. Equity N/A 1/2/97
WRL Goldman Sachs Growth N/A N/A 5/1/99
WRL Goldman Sachs Small Cap N/A N/A 5/1/99
WRL T. Rowe Price Dividend Growth N/A N/A 5/1/99
WRL T. Rowe Price Small Cap N/A N/A 5/1/99
WRL Salomon All Cap N/A N/A 5/1/99
WRL Pilgrim Baxter Mid Cap Growth N/A N/A 5/1/99
WRL Dreyfus Mid Cap N/A N/A 5/1/99
</TABLE>
* The calculation of total return performance for the WRL Janus Growth, WRL
AEGON Bond and WRL J.P. Morgan Money Market subaccounts prior to December
31, 1992 and the WRL C.A.S.E. Growth subaccount prior to May 1, 1996
reflects deductions for the mortality and expense risk charge on a monthly
basis, rather than a daily basis. The monthly deduction is made at the
beginning of each month and generally approximates the performance that
would have resulted if the subaccounts had actually been in existence since
the inception of the portfolios. Yield more closely reflects current
earnings of the WRL J.P. Morgan Money Market subaccount than its total
return.
** One year data has not been annualized.
/dagger/ Ten Year Date.
65
<PAGE>
<TABLE>
<CAPTION>
TABLE 7
ADJUSTED HISTORICAL AVERAGE ANNUAL TOTAL RETURNS
(ASSUMES NO SURRENDER AND STANDARD DEATH BENEFIT)
(TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES: 1.40%)
CORRESPONDING
10 YEARS PORTFOLIO
PORTFOLIO 1 YEAR 5 YEARS OR INCEPTION INCEPTION DATE
- --------- ------ ------- ------------ --------------
<S> <C> <C> <C> <C>
WRL Janus Growth*/dagger/ 10/2/86
WRL Janus Global 12/3/92
WRL AEGON Bond*/dagger/ 10/2/86
WRL AEGON Balanced 3/1/94
WRL Alger Aggressive Growth 3/1/94
WRL VKAM Emerging Growth 3/1/93
WRL LKCM Strategic Total Return 3/1/93
WRL Federated Growth & Income 3/1/94
WRL J.P. Morgan Money Market*/dagger/ 10/2/86
WRL J.P. Morgan Real Estate Securities** N/A 5/1/98
WRL Third Avenue Value** N/A 1/2/98
WRL NWQ Value Equity N/A 5/1/96
WRL Dean Asset Allocation N/A 1/3/95
WRL C.A.S.E. Growth* N/A 5/1/95
WRL GE/Scottish Equitable International Equity N/A 1/2/97
WRL GE U.S. Equity N/A 1/2/97
WRL Goldman Sachs Growth N/A N/A 5/1/99
WRL Goldman Sachs Small Cap N/A N/A 5/1/99
WRL T. Rowe Price Dividend Growth N/A N/A 5/1/99
WRL T. Rowe Price Small Cap N/A N/A 5/1/99
WRL Salomon All Cap N/A N/A 5/1/99
WRL Pilgrim Baxter Mid Cap Growth N/A N/a 5/1/99
WRL Dreyfus Mid Cap N/A N/A 5/1/99
</TABLE>
* The calculation of total return performance for the WRL Janus Growth, WRL
AEGON Bond and WRL J.P. Morgan Money Market subaccounts prior to December
31, 1992 and the WRL C.A.S.E. Growth subaccount prior to May 1, 1996
reflects deductions for the mortality and expense risk charge on a monthly
basis, rather than a daily basis. The monthly deduction is made at the
beginning of each month and generally approximates the performance that
would have resulted if the subaccounts had actually been in existence since
the inception of the portfolios. Yield more closely reflects current
earnings of the WRL J.P. Morgan Money Market subaccount than its total
return.
** One year data has not been annualized.
/dagger/ Ten Year Date.
66
<PAGE>
<TABLE>
<CAPTION>
TABLE 8
ADJUSTED HISTORICAL AVERAGE ANNUAL TOTAL RETURNS
(ASSUMES NO SURRENDER AND SELECTION OF
COMPOUNDING MINIMUM DEATH BENEFIT AND
GUARANTEED MINIMUM INCOME BENEFIT RIDER)
(TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES: 1.65%)
CORRESPONDING
10 YEARS PORTFOLIO
PORTFOLIO 1 YEAR 5 YEARS OR INCEPTION INCEPTION DATE
- --------- ------ ------- ------------ --------------
<S> <C> <C> <C> <C>
WRL Janus Growth*/dagger/ 10/2/86
WRL Janus Global 12/3/92
WRL AEGON Bond*/dagger/ 10/2/86
WRL AEGON Balanced 3/1/94
WRL Alger Aggressive Growth 3/1/94
WRL VKAM Emerging Growth 3/1/93
WRL LKCM Strategic Total Return 3/1/93
WRL Federated Growth & Income 3/1/94
WRL J.P. Morgan Money Market*/dagger/ 10/2/86
WRL J.P. Morgan Real Estate Securities** N/A 5/1/98
WRL Third Avenue Value** N/A 1/2/98
WRL NWQ Value Equity N/A 5/1/96
WRL Dean Asset Allocation N/A 1/3/95
WRL C.A.S.E. Growth* N/A 5/1/95
WRL GE/Scottish Equitable International Equity N/A 1/2/97
WRL GE U.S. Equity N/A 1/2/97
WRL Goldman Sachs Growth N/A N/A 5/1/99
WRL Goldman Sachs Small Cap N/A N/A 5/1/99
WRL T. Rowe Price Dividend Growth N/A N/A 5/1/99
WRL T. Rowe Price Small Cap N/A N/A 5/1/99
WRL Salomon All Cap N/A N/A 5/1/99
WRL Pilgrim Baxter Mid Cap Growth N/A N/A 5/1/99
WRL Dreyfus Mid Cap N/A N/A 5/1/99
</TABLE>
* The calculation of total return performance for the WRL Janus Growth, WRL
AEGON Bond and WRL J.P. Morgan Money Market subaccounts prior to December
31, 1992 and the WRL C.A.S.E. Growth subaccount prior to May 1, 1996
reflects deductions for the mortality and expense risk charge on a monthly
basis, rather than a daily basis. The monthly deduction is made at the
beginning of each month and generally approximates the performance that
would have resulted if the subaccounts had actually been in existence since
the inception of the portfolios. Yield more closely reflects current
earnings of the WRL J.P. Morgan Money Market subaccount than its total
return.
** One year data has not been annualized.
/dagger/ Ten Year Date.
67
<PAGE>
PART B
------
INFORMATION REQUIRED IN A STATEMENT OF
ADDITIONAL INFORMATION
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
WRL FREEDOM PREMIER(SM)
VARIABLE ANNUITY
Issued through
WRL SERIES ANNUITY ACCOUNT
Offered by
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
570 Carillon Parkway
St. Petersburg, Florida 33716
This Statement of Additional Information expands upon subjects discussed in the
current prospectus for the WRL Freedom Premier(SM) Variable Annuity offered by
Western Reserve Life Assurance Co. of Ohio. You may obtain a copy of the
prospectus dated ______, 1999, by calling 1-800-851-9777, or by writing to the
administrative office, Western Reserve Life, Annuity Department, P.O. Box 9051,
Clearwater, Florida 33758-9051. The prospectus sets forth information that a
prospective investor should know before investing in a Contract. Terms used in
the current prospectus for the Contract are incorporated in this Statement of
Additional Information.
THIS STATEMENT OF ADDITIONAL INFORMATION (SAI) IS NOT A PROSPECTUS AND SHOULD BE
READ ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACT AND THE WRL SERIES
ANNUITY ACCOUNT.
DATED: ________, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
----
DEFINITIONS OF SPECIAL TERMS................................................
THE CONTRACT--GENERAL PROVISIONS............................................
Owner...................................................................
Entire Contract.........................................................
Misstatement of Age or Gender...........................................
Addition, Deletion or Substitution of Investments.......................
Annuity Payment Options.................................................
Death Benefit...........................................................
Assignment..............................................................
Proof of Age, Gender and Survival.......................................
Non Participating.......................................................
Employee and Agent Purchases............................................
CERTAIN FEDERAL INCOME TAX CONSEQUENCES ....................................
Tax Status of the Contract..............................................
Taxation of Western Reserve.............................................
INVESTMENT EXPERIENCE.......................................................
Accumulation Units......................................................
Accumulation Unit Value.................................................
Annuity Unit Value and Annuity Payment Rates............................
Guaranteed Minimum Income Benefit Rider - Hypothetical Illustrations....
HISTORICAL PERFORMANCE DATA ................................................
Money Market Yields.....................................................
Other Subaccount Yields.................................................
Total Returns...........................................................
Other Performance Data..................................................
Advertising and Sales Literature........................................
PUBLISHED RATINGS...........................................................
ADMINISTRATION..............................................................
RECORDS AND REPORTS.........................................................
DISTRIBUTION OF THE CONTRACTS...............................................
OTHER PRODUCTS..............................................................
CUSTODY OF ASSETS...........................................................
LEGAL MATTERS...............................................................
INDEPENDENT ACCOUNTANTS.....................................................
OTHER INFORMATION...........................................................
FINANCIAL STATEMENTS........................................................
<PAGE>
<TABLE>
<CAPTION>
DEFINITIONS OF SPECIAL TERMS
- --------------------------------------------------------------------------------------------
<S> <C>
accumulation period The period between the Contract date and the maturity date while
the Contract is in force.
- --------------------------------------------------------------------------------------------
accumulation unit An accounting unit of measure used to calculate subaccount
value values during the accumulation period.
- --------------------------------------------------------------------------------------------
annuitant The person named in the application, or as subsequently changed,
to receive annuity payments. The annuitant may be changed as
provided in the Contract's death benefit provisions and annuity
provision.
- --------------------------------------------------------------------------------------------
annuity value The sum of the separate account value and the fixed account value.
- --------------------------------------------------------------------------------------------
annuity unit value An accounting unit of measure used to calculate annuity payments
from the subaccounts after the maturity date.
- --------------------------------------------------------------------------------------------
age The issue age is the annuitant's age on his/her birthday
immediately preceding the Contract date. Attained age is the
issue age plus the number of completed Contract years. When we
use the term "age" in this SAI, it has the same meaning as
"attained age."
- --------------------------------------------------------------------------------------------
beneficiary(ies) The person(s) entitled to receive the death benefit proceeds under
the Contract.
- --------------------------------------------------------------------------------------------
cash value The annuity value less any applicable premium taxes and any
surrender charge.
- --------------------------------------------------------------------------------------------
Code The Internal Revenue Code of 1986, as amended.
- --------------------------------------------------------------------------------------------
Contract date The later of the date on which the initial premium payment is
received and the date that the properly completed application is
received at Western Reserve's administrative office. It is also
the date when, depending on your state of residence, we allocate
your premium payment(s) either to the reallocation account or to
the fixed account and the subaccounts you selected on your
application. We measure Monthiversaries, Contract years and
Contract anniversaries from the Contract date.
- --------------------------------------------------------------------------------------------
fixed account An allocation option under the Contract, other than the separate
account, that provides for accumulation of premium payments, and
options for annuity payments on a fixed basis. The fixed account
may not be available in all states.
- --------------------------------------------------------------------------------------------
fixed account value During the accumulation period, a Contract's value allocated to
the fixed account.
- --------------------------------------------------------------------------------------------
fund WRL Series Fund, Inc., an investment company which is registered
with the U.S. Securities and Exchange Commission. We reserve the
right to add other registered investment companies to the Contract.
- --------------------------------------------------------------------------------------------
in force Condition under which the Contract is active and the owner is
entitled to exercise all rights under the Contract.
- --------------------------------------------------------------------------------------------
maturity date The date on which the accumulation period ends and annuity
payments begin.
- --------------------------------------------------------------------------------------------
Monthiversary The same day in the month as the Contract date. When
there is no date in a calendar month that coincides with
the Contract date, the Monthiversary is the first day of
the next month.
- --------------------------------------------------------------------------------------------
nonqualified Contracts Contracts issued other than in connection with retirement plans.
Nonqualified Contracts do not qualify for special
federal income tax treatment under the Code.
- --------------------------------------------------------------------------------------------
NYSE New York Stock Exchange.
- --------------------------------------------------------------------------------------------
owner (you, your) The person(s) entitled to exercise all rights under the
Contract. The annuitant is the owner unless the application states
otherwise, or unless a change of ownership is made at a later time.
- --------------------------------------------------------------------------------------------
portfolio A separate investment portfolio of the fund.
- --------------------------------------------------------------------------------------------
premium payments Amounts paid by an owner or on the owner's behalf to Western
Reserve as consideration for the benefits provided by the
Contract. When we use the term "premium payment" in this SAI, it
has the same meaning as "net premium payment" in the Contract,
which means the premium payment less any applicable premium
taxes.
- --------------------------------------------------------------------------------------------
qualified Contracts Contracts issued in connection with retirement
plans that qualify for special federal income tax
treatment under the Code.
- --------------------------------------------------------------------------------------------
reallocation account The fixed account or the WRL J.P. Morgan Money Market subaccount,
as indicated on the schedule page of your Contract.
- --------------------------------------------------------------------------------------------
reallocation date The date shown on the schedule page of your Contract when we
reallocate all annuity value held in the reallocation account to
the fixed account and subaccounts you selected. 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
Contract date.
- --------------------------------------------------------------------------------------------
separate account WRL Series Annuity Account, a separate account composed of
subaccounts established to receive and invest premium payments not
allocated to the fixed account.
- --------------------------------------------------------------------------------------------
separate account value During the accumulation period, a Contract's value in the separate
account, which equals the total value in each subaccount
during the accumulation period.
- --------------------------------------------------------------------------------------------
subaccount A subdivision of the separate account that invests exclusively in
the shares of a specified portfolio and supports the Contracts.
Subaccounts corresponding to each applicable portfolio hold assets
under the Contract during the accumulation period. Other
subaccounts corresponding to each applicable portfolio will hold
assets after the maturity date if a variable annuity option is
selected.
- --------------------------------------------------------------------------------------------
surrender The termination of a Contract at the option of the owner.
- --------------------------------------------------------------------------------------------
valuation date Each day on which the NYSE is open for trading, except when a
subaccount's corresponding portfolio does not value its shares.
Western Reserve is open for business on each day that
the NYSE is open.
- --------------------------------------------------------------------------------------------
valuation period The period of time over which we determine the change in the value
of the subaccounts in order to price accumulation units
and annuity units. Each valuation period begins at the
close of normal trading on the NYSE (currently 4:00 p.m.
Eastern time on each valuation date) and ends at the
close of normal trading of the NYSE on the next
valuation date.
- --------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
In order to supplement the description in the prospectus, the following provides
additional information about Western Reserve and the Contract, which may be of
interest to a prospective purchaser.
THE CONTRACT--GENERAL PROVISIONS
OWNER
The Contract shall belong to the owner upon issuance of the Contract after
completion of an application and delivery of the initial premium payment. While
the annuitant is living, the owner may: (1) assign the Contract; (2) surrender
the Contract; (3) amend or modify the Contract with Western Reserve's consent;
(4) receive annuity payments or name a payee to receive the payments; and (5)
exercise, receive and enjoy every other right and benefit contained in the
Contract. The exercise of these rights may be subject to the consent of any
assignee or irrevocable beneficiary; and of the owner's spouse in a community or
marital property state.
A joint owner can be named in the Contract application or in a written notice.
The surviving joint owner will become the new owner upon the other joint owner's
death, if one joint owner dies before the annuitant. If the surviving joint
owner dies before the annuitant, the surviving joint owner's estate will become
the owner.
NOTE CAREFULLY. If the surviving joint owner's estate becomes the new owner, and
if no probate estate is opened because the surviving joint owner has precluded
the opening of a probate estate by means of a trust or other instrument, unless
Western Reserve has received written notice of the trust as a successor owner
signed prior to the surviving joint owner's death, that trust may not exercise
ownership rights to the Contract. It may be necessary to open a probate estate
in order to exercise ownership rights to the Contract if the necessary written
notice has not been received by Western Reserve.
The owner may change the ownership of the Contract in a written notice. When
this change takes effect, all rights of ownership in the Contract will pass to
the new owner. A change of ownership may have tax consequences.
When there is a change of owner, the change will take effect as of the date
Western Reserve accepts the written notice. We assume no liability for any
payments made, or actions taken before a change is accepted, and shall not be
responsible for the validity or effect of any change of ownership. Changing the
owner cancels any prior choice of owner, but does not change the designation of
the beneficiary or the annuitant.
ENTIRE CONTRACT
The Contract and any endorsements thereon and the Contract application
constitute the entire contract between Western Reserve and the owner. All
statements in the application are representations and not warranties. No
statement will cause the Contract to be void or to be used in defense of a claim
unless contained in the application.
MISSTATEMENT OF AGE OR GENDER
If the age or gender of the annuitant has been misstated, Western Reserve will
change the annuity benefit payable to that which the premium payments would have
purchased for the correct age or gender. The dollar amount of any underpayment
Western Reserve makes shall be paid in full with the next payment due such
person or the beneficiary. The dollar amount of any overpayment made by Western
Reserve due to any misstatement shall be deducted from payments subsequently
accruing to such person or beneficiary. Any underpayment or overpayment will
include interest at 5% per year, from the date of the wrong payment to the date
of the adjustment. The age of the annuitant may be established at any time by
the submission of proof Western Reserve finds satisfactory.
ADDITION, DELETION, OR SUBSTITUTION OF INVESTMENTS
We reserve the right, subject to compliance with applicable law, to make
additions to, deletions from, or substitutions for the shares that are held by
the separate account or that the separate account may purchase. We reserve the
right to eliminate the shares of any portfolios of the fund and to substitute
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 judgment further investment in any portfolio should
become inappropriate in view of the purposes of the separate account. We will
not, however, substitute shares attributable to an owner's interest in a
subaccount without notice to, and prior approval of, the Securities and Exchange
Commission (the "SEC") to the extent required by the Investment Company Act of
1940, as amended (the "1940 Act"), or other applicable law.
We also reserve the right to establish additional subaccounts, each of which
would invest in a new portfolio of the fund, or in shares of another investment
company, with a specified investment objective. New subaccounts may be
established when, in the sole discretion of Western Reserve, marketing, tax,
investment or other conditions warrant, and any new subaccounts will be made
available to existing owners on a basis to be determined by Western Reserve. We
may also eliminate one or more subaccounts if, in our sole discretion,
marketing, tax, investment or other conditions warrant.
2
<PAGE>
In the event of any such substitution or change, we may make such changes in the
Contracts and other annuity contracts as may be necessary or appropriate to
reflect such substitution or change. If deemed by us to be in the best interests
of persons having voting rights under the Contracts, the separate account may be
operated as a management company under the 1940 Act, or subject to any required
approval, it may be deregistered under the 1940 Act in the event such
registration is no longer required.
We reserve the right to change the investment objective of any subaccount.
Additionally, if required by law or regulation, we will not materially change an
investment objective of the separate account or of a portfolio designated for a
subaccount unless a statement of change is filed with and approved by the
appropriate insurance official of the state of Western Reserve's domicile, or
deemed approved in accordance with such law or regulation.
ANNUITY PAYMENT OPTIONS
During the lifetime of the annuitant and prior to the maturity date, the owner
may choose an annuity payment option or change the election. If no election is
made prior to the maturity date, annuity payments will be made under Payment
Option D as Variable Life Income with 10 years of guaranteed payments.
Thirty days prior to the maturity date, we will mail to the owner a notice and a
form upon which the owner can select allocation options for the annuity proceeds
as of the maturity date, which cannot be changed thereafter and will remain in
effect until the Contract terminates. If a separate account annuity option is
chosen, the owner must include in the written notice the subaccount allocation
of the annuity proceeds as of the maturity date. If we do not receive that form
or other written notice acceptable to us prior to the maturity date, the
Contract's existing allocation options will remain in effect until the Contract
terminates. The owner may also, prior to the maturity date, select or change the
frequency of annuity payments, which may be monthly, quarterly, semi-annually or
annually, provided that the annuity option and payment frequency provides for
payments of at least $20 per period. If none of these is possible, a lump sum
payment will be made.
DETERMINATION OF THE FIRST VARIABLE PAYMENT. The amount of the first variable
payment is determined by multiplying the annuity proceeds times the appropriate
rate for the variable option selected. The rates are based on the Society of
Actuaries 1983 Individual Mortality Table A with projection and a 5% effective
annual assumed investment return and assuming a maturity date in the year 2000.
Gender based mortality tables will be used unless prohibited by law. The amount
of the first variable payment depends upon the gender (if consideration of
gender is allowed under state law) and adjusted age of the annuitant. The
adjusted age is the annuitant's actual age nearest birthday, at the maturity
date, adjusted as follows:
MATURITY DATE ADJUSTED AGE
------------- ------------
Before 2001 Actual Age
2001-2010 Actual Age minus 1
2011-2020 Actual Age minus 2
2021-2030 Actual Age minus 3
2031-2040 Actual Age minus 4
After 2040 As determined by Western Reserve
This adjustment assumes an increase in life expectancy, and therefore it results
in lower payments than without such an adjustment.
DETERMINATION OF ADDITIONAL VARIABLE PAYMENTS. The amount of variable annuity
payments after the first will increase or decrease according to the annuity unit
value which reflects the investment experience of the selected subaccount(s).
Each variable annuity payment after the first will be equal to the number of
units attributable to the Contract in each selected subaccount multiplied by the
annuity unit value of that subaccount on the date the payment is processed. The
number of such units is determined by dividing the first payment allocated to
that subaccount by the annuity unit value of that subaccount on the date the
first annuity payment is processed.
DEATH BENEFIT
ADJUSTED PARTIAL SURRENDER. A partial surrender will reduce the amount of your
monthly step-up death benefit and compounding minimum death benefit, if elected,
by an amount called the adjusted partial surrender. The reduction depends on the
relationship between the monthly step-up death benefit (or compounding minimum
death benefit), and annuity value. The adjusted partial surrender is
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the amount of a partial surrender times the ratio of [(a) divided by (b)] where:
(a) is the amount of either death benefit prior to the excess partial
surrender; and
(b) is the annuity value prior to the excess partial surrender.
THE FOLLOWING EXAMPLES DESCRIBE THE EFFECT OF SURRENDER ON THE MONTHLY STEP-UP
DEATH BENEFIT OR COMPOUNDING MINIMUM DEATH BENEFIT, AND ANNUITY VALUE.
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EXAMPLE 1
(Assumed Facts for Example)
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$75,000 current monthly step-up death benefit (MSUDB) or compounding
minimum death benefit (CMDB) before surrender
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$50,000 current annuity value before surrender
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$75,000 current death benefit (larger of annuity value and MSUDB or CMDB)
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6% current surrender charge percentage
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$15,000 requested partial surrender
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$10,000 surrender charge-free amount
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$5,000 excess partial surrender-EPS (amount subject to surrender charge)
- --------------------------------------------------------------------------------
$319.15 surrender charge on EPS = 0.06*(5,319.15)
- --------------------------------------------------------------------------------
$5,319.15 reduction in annuity value due to excess
partial surrender = 5000 + 319.15
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$22,500 adjusted partial surrender = $15,000* (75,000/50,000)
- --------------------------------------------------------------------------------
$52,500 new MSUDB or CMDB (after partial surrender) = 75,000 - 22,500
- --------------------------------------------------------------------------------
$34,680.85 new annuity value (after partial surrender) = 50,000 - 15,319.15
- --------------------------------------------------------------------------------
SUMMARY:
Reduction in MSUDB or CMDB = $22,500.00
Reduction in annuity value = $15,319.15
NOTE: The monthly step-up or compounding minimum death benefit is reduced more
than the annuity value since the MSUDB or CMDB was greater than the annuity
value just prior to the partial surrender.
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EXAMPLE 2
(Assumed Facts for Example)
- --------------------------------------------------------------------------------
$50,000 current monthly step-up death benefit (MSUDB) or compounding
minimum death benefit (CMDB) before surrender
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$75,000 current annuity value before partial surrender
- --------------------------------------------------------------------------------
$75,000 current death benefit (larger of annuity value and MSUDB or CMDB)
- --------------------------------------------------------------------------------
6% current surrender charge percentage
- --------------------------------------------------------------------------------
$15,000 requested partial surrender
- --------------------------------------------------------------------------------
$11,250 surrender charge-free amount
- --------------------------------------------------------------------------------
$3,750 excess partial surrender-EPS (amount subject to surrender charge)
- --------------------------------------------------------------------------------
$239.36 surrender charge on EPS less EIA = 0.06* (3,989.36)
- --------------------------------------------------------------------------------
$3,989.36 reduction in annuity value due to EPS = 3750 + 239.36
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$15,000 adjusted partial surrender = $15,000* (75,000/75,000)
- --------------------------------------------------------------------------------
$35,000 new MSUDB or CMDB (after partial surrender) = 50,000 -15,000
- --------------------------------------------------------------------------------
$59,760.64 new annuity value (after partial surrender) = 75,000
-11,250 - 3,989.36
- --------------------------------------------------------------------------------
SUMMARY:
Reduction in MSUDB or CMDB = $15,000.00
Reduction in annuity value = $15,239.36
NOTE: The MSDUB or CMDB and annuity value are reduced by the same amount since
the annuity value was higher than the MSUDB or CMDB just prior to the partial
surrender.
DEATH OF OWNER. Federal tax law requires that if any owner (including any
surviving joint owner who has become a current owner) dies before the maturity
date, then the entire value of the Contract must generally be distributed within
five years of the date of death of such owner. Special rules apply where (1) the
spouse of the deceased owner is the sole beneficiary, (2) the owner is not a
natural person and the primary annuitant dies or is changed, or (3) any owner
dies after the maturity date. See Certain Federal Income Tax Consequences for a
detailed description of these rules. Other rules may apply to qualified
Contracts.
If the owner (or a surviving joint owner) is not the annuitant and dies before
the annuitant:
o if no beneficiary is named and alive, the owner's estate will become the new
owner. The cash value must be distributed within five years of the former
owner's death;
o if the beneficiary is alive and is the owner's spouse, the Contract
will continue with the spouse as the new owner; or
o if the beneficiary is alive and is not the owner's spouse, the
beneficiary will become the new owner. The cash value must be distributed
either:
o within five years of the former owner's death; or
o over the lifetime of the new owner, if a natural person, with payments
beginning within one year of the former owner's death; or
o over a period that does not exceed the life expectancy (as defined by
the Code and regulations adopted under the Code) of the new owner, if a
natural person, with payments beginning within one year of the former
owner's death.
DEATH OF ANNUITANT. Due proof of death of the annuitant is proof that the
annuitant who is an owner died prior to the commencement of annuity payments.
Upon receipt of this proof and an election of a method of settlement and return
of the Contract, the death benefit generally will be paid within seven days, or
as soon thereafter as we have sufficient information about the beneficiary to
make the payment. The beneficiary may receive the amount payable in a lump sum
cash benefit, or, subject to any limitation under any state or federal law,
rule, or regulation, under one of the annuity payment options unless a
settlement agreement is effective at the owner's death preventing such election.
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If the annuitant dies during the accumulation period and the owner is a natural
person other than the annuitant, the owner will automatically become the
annuitant and this Contract will continue. In the event of joint owners, the
younger joint owner will automatically become the new annuitant and this
Contract will continue. If the annuitant dies during the accumulation period and
the owner is either (1) the same individual as the annuitant; or (2) other than
a natural person, then the death benefit proceeds are payable to the
beneficiary. However, in the event of joint owners, if the annuitant dies during
the accumulation period and is the same individual as one of the joint owners,
the surviving joint owner will automatically become the annuitant and this
Contract will continue.
If the annuitant was an owner, and the beneficiary was not the deceased
annuitant's spouse, (1) the death benefit must be distributed within five years
of the date of the annuitant/deceased owner's death, or (2) payments must begin
no later than one year after the annuitant/deceased owner's death and must be
made for the beneficiary's lifetime or for a period certain (so long as any
certain period does not exceed the beneficiary's life expectancy). Death
proceeds which are not paid to or for the benefit of a natural person must be
distributed within five years of the date of the annuitant/deceased owner's
death. If the sole beneficiary is the annuitant/deceased owner's surviving
spouse, such spouse may elect to continue the Contract as the new annuitant and
owner instead of receiving the death benefit. (See Certain Federal Income Tax
Consequences in this SAI.)
If the beneficiary elects to receive the death benefit proceeds under option
(1), then: (a) we will allow the beneficiary to make only ONE partial surrender
during the five-year period. That surrender must be made at the time option (1)
is elected. No surrender charges will apply to this surrender; (b) we will allow
the beneficiary to make ONE transfer to and from the subaccounts and the fixed
account during the five-year period. That transfer must be made at the time
option (1) is elected; (c) we will deduct the annual Contract charge each year
during the five-year period; (d) we will not apply any surrender charges to the
total distribution of the Contract; (e) we will not permit annuitization at the
end of the five-year period; and (f) if the beneficiary dies during the
five-year period, we will pay the remaining value of the Contract first to the
contingent beneficiary named by the owner. If no contingent beneficiary is
named, then we will make payments to the beneficiary's estate. The beneficiary
is not permitted to name his or her own beneficiary.
If there are joint owners, the annuitant is not the owner, and the one joint
owner dies prior to the maturity date, the surviving joint owner may surrender
the Contract at any time for the amount of the adjusted annuity value.
BENEFICIARY. The beneficiary designation in the application will remain in
effect until changed. The owner may change the designated beneficiary during the
annuitant's lifetime by sending written notice to us. The beneficiary's consent
to such change is not required unless the beneficiary was irrevocably designated
or law requires consent. (If an irrevocable beneficiary dies, the owner may then
designate a new beneficiary.) The change will take effect as of the date the
owner signs the written notice. We will not be liable for any payment made
before the written notice is received. Unless we receive written notice from the
owner to the contrary, no beneficiary may assign any payments under the Contract
before such payments are due. To the extent permitted by law, no payments under
the Contract will be subject to the claims of any beneficiary's creditors.
ASSIGNMENT
During the annuitant's lifetime and prior to the maturity date (subject to any
irrevocable beneficiary's rights) the owner may assign any rights or benefits
provided by a nonqualified Contract. The assignment of a Contract will be
treated as a distribution of the annuity value for federal tax purposes. Any
assignment must be made in writing and accepted by us. An assignment will be
effective as of the date accepted by us. We assume no liability for any payments
made or actions taken before a change is accepted and shall not be responsible
for the validity or effect of any assignment.
With regard to qualified Contracts, ownership of the Contract generally may be
assigned, but any assignment may be subject to restrictions, penalties, taxation
as a distribution, or even prohibition under the Code, and must be permitted
under the terms of the underlying retirement plan.
PROOF OF AGE, GENDER AND SURVIVAL
We may require proper proof of age and gender of any annuitant or co-annuitant
prior to making the first annuity payment. Prior to making any payment, we may
require proper proof that the annuitant or co-annuitant is alive and legally
qualified to receive such payment. If required by law to ignore differences in
gender of any payee, annuity payments will be determined using unisex rates.
NON-PARTICIPATING
The Contract will not share in Western Reserve's surplus earnings; no dividends
will be paid.
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EMPLOYEE AND AGENT PURCHASES
The Contract may be acquired by an employee or registered representative of any
broker/dealer authorized to sell the Contract or by their spouse or minor
children, or by an officer, director, trustee or bona-fide full-time employee of
Western Reserve or its affiliated companies or their spouse or minor children.
In such a case, we may credit an amount equal to a percentage of each premium
payment to the Contract due to lower acquisition costs we experience on those
purchases. The credit will be reported to the Internal Revenue Service ("IRS")
as taxable income to the employee or registered representative. We may offer, in
our discretion, certain employer sponsored savings plans, reduced fees and
charges including, but not limited to, the surrender charge, the mortality and
expense risk charge and the administrative charge for certain sales under
circumstances which may result in savings of certain costs and expenses. In
addition, there may be other circumstances of which we are not presently aware
which could result in reduced sales or distribution expenses. Credits to the
Contract or reductions in these fees and charges will not be unfairly
discriminatory against any owner.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING SUMMARY DOES NOT CONSTITUTE TAX ADVICE. IT IS A GENERAL DISCUSSION
OF CERTAIN OF THE EXPECTED FEDERAL INCOME TAX CONSEQUENCES OF INVESTMENT IN AND
DISTRIBUTIONS WITH RESPECT TO A CONTRACT BASED ON THE INTERNAL REVENUE CODE OF
1986, AS AMENDED, PROPOSED AND FINAL TREASURY REGULATIONS THEREUNDER, JUDICIAL
AUTHORITY, AND CURRENT ADMINISTRATIVE RULINGS AND PRACTICE. THIS SUMMARY
DISCUSSES ONLY CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO "UNITED STATES
PERSONS," AND DOES NOT DISCUSS STATE, LOCAL, OR FOREIGN TAX CONSEQUENCES. UNITED
STATES PERSONS MEANS CITIZENS OR RESIDENTS OF THE UNITED STATES, DOMESTIC
CORPORATIONS, DOMESTIC PARTNERSHIPS AND TRUSTS OR ESTATES THAT ARE SUBJECT TO
UNITED STATES FEDERAL INCOME TAX REGARDLESS OF THE SOURCE OF THEIR INCOME.
TAX STATUS OF THE CONTRACT
The following discussion is based on the assumption that the Contract qualifies
as an annuity contract for federal income tax purposes.
DIVERSIFICATION REQUIREMENTS. Section 817(h) of the Code provides that in order
for a variable contract which is based on a segregated asset account to qualify
as an annuity contract under the Code, the investments made by such account must
be "adequately diversified" in accordance with Treasury regulations. The
Treasury regulations issued under Section 817(h) (Treas. Reg. (ss.) 1.817-5)
apply a diversification requirement to each of the subaccounts of the separate
account. The separate account, through the fund and its portfolios, intends to
comply with the diversification requirements of the Treasury.
Section 817(h) applies to variable annuity contracts other than pension plan
contracts. The regulations reiterate that the diversification requirements do
not apply to pension plan contracts. All of the qualified retirement plans
(described below) are defined as pension plan contracts for these purposes.
Notwithstanding the exception of qualified contracts from application of the
diversification rules, the investment vehicle for Western Reserve's qualified
Contracts (i.e., the fund) will be structured to comply with the diversification
standards because it serves as the investment vehicle for nonqualified contracts
as well as qualified contracts.
OWNER CONTROL. In certain circumstances, owners of variable annuity contracts
may be considered the owners, for federal income tax purposes, of the assets of
the separate account used to support their contracts. In those circumstances,
income and gains from the separate account assets would be includable in the
variable annuity contract owner's gross income. Several years ago, the IRS
stated in published rulings that a variable contract owner will be considered
the owner of separate account assets if the contract owner possesses incidents
of ownership in those assets, such as the ability to exercise investment control
over the assets. More recently, the Treasury Department announced, in connection
with the issuance of regulations concerning investment diversification, that
those regulations "do not provide guidance concerning the circumstances in which
investor control of the investments of a segregated asset account may cause the
investor, rather than the insurance company, to be treated as the owner of the
assets in the account." This announcement also stated that guidance would be
issued by way of regulations or rulings on the "extent to which contract owners
may direct their investments to particular subaccounts without being treated as
owners of underlying assets."
The ownership rights under the Contract are similar to, but different in certain
respects from those described by the IRS in rulings in which it was determined
that contract owners were not owners of separate account assets. For example,
the owner of a Contract has the choice of one or more subaccounts in which to
allocate premiums and annuity values, and may be able to transfer among these
accounts more frequently than in such rulings. These differences could result in
owners being treated as the owners of the assets of the separate account. In
addition, we do not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has stated it expects to
issue. We therefore reserve the right to modify the Contracts as necessary to
attempt to prevent the owners from being considered the owners of a pro rata
share of the assets of the separate account.
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DISTRIBUTION REQUIREMENTS. The Code also requires that nonqualified contracts
contain specific provisions for distribution of contract proceeds upon the death
of an owner. In order to be treated as an annuity contract for federal income
tax purposes, the Code requires that such contracts provide that if any owner
dies on or after the maturity date and before the entire interest in the
contract has been distributed, the remaining portion must be distributed at
least as rapidly as under the method in effect on such owner's death. If any
owner dies before the maturity date, the entire interest in the contract must
generally be distributed within five years after such owner's date of death or
be applied to provide an immediate annuity under which payments will begin
within one year of such owner's death and will be made for the life of the
beneficiary or for a period not extending beyond the life expectancy of the
beneficiarY. However, if such owner's death occurs prior to the maturity date,
and such owner's surviving spouse is named beneficiary, then the contract may be
continued with the surviving spouse as the new owner. If any owner is not a
natural person, then for purposes of these distribution requirements, the
primary annuitant shall be treated as an owner and any death or change of such
primary annuitant shall be treated as the death of the owner. The Contract
contains provisions intended to comply with these requirements of the Code. No
regulations interpreting these requirements of the Code have yet been issued and
thus no assurance can be given that the provisions contained in the Contracts
satisfy all such Code requirements. The provisions contained in the Contracts
will be reviewed and modified if necessary to maintain their compliance with the
Code requirements when clarified by regulation or otherwise.
WITHHOLDING. The portion of any distribution under a Contract that is includable
in gross income will be subject to federal income tax withholding unless the
recipient of such distribution elects not to have federal income tax withheld
and properly notifies us. For certain qualified Contracts, certain distributions
are subject to mandatory withholding. The withholding rate varies according to
the type of distribution and the owner's tax status. For qualified Contracts,
"eligible rollover distributions" from section 401(a) plans and section 403(b)
tax-sheltered annuities are subject to a mandatory federal income tax
withholding of 20%. An eligible rollover distribution is the taxable portion of
any distribution from such a plan, except certain distributions such as
distributions required by the Code or distributions in a specified annuity form.
The 20% withholding does not apply, however, if the owner chooses a "direct
rollover" from the plan to another tax-qualified plan or IRA.
QUALIFIED CONTRACTS. The qualified Contract is designed for use with several
types of tax-qualified retirement plans. The tax rules applicable to
participants and beneficiaries in tax-qualified retirement plans vary according
to the type of plan and the terms and conditions of the plan. Special favorable
tax treatment may be available for certain types of contributions and
distributions. Adverse tax consequences may result from contributions in excess
of specified limits; distributions prior to age 59 1/2 (subject to certain
exceptions); distributions that do not conform to specified commencement and
minimum distribution rules; and in other specified circumstances. Some
retirement plans are subject to distribution and other requirements that are not
incorporated into our Contract administration procedures. Owners, participants
and beneficiaries are responsible for determining that contributions,
distributions and other transactions with respect to the Contract comply with
applicable law.
For qualified plans under section 401(a), 403(a), 403(b), and 457, the Code
requires that distributions generally must commence no later than the later of
April 1 of the calendar year following the calendar year in which the owner (or
plan participant) (i) reaches age 70-1/2 or (ii) retires, and must be made in a
specified form or manner. If the plan participant is a "5 percent owner" (as
defined in the Code), distributions generally must begin no later than April 1
of the calendar year in which the owner (or plan participant) reaches age
70-1/2. Each owner is responsible for requesting distributions under the
Contract that satisfy applicable tax rules.
We make no attempt to provide more than general information about use of the
Contract with the various types of retirement plans. Purchasers of Contracts for
use with any retirement plan should consult their legal counsel and tax advisor
regarding the suitability of the Contract.
INDIVIDUAL RETIREMENT ANNUITIES. In order to qualify as a traditional individual
retirement annuity ("IRA") under Section 408(b) of the Code, a Contract must
contain certain provisions: (i) the owner must be the annuitant; (ii) the
Contract generally is not transferable by the owner, e.g., the owner may not
designate a new owner, designate a contingent owner or assign the Contract as
collateral security; (iii) the total premium payments for any calendar year on
behalf of any individual may not exceed $2,000, except in the case of a rollover
amount or contribution under Sections 402(c), 403(a)(4), 403(b)(8) or 408(d)(3)
of the Code; (iv) annuity payments or partial surrenders must begin no later
than April 1 of the calendar year following the calendar year in which the
annuitant attains age 70-1/2; (v) an annuity payment option with a period
certain that will guarantee annuity payments beyond the life expectancy of the
annuitant and the beneficiary may not be selected; (vi) certain payments of
death benefits must be made in the event the annuitant dies prior to the
distribution of the annuity value; and (vii) the entire interest of the owner is
non-forfeitable. Contracts intended to qualify as traditional IRAs under Section
408(b) of the Code contain such provisions. Amounts in the IRA (other than
nondeductible contributions) are taxed when distributed from the IRA.
Distributions prior to age 59 1/2 (unless certain exceptions apply) are subject
to a 10% penalty tax.
Section 408 of the Code also indicates that no part of the funds for an
individual IRA may be invested in a life insurance contract, but the regulations
thereunder allow such funds to be invested in an annuity contract that provides
a death benefit that equals the greater of the premiums paid or the cash value
for the contract. The Contract provides an enhanced death benefit that could
exceed the amount of such a permissible death benefit, but it is unclear to what
extent such an enhanced death benefit could disqualify the Contract under
8
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Section 408 of the Code. The IRS has not reviewed the Contract for qualification
as an IRA, and has not addressed in a ruling of general applicability whether an
enhanced death benefit provision, such as the provision in the Contract,
comports with IRA qualification requirements.
ROTH INDIVIDUAL RETIREMENT ANNUITIES (ROTH IRA). The Roth IRA, under Section
408A of the Code, contains many of the same provisions as a traditional IRA.
However, there are some differences. First, the contributions are not deductible
and must be made in cash or as a rollover or transfer from another Roth IRA or
other IRA. A rollover from or conversion of an IRA to a Roth IRA may be subject
to tax and other special rules may apply. You should consult a tax advisor
before combining any converted amounts with any other Roth IRA contributions,
including any other conversion amounts from other tax years. The Roth IRA is
available to individuals with earned income and whose adjusted gross income is
under $110,000 for single filers, $160,000 for married filing jointly, and
$10,000 for married filing separately. The amount per individual that may be
contributed to all IRAs (Roth and traditional) is $2,000. Secondly, the
distributions are taxed differently. The Roth IRA offers tax-free distributions
when made five tax years after the first contribution to any Roth IRA and made
after attaining age 59 1/2, or to pay for qualified first time homebuyer
expenses (lifetime maximum of $10,000), or due to death or disability. All other
distributions are subject to income tax when made from earnings and may be
subject to a premature surrender penalty tax unless an exception applies. Unlike
the traditional IRA, there are no minimum required distributions during the
owner's lifetime; however, required distributions at death are the same.
SECTION 403(b) PLANS. Under Section 403(b) of the Code, payments made by public
school systems and certain tax exempt organizations to purchase Contracts for
their employees are excludable from the gross income of the employee, subject to
certain limitations. However, such payments may be subject to FICA (Social
Security) taxes. The Contract includes a death benefit that in some cases may
exceed the greater of the premium payments or the annuity value. The death
benefit could be characterized as an incidental benefit, the amount of which is
limited in any tax-sheltered annuity under section 403(b). Because the death
benefit may exceed this limitation, employers using the Contract in connection
with such plans should consult their tax advisor. Additionally, in accordance
with the requirements of the Code, Section 403(b) annuities generally may not
permit distribution of (i) elective contributions made in years beginning after
December 31, 1988, (ii) earnings on those contributions, and (iii) earnings on
amounts attributed to elective contributions held as of the end of the last year
beginning before January 1, 1989. Distributions of such amounts will be allowed
only upon the death of the employee, on or after attainment of age 59 1/2,
separation from service, disability, or financial hardship, except that income
attributable to elective contributions may not be distributed in the case of
hardship.
CORPORATE PENSION AND PROFIT SHARING PLANS AND H.R. 10 PLANS. Sections 401(a)
and 403(a) of the Code permit corporate employers to establish various types of
retirement plans for employees and self-employed individuals to establish
qualified plans for themselves and their employees. Such retirement plans may
permit the purchase of the Contracts to accumulate retirement savings. Adverse
tax consequences to the plan, the participant or both may result if the Contract
is assigned or transferred to any individual as a means to provide benefit
payments. The Contract includes a death benefit that in some cases may exceed
the greater of the premium payments or the annuity value. The death benefit
could be characterized as an incidental benefit, the amount of which is limited
in a pension or profit-sharing plan. Because the death benefit may exceed this
limitation, employers using the Contract in connection with such plans should
consult their tax advisor.
DEFERRED COMPENSATION PLANS. Section 457 of the Code, while not actually
providing for a qualified plan (as that term is used in the Code), provides for
certain deferred compensation plans with respect to service for state
governments, local governments, political subdivisions, agencies,
instrumentalities and certain affiliates of such entities, and tax exempt
organizations. The Contracts can be used with such plans. Under such plans a
participant may specify the form of investment in which his or her participation
will be made. For non-governmental section 457 plans, all such investments,
however, are owned by the sponsoring employer, and are subject to the claims of
the general creditors of the sponsoring employer. Depending on the terms of the
particular plan, a non-governmental employer may be entitled to draw on deferred
amounts for purposes unrelated to its section 457 plan obligations. In general,
all amounts received under a section 457 plan are taxable and are subject to
federal income tax withholding as wages.
TAXATION OF WESTERN RESERVE
Western Reserve at present is taxed as a life insurance company under Part I of
Subchapter L of the Code. The separate account is treated as part of us and,
accordingly, will not be taxed separately as a "regulated investment company"
under Subchapter M of the Code. We do not expect to incur any federal income tax
liability with respect to investment income and net capital gains arising from
the activities of the separate account retained as part of the reserves under
the Contract. Based on this expectation, it is anticipated that no charges will
be made against the separate account for federal income taxes. If, in future
years, any federal income taxes are incurred by us with respect to the separate
account, we may make a charge to the separate account.
9
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INVESTMENT EXPERIENCE
ACCUMULATION UNITS
Allocations of a premium payment directed to a subaccount are credited in the
form of accumulation units. Each subaccount has a distinct accumulation unit
value. The number of units credited is determined by dividing the premium
payment or amount transferred to the subaccount by the accumulation unit value
of the subaccount as of the end of the valuation period during which the
allocation is made. For each subaccount, the accumulation unit value for a given
business day is based on the net asset value of a share of the corresponding
portfolio of the fund less any applicable charges or fees.
Upon allocation to the selected subaccount of the separate account, premium
payments are converted into accumulation units of the subaccount. At the end of
any valuation period, a subaccount's value is equal to the number of units that
your Contract has in the subaccount, multiplied by the accumulation unit value
of the subaccount.
The number of units that your Contract has in each subaccount is equal to:
1. The initial units purchased on the Contract date; plus
2. Units purchased at the time additional premium payments are allocated
to the subaccount; plus
3. Units purchased through transfers from another subaccount or the fixed
account; minus
4. Any units that are redeemed to pay for partial surrenders; minus
5. Any units that are redeemed as part of a transfer to another subaccount
or the fixed account; minus
6. Any units that are redeemed to pay the annual Contract charge, any premium
taxes, any Guaranteed Minimum Income Benefit Rider charge and any transfer
charge.
The value of an accumulation unit was arbitrarily established at $10.00 at the
inception of each subaccount. Thereafter, the value of an accumulation unit is
determined as of the close of the regular session of business on the New York
Stock Exchange, on each day the Exchange is open.
ACCUMULATION UNIT VALUE
The accumulation unit value will vary from one valuation period to the next
depending on the investment results experienced by each subaccount. The
accumulation unit value for each 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 fund
portfolio owned by the subaccount times the portfolio's net asset value per
share; minus
2. The accrued daily percentage for the mortality and expense risk charge and
the administrative charge multiplied by the net assets of the subaccount;
minus
3. The accrued amount of reserve for any taxes that are determined by us to have
resulted from the investment operations of the subaccount; divided by
4. The number of outstanding units in the subaccount.
During the accumulation period, the mortality and expense risk charge is
deducted at an annual rate of 1.00% of net assets for each day in the valuation
period (1.25% if the compounding minimum death benefit is added) and compensates
us for certain mortality and expense risks. The administrative charge is
deducted at an annual rate of 0.40% of net assets for each day in the valuation
period and compensates us for certain administrative expenses. The accumulation
unit value may increase, decrease, or remain the same from valuation period to
valuation period.
ANNUITY UNIT VALUE AND ANNUITY PAYMENT RATES
The discussion in this section assumes the Guaranteed Minimum Income Benefit
Rider is not included in the Contract.
The amount of variable annuity payments will vary with annuity unit values.
Annuity unit values rise if the net investment performance of the subaccount
(that is, the portfolio performance minus subaccount fees and charges) exceeds
the assumed interest rate of 5% annually. Conversely, annuity unit values fall
if the net investment performance of the subaccount is less than the assumed
rate. The value of a variable annuity unit in each subaccount was established at
$10.00 on the date operations began for that subaccount. The value of a variable
annuity unit on any subsequent business day is equal to (a) multiplied by (b)
multiplied by (c), where:
(a) is the variable annuity unit value for that subaccount on the
immediately preceding business day;
(b) is the net investment factor for that subaccount for the valuation
period; and
(c) is the investment return adjustment factor for the valuation period.
10
<PAGE>
The investment return adjustment factor for the valuation period is the product
of discount factors of .99986634 per day to recognize the 5% effective annual
assumed investment return. The valuation period is the period from the close of
the immediately preceding business day to the close of the current business day.
The net investment factor for the Contract used to calculate the value of a
variable annuity unit in each subaccount for the valuation period is determined
by dividing (i) by (ii) and subtracting (iii) from the result, where:
(i) is the result of:
(1) the net asset value of a portfolio share held in that
subaccount determined at the end of the current valuation
period; plus
(2) the per share amount of any dividend or capital gain
distributions made by the portfolio for shares held in that
subaccount if the ex-dividend date occurs during the valuation
period; plus or minus
(3) a per share charge or credit for any taxes reserved for, which
we determine to have resulted from the investment operations
of the subaccount.
(ii) is the net asset value of a portfolio share held in that subaccount
determined as of the end of the immediately preceding valuation
period.
(iii) is a factor representing the mortality and expense risk charge and
administrative charge. This factor is equal, on an annual basis, to
1.40% of the daily net asset value of the subaccount.
The dollar amount of subsequent variable annuity payments will depend upon
changes in applicable annuity unit values.
The annuity payment rates vary according to the annuity option elected and the
gender and adjusted age of the annuitant at the maturity date. The Contract also
contains a table for determining the adjusted age of the annuitant.
ILLUSTRATION OF CALCULATIONS FOR ANNUITY UNIT VALUE
AND VARIABLE ANNUITY PAYMENTS
FORMULA AND ILLUSTRATION FOR DETERMINING ANNUITY UNIT VALUE
Annuity unit value = ABC
Where: A = Annuity unit value for the immediately preceding valuation period.
Assume.................................................... = $ X
B = Net investment experience factor for the valuation period for which
the annuity unit value is being calculated.
Assume..................................................... = Y
C = A factor to neutralize the assumed interest rate of 5% built into
the annuity tables used.
Assume..................................................... = Z
Then, the annuity unit value is: $ XYZ = $Q
FORMULA AND ILLUSTRATION FOR DETERMINING AMOUNT OF
FIRST MONTHLY VARIABLE ANNUITY PAYMENT
First monthly variable annuity payment = AB
------
$1,000
Where: A = The annuity value as of the maturity date.
Assume..................................................... = $ X
B = The annuity purchase rate per $1,000 based upon the option
selected, the gender and adjusted age of the annuitant according to
the tables contained in the Contract.
Assume..................................................... = $ Y
Then, the first monthly variable annuity payment = $XY = $Z
--------
1,000
11
<PAGE>
FORMULA AND ILLUSTRATION FOR DETERMINING THE NUMBER OF ANNUITY UNITS
REPRESENTED BY EACH MONTHLY VARIABLE ANNUITY PAYMENT
Number of annuity units = A
-
B
Where: A = The dollar amount of the first monthly variable annuity payment.
Assume................................................ = $ X
B = The annuity unit value for the valuation date on which the first
monthly payment is due. Assume........................ = $ Y
Then, the number of annuity units = $ X = Z
---
$ Y
GUARANTEED MINIMUM INCOME BENEFIT RIDER- HYPOTHETICAL ILLUSTRATIONS
This discussion assumes the Guaranteed Minimum Income Benefit Rider is included
in the Contract.
The amounts shown below are hypothetical guaranteed minimum monthly payment
amounts under the Guaranteed Minimum Income Benefit Rider for a $100,000 premium
when annuity payments do not begin until the Contract anniversary indicated in
the left-hand column. These figures assume that there were no subsequent premium
payments or partial surrenders, that there were no premium taxes and that the
$100,000 premium is annuitized under the Guaranteed Minimum Income Benefit
Rider. Six different annuity payment options are illustrated: a male annuitant,
a female annuitant and a joint and survivor annuity, each on a life only and a
life with 10-year certain basis. These hypothetical illustrations assume that
the annuitant is (or both annuitants are) 60 years old when the Contract is
issued, that the annual growth rate is 6.0% (once established, an annual growth
rate will not change during the life of the Guaranteed Minimum Income Benefit
Rider), and that there was no upgrade of the minimum annuitization value. The
figures below are based on an assumed investment return of 3%. Subsequent
payments will never be less than the amount of the first payment (although
subsequent payments will be calculated using a 5% assumed investment return and
a 2.50% daily separate account annuitization charge, provided no upgrade in
minimum annuitization value has occurred).
Illustrations of guaranteed minimum payments based on other assumptions will be
provided upon request.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
RIDER ANNIVERSARY
AT EXERCISE DATE MALE FEMALE JOINT & SURVIVOR
- ---------------------------------------------------------------------------------------
LIFE ONLY LIFE 10 LIFE ONLY LIFE 10 LIFE ONLY LIFE 10
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10 (age 70) $ 1,135 $ 1,067 $ 976 $ 949 $ 854 $ 852
- ---------------------------------------------------------------------------------------
15 1,833 1,634 1,562 1,469 1,332 1,318
- ---------------------------------------------------------------------------------------
29 (age 80) 3,049 2,479 2,597 2,286 2,145 2,078
- ---------------------------------------------------------------------------------------
</TABLE>
Life Only = Life Annuity with No Period Certain
Life 10 = Life Annuity with 10 Years Certain
This hypothetical illustration should not be deemed representative of past or
future performance of any underlying variable investment option.
Partial surrenders will affect the minimum annuitization value as follows: Each
Contract year, partial surrenders up to the limit of the minimum annuitization
value on the last Contract anniversary multiplied by the annual growth rate
reduce the minimum annuitization value on a dollar-for-dollar basis. Partial
surrenders over this limit will reduce the minimum annuitization value by an
amount equal to the excess partial surrender multiplied by the ratio of the
minimum annuitization value immediately prior to the excess partial surrender to
the annuity value immediately prior to the excess partial surrender.
The amount of the first payment provided by the Rider will be determined by
multiplying each $1,000 of minimum annuitization value to the applicable annuity
factor shown on Schedule I of the Rider. The applicable annuity factor depends
upon the annuitant's (and joint annuitant's, if any) gender (or without regard
to gender if required by law), age, and the Rider payment option selected and is
based on a guaranteed interest rate of 3% and the "1983 Table A" mortality table
improved to the year 2000 with projection Scale G. Subsequent payments will be
calculated as described in the Rider using a 5% assumed investment return.
Subsequent payments may fluctuate annually in accordance with the investment
performance of the subaccounts. However, subsequent payments are guaranteed to
never be less than the initial payment.
12
<PAGE>
The scheduled payment on each subsequent Contract anniversary after
annuitization using the Rider will equal the greater of the initial payment or
the payment supportable by the annuity units in the selected subaccounts. The
supportable payment is equal to the number of variable annuity units in the
selected subaccounts multiplied by the variable annuity unit values in those
subaccounts on the date the payment is made. The variable annuity unit values
used to calculate the supportable payment will assume a 5% assumed investment
return. If the supportable payment at any payment date during a Contract year is
greater than the scheduled payment for that Contract year, the excess will be
used to purchase additional annuity units. Conversely, if the supportable
payment at any payment date during a Contract year is less than the scheduled
payment for that Contract year, then there will be a reduction in the number of
annuity units credited to the Contract to fund the deficiency. In the case of a
reduction, you will not participate as fully in the future investment
performance of the subaccounts you selected since fewer annuity units are
credited to your Contract. Purchases and reductions of annuity units will be
allocated to each subaccount on a proportionate basis.
We bear the risk that we will need to make payments if all annuity units have
been used in an attempt to maintain the scheduled payment at the initial payment
level. In such an event, we will make all future payments equal to the initial
payment. Once all the annuity units have been used, the amount of your payment
will not increase or decrease and will not depend upon the performance of any
subaccounts. To compensate us for this risk, a fee will be deducted.
HISTORICAL PERFORMANCE DATA
MONEY MARKET YIELDS
YIELD - The yield quotation set forth in the prospectus for the WRL J.P. Morgan
Money Market subaccount is for the seven days ended on the date of the most
recent balance sheet of the separate account included in the registration
statement, and is computed by determining the net change, exclusive of capital
changes and income other than investment income, in the value of a hypothetical
pre-existing account having a balance of one unit in the WRL J.P. Morgan Money
Market subaccount at the beginning of the period, subtracting a hypothetical
charge reflecting deductions from owner accounts, and dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return, and multiplying the base period return by (365/7) with the
resulting figure carried to at least the nearest hundredth of one percent.
EFFECTIVE YIELD - The effective yield quotation for the WRL J.P. Morgan Money
Market subaccount set forth in the prospectus is for the seven days ended on the
date of the most recent balance sheet of the separate account included in the
registration statement. The effective yield is computed by determining the net
change, exclusive of capital changes and income other than investment income, in
the value of a hypothetical pre-existing subaccount having a balance of one unit
in the WRL J.P. Money Market subaccount at the beginning of the period. A
hypothetical charge, reflecting deductions from owner accounts, is subtracted
from the balance. The difference is divided by the value of the subaccount at
the beginning of the base period to obtain the base period return, which is then
compounded by adding 1. Next, the sum is raised to a power equal to 365 divided
by 7, and 1 is subtracted from the result. The following formula describes the
computation:
EFFECTIVE YIELD = ({BASE PERIOD RETURN + 1} 365/7) - 1
The effective yield is shown at least to the nearest hundredth of one
percent.
HYPOTHETICAL CHARGE - For purposes of the yield and effective yield
computations, the hypothetical charge reflects all fees and charges that are
charged to all owner accounts in proportion to the length of the base period.
Such fees and charges include the $30 annual Contract charge, calculated on the
basis of an average separate account value per Contract of $______, which
converts that charge to an annual rate of ____% of the separate account value.
The yield and effective yield quotations do not reflect any deduction for
premium taxes or transfer charges that may be applicable to a particular
Contract, nor do they reflect the surrender charge that may be assessed at the
time of surrender in an amount ranging up to 7% of the requested amount. The
specific surrender charge percentage applicable to a particular surrender
depends on the length of time premium payments have been held under the Contract
and whether surrenders have been made previously during that Contract year. (See
Expenses--Surrender Charge on page ____ of the prospectus.) No fees or sales
charges are assessed upon annuitization under the Contracts, except premium
taxes. Realized gains and losses from the sale of securities, and unrealized
appreciation and depreciation of assets held by the WRL J.P. Morgan Money Market
subaccount and fund are excluded from the calculation of yield.
The yield on amounts held in the WRL J.P. Morgan Money Market subaccount
normally will fluctuate on a daily basis. Therefore, the disclosed yield for any
given past period is not an indication or representation of future yields or
rates of return. The WRL J.P. Morgan Money Market subaccount actual yield is
affected by changes in interest rates on money market securities, average
portfolio maturity of the WRL J.P. Morgan Money Market, the types and quality of
portfolio securities held by the WRL J.P. Morgan Money Market and its operating
expenses. For the seven days ended December 31, 1998, the yield of the WRL J.P.
Morgan Money Market subaccount was 3.54%, and the effective yield was 3.61%.
13
<PAGE>
OTHER SUBACCOUNT YIELDS
The yield quotations for all of the subaccounts, except the WRL J.P. Morgan
Money Market subaccount, representing the accumulation period set forth in the
prospectus is based on the 30-day period ended on the date of the most recent
balance sheet of the separate account and are computed by dividing the net
investment income per unit earned during the period by the maximum offering
price per unit on the last date of the period, according to the following
formula:
YIELD = 2[( a - b + 1)6 -1]
-----
cd
Where: a = net investment income earned during the period by the
corresponding portfolio of the fund attributable to shares owned
by the subaccount.
b = expenses accrued for the period (net of reimbursement).
c = the average daily number of units outstanding during the period.
d = the maximum offering price per unit on the last day of the period.
For purposes of the yield quotations for all of the subaccounts, except the WRL
J.P. Morgan Money Market subaccount, the calculations take into account all fees
that are charged to all owner accounts during the accumulation period. Such fees
include the $30 annual Contract charge, calculated on the basis of an average
separate account value per Contract of $______, which converts that charge to an
annual rate of ___% of the separate account value. The calculations do not take
into account any premium taxes or any transfer or surrender charges.
Premium taxes currently range from 0% to 3.5% of premium payments depending upon
the jurisdiction in which the Contract is delivered. A surrender charge may be
assessed at the time of surrender in an amount ranging up to 7% of the requested
amount, with the specific percentage applicable to a particular surrender
depending on the length of time premium payments were held under the Contract,
and whether surrenders had been made previously during that Contract year. (See
Expenses--Surrender Charge on page 27 of the prospectus.)
The yield on amounts held in the subaccountS of the separate account normally
will fluctuate over time. Therefore, the disclosed yield for any given past
period is not an indication or representation of future yields or rates of
return. A subaccount's actual yield is affected by the types and quality of its
investments and its operating expenses. For the 30 days ended December 31, 1998,
the yield for the WRL AEGON Bond subaccount was 4.05%.
TOTAL RETURNS
The total return quotations set forth in the prospectus for all subaccounts,
except the WRL J.P. Morgan Money Market subaccount, holding assets for the
Contracts during the accumulation period are average annual total return
quotations for the one, three, five, and ten-year periods (or, while a
subaccount has been in existence for a period of less than one, three, five and
ten years, for such lesser period) ended on the date of the most recent balance
sheet of the separate account, and for the period from the date the subaccounts
commenced operations until the aforesaid date. The quotations are computed by
determining the average annual compounded rates of return over the relevant
periods that would equate the initial amount invested to the ending redeemable
value, according to the following formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of each period at the end of each
period.
For purposes of the total return quotations for all subaccounts, except the WRL
J.P. Morgan Money Market subaccount, the calculations take into account all fees
that are charged to all owner accounts during the accumulation period. Such fees
include the mortality and expense risk charge; the administrative charge and the
$30 annual Contract charge, calculated on the basis of an average separate
account value per Contract of $______, which converts that charge to an annual
rate of ____% of the separate account value. (The calculations may also reflect
the mortality and expense risk charge for the compounding minimum death benefit
and the 0.30% charge for the Guaranteed Minimum Income Benefit Rider). The
calculations also assume a complete surrender as of the end of the particular
period. The calculations do not reflect any deduction for premium taxes or any
transfer charge that may be applicable to a particular Contract.
14
<PAGE>
OTHER PERFORMANCE DATA
We may present the total return data stated in the prospectus on a non-standard
basis. This means that the data will not be reduced by all the fees and charges
under the Contract and that the data may be presented for different time periods
and for different premium payment amounts. NON-STANDARD PERFORMANCE DATA WILL
ONLY BE DISCLOSED IF STANDARD PERFORMANCE DATA FOR THE REQUIRED PERIODS IS ALSO
DISCLOSED.
We may also disclose cumulative total returns and average annual compound rates
of return (T) for the subaccounts based on the inception date of the
subaccounts. We calculate average annual compound rates of return (T) according
to the following formula:
P (1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years from inception date of the subaccount
to end date for the period
ERV = ending redeemable value, as of the end date for the
period, of a hypothetical $1,000 payment made at the
inception date of the subaccount.
We calculate cumulative total returns according to the following formula:
(1 + T)n - 1
Where T and N are the same values as above
In addition, we may present historic performance data for the portfolios since
their inception reduced by some or all of the fees and charges under the
Contract. Such adjusted historic performance includes data that precedes the
inception dates of the subaccounts. This data is designed to show the
performance that would have resulted if the Contract had been in existence
during that time.
For instance, we may disclose average annual total returns for the portfolios
reduced by all fees and charges under the Contract, as if the Contract had been
in existence. Such fees and charges include the mortality and expense risk
charge of 1.00% (1.25% if the compounding minimum death benefit is added), the
administrative charge of 0.40%, the Guaranteed Minimum Income Benefit Rider
charge of 0.30% and the $30 annual Contract charge (based on average separate
account value of $______, the annual Contract charge is translated into an
annual charge of ____%). Such data assumes a complete surrender of the Contract
at the end of the period.
ADVERTISING AND SALES LITERATURE
From time to time we may refer to the diversifying process of asset allocation
based on the Modern Portfolio Theory developed by Nobel Prize winning economist
Harry Markowitz. The basic assumptions of Modern Portfolio Theory are: (1) the
selection of individual investments has little impact on portfolio performance,
(2) market timing strategies seldom work, (3) markets are efficient, and (4)
portfolio selection should be made among asset classes. Modern Portfolio Theory
allows an investor to determine an efficient portfolio selection that may
provide a higher return with the same risk or the same return with lower risk.
When presenting the asset allocation process we may outline the process of
personal and investment risk analysis including determining individual risk
tolerances and a discussion of the different types of investment risk. We may
classify investors into four categories based on their risk tolerance and will
quote various industry experts on which types of investments are best suited to
each of the four risk categories. The industry experts quoted may include
Ibbotson Associates, CDA Investment Technologies, Lipper Analytical Services and
any other expert which has been deemed by us to be appropriate. We may also
provide an historical overview of the performance of a variety of investment
market indices, the performance of these indices over time, and the performance
of different asset classes, such as stocks, bonds, cash equivalents, etc. We may
also discuss investment volatility including the range of returns for different
asset classes and over different time horizons, and the correlation between the
returns of different asset classes. We may also discuss the basis of portfolio
optimization including the required inputs and the construction of efficient
portfolios using sophisticated computer-based techniques. Finally, we may
describe various investment strategies and methods of implementation, the
periodic rebalancing of diversified portfolios, the use of dollar cost averaging
techniques, a comparison of the tax impact of premium payments made on a "before
tax" basis through a tax-qualified plan with those made on an "after tax" basis
outside of a tax-qualified plan, and a comparison of tax-deferred versus non
tax-deferred accumulation of premium payments.
As described in the prospectus, in general, an owner is not taxed on increases
in value under a Contract until a distribution is made under the Contract. As a
result, the Contract will benefit from tax deferral during the accumulation
period, as the annuity value may grow more rapidly than under a comparable
investment where certain increases in value are taxed on a current basis. From
time to time, we may use narrative, numerical or graphic examples to show
hypothetical benefits of tax deferral in advertising and sales literature.
15
<PAGE>
PUBLISHED RATINGS
We may from time to time publish in advertisements, sales literature and reports
to owners, the ratings and other information assigned to it by one or more
independent rating organizations such as A.M. Best Company, Standard & Poor's
Insurance Ratings Services, Moody's Investors Service and Duff & Phelps Credit
Rating Co. A.M. Best's and Moody's ratings reflect their current opinion of the
relative financial strength and operating performance of an insurance company in
comparison to the norms of the life/health insurance industry. Standard &
Poor's, and Duff & Phelps provide ratings which measure the claims-paying
ability of insurance companies. These ratings are opinions of an operating
insurance company's financial capacity to meet the obligations of its insurance
contracts in accordance with their terms. Claims-paying ability ratings do not
refer to an insurer's ability to meet non-contract obligations such as debt or
commercial paper obligations. These ratings do not apply to the separate
account, its subaccounts, the fund or its portfolios, or to their performance.
ADMINISTRATION
Western Reserve performs administrative services for the Contracts. These
services include issuance of the Contracts, maintenance of records concerning
the Contracts, and certain valuation services.
RECORDS AND REPORTS
All records and accounts relating to the separate account will be maintained by
WRL Investment Services, Inc. As presently required by the 1940 Act and
regulations promulgated thereunder, Western Reserve will mail to all Contract
owners at their last known address of record, at least annually, reports
containing such information as may be required under the 1940 Act or by any
other applicable law or regulation. Contract owners will also receive
confirmation of each financial transaction and any other reports required by law
or regulation.
DISTRIBUTION OF THE CONTRACTS
AFSG Securities Corporation ("AFSG") is the principal underwriter of the
Contracts. AFSG is located at 4333 Edgewood Rd., N.E., Cedar Rapids, Iowa 52499.
AFSG is registered with the SEC under the Securities Exchange Act of 1934 and is
a member of the National Association of Securities Dealers, Inc. AFSG will not
be compensated for its services as principal underwriter of the Contracts.
The Contracts are offered to the public through broker-dealers licensed under
the federal securities laws, and state insurance laws and who have entered into
written sales agreements with AFSG. Western Reserve will generally pay
broker-dealers first year sales commissions in an amount no greater than ____%
of premium payments. In addition, broker-dealers may receive renewal commissions
equal to an amount no greater than ____% of the annuity value as of each
Contract anniversary, beginning in the second Contract year and each year
thereafter, providing the Contract has an annuity value of $25,000 or more on
each anniversary. Certain production, persistency and managerial bonuses may
also be paid. Subject to applicable federal and state laws and regulations,
Western Reserve may also pay compensation to banks and other financial
institutions for their services in connection with the sale and servicing of the
Contracts. The level of such compensation will not exceed that paid to
broker-dealers for their sale of the Contracts. The offering of the Contracts is
continuous and Western Reserve does not anticipate discontinuing the offering of
the Contracts. However, Western Reserve reserves the right to do so.
OTHER PRODUCTS
Western Reserve makes other variable annuity contracts available that may also
be funded through the separate account. These variable annuity contracts may
have different features, such as different investment choices or charges.
CUSTODY OF ASSETS
The assets of the separate account are held by Western Reserve. The assets
of the separate account are kept physically segregated and held apart from
our general account and any other separate account. WRL Investment Services,
Inc. maintains records of all purchases and redemptions of shares of the
fund. Additional protection for the assets of the separate account is
provided by a blanket bond issued to AEGON U.S. Holding Corporation ("AEGON
U.S.") in the amount of $10 million, 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. provides additional fidelity
coverage to a limit of $10 million.
16
<PAGE>
LEGAL MATTERS
Sutherland Asbill & Brennan LLP has provided advice on certain legal matters
concerning federal securities laws applicable to the issue and sale of the
Contracts. All matters of Ohio law pertaining to the Contracts, including the
validity of the Contracts and Western Reserve's right to issue the Contracts
under Ohio insurance law, have been passed upon by Thomas E. Pierpan, Esq., Vice
President, Associate General Counsel and Assistant Secretary of Western Reserve.
INDEPENDENT ACCOUNTANTS
The accounting firm of PricewaterhouseCoopers LLP, independent accountants,
provided audit services to the separate account for the year ended December 31,
1998. The principal business address of PricewaterhouseCoopers LLP is 160
Federal Street, Boston, Massachusetts 02110. The accounting firm of Ernst &
Young LLP, independent auditors, provided audit services to Western Reserve for
the year ended December 31, 1998. The principal business address of Ernst &
Young LLP is 801 Grand Avenue, Suite 3400, Des Moines, Iowa 50309-2764.
OTHER INFORMATION
A Registration Statement has been filed with the SEC, under the Securities Act
of 1933 as amended, with respect to the Contracts discussed in this SAI. Not all
of the information set forth in the Registration Statement, amendments and
exhibits thereto has been included in the prospectus or this SAI. Statements
contained in the prospectus and this SAI concerning the content of the Contracts
and other legal instruments are intended to be summaries. For a complete
statement of the terms of these documents, reference should be made to the
instruments filed with the SEC.
FINANCIAL STATEMENTS
The values of an owner's interest in the separate account will be affected
solely by the investment results of the selected subaccount(s). Western
Reserve's financial statements, which are included in this SAI, should be
considered only as bearing on our ability to meet our obligations under the
Contracts. They should not be considered as bearing on the investment
performance of the assets held in the separate account.
Financial statements for Western Reserve as of December 31, 1998 and 1997 and
for each of the three years in the period ended December 31, 1998 have been
prepared on the basis of statutory accounting principles, rather than generally
accepted accounting principles.
17
<PAGE>
WRL Series Annuity Account
PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
The financial statements for the WRL Series Annuity
Account and for Western Reserve Life Assurance Co.
of Ohio ("Western Reserve") will be included in a
future amendment.
(b) Exhibits
(1) Copy of resolution of the Board of
Directors of Western Reserve establishing
the Series Account 1/
(2) Not Applicable
(3) Distribution of Contracts
(a) Form of Master Service and
Distribution Compliance Agreement 1/
(b) Amendment to Master Service and
Distribution Compliance Agreement 4/
(c) Form of Broker/Dealer Supervisory
and Service Agreement 4/
(d) Principal Underwriting Agreement 4/
(e) First Amendment to Principal
Underwriting Agreement 4/
(4) (a) Specimen Flexible Payment Variable
Accumulation Deferred Annuity
Contract
(b) Guaranteed Minimum Income Benefit
Rider (GIB01)
(c) Terminal Illness Rider (EA132)
(d) Nursing Care Facility Waiver
Endorsement (EA133)
(5) Application for Flexible Payment Variable
Accumulation Deferred Annuity Contract 5/
(6) (a) Copy of Second Amended Articles of
Incorporation of Western Reserve 1/
(b) Copy of Amended Code of Regulations
of Western Reserve 1/
(7) Not Applicable
(8) Not Applicable
(9) Opinion and Consent of Thomas E. Pierpan,
Esq. as to Legality of Securities Being
Registered 5/
(10) (a) Written Consent of Sutherland Asbill
& Brennan LLP 5/
(b) Written Consent of Ernst & Young LLP 5/
(c) Written Consent of
PricewaterhouseCoopers LLP 5/
(11) Not Applicable
(12) Not Applicable
C-1
<PAGE>
(13) Schedules for Computation of Performance
Quotations 2/
(14) Not Applicable
(15) (a) Powers of Attorney 1/
(b) Power of Attorney - James R.
Walker 3/
- -------------------------------------
1/ This exhibit was previously filed on Post-Effective Amendment
No. 11 to Form N-4 dated April 20, 1998 (File No. 33-49556) and is
incorporated herein by reference.
2/ This exhibit was previously filed on Post-Effective Amendment No. 28 to
Form N-1A Registration Statement dated April 24, 1997 (File No. 33-507)
and is incorporated herein by reference.
3/ This exhibit was filed on Post-Effective Amendment No. 7 to Form N-4
Registration Statement dated December 23, 1996 (File No. 33-49556)
and is incorporated herein by reference.
4/ This exhibit was filed on Post-Effective Amendment No. 4 to the
Form S-6 Registration Statement dated April 21, 1999 (File
No. 333-23359) and is incorporated herein by reference.
5/ To be filed by amendment.
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
PRINCIPAL POSITION AND OFFICES
NAME BUSINESS ADDRESS WITH DEPOSITOR
---- ---------------- ---------------------
<S> <C> <C>
John R. Kenney (1) Chairman of the Board,
Chief Executive Officer
and President
Patrick S. Baird 4333 Edgewood Rd. N.E. Director
Cedar Rapids, Iowa 52499
Lyman H. Treadway 30195 Chagrin Boulevard Director
Suite 210N
Cleveland, OH 44124
Jack E. Zimmerman 507 St. Michel Circle Director
Kettering, Ohio 45429
James R. Walker 3320 Office Park Drive Director
Dayton, Ohio 45439
Alan M. Yaeger (1) Executive Vice
President, Actuary
and Chief Financial Officer
G. John Hurley (1) Executive Vice
President
William H. Geiger (1) Senior Vice President,
Secretary and
General Counsel
</TABLE>
C-2
<PAGE>
<TABLE>
<S> <C> <C>
Allan J. Hamilton (1) Vice President, Treasurer
and Controller
</TABLE>
- -------------------------
(1) 570 Carillon Parkway, St. Petersburg, Florida 33716.
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT.
VERENGING AEGON Netherlands Membership Association
AEGON N.V. Netherlands Corporation (53.63%)
AEGON Netherland N.V. Netherlands Corporation (100%)
AEGON Nevark Holding B.V. Netherlands Corporation (100%)
Groninger Financieringen B.V. Netherlands Corporation (100%)
AEGON International N.V. Netherlands Corporation (100%)
Voting Trust - (Trustees - K.J. Storm, Donald J. Shepard, H.B. Van Wijk,
Dennis Hersch)
AEGON U.S. Holding Corporation (DE) (100%)
Short Hills Management Company (NJ) (100%)
CORPA Reinsurance Company (NY) (100%)
AEGON Management Company (IN) (100%)
RCC North America Inc. (DE) (100%)
AEGON USA, Inc. - Holding Co. (IA) (100%)
First AUSA Life Insurance Company - Insurance Holding Co. (MD) (100%)
AUSA Life Insurance Company, Inc. - Insurance (NY) (100%)
Life Investors Insurance Company of America - Insurance (IA) (100%)
Bankers United Life Assurance Company - Insurance (IA)(100%)
PFL Life Insurance Company - Insurance (IA) (100%)
Southwest Equity Life Insurance Company - Insurance (AZ) (100%
Voting Common)
Iowa Fidelity Life Insurance Company - Insurance (AZ) (100% Voting
Common)
Western Reserve Life Assurance Company of Ohio - Insurance (OH)(100%)
WRL Series Fund, Inc. - Mutual fund (MD)
Monumental Life Insurance Company - Insurance (MD) (100%)
Monumental General Casualty Company - Insurance (MD) (100%)
United Financial Services, Inc. - General Agency (MD) (100%)
Bankers Financial Life Insurance Company - Insurance (AZ)
The Whitestone Corporation - Insurance agency (MD) (100%)
Cadet Holding Corp. - Holding company (IA) (100%)
AUSA Holding Company - Holding company (MD) (100%)
Monumental General Insurance Group, Inc. - Holding company (MD)(100%)
Monumental General Administrators, Inc. - Provides management
services to unaffiliated third party administrator (MD) (100%)
Executive Management and Consultant Services, Inc. - Provides
actuarial consulting services (MD) (100%)
Monumental General Mass Marketing, Inc. - Marketing arm for sale of
mass marketed insurance coverages (MD) (100%)
AUSA Financial Markets, Inc. - Marketing (IA) (100%)
Universal Benefits Corporation - Third party administrator (IA)
(100%)
Investors Warranty of America, Inc. - Provider of automobile extended
maintenance contracts (IA) (100%)
Massachusetts Fidelity Trust Company - Trust company (IA) (100%)
Money Services, Inc. - Provides financial counseling for employees
and agents of affiliated companies (DE) (100%)
Zahorik Company, Inc. - Broker-dealer (CA) (100%)
ZCI, Inc. (AL) (100%)
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InterSecurities, Inc. - Broker-dealer (DE) (100%)
ISI Insurance Agency Inc. & its Subsidiaries - Insurance agency
(CA) (100%)
Associated Mariner Financial Group, Inc. - Holding company
management services (MI) (100%)
Mariner Financial Services, Inc. - Broker/Dealer (MI) (100%)
Mariner/ISI Planning Corporation - Financial planning (MI)(100%)
Associated Mariner Agency, Inc. and its Subsidiaries- Insurance
agency (MI)(100%)
Mariner Mortgage Corporation - Mortgage origination (MI) (100%)
Idex Investor Services, Inc. - Shareholder services (FL) (100%)
Idex Management, Inc. - Investment advisor (DE) (50%)
Idex Series Fund - Mutual fund (MA)
Transunion Casualty Company - Insurance (IA) (100%)
AUSA Institutional Marketing Group, Inc. - Insurance agency (MN)
(100%)
Colorado Annuity Agency, Inc. - Insurance agency (MN) (100%)
Diversified Investment Advisors, Inc. - Registered investment advisor
(DE) (100%)
Diversified Investors Securities Corporation - Broker-dealer (DE)
(100%)
AEGON USA Securities, Inc. - Broker-dealer (IA) (100%)
AEGON USA Managed Portfolios, Inc. - Mutual fund (MD)
American Forum for Fiscal Fitness, Inc. - Marketing (IA) (100%)
Supplemental Insurance Division, Inc. - Insurance (TN) (100%)
Creditor Resources, Inc. - Credit insurance (MI) (100%)
CRC Creditor Resources Canadian Dealer Network Inc. - Insurance
agency (Canada)
AEGON USA Investment Management, Inc. - Investment advisor (IA) (100%)
AEGON USA Realty Advisors, Inc. - Provides real estate administrative
and real estate investment services (IA) (100%)
QUANTRA Corporation - (DE) (100%)
QUANTRA Software Corporation - (DE) (100%)
Landauer Realty Advisors, Inc. - Real estate counseling (IA)
(100%)
Landauer Associates, Inc. - Real estate counseling (DE) (100%)
AEGON USA Realty Management, Inc. - Real estate management (IA)
(100%)
Realty Information Systems, Inc. - Information systems for real
estate investment management (IA) (100%)
USP Real Estate Investment Trust - Real estate investment trust
(IA)
Cedar Income Fund Ltd. - Real estate investment trust (IA)
Item 27. NUMBER OF CONTRACTOWNERS.
Because the offering has not yet commenced, there are no Contract
owners.
Item 28. 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
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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 contendere 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:
(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,
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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 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
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<PAGE>
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' 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 contendere 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.
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<PAGE>
(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 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
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<PAGE>
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 any 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.
RULE 484 UNDERTAKING
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons
of Western Reserve pursuant to the foregoing provisions or otherwise, Western
Reserve 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 Western
Reserve of expenses incurred or paid by a director, officer or controlling
person of Western Reserve 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, Western Reserve 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 of
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.
Item 29. PRINCIPAL UNDERWRITER
(a) AFSG Securities Corporation ("AFSG") is the principal
underwriter for the Contracts. AFSG currently serves as
principal underwriter for the PFL Endeavor VA Separate
Account, the PFL Retirement Builder Variable Annuity
Account, the PFL Life Variable Annuity Account A, the
PFL Wright Variable Annuity Account, the AUSA Endeavor
Variable Annuity Account,
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<PAGE>
Separate Account C of First Providian Life and Health
Insurance Company, the Separate Account I,
Separate Account II, and Separate Account V of
Providian Life and Health Insurance Company, WRL Series
Life Account, WRL Series Annuity Account B and AUSA
Series Life Account.
(b) Directors and Officers of AFSG
PRINCIPAL POSITION AND OFFICES
NAME BUSINESS ADDRESS WITH UNDERWRITER
---- ---------------- --------------------
Larry N. Norman (1) Director and President
Harvey E. Willis (1) Vice President and Secretary
Lisa Wachendorf (1) Compliance Officer
Debra C. Cubero (1) Vice President
Gregory J. Garvin (1) Vice President
Michael F. Lane (1) Vice President
Sara J. Stange (1) Director and Vice President
Brenda K. Clancy (1) Vice President
Michael G. Ayers (1) Treasurer/Controller
Colleen S. Lyons (1) Assistant Secretary
John F. Reesor (1) Assistant Secretary
Anne Spaes (1) Vice President
Priscilla I. Hechler (2) Assistant Vice President and
Assistant Secretary
Thomas E. Pierpan (2) Assistant Secretary
Richard C. Hicks (2) Assistant Vice President
and Assistant Secretary
Nancy C. Hassett (2) Assistant Secretary
Gina A. Babka (2) Assistant Secretary
- --------------------------------------
(1) 4333 Edgewood Road, N.E., Cedar Rapids, IA 52499-0001
(2) 570 Carillon Parkway, St. Petersburg, FL 33716-1202
(c) Compensation to Principal Underwriter
Not Applicable
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<PAGE>
Item 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books, or other documents required to be
maintained by Section 31(a) of the 1940 Act and the rules
promulgated thereunder are maintained by the Registrant
through Western Reserve, 570 Carillon Parkway, St.
Petersburg, Florida 33716.
Item 31. MANAGEMENT SERVICES
Not Applicable
Item 32. UNDERTAKINGS
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.
Item 33. SECTION 403(b)(11) REPRESENTATION
Registrant represents that in connection with its offering of
Contracts as funding vehicles for retirement plans meeting the
requirements of Section 403(b) of the Internal Revenue Code of
1986, Registrant is relying on the no-action letter issued by
the Office of Insurance Products and Legal Compliance,
Division of Investment Management, to the American Council of
Life Insurance dated November 28, 1988 (Ref. No. IP-6-88), and
that the provisions of paragraphs (1) - (4) thereof have been
complied with.
TEXAS ORP REPRESENTATION
The Registrant intends to offer Contracts to participants in
the Texas Optional Retirement Program. In connection with that
offering, the Registrant is relying on Rule 6c-7 under the
Investment Company Act of 1940 and is complying with, or shall
comply with, paragraphs (a) - (d) of that Rule.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
Initial Registration Statement to be signed on its behalf by the undersigned,
thereunder duly authorized, in the City of St. Petersburg, State of Florida, on
this 6th day of July, 1999.
WRL SERIES ANNUITY ACCOUNT
(Registrant)
By: /s/ JOHN R. KENNEY
------------------------------------
John R. Kenney, Chairman of the
Board, Chief Executive Officer
and President of Western Reserve Life
Assurance Co. of Ohio
WESTERN RESERVE LIFE ASSURANCE
CO. OF OHIO
(Depositor)
By: /s/ JOHN R. KENNEY
------------------------------------
John R. Kenney, 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:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ JOHN R. KENNEY Chairman of the Board, July 6, 1999
- -------------------------- Chief Executive Officer
John R. Kenney and President
(Principal Executive
Officer)
/s/ ALLAN J. HAMILTON Vice President, Treasurer July 6, 1999
- -------------------------- and Controller
Allan J. Hamilton
/S/ ALAN M. YAEGER Executive Vice President, July 6, 1999
- -------------------------- Actuary and Chief Financial
Alan M. Yaeger Officer
/s/ PATRICK S. BAIRD Director July 6, 1999
- --------------------------
Patrick S. Baird */
/s/ LYMAN H. TREADWAY Director July 6, 1999
- --------------------------
Lyman H. Treadway */
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
/s/ JACK E. ZIMMERMAN Director July 6, 1999
- --------------------------
Jack E. Zimmerman */
/s/ JAMES R. WALKER Director July 6, 1999
- --------------------------
James R. Walker */
*/ /s/ PRISCILLA I. HECHLER
- ---------------------------
Signed by Priscilla I. Hechler
As Attorney-in-fact
</TABLE>
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
NO. OF EXHIBIT
- ------ ------------
4(a) Specimen Flexible Payment Variable Accumulation Deferred Annuity
Contract
4(b) Guaranteed Minimum Income Benefit Rider (GIB01)
4(c) Terminal Illness Rider (EA132)
4(d) Nursing Care Facility Waiver Endorsement (EA133)
EXHIBIT 99.A7
Exhibit 4(a)
Specimen Flexible Payment Variable Accumulation Deferred Annuity Contract
<PAGE>
================================================================================
WESTERN RESERVE LIFE Administrative Office:
ASSURANCE CO. OF OHIO P.O. Box 5068
(A STOCK COMPANY) Clearwater, Florida 33758-5068
Home Office: Columbus, Ohio (727) 299-1800
================================================================================
IN THIS CONTRACT Western Reserve Life Assurance Co. of Ohio will be referred to
as WE, OUR or US. OFFICE refers to our Administrative Office located in
Clearwater, Florida.
WE agree to pay the benefits of this Contract in accordance with its provisions.
CONTRACT VALUES DURING THE ACCUMULATION PERIOD WILL INCREASE OR DECREASE IN
ACCORDANCE WITH THE CONTRACT VALUE PROVISIONS AND THE INVESTMENT EXPERIENCE OF
THE APPLICABLE SUBACCOUNTS IN THE SEPARATE ACCOUNT. CONTRACT VALUES, WHEN BASED
ON THE INVESTMENT EXPERIENCE OF A SUBACCOUNT OF THE SEPARATE ACCOUNT, ARE
VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT.
THE CONSIDERATION for this Contract is the application and the payment of the
Initial Premium.
THE ANNUITANT, OWNER, AND BENEFICIARY are as shown in the application unless
changed in accordance with the provisions of this Contract.
THE PROVISIONS on the following pages are part of this Contract.
IN WITNESS WHEREOF, We have signed this Contract at Our Office in Clearwater,
Florida as of the Contract Date.
/s/ WILLIAM GEIGER /s/ JOHN R. KENNEY
- ------------------------------ ------------------------------
Secretary President
================================================================================
RIGHT TO EXAMINE CONTRACT
The Owner may cancel this Contract at any time within ten days after receipt
by returning it to Us at P.O. Box 5068, Clearwater, Florida 33758. If the
Contract is returned within this period, We will pay to the Owner the sum
of:
1. The total premiums received; plus (or minus)
2. The accumulated gains (or losses), if any, in the Separate Account for
this Contract as of the date We receive the returned Contract.
================================================================================
FLEXIBLE PAYMENT VARIABLE ACCUMULATION DEFERRED ANNUITY
Death Benefit Prior to Maturity
Monthly Annuity Commencing on Maturity Date
Non-Participating - No Dividends
1
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CONTRACT GUIDE
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<TABLE>
<S> <C> <C> <C>
CONTRACT SCHEDULE...................................... 3 SEPARATE ACCOUNT PROVISIONS (continued)
DEFINITIONS............................................ 5 Addition, Deletion or Substitution of
Accounts............................................ 5 Investments................................... 11
Accumulation Period................................. 5 Change of Investment Objective................... 11
Accumulation Unit Value............................. 5 Accumulation Unit Value.......................... 11
Age................................................. 5 PREMIUM PROVISIONS................................. 12
Annuitant........................................... 5 Premiums......................................... 12
Annuity Proceeds.................................... 5 CONTRACT VALUE PROVISIONS.......................... 12
Annuity Unit Value.................................. 5 Net Premium...................................... 12
Annuity Value....................................... 5 Allocation of Net Premiums....................... 12
Cash Value.......................................... 5 Subaccount Value................................. 13
Contingent Beneficiary.............................. 5 Fixed Account.................................... 13
Contract Date....................................... 5 Annual Contract Charge........................... 14
Death Benefit Proceeds.............................. 6 Annuity Value.................................... 14
Death Report Day.................................... 6 Partial Surrender................................ 14
Fixed Account....................................... 6 Cash Value....................................... 15
Maturity Date....................................... 6 Surrender Charge................................. 15
Monthiversary....................................... 6 Basis of Computation............................. 16
Premium Tax......................................... 6 DEATH BENEFIT PROVISIONS........................... 16
Reallocation Date................................... 6 Death of Annuitant During the
SEC................................................. 6 Accumulation Period........................... 16
Separate Account.................................... 6 Death Benefit Proceeds........................... 16
Series Fund......................................... 6 Alternative Election............................. 17
Subaccount.......................................... 6 ANNUITY PROVISIONS 18
Surrender........................................... 7 Commencement of Annuity Payments................. 18
Surrender Charge Period............................. 7 Maturity Date.................................... 19
Valuation Date...................................... 7 Annuity Option................................... 19
Valuation Period.................................... 7 Change of Annuitant.............................. 19
Written Notice...................................... 7 Payee............................................ 19
GENERAL PROVISIONS..................................... 7 Availability..................................... 19
The Contract........................................ 7 Age.............................................. 19
Ownership........................................... 7 Proof of Age and Sex............................. 19
Change of Ownership Upon Request.................... 8 Proof of Survival................................ 19
Change of Ownership Upon Death of Owner............. 8 Death Benefit After Maturity Date................ 20
Beneficiary......................................... 8 Restrictions..................................... 20
Change of Beneficiary............................... 9 FIXED ACCOUNT ANNUITY PAYMENTS..................... 20
Assignment.......................................... 9 Interest and Mortality........................... 20
Incontestability.................................... 9 Amount of Monthly Fixed Account Annuity
Age and Sex......................................... 9 Payment....................................... 20
Contract Years...................................... 9 Fixed Account Annuity Options.................... 20
Reports............................................. 9 VARIABLE ACCOUNT ANNUITY PAYMENTS.................. 22
Contract Payment.................................... 9 Annuity Unit Value............................... 22
Protection of Proceeds.............................. 9 Determination of the First Variable
SEPARATE ACCOUNT PROVISIONS............................ 10 Payment....................................... 23
Subaccounts.......................................... 10 Determination of Subsequent Variable
Transfers Among Subaccounts During the Payments...................................... 24
Accumulation Period.............................. 10 Variable Account Annuity Options................. 24
Transfers Among Subaccounts After the
Maturity Date..................................... 10
</TABLE>
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WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
CLEARWATER, FLORIDA
CONTRACT SCHEDULE
- --------------------------------------------------------------------------------
OWNER: John Doe
ANNUITANT: John Doe
ISSUE AGE 35
SEX: Male
<TABLE>
<S> <C> <C> <C>
ANNUITY OPTION: D-10 Year Certain CONTRACT NUMBER: 01-12345678
INITIAL PREMIUM: $50,000.00 CONTRACT DATE: September 03, 1998
DEATH BENEFIT OPTION: A MATURITY DATE: August 01, 2058
REALLOCATION DATE: September 18, 1998
REALLOCATION ACCOUNT: Money Market
</TABLE>
ANTICIPATED PREMIUM PATTERN*
AMOUNT MODE YEARS PAYABLE
$10,000.00 Annual 60 Years
* The anticipated premium pattern is based upon selection made in the
application. The amount may be changed in accordance with the Premium
Provisions on Page 12.
SEPARATE ACCOUNT PROVISIONS
Separate Account: WRL Series Annuity Account
Separate Account Charge
Death Benefit Option [A; B]: [1.25 - 1.65] % Annually
PREMIUM PROVISIONS
Maximum Additional Annual Premium: $1,000,000 (Without Prior Approval)
Minimum Additional Premium: $50.00
CONTRACT VALUE PROVISIONS
Annual Contract Charge: $30
Minimum Balance: $5,000
SURRENDER CHARGE PERIOD: 84 Months from the Date of Each
Premium Payment
SURRENDER CHARGE PERCENTAGE (As a Percentage of Each Respective Premium
Payment):
MONTHS SINCE DATE OF PAYMENT PERCENTAGE
---------------------------- ----------
24 Months or Less 7%
25 Months Through 36 Months 6%
37 Months Through 48 Months 5%
49 Months Through 60 Months 4%
61 Months Through 72 Months 3%
73 Months Through 84 Months 2%
85 Months or More 0%
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DEFINITIONS
================================================================================
ACCOUNTS Allocation options including the Fixed Account
and the Subaccounts of the Separate Account.
ACCUMULATION PERIOD The period between the Contract Date and the
Maturity Date while the Contract is in force.
ACCUMULATION An accounting unit of measure used to calculate
UNIT VALUE Subaccount values or the Contract during the
Accumulation Period.
AGE Issue Age refers to the Age of the Annuitant on
his/her birthday immediately preceding the
Contract Date. Attained Age refers to the Issue
Age plus the number of completed contract
years.
ANNUITANT The person named on the application, or as
subsequently changed, to receive annuity
payments. The Annuitant may be changed as
provided in the Death Benefit Provisions and
Annuity Provisions.
ANNUITY PROCEEDS The amount applied to purchase periodic annuity
payments. Such amount is the Annuity Value on
the Maturity Date, less any
applicable Premium Tax.
ANNUITY UNIT VALUE An accounting unit of measure used to calculate
annuity payments from a Subaccount after the
Maturity Date.
ANNUITY VALUE The value as described in the Annuity Value
section of the Contract Value Provisions.
CASH VALUE The value as described in the Cash Value
section of the Contract Value Provisions.
CONTINGENT The new Beneficiary upon the current
BENEFICIARY Beneficiary's death.
CONTRACT DATE The later of the date on which payments are
first received and the date the properly
completed application is received by Us at Our
Office.
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DEATH BENEFIT The value as described in the Death Benefit
PROCEEDS Proceeds section of the Death Benefit
Provisions.
DEATH REPORT DAY The Valuation Date coincident with or next
following the day on which We have received
both: 1) due proof of death; and 2) a Written
Notice for an election of a) a single sum
payment or b) an alternative election as
described under the Death Benefit Provisions.
FIXED ACCOUNT An allocation option other than the Separate
Account.
MATURITY DATE The date of the Annuitant's 95th birthday,
on which the Accumulation Period ends and
annuity payments are to commence. The date may
be changed as provided in the Annuity
Provisions.
MONTHIVERSARY The same day in each succeeding month as the
Contract Date. If there is no day in a calendar
month which coincides with the Contract Date,
the Monthiversary will be the first day of the
next month.
PREMIUM TAX Premium Tax levied by a state or other
government entity. The Premium Tax will be paid
when due and charged either against the premium
or the contract value.
REALLOCATION DATE The date on which any premiums are reallocated
from the Reallocation Account to the Accounts
elected by the Owner. The Reallocation Date is
shown on the Contract Schedule page.
SEC The United States Securities and Exchange
Commission.
SEPARATE ACCOUNT A separate investment account composed of
several Subaccounts established to receive
and invest net payments under the Contract and
under other variable annuity contracts issued
by the Company.
SERIES FUND A designated mutual fund from which a
Subaccount of the Separate Account will buy
shares.
5
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SUBACCOUNT A Separate Account allocation option that is
made available under this Contract.
SURRENDER The termination of the Contract at the option
of the Owner.
SURRENDER CHARGE The period of time during which a Surrender
PERIOD Charge may be imposed as shown on the Contract
Schedule page. For each premium, the period
begins on the date payment is received by Us.
VALUATION DATE Each day on which the New York Stock Exchange
is open for business.
VALUATION PERIOD The period commencing at the end of one
Valuation Date and 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 Contract 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.
GENERAL PROVISIONS
================================================================================
THE CONTRACT This Contract, the attached application, if
any, and any contract Riders constitute the
entire Contract. No Contract provision can be
waived or changed except by endorsement. Such
endorsement must be signed by Our President or
Secretary. We reserve the right to amend the
Contract to meet the requirements of any
applicable Federal or state laws or
regulations.
OWNERSHIP This Contract belongs to the Owner. The Owner
as shown on the Contract Schedule page, or as
subsequently changed, may exercise all rights
under this Contract including the right to
transfer ownership. These rights may be subject
to the consent of any assignee or irrevocable
beneficiary. Joint Owners may be named,
provided the Joint Owners are husband and wife.
6
<PAGE>
CHANGE OF We will not be bound by any requested change in
OWNERSHIP UPON the ownership designation unless it is made by
REQUEST Written Notice. The change will be effective on
the date the Written Notice is accepted by Us.
If We request, this Contract must be returned
to Our Office for endorsement.
Changing the Owner cancels any prior ownership
designation, but it does not change the
Beneficiary or the Annuitant.
CHANGE OF Should the Owner die during the Accumulation
OWNERSHIP UPON Period, We will be bound by the following:
DEATH OF OWNER
1. In the event of death of one Joint
Owner, this Contract will continue
with the surviving Joint Owner as sole
Owner.
2. If the Owner is the Annuitant, then
the Death Benefit Proceeds are payable
as provided in the Death Benefit
Provisions.
3. If the Owner is not the Annuitant and
dies before the Annuitant:
(a) If no Beneficiary is named and alive,
the Owner's estate will become the new
Owner. The Cash Value must be
distributed within five years of the
former Owner's death;
(b) If the Beneficiary is alive and is the
Owner's spouse, this Contract will
continue with the spouse as the new
Owner; or
(c) If the Beneficiary is alive and is not
the Owner's spouse, the Beneficiary
will become the new Owner. The Cash
Value must be distributed either:
(1) within five years of the former
Owner's death; or
(2) over the lifetime of the new
Owner, if a natural person, with
payments beginning within one year
of the former Owner's death; or
(3) over a period that does not exceed
the life expectancy (as defined by
the Internal Revenue Code and
Regulations adopted under the
Code) of the new Owner, if a
natural person, with payments
beginning within one year of
the former Owner's death.
BENEFICIARY The Beneficiary, as named in the application or
subsequently changed, is entitled to receive
the Death Benefit Proceeds, if any, as provided
in the Death Benefit Provisions of this
Contract, or the Cash Value, if any, as
provided in 3.c above. If no Beneficiary is
alive, the benefits payable to the Beneficiary
will be paid to the Owner, if surviving,
otherwise to the Owner's estate.
7
<PAGE>
CHANGE OF We will not be bound by any change in the
BENEFICIARY 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 Contract must be
returned to Our Office for endorsement.
ASSIGNMENT This Contract may be assigned prior to the
Maturity Date. 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 Contract is incontestable from the
Contract Date.
AGE AND SEX If a date of birth or sex has been misstated,
any amount payable will be adjusted to conform
to the correct date of birth and sex.
CONTRACT YEARS Contract years, quarters and anniversaries are
measured from the Contract Date.
REPORTS During the Accumulation Period, We will send a
report to the Owner at least once each year. It
will show the activity that occurred during the
year and the value of the Contract as of the
date of the report.
CONTRACT PAYMENT All payments from the Fixed Account will be
paid in one sum unless otherwise elected under
the Annuity Provisions of this Contract. We
have the right to postpone payments and
transfers from the Fixed Account for up to six
months. All payments and transfers from the
Subaccounts will be processed as provided in
this Contract unless one of the following
situations exist:
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 contractowners.
PROTECTION OF Unless the Owner directs by filing Written
PROCEEDS Notice, no Beneficiary may assign any payments
under this Contract before the same are due. To
the extent permitted by law, no payments under
this Contract will be subject to the claims of
creditors of any Beneficiary.
8
<PAGE>
SEPARATE ACCOUNT PROVISIONS
================================================================================
The variable benefits under this Contract are provided through the Separate
Account referenced on the Contract Schedule page. The assets of the Separate
Account are Our property. Assets equal to the liabilities of 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 contracts 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 contract benefits vary, but at
least monthly.
SUBACCOUNTS The Separate Account has various Subaccounts.
Each Subaccount invests exclusively in shares
of one of the portfolios of an underlying
Series Fund. Assets invested after the Maturity
Date may be invested in different Subaccounts
than assets invested during the Accumulation
Period. We reserve the right to add or remove
any Subaccount of the Separate Account. Income
and realized and unrealized gains and losses
from assets in each Subaccount are credited to,
or charged against, that Subaccount without
regard to income, gains, or losses in other
Subaccounts. Any amount charged against the
contract value for federal or state income
taxes will be deducted from that Subaccount.
TRANSFERS AMONG During the Accumulation Period, the Owner may
SUBACCOUNTS DURING transfer all or a portion of this Contract's
THE ACCUMULATION value in its Subaccounts to other Subaccounts
PERIOD or the Fixed Account. We reserve the right to
charge a $10 fee for each transfer after the
first twelve transfers during any one contract
year. This charge will be deducted from the
funds transferred. We must be notified in a
manner satisfactory to Us. The transfer
ordinarily will take effect on the first
Valuation Date on or following the date notice
is received at Our Office.
TRANSFERS AMONG After the Maturity Date, the Owner may transfer
SUBACCOUNTS AFTER the value of the variable annuity units from
THE MATURITY DATE one Subaccount to another. The minimum amount
which may be transferred is the lesser of $10
monthly income or the entire monthly income of
the variable annuity units in the Subaccount
from which the transfer is being made. If the
monthly income of the remaining units in a
Subaccount is less than $10, We reserve the
right to include the value of those variable
annuity units as part of the transfer.
After the Maturity Date, no transfers may be
made to or from the Fixed Account. We reserve
the right to limit transfers to once per
contract year.
ADDITION, DELETION OR We reserve the right to transfer assets of the
SUBSTITUTION Separate Account, which We determine to be
OF INVESTMENTS associated with the class of contracts to which
this Contract belongs, to another Separate
Account. If this type of transfer is made, the
term "Separate Account", as used in this
Contract, 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 contractowners or other
9
<PAGE>
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;
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 Contract is
delivered.
ACCUMULATION Some of the contract values fluctuate with the
UNIT VALUE investment results of the Subaccounts. In order
to determine how investment results affect the
contract values, an Accumulation Unit Value is
determined for each Subaccount. The
Accumulation Unit Value may increase or
decrease from one Valuation Period to the next.
Accumulation Unit Values also will vary between
Subaccounts.
The Accumulation Unit Value of any Subaccount
at the end of the 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. the accrued charge for administration and
mortality and expense. The daily amount of
this charge is equal to the daily net assets
of the Subaccounts multiplied by the daily
Separate Account Charge for the selected
Death Benefit Option. The maximum annual
factor for the Separate Account Charge is
shown on the Contract Schedule page; minus
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<PAGE>
3. the accrued amount of reserve for any taxes
that are determined by Us to have resulted
from the investment operations of the
Subaccount; and the result divided by
4. the number of outstanding units in the
Subaccount.
The use of the Accumulation Unit Value in
determining contract values is described in the
Contract Value Provisions.
PREMIUM PROVISIONS
================================================================================
PREMIUMS Premiums after the first are payable at Our
Office. The amount of premium which may be paid
during any contract year may not exceed the
Maximum Additional Annual Premium shown on the
Contract Schedule page without Our consent.
Premiums will not be accepted in an amount less
than the Minimum Additional Premium shown on
the Contract Schedule page without Our consent.
Our acceptance of any premium shall not
constitute a waiver of these limits with
respect to subsequent premiums.
CONTRACT VALUE PROVISIONS
================================================================================
NET PREMIUM The net premium will be the premium received
less Premium Tax, if any.
ALLOCATION OF NET Net Premiums will be allocated to the Accounts
PREMIUMS on the first Valuation Date on or following the
date the premium is received at Our Office.
With respect to the Initial Premium, the
allocation will take place on the Contract
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.
All allocation percentages must be in whole
numbers. The allocation of future net premiums
may be changed by the Owner. We reserve the
right to limit such change to once each year.
The request for change of allocations must be
in a manner satisfactory to Us. The allocation
change will be effective the date the request
for change is recorded by Us.
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SUBACCOUNT VALUE At the end of any Valuation Period, the
Subaccount value is equal to the number of
units that the Contract has in the Subaccount,
multiplied by the Accumulation Unit Value of
that Subaccount.
The number of units that the Contract has in
each Subaccount is equal to:
1. the initial units purchased on the Contract
Date; plus
2. units purchased at the time additional net
premiums are allocated to the Subaccount;
plus
3. units purchased through transfers from
another Account; minus
4. any units that are redeemed to pay for
partial Surrenders; minus
5. any units that are redeemed as part of a
transfer to another Account; minus
6. any units that are redeemed to pay the
Annual Contract Charge, Premium Tax and
transfer fees, if any.
FIXED ACCOUNT At the end of any Valuation Period, the Fixed
Account value is equal to:
1. the sum of all net 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 withdrawn from the Fixed
Account to pay for partial Surrenders;
minus
5. any amounts transferred to a Subaccount
from the Fixed Account; minus
6. any amounts charged to pay the Annual
Contract Charge, Premium Tax and transfer
fees, if any.
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 higher current
interest rates. The interest rates We set will
be credited for increments of at least one year
measured from each purchase payment or transfer
date.
On transfers from the Fixed Account to a
Subaccount, unless We otherwise consent:
1. Written Notice must be within 30 days after
a contract anniversary.
2. The transfer will ordinarily take place on
the first Valuation Date on or following
the date We receive such Written Notice.
3. The 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 contract year from
the Fixed Account.
Unless We otherwise consent, transfers to the
Fixed Account or allocation of Net Premiums to
the Fixed Account may be restricted if the
Fixed Account value following the transfer or
allocation would exceed $500,000.
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<PAGE>
We 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.
ANNUAL CONTRACT During the Accumulation Period, the Annual
CHARGE Contract Charge shown on the Contract Schedule
page will be made once a year from the Annuity
Value on each contract anniversary. This charge
will be deducted from each Subaccount and the
Fixed Account in proportion to the value each
bears to the Annuity Value. If the Contract is
surrendered on other than a contract
anniversary, the charge will also be made on
the date of Surrender.
The Annual Contract Charge prior to Surrender
will be waived if either (1) the Annuity Value
or (2) the sum of all net premiums received,
minus all partial Surrenders, equals or exceeds
$50,000 as of the contract anniversary for
which the charge is payable.
ANNUITY VALUE At the end of any Valuation Period, the Annuity
Value is equal to the sum of the Account
values.
PARTIAL SURRENDER Prior to the Maturity Date, a partial Surrender
may be made by the Owner without full Surrender
of this Contract. Unless We otherwise consent:
1. The request must be made by Written Notice.
2. The partial Surrender may not reduce the
Cash Value to less than the Minimum Balance
shown on the Contract Schedule page.
3. No amount from the Fixed Account
may be partially surrendered.
Except as provided below, the amount payable
will be the amount of the partial Surrender
less any applicable Surrender Charge and
Premium Tax. The Subaccount(s) for the partial
Surrender may be specified. If not specified,
partial Surrenders will be deducted from each
Subaccount and, if We consent, the Fixed
Account in proportion to the value each bears
to the Annuity Value.
Partial Surrenders may be made, without a
Surrender Charge being deducted at the time the
partial Surrender is made, in one of the
following ways:
1. Lump Sum
-----------------------------------------------
During any Contract Year, the Owner may request
a lump sum partial Surrender. The maximum
amount available without a Surrender Charge for
a lump sum partial Surrender is equal to A + B,
where:
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A is equal to:
(i) the Annuity Value on the date of the
partial Surrender; plus
(ii) any amounts previously surrendered
from this Contract under provision B
below; plus
(iii) any amounts previously surrendered
from this Contract that were subject
to Surrender Charges; minus
(iv) the total of all premiums paid for
this Contract.
and
B is equal to:
(i) 10% of the remaining Annuity Value
following the determination of A
above on the date of the partial
Surrender; minus
(ii) any amounts partially surrendered
under B(i) above during the contract
year in which the partial Surrender
is requested.
Unless We otherwise consent, the minimum lump
sum payment amount is $500.
2. Systematic Payout Option
-----------------------------------------------
During any contract year, a Systematic Payout
Option is available on a monthly, quarterly,
semi-annual or annual basis without a Surrender
Charge. Systematic payouts must be at least $50
and may not exceed 10% of the Annuity Value at
the time the payout is made, divided by the
number of payouts made per calendar year. We
reserve the right to discontinue systematic
payouts if any payout would reduce the Annuity
Value below the Minimum Balance shown on the
Contract Schedule page.
The Owner may elect to begin or discontinue
systematic payouts at any time. However, We
must receive Written Notice at least 30 days
prior to the date systematic payouts are to be
discontinued.
CASH VALUE This Contract may be surrendered by the
Owner for its Cash Value upon Written Notice at
any time prior to the then current Maturity
Date. The Cash Value at any time equals the
Annuity Value on the Valuation Date coincident
with or next following the date We receive
Written Notice of Surrender, less:
1. any applicable Surrender Charge; less
2. any applicable Premium Tax; less
3. the Annual Contract Charge.
SURRENDER On the Surrender or partial Surrender of
CHARGE premiums paid beyond the Surrender Charge
Period shown on the Contract Schedule page, no
Surrender Charge will be imposed.
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Except as provided in the Partial Surrender
provision, on the partial Surrender of premiums
within the Surrender Charge Period, the
Surrender Charge will equal the premium paid
within the Surrender Charge Period, times the
applicable Surrender Charge Percentage shown on
the Contract Schedule page.
On the full Surrender of premium payments
within the Surrender Charge Period, the
Surrender Charge will equal the premium paid
within the Surrender Charge Period (including
any premiums previously withdrawn to pay for
partial Surrenders for which a Surrender Charge
was not deducted), times the applicable
Surrender Charge Percentage shown on the
Contract Schedule page.
BASIS OF COMPUTATION A detailed statement of the method of
computation of values has been filed with
the insurance supervisory official of the
jurisdiction in which this Contract is
delivered. All values for this Contract are
equal to or greater than the values required by
statutes in such jurisdiction.
DEATH BENEFIT PROVISIONS
================================================================================
DEATH OF ANNUITANT If the Annuitant dies during the Accumulation
DURING THE Period and the Owner is a natural person
ACCUMULATION PERIOD other than the Annuitant, the Owner will
automatically become the Annuitant and this
Contract will continue. In the event of Joint
Owners, the younger Joint Owner will
automatically become the new Annuitant and this
Contract will continue.
If the Annuitant dies during the Accumulation
Period and the Owner is either (1) the same
individual as the Annuitant; or (2) other than
a natural person, then the Death Benefit
Proceeds as calculated below are payable to the
Beneficiary. However, in the event of Joint
Owners, if the Annuitant dies during the
Accumulation Period and is the same individual
as one of the Joint Owners, the surviving Joint
Owner will automatically become the Annuitant
and this Contract will continue.
DEATH BENEFIT If the Annuitant dies during the Accumulation
PROCEEDS Period, the Death Benefit Proceeds, if payable,
will be determined by the Death Benefit Option
shown on the Contract Schedule Page. The Death
Benefit Option may not be changed after this
Contract has been issued.
15
<PAGE>
OPTION A
Under Option A, the Death Benefit Proceeds will
be the greater of:
1. the Annuity Value as of the Death Report
Day; or
2. the excess of (a) the amount of premium
paid as of the Death Report Day, less
(b) any amount withdrawn from this Contract
to pay for partial Surrenders; or
3. the highest Annuity Value as of any
Monthiversary prior to the Annuitant's 81st
birthday. The highest Annuity Value will be
increased for premiums made and decreased
for adjusted partial Surrenders taken
following the date of the Monthiversary on
which the highest Annuity Value occurs.
OPTION B
Under Option B, the Death Benefit Proceeds will
be the greater of:
1. the Death Benefit Proceeds as determined
under Option A above; or
2. total premiums paid for this Contract, less
any adjusted partial Surrenders,
accumulated at 6% interest per annum from
the date of payment or partial Surrender
until the earlier of (a) the date of death,
or (b) the date of the Annuitant's 81st
birthday.
The adjusted partial Surrender under Death
Benefit Option A, 3, and Option B, 2, is equal
to (a) times (b) where:
(a) is the ratio of the value of any
proceeds that would have been payable had
death occurred, to the Annuity Value, as
these amounts existed on the date the
partial Surrender is processed, but prior
to the processing; and
(b) is the amount of the partial Surrender.
ALTERNATIVE ELECTION If the Beneficiary is entitled to receive the
Death Benefit Proceeds, the Beneficiary may
elect, in lieu of a lump sum payment, one of
the following options that provides for
complete distribution and termination of this
Contract at the end of the distribution period:
1. within five years of the date of death of
the Annuitant; or
2. over the lifetime of the Beneficiary; or
3. over a period that does not exceed the life
expectancy (as defined by the Internal
Revenue Code and Regulations adopted under
the Code) of such Beneficiary.
Multiple beneficiaries may choose individually
among any of the three options.
16
<PAGE>
For subparagraphs (1) and (3), the Annuity
Value as of the Death Report Day will be
adjusted to equal the Death Benefit Proceeds
and this Contract will remain in force as a
deferred annuity until the end of the elected
distribution period. For subparagraph (2), the
Maturity Date will be changed to the Death
Report Day and the Death Benefit Proceeds will
be used to purchase annuity payments under the
Annuity Provisions of this Contract.
For elections made under subparagraph (1), We
will:
a. at the time of election, allow one partial
Surrender and one transfer of all or a
portion of the Contract's value among
Subaccounts or the Fixed Account without a
transfer charge. Additional partial
Surrender and transfers are not permitted;
b. not deduct the Annual Contract Charge upon
complete distribution;
c. not permit payment of the Death Benefit
Proceeds under the Annuity Provisions
of this Contract upon complete
distribution.
The Beneficiary may not name a Beneficiary for
payment of the Death Benefit Proceeds. In the
event the Beneficiary dies prior to
distribution of all Death Benefit Proceeds, We
will pay the remaining value of the Death
Benefit Proceeds to the Contingent Beneficiary,
if named by the Owner. If no Contingent
Beneficiary is named, such payment will be made
to the Beneficiary's estate.
Subparagraphs (2) and (3) may be elected only
if the Beneficiary is a natural person and
payments start within one year of the date of
death of the Annuitant.
Except in the event of Joint Owners, as
provided in the Death of Annuitant During the
Accumulation Period provision, if the
Beneficiary is entitled to receive the Death
Benefit Proceeds and is the spouse of the
deceased Annuitant, then the Beneficiary may
elect to become the new Annuitant and Owner and
keep the Contract in force in lieu of receiving
the Death Benefit Proceeds. However, if the
spouse is also a Joint Owner of this Contract,
the terms of the Death of Annuitant During the
Accumulation Period provision shall apply.
ANNUITY PROVISIONS
================================================================================
COMMENCEMENT OF Monthly annuity payments will begin as of the
ANNUITY PAYMENTS Maturity Date shown on the Contract Schedule
page, unless another Maturity Date has been
elected as provided in these provisions.
17
<PAGE>
MATURITY DATE The Maturity Date shown on the Contract
Schedule page may be changed to a different
Maturity Date, subject to all of the following:
1. Written Notice prior to the Maturity Date.
2. The new Maturity Date is at least 5 years
after the Contract Date.
3. The new Maturity Date is not beyond the
Annuitant's 95th birthday.
ANNUITY OPTION The Annuity Option shown on the Contract
Schedule page may be changed to any other
option available upon Written Notice prior to
the Maturity Date. If a variable account
annuity payment option is chosen, the Owner
must include in the Written Notice the
Sub-Account allocation of the Annuity Proceeds
as of the Maturity Date.
CHANGE OF As of the Maturity Date and upon agreement with
ANNUITANT Us, the Owner may elect a different Annuitant
or add a joint Annuitant who will be a joint
payee under either Option C or Option E.
PAYEE The Annuitant(s) on the Maturity Date will
become the payee(s) and receive the annuity
payments
AVAILABILITY If the payee is not a natural person, an
Annuity Option is only available with Our
permission. No Annuity Option is available if:
1. the payee is an assignee; or
2. the periodic payment is less than $20.
AGE Age, when required, means Age nearest birthday
on the effective date of the option. We will
furnish rates for ages or combination of ages
not shown upon request.
PROOF OF AGE Prior to making the first monthly annuity
AND SEX payment under this Contract, We reserve the
right to require satisfactory evidence of the
birthdate and the sex of any payee. If required
by law to ignore differences in sex of any
payee, annuity payments will be determined
using unisex rates.
PROOF OF SURVIVAL Prior to making any payment under this
Contract, We reserve the right to require
satisfactory evidence that the payee is:
1. alive on the due date of such payment; and
2. legally qualified to receive such payment.
18
<PAGE>
DEATH BENEFIT AFTER The death benefit after the Maturity Date and
THE MATURITY DATE after the commencement of annuity payments
depends upon the annuity option selected. If a
payee dies on or after the commencement of
annuity payments, the remaining portion of any
interest In the Contract will be distributed at
least as rapidly as under the method of
distribution being used as of the date of the
payee's death.
RESTRICTIONS After the Maturity Date, no additional
premiums, partial Surrenders, full Surrenders,
change of Annuitants or Annuity Options may be
made under this Contract.
FIXED ACCOUNT ANNUITY PAYMENTS
================================================================================
INTEREST AND All Fixed Account annuity option payments are
MORTALITY based on a guaranteed interest rate of 3%.
Mortality is based on the "1983 Table a"
mortality table with projection. Gender based
mortality tables will be used unless prohibited
by law.
AMOUNT OF MONTHLY The amount of each monthly annuity payment will
FIXED ACCOUNT be determined by multiplying:
ANNUITY PAYMENT
1. the appropriate rate based on the guaranteed
interest rate and, for Options B and C, the
mortality table for Fixed Account annuity
payments; times
2. the Annuity Proceeds as of the Maturity
Date.
FIXED ACCOUNT The following options are available for payment
ANNUITY OPTIONS of Fixed Account monthly annuity payments. The
rates shown are the guaranteed rates for each
$1,000 of Annuity Proceeds at selected ages.
Any guaranteed rates not shown for the options
below will be available upon request. Higher
current rates may be available at the Maturity
Date.
19
<PAGE>
Option A - The Annuity Proceeds will be paid in equal
Fixed Period installments. The installments will be paid over
a fixed period determined from the following
table:
Fixed Period
(in Months) Rate
------------------------------
60 17.91
120 9.61
180 6.87
240 5.51
Option B - The Annuity Proceeds will be paid in equal
Life Income installments determined from the following
table. Such installments are payable:
1. during the payee's lifetime only (Life
Annuity); or
2. during a 10 or 20 year fixed period certain
and for the payee's remaining lifetime
(Certain Period); or
3. until the sum of installments paid equals
the Annuity Proceeds applied and for the
payee's remaining lifetime (Installment
Refund).
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
OPTION B: LIFE INCOME
MONTHLY INCOME PAYMENTS
- -------------------------------------------------------------------------------------------------------------------------
Guaranteed for Life Guaranteed for 10 Years
- --------------------------------------------------------------- ---------------------------------------------------------
Male Age Female Male Age Female
- ---------------------- -------------------- ------------------- -------------------- -------------------- ---------------
<S> <C> <C> <C> <C> <C>
$ 3.87 50 $ 3.55 $ 3.84 50 $ 3.54
4.23 55 3.83 4.19 55 3.82
4.72 60 4.21 4.63 60 4.18
5.40 65 4.73 5.22 65 4.66
6.34 70 5.45 5.96 70 5.30
- ---------------------- -------------------- ------------------- -------------------- -------------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------- ---------------------------------------------------------
Guaranteed Return of Policy Proceeds Guaranteed for 20 Years
- --------------------------------------------------------------- ---------------------------------------------------------
Male Age Female Male Age Female
- ---------------------- -------------------- ------------------- -------------------- -------------------- ---------------
<S> <C> <C> <C> <C> <C>
$ 3.73 50 $ 3.49 $ 3.76 50 $ 3.51
4.03 55 3.73 4.05 55 3.75
4.40 60 4.04 4.37 60 4.06
4.88 65 4.45 4.72 65 4.41
5.51 70 4.99 5.04 70 4.80
- ---------------------- -------------------- ------------------- -------------------- -------------------- ---------------
</TABLE>
20
<PAGE>
Option C - The Annuity Proceeds will be paid in equal
Joint and Survivor installments during the joint lifetime of two
Life Income payees and continuing upon the death of the
first payee for the remaining lifetime of the
survivor.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
OPTION C: JOINT AND SURVIVOR LIFE INCOME
- -------------------------------------------------------------------------------------------------------------------------
Monthly Payments for Each $1,000 of Amount Retained
- -------------------------------------------------------------------------------------------------------------------------
Age of Other Payee (Female)
---------------------------------------------------------------------------------------------------
Age of One 15 Years Less 10 Years Less 5 Years Less Same as
Payee (Male) Than Male Payee's Than Male Payee's Than Male Payee's Male Payee's
- --------------------- ------------------------- ------------------------- ------------------------- ---------------------
<S> <C> <C> <C> <C>
50 $ 2.99 $ 3.09 $3.20 $ 3.32
55 3.11 3.24 3.38 3.53
60 3.27 3.43 3.62 3.82
65 3.47 3.69 3.94 4.22
70 3.74 4.04 4.38 4.77
- --------------------- ------------------------- ------------------------- ------------------------- ---------------------
</TABLE>
VARIABLE ACCOUNT ANNUITY PAYMENTS
================================================================================
ANNUITY UNIT VALUE The Annuity Proceeds will be used to
purchase variable annuity units in the chosen
Subaccount(s). The Annuity Unit Value in any
Subaccount will increase or decrease reflecting
the investment experience of that Subaccount.
The Annuity Unit Value of any Subaccount at the
end of a Valuation Period is equal to (a)
multiplied by (b) multiplied by (c), where:
(a) is the Annuity Unit Value for that
Subaccount at the end of the immediately
preceding Valuation Period;
(b) is the net investment factor for the
Subaccount for the Valuation Period; and
(c) is the Assumed Investment Return adjustment
factor for the Valuation Period.
The Assumed Investment Return adjustment factor
for the Valuation Period is the product of
discount factors of .99986634 per day to
recognize the 5.0% effective annual Assumed
Investment Return.
21
<PAGE>
The net investment factor used to calculate the
value of the Annuity Unit Value in each
Subaccount for the Valuation Period is
determined by dividing (d) by (e) and
subtracting (f) from the result, where:
(d) is the net result of:
(1) the net asset value of a Series
Fund share held in that Subaccount
determined as of the end of the
current Valuation Period; plus
(2) the per share amount of any
dividend or capital gain distributions
made by the Series Fund for shares
held in that Subaccount if the
ex-dividend date occurs during the
Valuation Period; plus or minus
(3) a per share charge or credit for any
taxes reserved for, which We determine
to have resulted from the investment
operations of the Subaccount.
(e) is the net asset value of a Series Fund
share held in the Subaccount determined as
of the end of the immediately preceding
Valuation Period.
(f) is a factor representing the mortality and
expense risk fee, and administrative
charge. This factor is equal, on an annual
basis, to 1.40% of the daily net asset
value of a Series Fund share held in the
Separate Account for that Subaccount.
DETERMINATION OF The amount of the first variable payment is
THE FIRST VARIABLE determined by multiplying the Annuity Proceeds
PAYMENT times the appropriate rate from the variable
option selected. The tables are based on the
"1983 Table a" mortality table with projection
with a 5% effective annual Assumed Investment
Return and assuming a Maturity Date in the year
2000. Gender based mortality tables will be
used unless prohibited by law.
The amount of the first payment depends upon the
adjusted Age of the Annuitant. The adjusted Age
is the Annuitant's Age nearest the Maturity
Date, adjusted as follows:
Maturity Date Adjusted Age
----------------------------------------------
Before 2001 Actual Age
2001 - 2010 Actual Age minus 1
2011 - 2020 Actual Age minus 2
2021 - 2030 Actual Age minus 3
2031 - 2040 Actual Age minus 4
After the year 2040 as determined by Us.
22
<PAGE>
DETERMINATION OF The amount of variable annuity payments after
SUBSEQUENT the first will increase or decrease according
VARIABLE PAYMENTS to the Annuity Unit Value which reflects the
investment experience of the selected
Subaccount(s). Each variable annuity payment
after the first will be equal to the number of
variable annuity units in each selected
Subaccount multiplied by the Annuity Unit Value
of that Subaccount on the date the payment is
processed. The number of variable annuity units
in any selected Subaccount is determined by
dividing the first variable annuity payment
allocated to that Subaccount by the variable
Annuity Unit Value of that Subaccount on the
date the first annuity payment is processed. The
number of variable annuity units in any selected
Subaccount will be increased or reduced by the
number of units transferred to or from another
Subaccount.
VARIABLE ACCOUNT The following options are available for payment
ANNUITY OPTIONS of Variable Account monthly annuity payments.
The rates shown are the guaranteed rates for
each $1,000 of Annuity Proceeds at selected
ages. These rates are used to determine the
first variable payment under each option. Any
guaranteed rates not shown for the options below
will be available upon request.
Option D - The Annuity Proceeds will be paid in
Variable Life Income installments determined from the following
table. Such installments are payable:
1. during the payee's lifetime only (Variable
Life Annuity); or
2. during a 10 year fixed period certain and
for the payee's remaining lifetime
(Variable Certain Period).
<TABLE>
<CAPTION>
=========================================================================================================================
Adjusted Variable Life Annuity Variable Certain Period
Payee's Age Male Female Unisex Male Female Unisex
---------------- --------------- ------------------ ----------------- ----------------- =============
<S> <C> <C> <C> <C> <C> <C> <C>
55 5.46 5.06 5.26 5.39 5.03 5.21
60 5.93 5.42 5.68 5.81 5.37 5.59
65 6.60 5.91 6.26 6.37 5.82 6.10
70 7.55 6.63 7.09 7.07 6.43 6.75
75 8.87 7.70 8.29 7.89 7.23 7.56
80 10.75 9.30 10.03 8.74 8.18 8.46
85 13.36 11.68 12.52 9.50 9.11 9.31
90 16.94 15.13 16.04 10.04 9.80 9.92
=================== ================ =============== ================== ================= ================= =============
</TABLE>
Option E - The Annuity Proceeds will be paid in
Variable Joint and installments during the joint lifetime of two
Survivor Life Income payees and continuing upon the death of the
first payee for the remaining lifetime of the
survivor.
23
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
Home Office: Columbus, Ohio
Administrative Office:
P.O. Box 5068
Clearwater, Florida 33758
- --------------------------------------------------------------------------------
FLEXIBLE PAYMENT VARIABLE ACCUMULATION DEFERRED ANNUITY
Death Benefit Prior to Maturity
Monthly Annuity Commencing on Maturity Date
Non-Participating
No Dividends
24
EXHIBIT 99.A9
Exhibit 4(b)
Guaranteed Minimum Income Benefit Rider (6IB01)
<PAGE>
================================================================================
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
================================================================================
GUARANTEED MINIMUM INCOME BENEFIT RIDER
- --------------------------------------------------------------------------------
THIS RIDER provides a Guaranteed Minimum Income Benefit regardless of the
performance of the Subaccounts.
This Rider is attached to and made part of the variable annuity contract as of
the Rider Date. This Rider may only be terminated as provided herein. This Rider
is subject to all of the provisions in the Contract that do not conflict with
the provisions of this Rider. The Rider Payment Options provide for variable
annuity payments. Subsequent payments may fluctuate with the investment
performance of the annuity Subaccounts, but will never be less than the initial
payment.
Neither this Rider nor the Minimum Annuitization Value creates a Cash Value.
The payments provided under this Rider may be less than those provided under the
Variable Account Annuity Payments provisions of the Contract to which this Rider
is attached. For this reason, it is important that both annuitization methods be
evaluated closely to determine which method is most suitable.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CONTRACT NUMBER: 01-23456789 LAST DATE TO UPGRADE: July 15, 2047
RIDER DATE: July 15, 1998
MINIMUM ANNUITIZATION
VALUE (MAV) AT RIDER DATE: $10,000
ANNUAL GROWTH RATE: [3.00 - 6.00%] GUARANTEED MINIMUM INCOME BENEFIT
------------------------------------------------
RIDER FEE PERCENTAGE: [0.30 - 0.50%] FIRST DATE TO ELECT BENEFIT: July 15, 2008
RIDER FEE WAIVER
THRESHOLD:
[200 - 250%] LAST DATE TO ELECT BENEFIT: July 15, 2057
Separate Account Annuitization Charge after Election Date: [2.50 - 3.50%]
</TABLE>
-------------------- --------------------- --------------------------
GUARANTEED MINIMUM
ELECTION DATE ANNUITANT'S AGE MONTHLY PAYMENT*
-------------------- --------------------- --------------------------
July 15, 2008 45 $ 63.40
July 15, 2028 65 $ 299.81
July 15, 2033 70 $ 458.09
July 15, 2038 75 $ 701.49
July 15, 2043 80 $1,064.00
July 15, 2048 85 $1,573.08
July 15, 2053 90 $2,105.14
Per $10,000 of Initial MAV at Rider Date
---------------------------------------------------------------------
* Assumes no further premium payments and no partial surrenders. Assumes the
Minimum Annuitization Value is applied to a life with 10 year certain
Rider Payment Option with monthly payments.
<PAGE>
DEFINITIONS The following definitions are used in this Rider.
ANNUITANT
The Annuitant is designated on the Contract Schedule
page. The variable annuity payments are paid to the
Annuitant (or surviving Joint Annuitant).
ANNUITY FACTOR
A factor for the applicable Annuitant age, sex and
Rider Payment Option shown in Schedule I or Schedule II
of this Rider. For the Rider Payment Option chosen, the
Annuity Factors from Schedule I and Schedule II and the
Minimum Annuitization Value will be used to determine
the applicable annuity payments. For Annuitants age 85
or older at the time of annuitization, the age 85
Annuity Factor will be used for Schedule I. Factors not
shown are available from Us upon request. Schedule I
and Schedule II are based on the "1983 Table a"
mortality table, improved to the year 2000 with
projection scale G. For purposes of determining annuity
payments under this Rider, no adjustments will be made
to the Annuitant's age based upon Maturity Dates after
2000, as described in the Determination of the First
Variable Payment provision of the Contract.
ELECTION DATE
A date elected by the Owner on which Guaranteed Minimum
Income Benefit payments will begin. The Election Date
must be within 30 days following a Contract
Anniversary. The first and last dates to elect a Rider
Payment Option are shown on Page 1 of this Rider.
RIDER DATE
The date that this Rider is added to the Contract. This
date may only be the issue date of the Contract or a
Contract Anniversary date. This is also the Contract
Anniversary that the Owner most recently elected to
upgrade the Minimum Annuitization Value, if applicable.
SUPPORTABLE PAYMENT
The Supportable Payment is equal to the number of
variable annuity units in the selected Subaccounts
multiplied by the variable annuity unit values in those
Subaccounts on the date the payment is made.
GUARANTEED MINIMUM On the Election Date, the Owner may use the Minimum
INCOME BENEFIT Annuitization Value, less any outstanding loan plus
loan interest, and the applicable Annuity Factor to
provide variable payments to the Annuitant. The
Annuitant will begin to receive Guaranteed Minimum
Payments on the Election Date.
2
<PAGE>
The first variable payment is determined by multiplying
each $1,000 of Minimum Annuitization Value, less any
outstanding loan plus loan interest, by the Annuity
Factor in Schedule 1. Each subsequent payment will be
calculated as described in the Contract, using a 5%
assumed investment return. Subsequent payments may
fluctuate in accordance with the investment performance
of the annuity unit value. However, such payments will
never be less than the initial payment.
During the first contract year following annuitization,
each payment will be stabilized to equal the initial
payment. On each contract anniversary following
annuitization, the stabilized payment will be increased
or decreased (but never below the initial payment) and
held level for that contract year. On each contract
anniversary following annuitization, the stabilized
payment will equal the greater of the initial payment
or the supportable payment at that time.
If the Supportable Payment (at any payment date) is
greater than the stabilized payment for that year, the
excess will be used to purchase additional annuity
units as described below. If the Supportable Payment
(at any payment date) is less than the stabilized
payment for that year, annuity units will be redeemed
as described below to fund the deficiency.
After the Election Date, a Separate Account
Annuitization Charge will be charged. This charge may
be different than the Separate Account Charge in effect
prior to the Election Date. It may also be different
than the mortality and expense risk fee and
administative charge for the Settlement Options shown
in the Contract.
MINIMUM The Minimum Annuitization Value is used to determine
ANNUITIZATION VALUE Minimum Income Benefit payments, the Rider fee and
adjustments to partial surrenders.
On the Rider Date, the Minimum Annuitization Value is
the value of the variable annuity. Thereafter, the
Minimum Annuitization Value will be the accumulated
value, based upon the Annual Growth Rate shown on Page
1 of this Rider, of the following:
(A) the value of the variable annuity on the Rider
Date; plus
(B) any additional premiums made after the Rider Date;
minus
(C) the amount of any partial surrenders, as
determined under the Partial Surrender provision
below.
3
<PAGE>
PARTIAL SURRENDERS In any contract year, the Minimum Annuitization Value
will be reduced by the actual amount of contract
partial surrenders as long as the partial surrenders do
not exceed a maximum annual free amount. Partial
surrenders in excess of the maximum annual free amount
will reduce the Minimum Annuitization Value by an
amount equal to (A) divided by (B) multiplied by (C)
where:
(A) is the amount of the excess partial surrenders;
(B) is the value of the Contract after the current
contract year maximum free amount has been
partially surrendered, but prior to the partial
surrender of the excess portion and
(C) is the Minimum Annuitization Value after the
current contract year maximum annual free amount
has been partially surrendered, but prior to
partial surrender of the excess portion.
For each contract year, the maximum annual free amount
is equal to the Minimum Annuitization Value as of the
beginning of the contract year, multiplied by the
effective Annual Growth Rate shown on page one of this
Rider. Partial surrenders during a contract year will
reduce the available maximum annual free amount by the
amount of the partial surrender.
RIDER FEE We will deduct a fee from the value of the Contract on
each Contract Anniversary and on the termination date
of this Rider. The rider fee is the Minimum
Annuitization Value at the time the fee is deducted,
multiplied by the Rider Fee Percentage shown on the
first page of this Rider. The fee will be deducted from
each Account in proportion to the value each bears to
the Annuity Value. This fee will not be deducted after
the Election Date.
WAIVER OF RIDER FEE If the value of the Contract, on a particular Contract
Anniversary, exceeds an amount equal to the Rider Fee
Waiver Threshold (shown on Page 1 of this Rider)
multiplied by the Minimum Annuitization Value, the
rider fee will be waived for that Contract Anniversary.
MINIMUM The Owner may elect, in writing, to upgrade the Minimum
ANNUITIZATION Annuitization Value to the value of the Contract on a
VALUE UPGRADE Contract Anniversary. This may be done within 30 days
immediately following any Contract Anniversary, and
prior to the Last Date to Upgrade shown on Page 1 of
this Rider.
If an upgrade is elected, this Rider will terminate and
a new rider will be issued with a new Rider Date,
Election Date and its own guaranteed benefits. The new
annual Rider Fee Percentage may be different than this
Rider's, but it will never be greater than 0.50%.
4
<PAGE>
RIDER PAYMENT The minimum Annuitization Value and applicable Annuity
OPTIONS Factors from Schedule I may be applied to the following
payment options:
LIFE INCOME
An election may be made for "No Period Certain" or "10
Years Certain". In the event of the death of the person
receiving payments prior to the end of the chosen
period certain, the remaining period certain payments
will be continued to the Beneficiary.
JOINT AND FULL SURVIVOR
An election may be made for "No Period Certain" or "10
Years Certain". Payments will be made as long as either
the Annuitant or Joint Annuitant is living. In the
event of the death of both the Annuitant and the Joint
Annuitant prior to the end of the chosen period
certain, the remaining period certain payments will be
continued to the Beneficiary.
PURCHASE/REDEMPTION The number of annuity units purchased or redeemed is
OF ANNUITY UNITS equal to the allocated annuity income purchased or
redeemed, respectively, divided by the Annuity Unit
Value for each respective Subaccount. Purchases and
redemptions of annuity income will be allocated to each
Subaccount on a proportionate basis. The amount of
annuity income purchased or redeemed is the difference
between the Supportable Payment and the stabilized
payment, times the Attained Age nearest birthday
Annuity Factors shown on Schedule II, divided by
$1,000.
The Company bears the risk that it will need to make
payments if all annuity units have been redeemed in an
attempt to maintain the stabilized payment at the
initial payment level. In such an event, the Company
will make all future payments equal to the initial
payment.
ASSIGNMENT Payments made under this Rider may not be pledged or
assigned. Payments will only be made to the Annuitant
or Joint Annuitant named in the Contract.
CHANGE OF ANNUITANT If the Annuitant is changed, this Rider will terminate
and a new Rider will be issued with a new Rider Date,
Election Date and its own guaranteed benefits. The new
annual Rider fee may be different than the Rider fee
under this Rider, but it will never be greater than
0.50%.
5
<PAGE>
TERMINATION This Rider will be terminated upon the earliest of:
(a) the Election Date;
(b) 30 days after the Last Date to Elect Benefit shown
on the first page of this Rider;
(c) the date the Contract terminates;
(d) the date the Owner elects to apply the value of
the Contract to annuitize this Contract;
(e) the date the Owner elects to upgrade the Minimum
Annuitization Value; or
(f) the date that the Annuitant is changed.
This Rider cannot be terminated prior to the earliest
of the above dates.
Signed for Us at Our Office in Clearwater, Florida.
/s/ WILLIAM H. GEIGER /s/ JOHN R. KENNEY
--------------------- ------------------
Secretary President
6
<PAGE>
SCHEDULE I - ANNUITY FACTORS
The amounts shown in these tables are the Annuity Factors for each $1,000 of the
Minimum Annuitization Value and assume a 3% Assumed Investment Return.
<TABLE>
<CAPTION>
- ------------------- ---------------------------------------------------- ----------------------------------------------------
MONTHLY ANNUITY FACTOR FOR MONTHLY ANNUITY FACTOR FOR
LIFE WITH NO PERIOD CERTAIN LIFE WITH 10 YEARS CERTAIN
- ------------------- ---------------------------------------------------- ----------------------------------------------------
AGE MALE FEMALE UNISEX MALE FEMALE UNISEX
- ------------------- ----------------- ----------------- ---------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
65 5.40 4.73 5.07 5.22 4.66 4.94
70 6.34 5.45 5.90 5.96 5.30 5.63
75 7.65 6.52 7.09 6.82 6.13 6.48
80 9,51 8.10 8.81 7.73 7.13 7.43
85 12.09 10.44 11.27 8.54 8.12 8.33
- ------------------- ----------------- ----------------- ---------------- ----------------- ----------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------- -----------------------------------------------------------------------------------------------------------
MONTHLY ANNUITY FACTOR FOR JOINT AND FULL SURVIVOR
-----------------------------------------------------------------------------------------------------------
AGE OF FEMALE ANNUITANT*
-----------------------------------------------------------------------------------------------------------
AGE OF 15 YEARS 12 YEARS 9 YEARS 6 YEARS 3 YEARS 3 YEARS
MALE LESS THAN LESS THAN LESS THAN LESS THAN LESS THAN SAME AS MORE THAN
ANNUITANT* MALE MALE MALE MALE MALE MALE MALE
- ----------------- -------------- --------------- -------------- --------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
65 3.47 3.60 3.74 3.89 4.05 4.22 4.39
70 3.74 3.91 4.10 4.31 4.53 4.77 5.02
75 4.10 4.34 4.60 4.89 5.22 5.56 5.90
80 4.60 4.92 5.30 5.73 6.20 6.69 7.18
85 5.29 5.76 6.32 6.94 7.62 8.32 9.01
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
MONTHLY ANNUITY FACTOR FOR JOINT AND FULL SURVIVOR WITH 10 YEAR CERTAIN
-----------------------------------------------------------------------------------------------------------
AGE OF FEMALE ANNUITANT*
-----------------------------------------------------------------------------------------------------------
AGE OF 15 YEARS 12 YEARS 9 YEARS 6 YEARS 3 YEARS 3 YEARS
MALE LESS THAN LESS THAN LESS THAN LESS THAN LESS THAN SAME AS MORE THAN
ANNUITANT* MALE MALE MALE MALE MALE MALE MALE
- ----------------- -------------- --------------- -------------- --------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
65 3.47 3.60 3.74 3.89 4.05 4.22 4.39
70 3.74 3.91 4.10 4.30 4.52 4.76 4.99
75 4.10 4.33 4.58 4.87 5.18 5.50 5.81
80 4.58 4.89 5.25 5.65 6.07 6.48 6.86
85 5.23 5.66 6.15 6.66 7.17 7.62 8.00
- ----------------- -------------- --------------- -------------- --------------- -------------- --------------- --------------
*Age nearest birthday
- -----------------------------------------------------------------------------------------------------------------------------
The annual, semi-annual or quarterly Annuity Factor shall be the Annuity Factor shown multiplied by 11.80, 5.95 or 2.99,
respectively.
- -----------------------------------------------------------------------------------------------------------------------------
Annuity Factors not shown in the above tables will be calculated on the same basis as those shown and may be obtained from
the Company.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II - ANNUITY FACTORS
The amounts shown in these tables are the Annuity Factors for each $1,000 of the
Minimum Annuitization Value and assume a 5% Assumed Investment Return.
- ------------------- ---------------------------------------------------- ----------------------------------------------------
MONTHLY ANNUITY FACTOR FOR MONTHLY ANNUITY FACTOR FOR
LIFE WITH NO PERIOD CERTAIN LIFE WITH 10 YEARS CERTAIN
- ------------------- ---------------------------------------------------- ----------------------------------------------------
AGE MALE FEMALE UNISEX MALE FEMALE UNISEX
- ------------------- ----------------- ----------------- ---------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
50 $5.12 $4.81 $4.97 $5.08 $4.79 $4.94
55 5.46 5.06 5.26 5.39 5.03 5.21
60 5.93 5.42 5.68 5.81 5.37 5.59
65 6.60 5.91 6.26 6.37 5.82 6.10
70 7.55 6.63 7.09 7.07 6.43 6.75
75 8.87 7.70 8.29 7.89 7.23 7.56
80 10.75 9.30 10.03 8.74 8.18 8.46
85 13.36 11.68 12.52 9.50 9.11 9.31
90 16.94 15.13 16.04 10.04 9.80 9.92
95 21.76 19.41 20.59 10.36 10.23 10.30
- ------------------- ----------------- ----------------- ---------------- ----------------- ----------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------- -----------------------------------------------------------------------------------------------------------
MONTHLY ANNUITY FACTOR FOR JOINT AND FULL SURVIVOR
-----------------------------------------------------------------------------------------------------------
AGE OF FEMALE ANNUITANT*
-----------------------------------------------------------------------------------------------------------
AGE OF 15 YEARS 12 YEARS 9 YEARS 6 YEARS 3 YEARS 3 YEARS
MALE LESS THAN LESS THAN LESS THAN LESS THAN LESS THAN SAME AS MORE THAN
ANNUITANT* MALE MALE MALE MALE MALE MALE MALE
- ----------------- -------------- --------------- -------------- --------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
65 $4.71 $4.82 $4.94 $5.07 $5.22 $5.37 $5.53
70 4.95 5.10 5.27 5.46 5.67 5.89 6.13
75 5.28 5.50 5.74 6.02 6.33 6.66 7.00
80 5.75 6.06 6.43 6.84 7.30 7.78 8.27
85 6.43 6.89 7.43 8.04 8.71 9.42 10.10
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
MONTHLY ANNUITY FACTOR FOR JOINT AND FULL SURVIVOR WITH 10 YEAR CERTAIN
-----------------------------------------------------------------------------------------------------------
AGE OF FEMALE ANNUITANT*
-----------------------------------------------------------------------------------------------------------
AGE OF 15 YEARS 12 YEARS 9 YEARS 6 YEARS 3 YEARS 3 YEARS
MALE LESS THAN LESS THAN LESS THAN LESS THAN LESS THAN SAME AS MORE THAN
ANNUITANT* MALE MALE MALE MALE MALE MALE MALE
- ----------------- -------------- --------------- -------------- --------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
65 $4.71 $4.82 $4.94 $5.07 $5.21 $5.36 $5.52
70 4.95 5.10 5.26 5.45 5.66 5.87 6.10
75 5.27 5.48 5.72 5.99 6.28 6.59 6.89
80 5.72 6.02 6.36 6.74 7.14 7.53 7.90
85 6.35 6.76 7.23 7.71 8.20 8.63 8.99
- ----------------- -------------- --------------- -------------- --------------- -------------- --------------- --------------
*Age nearest birthday
- -----------------------------------------------------------------------------------------------------------------------------
The annual, semi-annual or quarterly Annuity Factor shall be the Annuity Factor shown multiplied by 11.80, 5.95 or 2.99,
respectively.
- -----------------------------------------------------------------------------------------------------------------------------
Annuity Factors not shown in the above tables will be calculated on the same basis as those shown and may be obtained from
the Company.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
EXHIBIT 99.A9-1
Exhibit 4(c)
Terminal Illness Rider (EA132)
<PAGE>
================================================================================
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
================================================================================
ENDORSEMENT
The Contract to which this Endorsement is attached is hereby amended by addition
of the following.
For purposes of this Endorsement, the following definitions apply:
IMMEDIATE FAMILY A spouse, child, brother, sister, parent, grandparent,
or grandchild of the Annuitant or Owner(s).
PHYSICIAN A Doctor of Medicine or a Doctor of Osteopathy licensed
to practice medicine and treat injury or illness in the
state in which treatment is received and who is acting
within the scope of that license. A physician must be
someone other than:
1. the Annuitant;
2. the Owner;
3. a person who lives with the Annuitant or Owner;
4. a person who is a member of the Annuitant's or
Owner's immediate family.
PHYSICIAN'S STATEMENT A written statement acceptable to Us and signed by a
Physician, which:
1. provides the Physician's diagnosis and prognosis
of the Owner's non-correctable medical condition;
and
2. states with reasonable medical certainty that the
non-correctable medical condition will result in
the Owner's death within 12 months from the date
of the Physician's Statement. This statement must
take into consideration the ordinary and
reasonable medical care, advice and treatment
available in the same or similar communities.
TERMINAL CONDITION A condition resulting from injury or illness which, as
determined by a Physician, has reduced life expectancy
to not more than 12 months from the date of the
Physician's Statement.
1
<PAGE>
WE OR US Refers to Western Reserve Life Assurance Co. of Ohio.
YOU OR YOUR Refers to the Owner or Joint Owner of the Contract. If
the Owner is other than a natural person, You will mean
the Annuitant as named under the Contract.
If you are diagnosed with a Terminal Condition, We will waive all Surrender
Charges upon full Surrender or upon each partial surrender. Requests for
Surrender or a partial Surrender must be accompanied by a Physician's Statement.
The minimum amount available for a partial Surrender under this Endorsement is
$1,000.
Partial Surrenders will reduce the Annuity Value by the amount surrendered. If
You request a full Surrender, or if any partial Surrender reduces the Annuity
Value below the Minimum Balance shown on the Contract Schedule page, We will pay
the Contract's Annuity Value and the Contract will terminate without further
value.
This Endorsement is part of the Contract and is subject to all of the terms and
conditions not inconsistent with this Endorsement.
Signed for Us at Our Administrative Office as of the Contract Date, unless a
later date is shown here.
/s/ WILLIAM H. GEIGER /s/ JOHN R. KENNEY
--------------------- ------------------
Secretary President
2
EXHIBIT 99.A9-2
Exhibit 4(d)
Nursing Care Facility Waiver Endorsement (EA133)
<PAGE>
================================================================================
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
================================================================================
ENDORSEMENT
The Contract to which this Endorsement is attached is hereby amended by addition
of the following.
For purposes of this Endorsement, the following definitions apply:
NURSING CARE FACILITY A skilled or intermediate care facility which meets all
of the following tests:
1. It must be legally operated to provide skilled or
intermediate nursing care to patients at their
expense.
2. It must provide licensed nursing care by a
registered, licensed practical or vocational nurse
(RN, LPN, or LVN); it must do so 24 hours a day
under the direction of a physician or registered
nurse (RN).
3. It must keep daily medical records for each
patient.
4. It is not: a custodial care facility; a home for
the aged; an adult congregate living facility; an
adult day care center; nor a place mainly for
rest, retirement care, or the treatment of
alcoholism, mental illness, or drug abuse.
5. It is not a hospital but it may be part of a
hospital. A bed, ward, unit or wing not meeting
all of the above tests is not considered part of
such Nursing Care Facility
SKILLED OR INTERMEDIATE Using professional nursing methods and procedures
NURSING CARE administered by licensed health care personnel. Such
care includes: post-hospital care; rehabilitation
nursing care; maintenance therapy; administration of
medications which cannot be self-administered;
injections; and catheterization.
WE OR US Refers to Western Reserve Life Assurance Co. of Ohio.
YOU OR YOUR Refers to the Owner or Joint Owner of the Contract. If
the Owner is other than a natural person, You will mean
the Annuitant as named under the Contract.
1
<PAGE>
If You are confined to a Nursing Care Facility for 30 consecutive days or
longer, We will waive all Surrender Charges on Surrender or partial Surrenders
from the Contract, as follows. Such confinement must begin after the Contract
Date. We will waive Surrender Charges under this Endorsement only for Surrender
or partial Surrenders made during such confinement or within two months after
confinement ends. Each Surrender or partial Surrender request must be
accompanied by satisfactory written evidence of confinement, including dates of
confinement, at the time the request is made.
This Endorsement is part of the Contract and is subject to all of the terms and
conditions not inconsistent with this Endorsement.
Signed for Us at Our Administrative Office as of the Contract Date, unless a
later date is shown here.
/s/ WILLIAM H. GEIGER /s/ JOHN R. KENNEY
--------------------- ------------------
Secretary President
2
