As filed with the Securities and Exchange Commission on April 28, 2000
Registration No. 33-49558/811-5672
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. ( )
POST-EFFECTIVE AMENDMENT NO. 13 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 81 (X)
(Check appropriate box or boxes)
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WRL SERIES ANNUITY ACCOUNT
(Exact Name of Registrant)
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
(Name of Depositor)
570 Carillon Parkway
St. Petersburg, Florida 33716
(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.
Senior Vice President, General Counsel and Assistant Secretary
Western Reserve Life Assurance Co. of Ohio
570 Carillon Parkway
St. Petersburg, Florida 33716
(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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Title of securities being registered: Units of interest in the separate
account under flexible payment deferred variable annuity contracts.
Pursuant to Rule 429 under the Securities Act of 1933, the prospectus
contained herein also relates to Registration Statement No. 333-00503.
It is proposed that this filing will become effective (check appropriate
space)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 2000, pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on _________, pursuant to paragraph (a) of Rule 485
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PART A
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE>
WRL FREEDOM CONQUEROR(R)
VARIABLE ANNUITY
Issued Through
WRL SERIES ANNUITY ACCOUNT
By
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
PROSPECTUS
MAY 1, 2000
This prospectus gives you important information about the WRL Freedom
Conqueror(R), a flexible payment variable accumulation deferred annuity
contract. Please read this prospectus and the mutual fund prospectuses 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 30 investment choices: a fixed account and 29
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 29 portfolios we currently offer through the subaccounts under this Contract
are:
<TABLE>
<CAPTION>
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WRL SERIES FUND, INC.
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<S> <C> <C>
WRL VKAM Emerging Growth WRL Great Companies - America (SM)
- -------------------------------------------------------------------- ---------------------------------------------------------------
WRL T. Rowe Price Small Cap WRL Salomon All Cap
- -------------------------------------------------------------------- ---------------------------------------------------------------
WRL Goldman Sachs Small Cap WRL C.A.S.E. Growth
- -------------------------------------------------------------------- ---------------------------------------------------------------
WRL Pilgrim Baxter Mid Cap Growth WRL Dreyfus Mid Cap
- -------------------------------------------------------------------- ---------------------------------------------------------------
WRL Alger Aggressive Growth WRL NWQ Value Equity
- -------------------------------------------------------------------- ---------------------------------------------------------------
WRL Third Avenue Value WRL T. Rowe Price Dividend Growth
- -------------------------------------------------------------------- ---------------------------------------------------------------
WRL Value Line Aggressive Growth WRL Dean Asset Allocation
- -------------------------------------------------------------------- ---------------------------------------------------------------
WLR GE International Equity (formerly, WRL GE/Scottish Equitable WRL LKCM Strategic Total Return
International Equity)
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WRL Janus Global WRL J.P. Morgan Real Estate Securities
- -------------------------------------------------------------------- ---------------------------------------------------------------
WRL Great Companies - Technology(SM) WRL Federated Growth & Income
- -------------------------------------------------------------------- ---------------------------------------------------------------
WRL Janus Growth WRL AEGON Balanced
- -------------------------------------------------------------------- ---------------------------------------------------------------
WRL Goldman Sachs Growth WRL AEGON Bond
- -------------------------------------------------------------------- ---------------------------------------------------------------
WRL GE U.S. Equity WRL J.P. Morgan Money Market
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VARIABLE INSURANCE PRODUCTS FUND (VIP)
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Fidelity VIP Equity-Income Portfolio - Service Class 2
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VARIABLE INSURANCE PRODUCTS FUND II (VIP II)
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Fidelity VIP II Contrafund(R) Portfolio - Service Class 2
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VARIABLE INSURANCE PRODUCTS FUND III (VIP III)
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Fidelity VIP III Growth Opportunities Portfolio - Service Class 2
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</TABLE>
If you would like more information about the WRL Freedom Conqueror(R), you can
obtain a free copy of the Statement of Additional Information ("SAI") dated May
1, 2000. Please call us at 1-800-851-9777 or write us at: Western Reserve,
Administrative Office - Annuity Department, 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 (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.
<TABLE>
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<S> <C>
PLEASE NOTE THAT THE CONTRACT AND THE FUNDS: THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED
o ARE NOT BANK DEPOSITS OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY
o ARE NOT FEDERALLY INSURED OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
o ARE NOT ENDORSED BY ANY BANK OR GOVERNMENT AGENCY CRIMINAL OFFENSE.
o ARE NOT GUARANTEED TO ACHIEVE THEIR GOAL
o INVOLVE RISKS, INCLUDING POSSIBLE LOSS OF PREMIUM
</TABLE>
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
DEFINITIONS OF SPECIAL TERMS..................................................................... 1
SUMMARY.......................................................................................... 3
ANNUITY CONTRACT FEE TABLE....................................................................... 8
EXAMPLES ........................................................................................ 11
1. THE ANNUITY CONTRACT........................................................................ 12
The Contract ............................................................................... 12
Other Contracts........................................................................... 12
2. ANNUITY PAYMENTS (THE INCOME PHASE)......................................................... 12
Annuity Payment Options Under the Contract.................................................. 13
Fixed Annuity Payment Options............................................................... 13
Variable Annuity Payment Options............................................................ 14
3. PURCHASE.................................................................................... 14
Contract Issue Requirements................................................................. 14
Purchase Payments........................................................................... 14
Initial Purchase Payments................................................................... 14
Additional Purchase Payments................................................................ 15
Maximum Annual Purchase Payments............................................................ 15
Allocation of Purchase Payments............................................................. 15
Right to Cancel Period...................................................................... 15
Annuity Value............................................................................... 16
Accumulation Units.......................................................................... 16
4. INVESTMENT CHOICES.......................................................................... 16
The Separate Account........................................................................ 16
The Fixed Account........................................................................... 17
Transfers................................................................................... 18
Dollar Cost Averaging Program............................................................... 18
Asset Rebalancing Program................................................................... 19
Telephone or Fax Transactions............................................................... 19
Third Party Investment Services............................................................. 19
5. EXPENSES.................................................................................... 20
Mortality and Expense Risk Charge........................................................... 20
Administrative Charge....................................................................... 20
Annual Contract Charge...................................................................... 20
Transfer Charge............................................................................. 20
Loan Processing Fee......................................................................... 20
Premium Taxes............................................................................... 20
Federal, State and Local Taxes.............................................................. 21
Withdrawal Charge........................................................................... 21
Portfolio Management Fees................................................................... 22
Reduced or Waived Charges and Expenses to Employees......................................... 22
6. TAXES....................................................................................... 23
Annuity Contracts in General................................................................ 23
Qualified and Nonqualified Contracts........................................................ 23
Partial Withdrawals and Complete Surrenders -- Nonqualified Contracts....................... 23
Multiple Contracts.......................................................................... 24
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Diversification and Distribution Requirements............................................... 24
Withdrawals - Qualified Contracts........................................................... 24
Partial Withdrawals and Complete Surrenders - Qualified Contracts........................... 24
Taxation of Death Benefit Proceeds.......................................................... 25
Annuity Payments............................................................................ 25
Transfers, Assignments or Exchanges of Contracts............................................ 25
Possible Tax Law Changes.................................................................... 25
7. ACCESS TO YOUR MONEY........................................................................ 25
Partial Withdrawals and Complete Surrenders................................................. 25
Delay of Payment and Transfers.............................................................. 26
Systematic Partial Withdrawals.............................................................. 27
Contract Loans for Qualified Contracts...................................................... 27
8. PERFORMANCE................................................................................. 28
9. DEATH BENEFIT............................................................................... 29
When We Pay a Death Benefit................................................................. 29
When We Do Not Pay a Death Benefit.......................................................... 29
Amount of Death Benefit During the Accumulation Period...................................... 30
Alternate Payment Elections Before the Maturity Date........................................ 31
10. OTHER INFORMATION .......................................................................... 31
Ownership................................................................................... 31
Annuitant................................................................................ 31
Beneficiary.............................................................................. 31
Assignment.................................................................................. 31
Western Reserve Life Assurance Co. of Ohio.................................................. 31
The Separate Account........................................................................ 32
Voting Rights............................................................................... 32
Distribution of the Contracts............................................................... 32
Non-Participating Contract.................................................................. 33
Variations in Contract Provisions........................................................... 33
IMSA........................................................................................ 33
Legal Proceedings........................................................................... 33
Financial Statements........................................................................ 33
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION .................................... 34
APPENDIX A
Condensed Financial Information.................................................................. 35
APPENDIX B
Historical Performance Data...................................................................... 41
</TABLE>
<PAGE>
DEFINITIONS OF SPECIAL TERMS
<TABLE>
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accumulation period The period between the Contract date and the maturity date while the Contract is in force.
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accumulation unit value An accounting unit of measure we use to calculate subaccount values during the
accumulation period.
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administrative office Our administrative office and mailing address is P.O. Box 5068, Clearwater, Florida 33758-5068.
Our street address is 570 Carillon Parkway, St. Petersburg, Florida 33716. Our phone number is
1-800-851-9777.
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age The issue age, which is annuitant's age on the birthday nearest the Contract date, plus the
number of completed Contract years. When we use the term "age" in this prospectus, it has the same
meaning as "attained age" in the Contract.
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annuitant The person you named in the application (or later 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 unit value An accounting unit of measure we use to calculate annuity payments from the subaccounts after
the maturity date.
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annuity value The sum of the separate account value and the fixed account value.
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beneficiary(ies) The person(s) you elect 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 withdrawal 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 purchase payment is received or the date that the
properly completed application is received at Western Reserve's administrative office. We measure
Contract years, Contract months, and Contract anniversaries from the Contract date.
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death report day The valuation date on which we have received both proof of annuitant's death and your
beneficiary's election regarding payment.
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fixed account An option to which you can direct your money under the Contract, other than the separate
account. It provides a guarantee of principal and interest. The assets supporting the fixed
account are held in the general account. The fixed account is not available in all states.
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fixed account value During the accumulation period, your Contract's value in the fixed account.
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funds Investment companies which are registered with the U.S. Securities and Exchange Commission.
The Contract allows you to invest in the portfolios of the funds through our subaccounts. 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. The latest
maturity date is the annuitant's 90th birthday.
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NYSE New York Stock Exchange.
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nonqualified contract Contracts issued other than in connection with retirement plants. Nonqualified
Contracts do not qualify for special federal income tax treatment under the Code.
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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.
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portfolio A separate investment portfolio of a fund.
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purchase 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 "purchase payment" in this prospectus,
it has the same meaning as "net payment" in the Contract, which means the purchase payment less any
applicable premium taxes.
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qualified Contracts Contracts issued in connection with retirement plans that qualify for special federal income tax
treatment under the Code.
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separate account WRL Series Annuity Account, a separate account composed of several subaccounts established
to receive and invest purchase payments not allocated to the fixed account.
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separate account value During the accumulation period, your Contract's value in the separate account,
which equals the total value in each subaccount.
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</TABLE>
1
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<TABLE>
<CAPTION>
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<S> <C>
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 portfolio hold assets under
the Contract during the accumulation period. Other subaccounts corresponding to each portfolio will
hold assets after the maturity date if you select a variable annuity option.
- ------------------------------ ---------------------------------------------------------------------------------------------------
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
business day portfolio does not value its shares. Western Reserve is open for business on each day that the
NYSE is open. When we use the term "business day," it has the same meaning as valuation date.
- ------------------------------ ---------------------------------------------------------------------------------------------------
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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Western Reserve Western Reserve Life Assurance Co. of Ohio.
(we, us, our)
- ------------------------------ ---------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
SUMMARY
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 Conqueror(R) is a flexible payment variable accumulation
deferred annuity contract (the "Contract") offered by Western Reserve. 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 29 subaccounts.
Each subaccount invests exclusively in a single portfolio of a 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 4%, 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 certain limits on transfers from the fixed
account.
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 ordinary 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 annuity payment
option you choose, will largely 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. You cannot annuitize until your Contract's fifth
anniversary.
3 PURCHASE
You can buy this Contract with $5,000 ($1,000 for traditional or Roth IRAs and
$50 for other qualified Contracts) or more 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 29 fund portfolios by directing it to
the corresponding subaccount. The portfolios are described in the fund
prospectuses. The portfolios now available to you under the Contract are:
3
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
WRL SERIES FUND, INC.
- -------------------------------------------------------------------- ---------------------------------------------------------------
<S> <C>
WRL VKAM Emerging Growth WRL Great Companies - America (SM)
- -------------------------------------------------------------------- ---------------------------------------------------------------
WRL T. Rowe Price Small Cap WRL Salomon All Cap
- -------------------------------------------------------------------- ---------------------------------------------------------------
WRL Goldman Sachs Small Cap WRL C.A.S.E. Growth
- -------------------------------------------------------------------- ---------------------------------------------------------------
WRL Pilgrim Baxter Mid Cap Growth WRL Dreyfus Mid Cap
- -------------------------------------------------------------------- ---------------------------------------------------------------
WRL Alger Aggressive Growth WRL NWQ Value Equity
- -------------------------------------------------------------------- ---------------------------------------------------------------
WRL Third Avenue Value WRL T. Rowe Price Dividend Growth
- -------------------------------------------------------------------- ---------------------------------------------------------------
WRL Value Line Aggressive Growth WRL Dean Asset Allocation
- -------------------------------------------------------------------- ---------------------------------------------------------------
WRL GE International Equity WRL LKCM Strategic Total Return
- -------------------------------------------------------------------- ---------------------------------------------------------------
WRL Janus Global WRL J.P. Morgan Real Estate Securities
- -------------------------------------------------------------------- ---------------------------------------------------------------
WRL Great Companies - Technology(SM) WRL Federated Growth & Income
- -------------------------------------------------------------------- ---------------------------------------------------------------
WRL Janus Growth WRL AEGON Balanced
- -------------------------------------------------------------------- ---------------------------------------------------------------
WRL Goldman Sachs Growth WRL AEGON Bond
- -------------------------------------------------------------------- ---------------------------------------------------------------
WRL GE U.S. Equity WRL J.P. Morgan Money Market
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VARIABLE INSURANCE PRODUCTS FUND (VIP)
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Fidelity VIP Equity-Income Portfolio - Service Class 2
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VARIABLE INSURANCE PRODUCTS FUND II (VIP II)
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Fidelity VIP II Contrafund(R) Portfolio - Service Class 2
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VARIABLE INSURANCE PRODUCTS FUND III (VIP III)
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio - Service Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
</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 purchase payments to the fixed account. The fixed
account is not available in all states. Residents of New Jersey and Washington
may not direct or transfer any money to the fixed account.
Transfers. You have the flexibility to transfer assets within your Contract. At
any time during the accumulation period you may transfer amounts among the
subaccounts and between the subaccounts and the fixed account. Certain
restrictions apply.
5. EXPENSES
We do not take any deductions from purchase payments at the time you buy the
Contract. You invest the full amount of each purchase payment in one or more of
the investment choices.
During the accumulation period and the income phase, we deduct a daily mortality
and expense risk charge of 1.25% and an administrative charge of 0.15% each year
from the money you have invested in the subaccounts.
During the accumulation period, we deduct an annual Contract charge of $35 from
the annuity value on each Contract anniversary and at the time of surrender.
We impose a $10 charge per transfer if you make more than 12 transfers among the
subaccounts per Contract year.
We may deduct state premium taxes, which currently range from 0% to 3.50%, when
you make your purchase payments, if you surrender the Contract or partially
withdraw 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 withdrawal or surrender your Contract completely, we will
deduct a withdrawal charge for purchase payments withdrawn within seven years
after we receive a purchase payment. This charge is 8% of the amount that must
be withdrawn if the withdrawal occurs within the first year of our receipt of
the purchase payment, and then declines gradually to 7% in the second year, 6%
in the third year, 5% in the fourth year, 4% in the fifth year, 3% in the sixth
year, and 2% in the seventh year.
When we calculate withdrawal charges, we treat withdrawals as coming first from
the oldest purchase payment, then the next oldest and so forth. For the first
withdrawal or systematic partial withdrawal you make in any Contract year, we
will waive that portion of the withdrawal charge that is based on the first 10%
of your Contract's annuity value at the time of the withdrawal. Amounts of the
first withdrawal in excess of the first 10% of your Contract's annuity value and
all subsequent withdrawals you make during the Contract year will be subject to
a withdrawal charge. We will deduct the full withdrawal charge if you surrender
your Contract completely. We waive this charge under certain circumstances. See
Expenses - Withdrawal Charge on page 21 for how we calculate the withdrawal
charge waived.
4
<PAGE>
We will deduct the full withdrawal charge from the death benefit if the
annuitant dies and the death benefit payable is the Contract's cash value.
The portfolios deduct management fees and expenses from amounts you have
invested in the portfolios. Some portfolios also deduct 12b-1 fees from
portfolio assets. These fees and expenses currently range from 0.44% to 1.20%
annually, depending on the portfolio. See the Annuity Contract Fee Table on page
8 of this this prospectus and the fund prospectuses.
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 retirement plan.
Death benefits are taxable and generally are included in the income of the
recipient as follows: if received under an annuity payment option, death
benefits are taxed in the same manner as annuity payouts; if not received under
an annuity option (for instance, if paid out in a lump sum), death benefits are
taxed in the same manner as a partial withdrawal or complete surrender.
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 withdrawal if it reduces the cash
value below $5,000. No partial withdrawals may be made from the fixed account
without prior consent from us. Access to amounts held in qualified Contracts may
be restricted or prohibited. For qualified Contracts issued under Code Section
403(b), certain restrictions will apply. Withdrawal charges may apply. You may
also have to pay federal income tax and a penalty tax on any money you take out.
Partial withdrawals may reduce the death benefit 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. Death benefit provisions
may vary by state.
If you name different persons as owner and annuitant, you can affect whether the
death benefit is payable and who would receive it. Use care when naming owners,
annuitants and beneficiaries, and consult your agent if you have questions.
If the annuitant dies during the accumulation period and before the eighth
Contract year, the death benefit will be the greater of:
o the cash value of your Contract on the death report day; or
o the total purchase payments you make to the Contract, reduced by partial
withdrawals, credited with 5% on each Contract anniversary (until you turn
age 80), up to a maximum of 200% of total purchase payments minus any
partial withdrawals. (Please note that the 5% credit is not available in
all states.)
If the annuitant dies during the accumulation period and after the seventh
Contract year, the death benefit will be the greatest of:
o the death benefits described above;
o the cash value of your Contract on the seventh Contract anniversary,
reduced by any partial withdrawals;
o if your Contract was issued before May 1, 2000, the highest annuity value
as of any Contract anniversary occurring between (a) the later of May 1,
2000 and the seventh Contract anniversary and (b) the earlier of:
5
<PAGE>
o the annuitant's date of death; or
o the Contract anniversary nearest the annuitant's 80th birthday.
o if your Contract was issued on or after May 1, 2000, the highest annuity
value as of any Contract anniversary occurring between the seventh Contract
anniversary and the earlier of:
o the annuitant's date of death; or
o the Contract anniversary nearest the annuitant's 80th birthday.
The highest annuity value will be increased by purchase payments made and
decreased by adjusted partial withdrawals taken since the Contract
anniversary with the highest annuity value.
The death benefit payable, if any, on or after the maturity date depends on the
annuity payment option selected. See Fixed Annuity Payment Options and Variable
Annuity Payment Options on pages 13 and 14 for a description of the annuity
payment options. Please note that not all payment options provide for a death
benefit.
We deduct the full withdrawal charge from the death benefit if the annuitant
dies and the death benefit payable is the Contract's cash value. We will waive
withdrawal charges if the beneficiary elects to apply the death benefit to a new
variable annuity contract issued by Western Reserve.
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 generally be
the total purchase payments we have received, plus (or minus) any gains (or
losses) in the amounts you invested in the subaccounts. You will keep any gains,
and bear any losses, on amounts that you invested in the subaccounts. If state
law requires, we will refund your original purchase payment(s). We determine the
value of the refund as of the date we receive the returned Contract at our
administrative office. 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, and/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) 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. If you are purchasing the Contract through a tax-favored arrangement,
including traditional IRAs and Roth IRAs, you should consider carefully the
costs and benefits of the Contract (including annuity income benefits) before
purchasing the Contract, since the tax-favored arrangement itself provides
tax-sheltered growth.
ADDITIONAL FEATURES. This Contract has additional features that might interest
you. These include the following:
o REDUCED MINIMUM INITIAL PURCHASE PAYMENT (FOR NONQUALIFIED CONTRACTS): You
may make a minimum initial purchase 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.
o SYSTEMATIC PARTIAL WITHDRAWALS: You can arrange to have money automatically
sent to you while your Contract is in the accumulation period. You may take
systematic partial withdrawals monthly, quarterly, semi-annually or
annually without paying withdrawal charges. Amounts you receive may be
included in your gross income and, in certain circumstances, may be subject
to penalty taxes.
o 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
into your choice of subaccounts. Dollar cost averaging does not guarantee a
profit and does not protect against a loss if market prices decline.
o 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.
o TELEPHONE OR FAX TRANSACTIONS: You may make transfers, withdrawals, and/or
change the allocation of additional purchase payments by telephone or fax.
6
<PAGE>
o NURSING CARE FACILITY WAIVER: If you are confined to a nursing care
facility, you may take partial withdrawals or surrender your Contract
completely without paying the withdrawal charge, under certain
circumstances.
o CONTRACT LOANS: If you own a qualified Contract, you may be eligible to
take out Contract loans during the accumulation period, subject to certain
restrictions. See Contract Loans for Qualified Contracts on page 27 for
details.
These features are not 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 form for details.
11. INQUIRIES
If you need additional information, please contact us at:
Western Reserve Life
Annuity Department
Attention: Administrative Office
P.O. Box 9051
Clearwater, FL 33758-9051
1-800-851-9777
www.westernreserve.com
7
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
ANNUITY CONTRACT FEE TABLE
====================================================================================================================================
OWNER TRANSACTION EXPENSES SEPARATE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE SEPARATE ACCOUNT VALUE)
- -------------------------------------------------------------------- ---------------------------------------------------------------
Sales Load On Purchase Payments...............................None
Maximum Withdrawal Charge(1)(2) Mortality and Expense Risk Charge(4).................... 1.25%
(as a % of purchase payments)...................................8% Administrative Charge(4)................................ 0.15%
Transfer Charge...............................$10 After 12 Per Year
Loan Processing Fee(3).................................$30 Per Loan TOTAL SEPARATE ACCOUNT
ANNUAL EXPENSES......................................... 1.40%
==================================================================== ---------------------------------------------------------------
ANNUAL CONTRACT CHARGE(2).....................$35 Per Contract Year
- -------------------------------------------------------------------- ---------------------------------------------------------------
PORTFOLIO ANNUAL EXPENSES (5)
(as a percentage of average net assets and after expense reimbursements)
- --------------------------------------------------------------------- --------------- -------------- ------------- -----------------
TOTAL PORTFOLIO
PORTFOLIOS MANAGEMENT OTHER RULE 12b-1 ANNUAL EXPENSES
FEES EXPENSES FEES
- --------------------------------------------------------------------- --------------- -------------- ------------- -----------------
<S> <C> <C> <C> <C>
WRL SERIES FUND, INC.(6)(7)
WRL VKAM Emerging Growth 0.80 % 0.07 % N/A 0.87 %
WRL T. Rowe Price Small Cap (8) 0.75 % 0.25 % N/A 1.00 %
WRL Goldman Sachs Small Cap(8) 0.90 % 0.10 % N/A 1.00 %
WRL Pilgrim Baxter Mid Cap Growth(8) 0.90 % 0.10 % N/A 1.00 %
WRL Alger Aggressive Growth 0.80 % 0.09 % N/A 0.89 %
WRL Third Avenue Value 0.80 % 0.20 % N/A 1.00 %
WRL Value Line Aggressive Growth(9) 0.80 % 0.20 % N/A 1.00 %
WRL GE International Equity(10) 1.00 % 0.20 % N/A 1.20 %
WRL Janus Global(11) 0.80 % 0.12 % N/A 0.92 %
WRL Great Companies - Technology(SM)(9) 0.80 % 0.20 % N/A 1.00 %
WRL Janus Growth(12) 0.80 % 0.05 % N/A 0.85 %
WRL Goldman Sachs Growth(8) 0.90 % 0.10 % N/A 1.00 %
WRL GE U.S. Equity 0.80 % 0.13 % N/A 0.93 %
WRL Great Companies - America (SM)(9) 0.80 % 0.20 % N/A 1.00 %
WRL Salomon All Cap(8) 0.90 % 0.10 % N/A 1.00 %
WRL C.A.S.E. Growth 0.80 % 0.20 % N/A 1.00 %
WRL Dreyfus Mid Cap(8) 0.85 % 0.15 % N/A 1.00 %
WRL NWQ Value Equity 0.80 % 0.10 % N/A 0.90 %
WRL T. Rowe Price Dividend Growth(8) 0.90 % 0.10 % N/A 1.00 %
WRL Dean Asset Allocation 0.80 % 0.07 % N/A 0.87 %
WRL LKCM Strategic Total Return 0.80 % 0.06 % N/A 0.86 %
WRL J.P. Morgan Real Estate Securities 0.80 % 0.20 % N/A 1.00 %
WRL Federated Growth & Income 0.75 % 0.14 % N/A 0.89 %
WRL AEGON Balanced 0.80 % 0.09 % N/A 0.89 %
WRL AEGON Bond 0.45 % 0.08 % N/A 0.53 %
WRL J.P. Morgan Money Market 0.40 % 0.04 % N/A 0.44 %
VARIABLE INSURANCE PRODUCTS FUND (VIP)(13)
Fidelity VIP Equity-Income Portfolio - Service Class 2(14) 0.48 % 0.10 % 0.25 % 0.83 %
VARIABLE INSURANCE PRODUCTS FUND II (VIP II)(13)
Fidelity VIP II Contrafund(R) Portfolio - Service Class 2(14) 0.58 % 0.12 % 0.25 % 0.95 %
VARIABLE INSURANCE PRODUCTS FUND III (VIP III)(13)
Fidelity VIP III Growth Opportunities Portfolio - Service Class 2(14) 0.58 % 0.13 % 0.25 % 0.96 %
===================================================================== =============== ============== ============= =================
</TABLE>
(1) The withdrawal charge decreases based on the number of years since the
purchase payment was made, from 8% in the year in which the purchase
payment was made to 0% in the eighth year after the purchase payment
was made. To calculate withdrawal charges, the first purchase payment
made is considered to come out first. This charge is waived under
certain circumstances.
8
<PAGE>
(2) We may reduce or waive the withdrawal 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. This loan fee is
not applicable in all states.
(4) These charges apply to each subaccount. They do not apply to the fixed
account. These charges apply during the accumulation period and the
income phase.
(5) The fee table information relating to portfolios was provided to
Western Reserve by the funds. Western Reserve has not independently
verified such information.
(6) Effective January 1, 1997, the Board of the WRL Series Fund Inc. (the
"WRL Fund") authorized the WRL Fund to charge each portfolio of the WRL
Fund an annual Rule 12b-1 fee of up to 0.15% of each portfolio's
average daily net assets. However, the WRL Fund will not deduct the fee
from any portfolio before April 30, 2001. You will receive advance
written notice if a Rule 12b-1 fee is to be deducted. See the WRL Fund
prospectus for more details.
(7) WRL Investment Management, Inc. ("WRL Management"), the investment
adviser of the WRL Fund, has undertaken, until at least April 30, 2001,
to pay expenses on behalf of the portfolios of the WRL Fund, to the
extent normal total operating expenses of a portfolio exceed a stated
percentage of the WRL portfolio's average daily net assets. The expense
limit, the amount reimbursed by WRL Management during 1999, and the
expense ratio without the reimbursement are listed below for each
portfolio:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
EXPENSE REIMBURSEMENT EXPENSE RATIO
LIMIT AMOUNT WITHOUT REIMBURSEMENT
---------------------------------------------------------- --------------- ------------------ ----------------------------
<S> <C> <C> <C>
WRL VKAM Emerging Growth 1.00 % $ N/A N/A
---------------------------------------------------------- --------------- ------------------ ----------------------------
WRL T. Rowe Price Small Cap 1.00 % 63,542 2.46 %
---------------------------------------------------------- --------------- ------------------ ----------------------------
WRL Goldman Sachs Small Cap 1.00 % 60,555 5.57 %
---------------------------------------------------------- --------------- ------------------ ----------------------------
WRL Pilgrim Baxter Mid Cap Growth 1.00 % 34,986 1.40 %
---------------------------------------------------------- --------------- ------------------ ----------------------------
WRL Alger Aggressive Growth 1.00 % N/A N/A
---------------------------------------------------------- --------------- ------------------ ----------------------------
WRL Third Avenue Value 1.00 % 10,734 1.06 %
---------------------------------------------------------- --------------- ------------------ ----------------------------
WRL Value Line Aggressive Growth 1.00 % N/A N/A
---------------------------------------------------------- --------------- ------------------ ----------------------------
WRL GE International Equity 1.20 % 112,088 1.84 %
---------------------------------------------------------- --------------- ------------------ ----------------------------
WRL Janus Global 1.00 % N/A N/A
---------------------------------------------------------- --------------- ------------------ ----------------------------
WRL Great Companies - Technology(SM) 1.00 % N/A N/A
---------------------------------------------------------- --------------- ------------------ ----------------------------
WRL Janus Growth 1.00 % N/A N/A
---------------------------------------------------------- --------------- ------------------ ----------------------------
WRL Goldman Sachs Growth 1.00 % 49,677 2.68 %
---------------------------------------------------------- --------------- ------------------ ----------------------------
WRL GE U.S. Equity 1.00 % N/A N/A
---------------------------------------------------------- --------------- ------------------ ----------------------------
WRL Great Companies - America(SM) 1.00 % N/A N/A
---------------------------------------------------------- --------------- ------------------ ----------------------------
WRL Salomon All Cap 1.00 % 53,174 2.87 %
---------------------------------------------------------- --------------- ------------------ ----------------------------
WRL C.A.S.E. Growth 1.00 % N/A N/A
---------------------------------------------------------- --------------- ------------------ ----------------------------
WRL Dreyfus Mid Cap 1.00 % 34,541 4.89 %
---------------------------------------------------------- --------------- ------------------ ----------------------------
WRL NWQ Value Equity 1.00 % N/A N/A
---------------------------------------------------------- --------------- ------------------ ----------------------------
WRL T. Rowe Price Dividend Growth 1.00 % 46,989 2.35 %
---------------------------------------------------------- --------------- ------------------ ----------------------------
WRL Dean Asset Allocation 1.00 % N/A N/A
---------------------------------------------------------- --------------- ------------------ ----------------------------
WRL LKCM Strategic Total Return 1.00 % N/A N/A
---------------------------------------------------------- --------------- ------------------ ----------------------------
WRL J.P. Morgan Real Estate Securities 1.00 % 51,924 2.69 %
---------------------------------------------------------- --------------- ------------------ ----------------------------
WRL Federated Growth & Income 1.00 % N/A N/A
---------------------------------------------------------- --------------- ------------------ ----------------------------
WRL AEGON Balanced 1.00 % N/A N/A
---------------------------------------------------------- --------------- ------------------ ----------------------------
WRL AEGON Bond 0.70 % N/A N/A
---------------------------------------------------------- --------------- ------------------ ----------------------------
WRL J.P. Morgan Money Market 0.70 % N/A N/A
---------------------------------------------------------- --------------- ------------------ ----------------------------
</TABLE>
(8) Because these portfolios commenced operations on May 3, 1999, the
percentages set forth as "Other Expenses" and "Total Portfolio Annual
Expenses" are annualized.
(9) Because these portfolios commenced operations on May 1, 2000, the
percentages set forth as "Other Expenses" and "Total Portfolio Annual
Expenses" are estimates.
(10) The fee table reflects estimated 2000 expenses because the expense
limit for this portfolio will be reduced from 1.50% to 1.20% effective
May 1, 2000.
(11) WRL Management currently waives 0.025% of its advisory fee on portfolio
average daily net assets over $2 billion (net fee -- 0.775%.). This
waiver will be terminated on June 25, 2000.
9
<PAGE>
(12) 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%). The fee table reflects estimated 2000
expenses because of the termination of the fee waiver. This waiver will
be terminated on June 25, 2000.
(13) The 12b-1 fee deducted for the Variable Insurance Products Fund (VIP),
Variable Insurance Products Fund II (VIP II), and Variable Insurance
Products Fund III (VIP III) (the "Fidelity VIP Funds") covers certain
shareholder support services provided by companies selling variable
contracts investing in the Fidelity VIP Funds. The 12b-1 fees assessed
against the Fidelity VIP Funds shares held for the Contracts will be
remitted to AFSG Securities Corporation ("AFSG"), the principal
underwriter for the Contracts.
(14) Service Class 2 expenses are based on estimated expenses for year 2000.
10
<PAGE>
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.
<TABLE>
<CAPTION>
====================================== ================================================== ==========================================
IF YOU ANNUITIZE* OR REMAIN INVESTED IN
THE CONTRACT AT THE END OF THE
IF YOU SURRENDER THE CONTRACT AT THE END APPLICABLE TIME PERIOD OR IF YOU DO NOT
SUBACCOUNTS OF THE APPLICABLE TIME PERIOD SURRENDER OR ANNUITIZE UNDER THE CONTRACT
====================================== ================================================== ==========================================
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WRL VKAM Emerging Growth $104 $133 $164 $266 $24 $73 $124 $266
WRL T. Rowe Price Small Cap 105 137 171 279 25 77 131 279
WRL Goldman Sachs Small Cap 105 137 171 279 25 77 131 279
WRL Pilgrim Baxter Mid Cap Growth 105 137 171 279 25 77 131 279
WRL Alger Aggressive Growth 104 133 165 268 24 73 125 268
WRL Third Avenue Value 105 137 171 279 25 77 131 279
WRL Value Line Aggressive Growth 105 137 171 279 25 77 131 279
WLR GE International Equity 107 142 181 299 27 82 141 299
WRL Janus Global 104 134 167 271 24 74 127 271
WRL Great Companies - Technology(SM) 105 137 171 279 25 77 131 279
WRL Janus Growth 103 132 163 264 23 72 123 264
WRL Goldman Sachs Growth 105 137 171 279 25 77 131 279
WRL GE U.S. Equity 104 134 167 272 24 74 127 272
WRL Great Companies - America (SM) 105 137 171 279 25 77 131 279
WRL Salomon All Cap 105 137 171 279 25 77 131 279
WRL C.A.S.E. Growth 105 137 171 279 25 77 131 279
WRL Dreyfus Mid Cap 105 137 171 279 25 77 131 279
WRL NWQ Value Equity 104 133 166 269 24 73 126 269
WRL T. Rowe Price Dividend Growth 105 137 171 279 25 77 131 279
WRL Dean Asset Allocation 104 133 164 266 24 73 124 266
WRL LKCM Strategic Total Return 103 132 164 265 23 72 124 265
WRL J.P. Morgan Real Estate Securities 105 137 171 279 25 77 131 279
WRL Federated Growth & Income 104 133 165 268 24 73 125 268
WRL AEGON Balanced 104 133 165 268 24 73 125 268
WRL AEGON Bond 100 122 147 231 20 62 107 231
WRL J.P. Morgan Money Market 99 120 142 222 19 60 102 222
VARIABLE INSURANCE PRODUCTS FUND
(VIP)
Fidelity VIP Equity-Income Portfolio - Service 103 131 162 262 23 71 122 262
Class 2
VARIABLE INSURANCE PRODUCTS FUND
II (VIP II)
Fidelity VIP II Contrafund(R) Portfolio - Service 104 135 168 274 24 75 128 274
Class 2
VARIABLE INSURANCE PRODUCTS FUND
III (VIP III)
Fidelity VIP III Growth Opportunities Portfolio - 104 135 169 275 24 75 129 275
Service Class 2
========================================================= ========== ========== ========== ========== ========== ========== ========
</TABLE>
* You cannot annuitize before your Contract's fifth anniversary.
The fee table and examples above will help you understand the costs of investing
in the subaccounts. The fee table and examples reflect the 1999 expenses (except
as noted in the footnotes) of the portfolios and the subaccount fees and charges
but do not reflect premium taxes which may range up to 3.50%, depending on the
jurisdiction.
11
<PAGE>
PLEASE REMEMBER THAT THE EXAMPLES ARE ILLUSTRATIONS AND DO NOT REPRESENT PAST OR
FUTURE EXPENSES. YOUR ACTUAL EXPENSES PAID MAY BE HIGHER OR LOWER THAN THOSE
SHOWN. SIMILARLY, YOUR RATE OF RETURN MAY BE MORE OR LESS THAN THE 5% ASSUMED IN
THE EXAMPLES.
The examples above assume that no transfer charges have been assessed. In
addition, the $35 annual Contract charge is reflected as a charge of 0.05% based
on an average Contract size of $64,172.
Financial Information. We have included in Appendix A a financial history of the
accumulation unit values for the subaccounts.
1. THE ANNUITY CONTRACT
THE CONTRACT
- ------------
This prospectus describes the WRL Freedom Conqueror(R) 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 you an
income in the form of annuity payments. These payments begin after the maturity
date. (See Section 2 on page 12.) 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 payment variable accumulation deferred annuity. You
can use the Contract to accumulate funds for retirement or other long-term
financial planning purposes.
It is a "flexible payment" Contract because after you purchase it, you can
generally make additional investments of $50 or more at any time, 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. If you elect to receive variable annuity
payments during the income phase of your Contract, the amount of your annuity
payments will also depend 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 4% per year. There
may be different interest rates for each payment or transfer you direct to the
fixed account which are equal to or 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.
The fixed account is not available in all states. Residents of New Jersey and
Washington may not direct 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 funds. 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.
2. ANNUITY PAYMENTS (THE INCOME PHASE)
You choose the date when annuity payments start under the Contract. 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 annuitant's 90th birthday. 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.
12
<PAGE>
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; we may limit subaccount
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.
Supplemental Contract. Once you annuitize and if you have selected a fixed
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.
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:
o the amount of the annuity proceeds on the maturity date;
o the interest rate we credit on those amounts (we guarantee a minimum annual
interest rate of 3%); and
o 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 would remain the same. 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 charge of 1.25% and the administrative charge of 0.15% annually) 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. Some of the annuity payment
options is not available in all states. Options A, B, and C are fixed only.
Options D and E are variable only.
FIXED ANNUITY PAYMENT 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.
o No Period Certain -- We will make level payments only during the annuitant's
lifetime; or
o 10 Years Certain -- We will make level payments for the longer of the
annuitant's lifetime or 10 years; or
o 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 joint annuitant
of your choice. Payments will be made as long as either person is living.
13
<PAGE>
VARIABLE ANNUITY PAYMENT OPTIONS
Payment Option D -- Variable Life Income. The annuity proceeds are used to
purchase variable annuity units in the subaccounts you select. You may choose
between:
o No Period Certain--We will make variable payments only during the annuitant's
lifetime; or
o 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 joint
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: The death benefit payable after the maturity date will be
affected by the annuity option you choose.
If:
o you choose Life Income with No Period Certain or a Joint and Survivor Life
Income (fixed or variable); and
o the annuitant(s) dies, for example, before the due date of the second annuity
payment;
Then:
o we may make only one annuity payment and there will be no death benefit
payable.
If:
o you choose Fixed Installments, Life Income with 10 Years Certain, Life Income
with Guaranteed Return of Annuity Proceeds or Variable Life Income with 10
Years Certain; and
o the person receiving payments dies prior to the end of the guaranteed period;
Then:
o 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 annuitant's address of record. The annuitant is responsible to keep
Western Reserve informed of the annuitant's current address of record.
3. PURCHASE
CONTRACT ISSUE REQUIREMENTS
Western Reserve will issue a Contract IF:
o we receive the information we need to issue the Contract;
o we receive a minimum initial purchase payment; and
o you are age 85 or younger and the annuitant is age 80 or younger.
PURCHASE PAYMENTS
You should make checks or drafts for purchase 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.
INITIAL PURCHASE PAYMENTS
The initial purchase payment for nonqualified Contracts must be at least $5,000.
However, you may make a minimum initial purchase 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 purchase payment is $1,000 and for qualified
Contracts other than traditional or Roth IRAs, the minimum initial purchase
payment is $50.
14
<PAGE>
We will credit your initial purchase payment to your Contract within two
business days after the day we receive it at our administrative office and your
complete Contract information. If we are unable to credit your initial purchase
payment, we will contact you within five business days and explain why. We will
also return your initial purchase payment at that time unless you tell us to
keep it. We will credit your initial purchase payment as soon as we receive all
necessary application information.
The date on which we credit your initial purchase 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 purchase payments by bank wire, please instruct your bank to
wire federal funds as follows:
All First Bank of Baltimore
ABA #: 052000113
For credit to: Western Reserve Life
Account #: 89539600
Owner's Name:
Contract Number:
Attention: Annuity Accounting
We may reject any application or purchase payments for any reason permitted by
law.
ADDITIONAL PURCHASE PAYMENTS
You are not required to make any additional purchase payments. However, you can
make additional purchase payments as often as you like during the lifetime of
the annuitant and prior to the maturity date. We will accept purchase payments
by bank wire or check. Additional purchase payments must be at least $50 ($100
monthly in the case of nonqualified Contracts with a $1,000 initial purchase
payment and $1,000 if by wire). We will credit any additional purchase payments
you make to your Contract at the accumulation unit value computed at the end of
the business day on which we receive them at our administrative office. Our
business day closes at 4:00 p.m. Eastern Time. If we receive your purchase
payments after the close of our business day, we will calculate and credit them
as of the close of the next business day.
MAXIMUM ANNUAL PURCHASE PAYMENTS
We allow purchase payments up to a total of $1,000,000 per Contract year without
prior approval.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a Contract, we will allocate your purchase payment to the
investment choices you selected on your application. Your allocation must be in
whole percentages and must total 100%. We will allocate additional purchase
payments as you selected on your application, unless you request a different
allocation.
You may change allocations for future additional purchase payments by writing
or telephoning the administrative office, subject to the limitations described
below under Telephone or Fax Transactions on page 19. The allocation change will
apply to purchase 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.
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 generally be the total purchase
payments we have received, plus (or minus) any gains (or losses) in the amounts
you invested in the subaccounts. You will keep any gains, and bear any losses,
on amounts that you invested in the subaccounts. If state law requires, we will
refund your original purchase payment(s). We determine the value of the refund
as of the date we receive the returned Contract at our administrative office. 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, and/or receive a different refund
amount.
15
<PAGE>
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 valuation date. A
valuation date 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
measurement called an accumulation unit. During the income phase, we use a
measurement called 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
that valuation date. If you withdraw or transfer out of a subaccount, or if we
assess a transfer charge, annual Contract charge or any withdrawal 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 valuation date. 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.
4. INVESTMENT CHOICES
THE SEPARATE ACCOUNT
The separate account currently consists of 29 subaccounts.
The Funds. Each subaccount invests exclusively in one portfolio of a fund. The
portfolios and their advisers or sub-advisers are listed below.
16
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------- ----------------------------------------------------------------
PORTFOLIO ADVISER OR SUB-ADVISER
- ------------------------------------------------------------------- ----------------------------------------------------------------
<S> <C>
WRL VKAM Emerging Growth Van Kampen Asset Management Inc.
- ------------------------------------------------------------------- ----------------------------------------------------------------
WRL T. Rowe Price Small Cap T. Rowe Price Associates, Inc.
- ------------------------------------------------------------------- ----------------------------------------------------------------
WRL Goldman Sachs Small Cap Goldman Sachs Asset Management
- ------------------------------------------------------------------- ----------------------------------------------------------------
WRL Pilgrim Baxter Mid Cap Growth Pilgrim Baxter & Associates, Ltd.
- ------------------------------------------------------------------- ----------------------------------------------------------------
WRL Alger Aggressive Growth Fred Alger Management, Inc.
- ------------------------------------------------------------------- ----------------------------------------------------------------
WRL Third Avenue Value EQSF Advisers, Inc.
- ------------------------------------------------------------------- ----------------------------------------------------------------
WRL Value Line Aggressive Growth Value Line, Inc.
- ------------------------------------------------------------------- ----------------------------------------------------------------
WLR GE International Equity GE Asset Management Incorporated*
- ------------------------------------------------------------------- ----------------------------------------------------------------
WRL Janus Global Janus Capital Corporation
- ------------------------------------------------------------------- ----------------------------------------------------------------
WRL Great Companies - Technology(SM) Great Companies, L.L.C.
- ------------------------------------------------------------------- ----------------------------------------------------------------
WRL Janus Growth Janus Capital Corporation
- ------------------------------------------------------------------- ----------------------------------------------------------------
WRL Goldman Sachs Growth Goldman Sachs Asset Management
- ------------------------------------------------------------------- ----------------------------------------------------------------
WRL GE U.S. Equity GE Asset Management Incorporated
- ------------------------------------------------------------------- ----------------------------------------------------------------
WRL Great Companies - America (SM) Great Companies, L.L.C.
- ------------------------------------------------------------------- ----------------------------------------------------------------
WRL Salomon All Cap Salomon Brothers Asset Management Inc
- ------------------------------------------------------------------- ----------------------------------------------------------------
WRL C.A.S.E. Growth C.A.S.E. Management, Inc.
- ------------------------------------------------------------------- ----------------------------------------------------------------
WRL Dreyfus Mid Cap The Dreyfus Corporation
- ------------------------------------------------------------------- ----------------------------------------------------------------
WRL NWQ Value Equity NWQ Investment Management Company, Inc.
- ------------------------------------------------------------------- ----------------------------------------------------------------
WRL T. Rowe Price Dividend Growth T. Rowe Price Associates, Inc.
- ------------------------------------------------------------------- ----------------------------------------------------------------
WRL Dean Asset Allocation Dean Investment Associates
- ------------------------------------------------------------------- ----------------------------------------------------------------
WRL LKCM Strategic Total Return Luther King Capital Management Corporation
- ------------------------------------------------------------------- ----------------------------------------------------------------
WRL J.P. Morgan Real Estate Securities J.P. Morgan Investment Management Inc.
- ------------------------------------------------------------------- ----------------------------------------------------------------
WRL Federated Growth & Income Federated Investment Counseling
- ------------------------------------------------------------------- ----------------------------------------------------------------
WRL AEGON Balanced AEGON USA Investment Management, Inc.
WRL AEGON Bond
- ------------------------------------------------------------------- ----------------------------------------------------------------
WRL J.P. Morgan Money Market J.P. Morgan Investment Management Inc.
- ------------------------------------------------------------------- ----------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio - Service Class 2 Fidelity Management & Research Company
Fidelity VIP II Contrafund(R) Portfolio - Service Class 2
Fidelity VIP III Growth Opportunities Portfolio - Service Class 2
- ------------------------------------------------------------------- ----------------------------------------------------------------
</TABLE>
* Effective May 1, 2000, GE Asset Management Incorporated is the sole
sub-adviser.
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 sub-adviser that are sold directly to
the public. You should not expect that the investment results of the other
portfolios and mutual funds would be similar to those portfolios offered by this
prospectus.
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, which is
attached to this prospectus. You should read the fund prospectus carefully
before you invest.
THE FIXED ACCOUNT
Purchase payments you allocate to and amounts you transfer 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 Act or 1940 Act. Western Reserve has been advised
that the staff of the SEC has not reviewed the disclosure in this prospectus
which relate to the fixed account.
We guarantee that the interest credited to the fixed account will not be less
than 4% per year. We have no formula for determining fixed account interest
rates. We establish the interest rate, at our sole discretion, for each purchase
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.
17
<PAGE>
When you request a transfer or partial withdrawal 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 oldest
you have put in the fixed account. You may not make partial withdrawals from the
fixed account unless we consent.
The fixed account is not available in all states. Residents of New Jersey and
Washington may not direct or transfer any money to the fixed account.
TRANSFERS
During the accumulation period, you or your agent/registered representative of
record may make transfers from any subaccount. However, if you elect the asset
rebalancing program, you may not make any transfers if you want to continue in
the program. A transfer would automatically cancel your participation in the
asset rebalancing program. We may also limit "substantive" transfers as
discussed below.
Transfers from the fixed account are allowed once each Contract year. We must
receive written notice within 30 days after a Contract anniversary. 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. We may limit
subaccount transfers to one per Contract year.
The fixed account is not available in all states. Residents of New Jersey and
Washington may not transfer any of their Contract value to the fixed account.
Transfers may be made by telephone or fax, subject to limitations described
below under Telephone or Fax Transactions on page 19.
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.
Transfers to and from the subaccounts will be processed based on the
accumulation unit values determined at the end of the business day on which we
receive your written, telephoned, or faxed request at our administrative office,
provided we receive your request at our administrative office before the close
of our business day (usually 4:00 p.m. Eastern Time). If we receive your request
after the close of our business day, we will process the transfer request using
the accumulation unit value for the next business day.
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, discontinue transfer privileges, modify our procedures, or
limit the number of transfers we permit.
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 a total of $1,000 monthly ($500 for New
Jersey residents). To qualify, a minimum of $10,000 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.
18
<PAGE>
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.
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 if you elect to participate in any
asset allocation service provided by a third party.
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 or if you elect to participate in any asset allocation service
provided by a third party. Asset rebalancing ignores amounts in the fixed
account. You can choose to rebalance quarterly, semi-annually, or annually.
To qualify for asset rebalancing, a minimum annuity value of $10,000 is
required. Asset rebalancing does not guarantee gains, nor does it assure that
any subaccount will not have losses.
There is no charge for this program. 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 withdrawals and change the allocation of
additional purchase payments by telephone. Telephone withdrawals are not allowed
in the following situations:
o for qualified Contracts (except IRAs);
o if the amount you want to withdraw is greater than $50,000; or
o if the address of record has been changed within the past 10 days.
Upon instructions from you, the registered representative/agent of record for
your Contract may also make telephone transfers or withdrawals 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 withdrawals 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. We may also
require written confirmation of your request. We will not be liable for
following telephone requests that we believe are genuine.
Please use the following fax numbers for the following types of transactions:
o To request a transfer, please fax your request to us at 727-299-1620. WE WILL
NOT BE RESPONSIBLE FOR SAME-DAY PROCESSING OF TRANSFERS IF YOU FAX YOUR
TRANSFER REQUEST TO A NUMBER OTHER THAN THIS FAX NUMBER; and
o To request a partial withdrawal, please fax your request to us at
727-299-1620.
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 or fax requests must be received before 4:00 p.m. Eastern time to
assure same-day pricing of the transaction. We 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
19
<PAGE>
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
There are charges and expenses associated with your Contract that reduce the
return on your investment in the Contract. Unless we indicate otherwise, the
expenses described below apply only during the accumulation period.
MORTALITY AND EXPENSE RISK CHARGE
We charge a fee as compensation for bearing certain mortality and expense risks
under the Contract. Examples include a guarantee of annuity rates, the death
benefits, 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
1.25% of the average daily net assets that you have invested in each subaccount.
This charge is deducted daily from the subaccounts during both the accumulation
period and the income phase.
If this charge does not cover our actual mortality and expense risk costs, we
absorb the loss. Conversely, if the charge covers more than 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 0.15% per year of
the daily net assets that you have invested in each subaccount. This charge is
deducted from the subaccounts during both the accumulation period and the income
phase.
ANNUAL CONTRACT CHARGE
We deduct an annual Contract charge of $35 from your annuity value on each
Contract anniversary and at surrender. We deduct this charge from the fixed
account and each subaccount in proportion to the amount of annuity value in each
account. We deduct the charge to cover our costs of administering the Contract.
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
transfers and asset rebalancing 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. You have
the option either to send us a $30 check for this fee or to have us deduct the
$30 from the loan amount. This fee is not applicable for all states. 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 purchase payments you make. A premium
tax is a regulatory tax that some states assess on the purchase payments made
into a contract. If we should have to pay any premium tax, we may deduct the tax
from each purchase
20
<PAGE>
payment or from the accumulation unit value as we incur the tax. We may deduct
the total amount of premium taxes, if any, from the annuity value when:
o you elect to begin receiving annuity payments;
o you surrender the Contract;
o you request a partial withdrawal; or
o a death benefit is paid.
As of the date of this prospectus, the following states assess a premium tax on
all initial and subsequent purchase payments:
- ------------------------ -------------------------- ----------------------------
STATE QUALIFIED CONTRACTS NONQUALIFIED CONTRACTS
- ------------------------- -------------------------- ---------------------------
South Dakota 0.00% 1.25%
- ------------------------- -------------------------- ---------------------------
Wyoming 0.00% 1.00%
- ------------------------- -------------------------- ---------------------------
As of the date of this prospectus, the following states assess a premium tax
against the accumulation unit value if you choose an annuity payment option
instead of receiving a lump sum distribution:
- -------------------------- --------------------------- -------------------------
STATE QUALIFIED CONTRACTS NONQUALIFIED CONTRACTS
- -------------------------- --------------------------- -------------------------
California 0.50% 2.35%
- -------------------------- --------------------------- -------------------------
Kentucky 2.00% 2.00%
- -------------------------- --------------------------- -------------------------
Maine 0.00% 2.00%
- ---------------------- ---------------------------------------------------------
Nevada 0.00% 3.50%
- -------------------------- --------------------------- -------------------------
West Virginia 1.00% 1.00%
- -------------------------- --------------------------- -------------------------
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.
WITHDRAWAL CHARGE
During the accumulation period, you may withdraw part or all of the Contract's
annuity value. We impose a withdrawal charge to help us recover sales expenses,
including broker/dealer compensation and printing, sales literature and
advertising costs. We expect to profit from this charge. We deduct this charge
from your annuity value at the time you request the withdrawal.
If you take a partial withdrawal or if you surrender your Contract completely,
we will deduct a withdrawal charge of up to 8.0% of purchase payments withdrawn
within seven years after we receive a purchase payment. We calculate the
withdrawal charge on the full amount that must be withdrawn from your annuity
value in order to pay the withdrawal amount, including the withdrawal charge. To
calculate withdrawal charges, we treat withdrawals as coming first from the
oldest purchase payment, then the next oldest and so forth.
For the first withdrawal you make in any Contract year, we waive that portion of
the withdrawal charge that is based on the first 10% of your Contract's annuity
value at the time of the withdrawal. Amounts of the first withdrawal in excess
of 10% of your Contract's annuity value and all subsequent withdrawals you make
during the Contract year will be subject to a withdrawal charge. We will deduct
the full withdrawal charge if you surrender your Contract completely. We do not
assess withdrawal charges when you annuitize. We waive the withdrawal charge
under certain circumstances (see below).
We will deduct the full withdrawal charge from the death benefit if the
annuitant dies and the death benefit payable is the Contract's cash value.
The following schedule shows the withdrawal charges that apply during the seven
years following each purchase payment:
21
<PAGE>
=============================== =======================
NUMBER OF YEARS
FROM RECEIPT OF EACH PURCHASE WITHDRAWAL
PAYMENT CHARGE
=============================== =======================
0 - 1 8%
- ------------------------------- -----------------------
2 7%
- ------------------------------- -----------------------
3 6%
- ------------------------------- -----------------------
4 5%
- ------------------------------- -----------------------
5 4%
- ------------------------------- -----------------------
6 3%
- ------------------------------- -----------------------
7 2%
- ------------------------------- -----------------------
Over 7 0%
- ------------------------------- -----------------------
For example, assume your Contract's annuity value is $100,000 at the end of the
second year since your initial purchase payment and you withdraw $30,000 as your
first withdrawal of the Contract year. Because the $30,000 is more than 10% of
your Contract's annuity value ($10,000), you would pay a withdrawal charge of
$1,505.37 on the remaining $20,000 (7% of $21,505.37, which is $20,000 plus the
$1,505.37 withdrawal charge).
Keep in mind that withdrawals may be taxable, and if made before age 59-1/2, may
be subject to a 10% federal penalty tax. For tax purposes, withdrawals are
considered to come from earnings first.
Systematic Partial Withdrawals. During any Contract year, you may make
systematic partial withdrawals on a monthly, quarterly, semi-annual or annual
basis without paying withdrawal charges. Systematic partial withdrawals must be
at least $200 ($50 if by direct deposit). The amount of the systematic partial
withdrawals may not exceed 10% of the annuity value at the time the withdrawal
is made, divided by the number of withdrawals made per calendar year. We reserve
the right to discontinue systematic partial withdrawals if any surrender would
reduce your annuity value below $5,000.
You may elect to begin or discontinue systematic partial withdrawals at any
time. However, we must receive written notice at least 30 days prior to the date
systematic partial withdrawals are to be discontinued. (See Systematic Partial
Withdrawals on page 27.)
Nursing Care Facility Waiver. If your Contract contains a nursing care facility
waiver, we will waive the withdrawal charge, provided:
o you have been confined to a nursing care facility for 30 consecutive days or
longer;
o your confinement began after the Contract date; and
o you provide us with written evidence of your confinement within two months
after your confinement ends.
We will waive the withdrawal charge under the endorsement only for partial
withdrawals and complete surrenders made during your confinement or within two
months after your confinement ends. This waiver is not available in all states.
PORTFOLIO MANAGEMENT FEES
The value of the assets in each subaccount is reduced by the management fees and
expenses paid by the portfolios. Some portfolios also deduct 12b-1 fees from
portfolio assets. A description of these fees and expenses is found in the
Annuity Contract Fee Table section on page 8 of this prospectus and in the fund
prospectuses.
Our affiliate, AFSG, the principal underwriter for the Contracts, will receive
the 12b-1 fees deducted from portfolio assets for providing shareholder support
services to the portfolios. We and our affiliates, including the principal
underwriter for the Contracts, may receive compensation from the investment
advisers, administrators, and/or distributors (and an affiliate thereof) of the
portfolios in connection with administrative or other services and cost savings
experienced by the investment advisers, administrators or distributors. It is
anticipated that such compensation will be based on assets of the particular
portfolios attributable to the Contract and may be significant. Some advisers,
administrators, distributors or portfolios may pay us (and our affiliates) more
than others.
REDUCED OR WAIVED CHARGES AND EXPENSES TO EMPLOYEES
We may reduce or waive the withdrawal 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.
22
<PAGE>
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 generally not be taxed on increases in the value of your Contract until
a distribution occurs - either as a partial withdrawal, complete surrender or as
annuity payments.
When a non-natural person (e.g., corporations 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.
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:
o 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.
o 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.
o Corporate Pension and 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.
o 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 WITHDRAWALS AND COMPLETE SURRENDERS -- NONQUALIFIED CONTRACTS
In general, if you make a withdrawal (partial or systematic) from your Contract,
the Code treats that withdrawal as first coming from earnings and then from your
purchase payments. When you make a withdrawal you are taxed on the amount of the
withdrawal that is earnings. When you make a complete surrender you are
generally taxed on the amount that your surrender proceeds exceed your total
purchase payments. Loans, pledges and assignments are taxed in the same manner
as partial withdrawals and complete surrenders. Different rules apply for
annuity payments.
23
<PAGE>
In the event of a partial withdrawal or systematic partial withdrawal 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.
The Code also provides that withdrawn 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 withdrawals will be exempt from the penalty. They include any
amounts:
o paid on or after the taxpayer reaches age 59-1/2;
o paid after the owner dies;
o paid if the taxpayer becomes totally disabled (as that term is defined in the
Code);
o paid in a series of substantially equal payments made annually (or more
frequently) under a lifetime annuity;
o paid under an immediate annuity; or
o which come from purchase 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. Qualified and nonqualified Contracts 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. Western Reserve may
modify the Contract to attempt to maintain favorable tax treatment.
PARTIAL WITHDRAWALS AND COMPLETE SURRENDERS -- 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
distributed 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.
In the case of a partial withdrawal, systematic partial withdrawal, or complete
surrender distributed to a participant or beneficiary under a qualifed Contract
(other than a Roth IRA 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 purchase 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.
The Code limits the distribution of purchase payments from certain 403(b)
Contracts. Distributions generally can only be made when an owner:
o reaches age 59-1/2;
o leaves his/her job;
o dies;
o becomes disabled (as that term is defined in the Code); or
o in the case of hardship. However, in the case of hardship, the owner can only
withdraw the purchase payments and not any earnings.
Loans, pledges and assignments of qualified Contracts are taxed in the same
manner as withdrawals from such Contracts.
24
<PAGE>
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:
o if distributed in a lump sum, these amounts are taxed in the same manner as a
full surrender; or
o 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 purchase 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 (other
than a Roth IRA as to which there are special rules) , 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:
o 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.
o 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 changes 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 legal
developments and their effect on the Contract.
7. ACCESS TO YOUR MONEY
PARTIAL WITHDRAWALS AND COMPLETE SURRENDERS
You can have access to the money in your Contract in several ways:
o by making a withdrawal (either a partial withdrawal or complete surrender); or
o by taking annuity payments.
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<PAGE>
If you want to surrender your Contract completely, you will receive your cash
value, which equals the annuity value of your Contract minus:
o any withdrawal charges;
o any premium taxes;
o any loans; and
o the annual Contract charge.
The cash value will be determined at the accumulation unit value next determined
as of the end of the business day (usually 4:00 p.m. Eastern Time) on which we
receive your request for partial withdrawal or complete surrender at our
administrative office, unless you specify a later date in your request.
No partial withdrawal is permitted if the withdrawal would reduce the cash value
below $5,000. You may not make partial withdrawals from the fixed account unless
we consent. Unless you tell us otherwise, we will take the withdrawal from each
of the investment choices in proportion to the cash value.
Remember that any withdrawal you take will reduce the annuity value. Under some
circumstances, a partial withdrawal will reduce the death benefit by more than
the dollar amount of the withdrawal. See Section 9, Death Benefit, for more
details.
Income taxes, federal tax penalties and certain restrictions may apply to any
partial withdrawals or any complete 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 withdrawals as long as the withdrawal proceeds are being sent to the
address of record. The maximum withdrawal 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 withdrawal or complete surrender payment, we
will deduct that charge from the payment. We charge $20 for an overnight
delivery ($30 for Saturday delivery).
For your protection, we will require a signature guarantee for:
o all requests for partial withdrawals or surrenders over $500,000; or
o where the partial withdrawal or surrender proceeds will be sent to an address
other than the address of record.
All signature guarantees must be made by:
o a national or state bank;
o a member firm of a national stock exchange; or
o 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 withdrawal. 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 partial withdrawal, a
complete surrender, a death benefit, or the death of the owner of a nonqualified
Contract, will generally occur within seven days from the date all required
information is received by us. We may be permitted to defer such payment from
the separate account if:
o the NYSE is closed for other than usual weekends or holidays or trading on the
NYSE is otherwise restricted; or
o an emergency exists as defined by the SEC or the SEC requires that trading be
restricted; or
o the SEC permits a delay for the protection of owners.
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<PAGE>
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, partial withdrawals, surrenders and loan amounts
from the fixed account for up to six months.
SYSTEMATIC PARTIAL WITHDRAWALS
You can elect to receive regular payments from your Contract without paying
withdrawal charges by using systematic partial withdrawals. You can withdraw up
to 10% of your cash value annually in equal monthly, quarterly, semi-annual or
annual payments of at least $200 ($50 if by direct deposit). Your cash value
must equal at least $25,000. We will not process a systematic partial withdrawal
if the cash value for the entire Contract would be reduced below $5,000. No
systematic partial withdrawals are permitted from the fixed account. We will
impose a withdrawal charge for payments made under systematic partial
withdrawals.
You may stop systematic partial withdrawals at any time, but we must receive
written notice at least 30 days prior to the date systematic partial withdrawals
are to be discontinued. We reserve the right to discontinue offering systematic
partial withdrawals 30 days after we send you written notice. Systematic partial
withdrawals 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 withdrawal you receive.
CONTRACT LOANS FOR QUALIFIED CONTRACTS
You can take Contract loans during the accumulation period when the Contract:
o is used in connection with a tax-sheltered annuity plan under Section 403(b)
of the Code (limit of one Contract loan per calendar year);
o is purchased by a pension, profit-sharing, or other similar plan qualified
under section 401(a) of the Code (including Section 401(k) plans - please
contact your plan administrator); and
o has been in force for at least 10 days.
The maximum amount you may borrow against the Contract is the lesser of:
o 50% of the annuity value; or
o $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 is 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 interest due on
the loan exceed the amount in the loan reserve, we will withdraw the difference
from the subaccounts 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 and transfer it in accordance with your current purchase
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 exceed 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
amount no longer exceeds the cash value. If the excess amount is not paid within
31 days after we mail the notice, the Contract will terminate without value.
You can repay any Contract loan in full:
o while the Contract is in force; and
o during the accumulation period.
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<PAGE>
NOTE CAREFULLY: If you do not repay your Contract loan, we will subtract the
amount of the unpaid loan plus interest from:
o the amount of any death benefit proceeds; or
o the amount we pay upon a partial withdrawal or complete surrender; or
o the amount we apply on the maturity date to provide annuity payments.
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 4%. Principal and interest must be
repaid:
o in level quarterly or monthly payments over a 5-year period; or
o 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:
o a repayment is not received within 31 days from the original due date;
Then:
o a distribution of all Contract loans and unpaid accrued interest, and any
applicable charges, including any withdrawal 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 to not
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 impose a $30 fee to
cover loan processing and expenses associated with establishing and
administering the loan reserve (not applicable in all states). We reserve the
right to limit the number of Contract loans made 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 standardized total return figures for the subaccounts
that reflect the deduction of all charges assessed during the accumulation
period under the Contract, including the mortality and expense charge, the
administrative charge, the annual Contract charge and the withdrawal charge.
THESE FIGURES ARE BASED ON THE ACTUAL HISTORICAL PERFORMANCE OF THE SUBACCOUNTS
INVESTING IN THE UNDERLYING PORTFOLIOS SINCE THEIR INCEPTION, ADJUSTED TO
REFLECT CURRENT CONTRACT CHARGES.
Second, we may disclose total return figures on a non-standardized 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 withdrawal charge currently
assessed under the Contract. We will only disclose non-standardized performance
data if it is accompanied by standardized 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 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 WRL Fund prospectus presents the total return of certain existing
SEC-registered funds that are managed by sub-advisers to the WRL 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-Adviser Funds." None of the fees and charges under the Contract has
been deducted
28
<PAGE>
from the performance data of the Similar Sub-Adviser Funds. If Contract fees and
charges were deducted, the investment returns would be lower. The similar
Sub-Adviser 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:
o you are both the annuitant and the owner of the Contract; and
o 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.
Federally prescribed mandatory 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. See Fixed Annuity
Payment Options and Variable Annuity Payment Options on pages 13 and 14 for a
description of the annuity payment options. Please note that not all payment
options provide for a death benefit.
If:
o you are not the annuitant; and
o you die on or after the maturity date; and
o the entire interest in the Contract has not been paid to you;
Then:
o 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:
o you are not the annuitant; and
o the annuitant dies prior to the maturity date;
Then:
o you will become the new annuitant and the Contract will continue.
If:
o you are not the annuitant; and
o you die prior to the maturity date;
Then:
o if the successor owner is alive and is the owner's spouse, ^that person
becomes the new owner and the Contract will continue;
o if the successor owner is alive and is not the owner's spouse, the successor
owner will become the new owner. This new owner generally must surrender the
Contract for the cash value within five years of the former owner's death; or
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<PAGE>
o if the owner does not name a successor owner or no successor owner is alive,
the owner's estate will become the new owner and cash value must generally be
distributed within 5 years of the former owner's death.
NOTE CAREFULLY. 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
Western Reserve receives 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 contingent owner is named in a written
notice received by Western Reserve.
AMOUNT OF DEATH BENEFIT DURING THE ACCUMULATION PERIOD
Death benefit provisions may differ from state to state. The death benefit may
be paid as a lump sum or as annuity payments, but in all events will be paid in
accordance with any applicable federal and state laws, rules and regulations.
If the annuitant dies during the accumulation period and if a death benefit is
payable, the death benefit will be the greatest of the following:
If:
o the annuitant dies during the accumulation period and before the eighth
Contract year;
Then:
o the death benefit will be the greater of:
o the cash value of your Contract on the death report day; or
o the total purchase payments you make to the Contract, reduced by any partial
withdrawals, credited with 5% on each Contract anniversary (until you turn age
80), up to a maximum of 200% of total purchase payments minus any partial
withdrawals. (Please note that the 5% credit is not available in all states.)
If:
o the annuitant dies during the accumulation period and after the seventh
Contract year;
Then:
o the death benefit will be the greatest of:
o the death benefits described above;
o the cash value of your Contract on the seventh Contract anniversary, reduced
by any partial withdrawals;
o if your Contract was issued before May 1, 2000, the highest annuity value as
of any Contract anniversary occurring between (a) the later of May 1, 2000 and
the seventh Contract anniversary and (b) the earlier of:
o the annuitant's date of death; or
o the Contract anniversary nearest the annuitant's 80th birthday.
o if your Contract was issued on or after May 1, 2000, the highest annuity value
as of any Contract anniversary occurring between the seventh Contract
anniversary and the earlier of:
o the annuitant's date of death; or
o the Contract anniversary nearest the annuitant's 80th birthday.
The highest annuity value will be increased by purchase payments made and
decreased by adjusted partial withdrawals taken since the Contract anniversary
date with the highest annuity value. The adjusted partial withdrawal is equal
to (a) times (b) where:
o (a) is the ratio of the death benefit to the annuity value, calculated on
the date the partial withdrawal is processed, but prior to the processing;
and
o (b) is the amount of the partial withdrawal.
NOTE: The CASH VALUE is the annuity value, minus the annual Contract charge, any
applicable premium taxes and any withdrawal charges. This means that we will
deduct the full withdrawal charge from the death benefit if the annuitant dies
and the death benefit payable is the Contract's cash value. We will waive the
withdrawal charge if the beneficiary elects to apply the death benefit to a new
variable annuity contract issued by Western Reserve.
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ALTERNATE PAYMENT ELECTIONS BEFORE THE MATURITY DATE
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.
Multiple beneficiaries may choose individually among any of the three options.
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, including
the right to transfer ownership (subject to any assignee or irrevocable
beneficiary's consent). You can change the owner at any time by notifying us in
writing. An ownership change may be a taxable event.
ANNUITANT
- ---------
The annuitant is the person named in the application to receive annuity
payments. If no person is named, the owner will be the annuitant. As of the
maturity date, and upon our agreement, the owner may change the annuitant or, if
either annuity Option C or Option E has been selected, add a joint annuitant. On
the maturity date, the annuitant(s) will become the payee(s) and receive the
annuity payments.
BENEFICIARY
- -----------
The beneficiary is the person who receives the death benefit upon the death of
the annuitant when the owner is the annuitant. The beneficiary will become the
new owner when the owner is not the same person as the annuitant and the owner
dies before the annuitant. You may change the beneficiary during the lifetime of
the annuitant, subject to the rights of any irrevocable beneficiary. Any change
must be made in writing and received by us at our administrative office and, if
accepted, will be effective as of the date on which the request was signed by
the owner. Prior to the maturity date, if no owner or beneficiary survives the
annuitant the owner's estate will be the beneficiary. In the case of certain
qualified Contracts, the Treasury Regulations prescribe certain limitations on
the designation of a beneficiary. See the SAI for more details on the
beneficiary.
ASSIGNMENT
You can also assign the Contract any time prior to the maturity date. 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 and such assignments may be subject
to tax penalties and taxed as distributions under the Code.
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 indirectly 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 29 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 Contracts 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 (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 accordance with 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 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.
AFSG will receive the 12b-1 fees assessed against the Fidelity VIP Funds' shares
held for the Contracts as compensation for providing certain shareholder support
services. AFSG will also receive an additional fee based on the value of shares
of the Fidelity VIP Funds held for the Contracts as compensation for providing
certain recordkeeping services.
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, including InterSecurities, Inc.,
Transamerica Capital, Inc. and Transamerica Financial Resources, Inc., all
affiliates of Western Reserve. Western Reserve will generally pay broker/dealers
first-year sales commissions in an amount up to 7% of purchase payments. In
addition, broker/dealers may receive trail commissions of up to 0.20% of the
annuity value in each Contract year, starting at the end of the first quarter of
the second Contract year, provided the Contract has an annuity value of $25,000
or more in the subaccounts. These commissions are not deducted from purchase
payments. 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.
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.
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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.
The fixed account is not available in all states. Residents of New Jersey and
Washington may not direct or transfer any money to the fixed account.
IMSA
We are a 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 and advertising 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 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.
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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
Administrative Office
Attention: Annuity Department
P.O. Box 9051
Clearwater, Florida 33758-9051
1-800-851-9777
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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 number of accumulation units combines the units outstanding for four
variable annuity contracts issued by Western Reserve through the subaccounts.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
WRL J.P. MORGAN MONEY MARKET SUBACCOUNT
- -------------------------------------------------------------------------------------------
NUMBER OF
ACCUMULATION
ACCUMULATION UNIT ACCUMULATION UNIT UNITS
VALUE AT BEGINNING VALUE AT END OF OUTSTANDING AT
OF PERIOD PERIOD END OF PERIOD
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/03/1992(1) - 12/31/1992 $10.000 $10.009 10,000
- -------------------------------------------------------------------------------------------
12/31/1993 $10.009 $10.110 869,019
- -------------------------------------------------------------------------------------------
12/31/1994 $10.110 $10.319 2,765,589
- -------------------------------------------------------------------------------------------
12/31/1995 $10.319 $10.728 2,658,931
- -------------------------------------------------------------------------------------------
12/31/1996 $10.728 $11.119 5,253,582
- -------------------------------------------------------------------------------------------
12/31/1997 $11.119 $11.546 5,382,846
- -------------------------------------------------------------------------------------------
12/31/1998 $11.546 $11.989 7,839,228
- -------------------------------------------------------------------------------------------
12/31/1999 $11.989 $12.396 21,724,144
- -------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------
WRL AEGON BOND SUBACCOUNT
- -------------------------------------------------------------------------------------------
NUMBER OF
ACCUMULATION
ACCUMULATION UNIT ACCUMULATION UNIT UNITS
VALUE AT BEGINNING VALUE AT END OF OUTSTANDING AT
OF PERIOD PERIOD END OF PERIOD
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/03/1992(1) - 12/31/1992 $10.000 $10.136 10,000
- -------------------------------------------------------------------------------------------
12/31/1993 $10.136 $11.330 1,524,761
- -------------------------------------------------------------------------------------------
12/31/1994 $11.330 $10.400 1,693,632
- -------------------------------------------------------------------------------------------
12/31/1995 $10.400 $12.613 2,598,178
- -------------------------------------------------------------------------------------------
12/31/1996 $12.613 $12.455 3,055,305
- -------------------------------------------------------------------------------------------
12/31/1997 $12.455 $13.407 4,801,744
- -------------------------------------------------------------------------------------------
12/31/1998 $13.407 $14.452 6,350,826
- -------------------------------------------------------------------------------------------
12/31/1999 $14.452 $13.832 6,280,541
- -------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------
WRL JANUS GROWTH SUBACCOUNT
- -------------------------------------------------------------------------------------------
NUMBER OF
ACCUMULATION
ACCUMULATION UNIT ACCUMULATION UNIT UNITS
VALUE AT BEGINNING VALUE AT END OF OUTSTANDING AT
OF PERIOD PERIOD END OF PERIOD
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/03/1992(1) - 12/31/1992 $10.000 $10.240 10,000
- -------------------------------------------------------------------------------------------
12/31/1993 $10.240 $10.499 8,326,400
- -------------------------------------------------------------------------------------------
12/31/1994 $10.499 $9.493 11,839,096
- -------------------------------------------------------------------------------------------
12/31/1995 $9.493 $13.771 14,387,637
- -------------------------------------------------------------------------------------------
12/31/1996 $13.771 $16.019 19,832,582
- -------------------------------------------------------------------------------------------
12/31/1997 $16.019 $18.568 23,272,252
- -------------------------------------------------------------------------------------------
12/31/1998 $18.568 $30.116 27,434,976
- -------------------------------------------------------------------------------------------
12/31/1999 $30.116 $47.419 32,275,260
- -------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
WRL JANUS GLOBAL SUBACCOUNT
- -------------------------------------------------------------------------------------------
NUMBER OF
ACCUMULATION
ACCUMULATION UNIT ACCUMULATION UNIT UNITS
VALUE AT BEGINNING VALUE AT END OF OUTSTANDING AT
OF PERIOD PERIOD END OF PERIOD
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/03/1992(1) - 12/31/1992 $10.000 $10.151 25,000
- -------------------------------------------------------------------------------------------
12/31/1993 $10.151 $13.518 2,212,212
- -------------------------------------------------------------------------------------------
12/31/1994 $13.518 $13.364 7,170,632
- -------------------------------------------------------------------------------------------
12/31/1995 $13.364 $16.217 6,903,573
- -------------------------------------------------------------------------------------------
12/31/1996 $16.217 $20.428 11,159,128
- -------------------------------------------------------------------------------------------
12/31/1997 $20.428 $23.921 15,530,666
- -------------------------------------------------------------------------------------------
12/31/1998 $23.921 $30.669 17,104,721
- -------------------------------------------------------------------------------------------
12/31/1999 $30.669 $51.748 18,875,171
- -------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------
WRL LKCM STRATEGIC TOTAL RETURN SUBACCOUNT
- -------------------------------------------------------------------------------------------
NUMBER OF
ACCUMULATION UNIT ACCUMULATION UNIT ACCUMULATION
VALUE AT BEGINNING VALUE AT END OF UNITS OUTSTANDING
OF PERIOD PERIOD AT END OF PERIOD
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
3/01/1993(1) - 12/31/1993 $10.000 $11.243 2,518,263
- -------------------------------------------------------------------------------------------
12/31/1994 $11.243 $11.027 6,504,999
- -------------------------------------------------------------------------------------------
12/31/1995 $11.027 $13.555 7,498,916
- -------------------------------------------------------------------------------------------
12/31/1996 $13.555 $15.372 12,770,554
- -------------------------------------------------------------------------------------------
12/31/1997 $15.372 $18.471 15,124,297
- -------------------------------------------------------------------------------------------
12/31/1998 $18.471 $19.969 16,461,563
- -------------------------------------------------------------------------------------------
12/31/1999 $19.969 $22.069 16,136,973
- -------------------------------------------------------------------------------------------
<CAPTION>
------------------------------------------------------------------------------------------
WRL VKAM EMERGING GROWTH SUBACCOUNT
------------------------------------------------------------------------------------------
NUMBER OF
ACCUMULATION
ACCUMULATION UNIT ACCUMULATION UNIT UNITS
VALUE AT BEGINNING VALUE AT END OF OUTSTANDING AT
OF PERIOD PERIOD END OF PERIOD
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
3/01/1993(1) - 12/31/1993 $10.000 $12.354 2,059,530
------------------------------------------------------------------------------------------
12/31/1994 $12.354 $11.286 5,547,915
------------------------------------------------------------------------------------------
12/31/1995 $11.286 $16.337 6,434,051
------------------------------------------------------------------------------------------
12/31/1996 $16.337 $19.152 9,376,917
------------------------------------------------------------------------------------------
12/31/1997 $19.152 $22.938 11,279,603
------------------------------------------------------------------------------------------
12/31/1998 $22.938 $31.063 12,278,821
------------------------------------------------------------------------------------------
12/31/1999 $31.063 $62.846 14,178,995
------------------------------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------------------------------
WRL ALGER AGGRESSIVE GROWTH SUBACCOUNT
-------------------------------------------------------------------------------------------
NUMBER OF
ACCUMULATION
ACCUMULATION ACCUMULATION UNIT UNITS
UNIT VALUE AT VALUE AT END OF OUTSTANDING AT
BEGINNING OF PERIOD PERIOD END OF PERIOD
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
3/01/1994(1) - 12/31/1994 $10.000 $9.782 1,165,716
-------------------------------------------------------------------------------------------
12/31/1995 $9.782 $13.313 4,538,244
-------------------------------------------------------------------------------------------
12/31/1996 $13.313 $14.500 6,954,084
-------------------------------------------------------------------------------------------
12/31/1997 $14.500 $17.766 9,141,315
-------------------------------------------------------------------------------------------
12/31/1998 $17.766 $26.048 10,807,100
-------------------------------------------------------------------------------------------
12/31/1999 $26.048 $43.416 13,252,453
-------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
WRL AEGON BALANCED SUBACCOUNT
------------------------------------------------------------------------------------------
NUMBER OF
ACCUMULATION
ACCUMULATION UNIT ACCUMULATION UNIT UNITS
VALUE AT BEGINNING VALUE AT END OF OUTSTANDING AT
OF PERIOD PERIOD END OF PERIOD
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
3/01/1994(1) - 12/31/1994 $10.000 $9.339 849,727
------------------------------------------------------------------------------------------
12/31/1995 $9.339 $11.032 1,456,512
------------------------------------------------------------------------------------------
12/31/1996 $11.032 $12.045 2,385,500
------------------------------------------------------------------------------------------
12/31/1997 $12.045 $13.909 3,156,354
------------------------------------------------------------------------------------------
12/31/1998 $13.909 $14.666 4,024,017
------------------------------------------------------------------------------------------
12/31/1999 $14.666 $14.900 4,467,001
------------------------------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------------------------------
WRL FEDERATED GROWTH & INCOME SUBACCOUNT
-------------------------------------------------------------------------------------------
NUMBER OF
ACCUMULATION
ACCUMULATION UNIT ACCUMULATION UNIT UNITS
VALUE AT BEGINNING VALUE AT END OF OUTSTANDING AT
OF PERIOD PERIOD END OF PERIOD
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
3/01/1994(1) - 12/31/1994 $10.000 $9.453 400,544
-------------------------------------------------------------------------------------------
12/31/1995 $9.453 $11.676 863,789
-------------------------------------------------------------------------------------------
12/31/1996 $11.676 $12.853 1,553,811
-------------------------------------------------------------------------------------------
12/31/1997 $12.853 $15.799 2,315,992
-------------------------------------------------------------------------------------------
12/31/1998 $15.799 $16.055 3,248,069
-------------------------------------------------------------------------------------------
12/31/1999 $16.055 $15.127 3,023,724
-------------------------------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------------------------------
WRL DEAN ASSET ALLOCATION SUBACCOUNT
-------------------------------------------------------------------------------------------
NUMBER OF
ACCUMULATION
ACCUMULATION UNIT ACCUMULATION UNIT UNITS
VALUE AT BEGINNING VALUE AT END OF OUTSTANDING AT
OF PERIOD PERIOD END OF PERIOD
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1/03/1995(1) - 12/31/1995 $10.000 $11.843 6,104,685
-------------------------------------------------------------------------------------------
12/31/1996 $11.843 $13.363 9,397,631
-------------------------------------------------------------------------------------------
12/31/1997 $13.363 $15.363 12,633,177
-------------------------------------------------------------------------------------------
12/31/1998 $15.363 $16.411 14,496,370
-------------------------------------------------------------------------------------------
12/31/1999 $16.411 $15.270 10,938,985
-------------------------------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------------------------------
WRL C.A.S.E. GROWTH SUBACCOUNT
-------------------------------------------------------------------------------------------
NUMBER OF
ACCUMULATION
ACCUMULATION UNIT ACCUMULATION UNIT UNITS
VALUE AT BEGINNING VALUE AT END OF OUTSTANDING AT
OF PERIOD PERIOD END OF PERIOD
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5/01/1996(1) - 12/31/1996 $10.000 $10.773 1,164,233
-------------------------------------------------------------------------------------------
12/31/1997 $10.773 $12.220 2,618,284
-------------------------------------------------------------------------------------------
12/31/1998 $12.220 $12.348 3,043,446
-------------------------------------------------------------------------------------------
12/31/1999 $12.348 $16.297 3,137,092
-------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
WRL NWQ VALUE EQUITY SUBACCOUNT
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5/01/1996(1) - 12/31/1996 $10.000 $11.213 2,118,820
------------------------------------------------------------------------------------------
12/31/1997 $11.213 $13.827 7,035,132
------------------------------------------------------------------------------------------
12/31/1998 $13.827 $12.983 7,102,945
------------------------------------------------------------------------------------------
12/31/1999 $12.983 $13.820 5,579,088
------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------
WRL GE INTERNATIONAL EQUITY SUBACCOUNT
- ------------------------------------------------------------------------------------------
NUMBER OF
ACCUMULATION UNIT ACCUMULATION UNIT ACCUMULATION
VALUE AT BEGINNING VALUE AT END OF UNITS OUTSTANDING
OF PERIOD PERIOD AT END OF PERIOD
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1/02/1997(1) - 12/31/1997 $10.000 $10.601 1,050,984
- ------------------------------------------------------------------------------------------
12/31/1998 $10.601 $11.797 1,642,437
- ------------------------------------------------------------------------------------------
12/31/1999 $11.797 $14.536 1,407,842
- ------------------------------------------------------------------------------------------
<CAPTION>
------------------------------------------------------------------------------------------
WRL GE U.S. EQUITY SUBACCOUNT
------------------------------------------------------------------------------------------
NUMBER OF
ACCUMULATION
ACCUMULATION UNIT ACCUMULATION UNIT UNITS
VALUE AT BEGINNING VALUE AT END OF OUTSTANDING AT
OF PERIOD PERIOD END OF PERIOD
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1/02/1997(1) - 12/31/1997 $10.000 $12.526 2,141,414
------------------------------------------------------------------------------------------
12/31/1998 $12.526 $15.177 4,840,127
------------------------------------------------------------------------------------------
12/31/1999 $15.177 $17.721 6,781,197
------------------------------------------------------------------------------------------
<CAPTION>
------------------------------------------------------------------------------------------
WRL THIRD AVENUE VALUE SUBACCOUNT
------------------------------------------------------------------------------------------
NUMBER OF
ACCUMULATION
ACCUMULATION UNIT ACCUMULATION UNIT UNITS
VALUE AT BEGINNING VALUE AT END OF OUTSTANDING AT
OF PERIOD PERIOD END OF PERIOD
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1/02/1998(1) - 12/31/1998 $10.000 $9.187 1,025,234
------------------------------------------------------------------------------------------
12/31/1999 $9.187 $10.483 968,035
------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------
WRL J.P. MORGAN REAL ESTATE SECURITIES SUBACCOUNT
-------------------------------------------------------------------------------------------
NUMBER OF
ACCUMULATION UNIT ACCUMULATION UNIT ACCUMULATION
VALUE AT BEGINNING VALUE AT END OF UNITS OUTSTANDING
OF PERIOD PERIOD AT END OF PERIOD
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5/01/1998(1) - 12/31/1998 $10.000 $8.427 157,193
-------------------------------------------------------------------------------------------
12/31/1999 $8.427 $7.996 203,365
-------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
WRL GOLDMAN SACHS GROWTH SUBACCOUNT
-------------------------------------------------------------------------------------------
NUMBER OF
ACCUMULATION UNIT ACCUMULATION UNIT ACCUMULATION
VALUE AT BEGINNING VALUE AT END OF UNITS OUTSTANDING
OF PERIOD PERIOD AT END OF PERIOD
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5/03/1999(1) - 12/31/1999 $10.000 $11.640 503,875
-------------------------------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------------------------------
WRL GOLDMAN SACHS SMALL CAP SUBACCOUNT
-------------------------------------------------------------------------------------------
NUMBER OF
ACCUMULATION UNIT ACCUMULATION UNIT ACCUMULATION
VALUE AT BEGINNING VALUE AT END OF UNITS OUTSTANDING
OF PERIOD PERIOD AT END OF PERIOD
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5/3/1999(1) - 12/31/1999 $10.000 $11.631 166,378
-------------------------------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------------------------------
WRL T. ROWE PRICE DIVIDEND GROWTH SUBACCOUNT
-------------------------------------------------------------------------------------------
NUMBER OF
ACCUMULATION UNIT ACCUMULATION UNIT ACCUMULATION
VALUE AT BEGINNING VALUE AT END OF UNITS OUTSTANDING
OF PERIOD PERIOD AT END OF PERIOD
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5/3/1999(1) - 12/31/1999 $10.000 $9.173 691,875
-------------------------------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------------------------------
WRL T. ROWE PRICE SMALL CAP SUBACCOUNT
-------------------------------------------------------------------------------------------
NUMBER OF
ACCUMULATION UNIT ACCUMULATION UNIT ACCUMULATION
VALUE AT BEGINNING VALUE AT END OF UNITS OUTSTANDING
OF PERIOD PERIOD AT END OF PERIOD
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5/3/1999(1) - 12/31/1999 $10.000 $13.719 359,295
-------------------------------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------------------------------
WRL SALOMON ALL CAP SUBACCOUNT
-------------------------------------------------------------------------------------------
NUMBER OF
ACCUMULATION UNIT ACCUMULATION UNIT ACCUMULATION
VALUE AT BEGINNING VALUE AT END OF UNITS OUTSTANDING
OF PERIOD PERIOD AT END OF PERIOD
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5/3/1999(1) - 12/31/1999 $10.000 $11.449 425,168
-------------------------------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------------------------------
WRL PILGRIM BAXTER MID CAP GROWTH SUBACCOUNT
-------------------------------------------------------------------------------------------
NUMBER OF
ACCUMULATION UNIT ACCUMULATION UNIT ACCUMULATION
VALUE AT BEGINNING VALUE AT END OF UNITS OUTSTANDING
OF PERIOD PERIOD AT END OF PERIOD
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5/3/1999(1) - 12/31/1999 $10.000 $17.633 1,452,014
-------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
WRL DREYFUS MID CAP SUBACCOUNT
-------------------------------------------------------------------------------------------
NUMBER OF
ACCUMULATION UNIT ACCUMULATION UNIT ACCUMULATION
VALUE AT BEGINNING VALUE AT END OF UNITS OUTSTANDING
OF PERIOD PERIOD AT END OF PERIOD
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5/3/1999(1) - 12/31/1999 $10.000 $10.620 209,699
-------------------------------------------------------------------------------------------
</TABLE>
(1) Commencement of operations of these subaccounts.
Because the WRL Value Line Aggressive Growth, WRL Great Companies --America SM
and WRL Great Companies -- Technology SM portfolios did not commence operations
until May 1, 2000, and because the Fidelity VIP Equity-Income Portfolio -
Service Class 2, Fidelity VIP II Contrafund(R) Portfolio - Service Class 2 and
Fidelity VIP III Growth Opportunities Portfolio - Service Class 2 were not
offered under this prospectus until May 1, 2000, there is no condensed financial
information for these subaccounts for the year ended December 31, 1999.
40
<PAGE>
APPENDIX B
HISTORICAL PERFORMANCE DATA
STANDARDIZED PERFORMANCE DATA
Western Reserve 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, 1999, the yield of the WRL J.P. Morgan Money
Market subaccount was 3.74%, and the effective yield was 3.81%.
OTHER SUBACCOUNTS. The YIELD of a subaccount, other than the WRL J.P. Morgan
Money Market subaccount, refers to the annualized income generated by an
investment 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 ^a
subaccount for various periods of time including a period measured from the date
the first subaccount investing in the underlying portfolios began operations.
When the first subaccount investing in the underlying portfolios has been in
operation for 1, 5, and 10 years, the total return for these periods will be
provided, adjusted to reflect current subaccount charges. 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 of the subaccounts for periods from inception of the
subaccounts investing in the underlying portfolios to December 31, 1999, and for
the one, five and ten-year periods ended December 31, 1999 are shown in Table 1
below. Total returns shown in Table 1 reflect deductions of 1.25% for the
mortality and expense risk charge, 0.15% for the administrative charge and $35
for the annual Contract charge. (Based on an average Contract size of $64,172,
the annual Contract charge translates into a charge of 0.05%.) Total returns
also assume a complete surrender of the Contract at the end of the period;
therefore, the withdrawal charge is deducted.
41
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
TABLE 1
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS OF THE SUBACCOUNTS
(ASSUMES SURRENDER)
----------------------------------------------------------------------------------------------------------------------------------
10 YEARS
--------
ENDED INCEPTION OF THE SUBACCOUNT
SUBACCOUNT 1 YEAR ENDED 5 YEARS ENDED ----- SUBACCOUNT TO INCEPTION
12/31/99 12/31/99 12/31/99 12/31/99** Date**
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
WRL J.P Morgan Money Market* -4.66% 3.02% 3.29% 3.55% 02/24/1989
----------------------------------------------------------------------------------------------------------------------------------
WRL AEGON Bond -12.34% 5.21% 5.81% 6.51% 02/24/1989
----------------------------------------------------------------------------------------------------------------------------------
WRL Janus Growth 49.37% 37.71% 21.92% 23.31% 02/24/198
----------------------------------------------------------------------------------------------------------------------------------
WRL Janus Global 60.64% 30.81% N/A 26.12% 12/03/1992
----------------------------------------------------------------------------------------------------------------------------------
WRL LKCM Strategic Total Return 2.45% 14.41% N/A 12.11% 03/01/1993
----------------------------------------------------------------------------------------------------------------------------------
WRL VKAM Emerging Growth 94.20% 40.76% N/A 30.76% 03/01/1993
----------------------------------------------------------------------------------------------------------------------------------
WRL Alger Aggressive Growth 58.58% 34.47% N/A 28.42% 03/01/1994
----------------------------------------------------------------------------------------------------------------------------------
WRL AEGON Balanced -6.46% 9.23% N/A 6.68% 03/01/1994
----------------------------------------------------------------------------------------------------------------------------------
WRL Federated Growth & Income -13.83% 9.29% N/A 6.97% 03/01/1994
----------------------------------------------------------------------------------------------------------------------------------
WRL Dean Asset Allocation -15.00% N/A N/A 8.26% 01/03/1995
----------------------------------------------------------------------------------------------------------------------------------
WRL C.A.S.E. Growth 23.91% N/A N/A 16.63% 05/01/1995
----------------------------------------------------------------------------------------------------------------------------------
WRL NWQ Value Equity -1.61% N/A N/A 8.11% 05/01/1996
----------------------------------------------------------------------------------------------------------------------------------
WRL GE International Equity 15.15% N/A N/A 11.72% 01/02/1997
----------------------------------------------------------------------------------------------------------------------------------
WRL GE U.S. Equity 8.70% N/A N/A 19.68% 01/02/1997
----------------------------------------------------------------------------------------------------------------------------------
WRL Third Avenue Value 6.04% N/A N/A -1.13% 01/02/1998
----------------------------------------------------------------------------------------------------------------------------------
WRL J.P. Morgan Real Estate Securities -13.16% N/A N/A -17.23% 05/01/1998
----------------------------------------------------------------------------------------------------------------------------------
WRL Goldman Sachs Growth N/A N/A N/A 8.36% 05/03/1999
----------------------------------------------------------------------------------------------------------------------------------
WRL Goldman Sachs Small Cap N/A N/A N/A 8.26% 05/03/1999
----------------------------------------------------------------------------------------------------------------------------------
WRL T. Rowe Price Dividend Growth N/A N/A N/A -16.30% 05/03/1999
----------------------------------------------------------------------------------------------------------------------------------
WRL T. Rowe Price Small Cap N/A N/A N/A 29.15% 05/03/1999
----------------------------------------------------------------------------------------------------------------------------------
WRL Salomon All Cap N/A N/A N/A 6.45% 05/03/1999
----------------------------------------------------------------------------------------------------------------------------------
WRL Pilgrim Baxter Mid Cap Growth N/A N/A N/A 68.27% 05/03/1999
----------------------------------------------------------------------------------------------------------------------------------
WRL Dreyfus Mid Cap N/A N/A N/A -1.84% 05/03/1999
----------------------------------------------------------------------------------------------------------------------------------
WRL Value Line Aggressive Growth N/A N/A N/A N/A 05/01/2000
----------------------------------------------------------------------------------------------------------------------------------
WRL Great Companies - America(SM) N/A N/A N/A N/A 05/01/2000
----------------------------------------------------------------------------------------------------------------------------------
WRL Great Companies - Technology(SM) N/A N/A N/A N/A 05/01/2000
----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio - Service Class 2 N/A N/A N/A N/A 05/01/2000
----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund(R)Portfolio - Service Class 2 N/A N/A N/A N/A 05/01/2000
----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio -
Service Class 2 N/A N/A N/A N/A 05/01/2000
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Yield more closely reflects the current earnings of the WRL J.P. Morgan
Money Market subaccount than its total return.
** Refers to the date when the separate account first invested in the underlying
portfolios.
NON-STANDARDIZED PERFORMANCE DATA
In addition to the standardized data discussed above, similar performance data
for other periods may also be shown.
We may from time to time also disclose average annual total return or other
performance data in non-standardized formats for the subaccounts. The
non-standardized performance data may make different assumptions regarding the
amount invested, the time periods shown, or the effect of partial withdrawals or
annuity payments.
All non-standardized performance data will be advertised only if the
standardized performance data as shown in Table 1 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-standardized
average annual total returns for periods from inception of the subaccounts to
December 31, 1999, and for the one,five and ten-year periods ended December 31,
1999 are shown in Table 2 below. Total returns shown in Table 2 reflect
deductions of 1.25% for the mortality and expense risk charge, 0.15% for the
administrative charge and $35 for the annual Contract charge. (Based on an
average Contract size of $64,172, the annual Contract charge translates into a
charge of 0.05%.) Total returns assume that the Contract is not surrendered and
therefore the withdrawal charge is not deducted.
42
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
TABLE 2
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS OF THE SUBACCOUNTS
(ASSUMES NO SURRENDER)
----------------------------------------------------------------------------------------------------------------------------------
10 YEARS
--------
SUBACCOUNT ENDED INCEPTION OF THE SUBACCOUNT
1 YEAR ENDED 5 YEARS ENDED ----- SUBACCOUNT TO INCEPTION
12/31/99 12/31/99 12/31/99 12/31/99** Date**
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
WRL J.P Morgan Money Market* 3.34% 3.72% 3.29% 3.55% 02/24/1989
----------------------------------------------------------------------------------------------------------------------------------
WRL AEGON Bond -4.34% 5.86% 5.81% 6.51% 02/24/1989
----------------------------------------------------------------------------------------------------------------------------------
WRL Janus Growth 57.37% 37.93% 21.92% 23.31% 02/24/1989
----------------------------------------------------------------------------------------------------------------------------------
WRL Janus Global 68.64% 31.08% N/A 26.12% 12/03/1992
----------------------------------------------------------------------------------------------------------------------------------
WRL LKCM Strategic Total Return 10.45% 14.87% N/A 12.26% 03/01/1993
----------------------------------------------------------------------------------------------------------------------------------
WRL VKAM Emerging Growth 102.20% 40.96% N/A 30.82% 03/01/1993
----------------------------------------------------------------------------------------------------------------------------------
WRL Alger Aggressive Growth 66.58% 34.71% N/A 28.57% 03/01/1994
----------------------------------------------------------------------------------------------------------------------------------
WRL AEGON Balanced 1.54% 9.78% N/A 7.06% 03/01/1994
----------------------------------------------------------------------------------------------------------------------------------
WRL Federated Growth & Income -5.83% 9.85% N/A 7.33% 03/01/1994
----------------------------------------------------------------------------------------------------------------------------------
WRL Dean Asset Allocation -7.00% N/A N/A 8.84% 01/03/1995
----------------------------------------------------------------------------------------------------------------------------------
WRL C.A.S.E. Growth 31.91% N/A N/A 17.12% 05/01/1995
----------------------------------------------------------------------------------------------------------------------------------
WRL NWQ Value Equity 6.39% N/A N/A 9.20% 05/01/1996
----------------------------------------------------------------------------------------------------------------------------------
WRL GE International Equity 23.15% N/A N/A 13.30% 01/02/1997
----------------------------------------------------------------------------------------------------------------------------------
WRL GE U.S. Equity 16.70% N/A N/A 21.07% 01/02/1997
----------------------------------------------------------------------------------------------------------------------------------
WRL Third Avenue Value 14.04% N/A N/A 2.37% 01/02/1998
----------------------------------------------------------------------------------------------------------------------------------
WRL J.P. Morgan Real Estate Securities -5.16% N/A N/A -12.56% 05/01/1998
----------------------------------------------------------------------------------------------------------------------------------
WRL Goldman Sachs Growth N/A N/A N/A 16.36% 05/03/1999
----------------------------------------------------------------------------------------------------------------------------------
WRL Goldman Sachs Small Cap N/A N/A N/A 16.26% 05/03/1999
----------------------------------------------------------------------------------------------------------------------------------
WRL T. Rowe Price Dividend Growth N/A N/A N/A -8.30% 05/03/1999
----------------------------------------------------------------------------------------------------------------------------------
WRL T. Rowe Price Small Cap N/A N/A N/A 37.15% 05/03/1999
----------------------------------------------------------------------------------------------------------------------------------
WRL Salomon All Cap N/A N/A N/A 14.45% 05/03/1999
----------------------------------------------------------------------------------------------------------------------------------
WRL Pilgrim Baxter Mid Cap Growth N/A N/A N/A 76.27% 05/03/1999
----------------------------------------------------------------------------------------------------------------------------------
WRL Dreyfus Mid Cap N/A N/A N/A 6.16% 05/03/1999
----------------------------------------------------------------------------------------------------------------------------------
WRL Value Line Aggressive Growth N/A N/A N/A N/A 05/01/2000
----------------------------------------------------------------------------------------------------------------------------------
WRL Great Companies - America(SM) N/A N/A N/A N/A 05/01/2000
----------------------------------------------------------------------------------------------------------------------------------
WRL Great Companies - Technology(SM) N/A N/A N/A N/A 05/01/2000
----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio - Service Class 2 N/A N/A N/A N/A 05/01/2000
----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund(R)Portfolio - Service Class 2 N/A N/A N/A N/A 05/01/2000
----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio -
Service Class 2 N/A N/A N/A N/A 05/01/2000
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Yield more closely reflects the current earnings of the WRL J.P. Morgan
Money Market subaccount than its total return.
** Refers to the date when the separate account first invested in the underlying
portfolios.
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 would include^
data that precedes the inception dates of the subaccounts investing in the
underlying portfolios. 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 subaccounts available
under the Contract were 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.
Because the separate account has been invested in portfolio shares since the
inception of the class of portfolio shares held by the separate account, the
adjusted historic portfolio data for the Contract corresponds to the performance
data displayed in Tables 1 and 2 of Appendix B.
43
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF
ADDITIONAL INFORMATION
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
WRL FREEDOM CONQUEROR(R)
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 Conqueror(R) Variable Annuity offered by
Western Reserve Life Assurance Co. of Ohio. You may obtain a copy of the
prospectus dated May 1, 2000, by calling 1-800-851-9777, or by writing to the
administrative office, Western Reserve Life, 570 Carillon Parkway, St.
Petersburg, Florida 33716. 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: MAY 1, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
DEFINITIONS OF SPECIAL TERMS..................................................................... 1
THE CONTRACT--GENERAL PROVISIONS ................................................................ 3
Owner ......................................................................................... 3
Entire Contract ............................................................................... 3
Misstatement of Age or Gender ................................................................. 3
Addition, Deletion or Substitution of Investments ............................................. 3
Annuity Payment Options........................................................................ 4
Death Benefit.................................................................................. 4
Assignment .................................................................................... 5
Proof of Age, Gender and Survival ............................................................. 5
Non-Participating ............................................................................. 6
Employee and Agent Purchases................................................................... 6
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.......................................................... 6
Tax Status of the Contract..................................................................... 6
Taxation of Western Reserve ................................................................... 8
INVESTMENT EXPERIENCE ........................................................................... 8
Accumulation Units............................................................................. 8
Accumulation Unit Value........................................................................ 9
Annuity Unit Value and Annuity Payment Rates .................................................. 9
HISTORICAL PERFORMANCE DATA ..................................................................... 11
Money Market Yields ........................................................................... 11
Other Subaccount Yields ....................................................................... 11
Total Returns ................................................................................. 12
Other Performance Data ........................................................................ 12
Advertising and Sales Literature .............................................................. 13
PUBLISHED RATINGS. .............................................................................. 13
ADMINISTRATION .................................................................................. 13
RECORDS AND REPORTS ............................................................................. 13
DISTRIBUTION OF THE CONTRACTS ................................................................... 13
OTHER PRODUCTS .................................................................................. 14
CUSTODY OF ASSETS ............................................................................... 14
LEGAL MATTERS ................................................................................... 14
INDEPENDENT ACCOUNTANTS ......................................................................... 14
OTHER INFORMATION ............................................................................... 14
FINANCIAL STATEMENTS ............................................................................ 14
</TABLE>
<PAGE>
DEFINITIONS OF SPECIAL TERMS
- ------------------------------ -------------------------------------------------
accumulation period The period between the Contract date and the
maturity date while the Contract is in force.
- ------------------------------ -------------------------------------------------
accumulation unit value An accounting unit of measure we use to calculate
subaccount values during the accumulation period.
- ------------------------------ -------------------------------------------------
administrative office Our administrative office and mailing address is
P.O. Box 5068, Clearwater, Florida 33758-5068.
Our street address is 570 Carillon Parkway, St.
Petersburg, Florida 33716. Our phone number is
1-800-851-9777.
- ------------------------------ -------------------------------------------------
age The issue age, which is annuitant's age on the
birthday nearest the Contract date, plus the
number of completed Contract years. When we use
the term "age" in this SAI, it has the same
meaning as "attained age" in the Contract.
- ------------------------------ -------------------------------------------------
annuitant The person you named in the application (or later
changed), to receive annuity payments. The
annuitant may be changed as provided in the
Contract's death benefit provisions and annuity
provision.
- ------------------------------ -------------------------------------------------
annuity unit value An accounting unit of measure we use to calculate
annuity payments from the subaccounts after
the maturity date.
- ------------------------------ -------------------------------------------------
annuity value The sum of the separate account value and the
fixed account value.
- ------------------------------ -------------------------------------------------
beneficiary(ies) The person(s) you elect to receive the death
benefit proceeds under the Contract.
- ------------------------------ -------------------------------------------------
cash value The annuity value less any applicable premium
taxes and any withdrawal charge.
- ------------------------------ -------------------------------------------------
Code The Internal Revenue Code of 1986, as amended.
- ------------------------------ -------------------------------------------------
Contract date The later of the date on which the initial
purchase payment is received or the date that the
properly completed application is received at
Western Reserve's administrative office. We
measure Contract years, Contract months, and
Contract anniversaries from the Contract date.
- ------------------------------ -------------------------------------------------
death report day The valuation date on which we have received both
proof of annuitant's death and your beneficiary's
election regarding payment.
- ------------------------------ -------------------------------------------------
fixed account An option to which you can direct your money
under the Contract, other than the separate
account. It provides a guarantee of principal
and interest. The assets supporting the fixed
account are held in the general account. The
fixed account is not available in all states.
- ------------------------------ -------------------------------------------------
fixed account value During the accumulation period, your Contract's
value in the fixed account.
- ------------------------------ -------------------------------------------------
funds Investment companies which are registered with
the U.S. Securities and Exchange Commission.
The Contract allows you to invest in the
portfolios of the funds through our subaccounts.
We reserve the right to add other registered
investment companies to the Contract in the
future.
- ------------------------------ -------------------------------------------------
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. The latest maturity
date is the annuitant's 90th birthday.
- ------------------------------ -------------------------------------------------
NYSE New York Stock Exchange.
- ------------------------------ -------------------------------------------------
nonqualified contract Contracts issued other than in connection with
retirement plants. Nonqualified Contracts do not
qualify for special federal income tax treatment
under the Code.
- ------------------------------ -------------------------------------------------
owner The person(s) entitled to exercise all rights
(you, your) 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 a fund.
- ------------------------------ -------------------------------------------------
purchase 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 "purchase payment" in this SAI, it has
the same meaning as "net payment" in the
Contract, which means the purchase 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.
- ------------------------------ -------------------------------------------------
separate account WRL Series Annuity Account, a separate account
composed of several subaccounts established to
receive and invest purchase payments not
allocated to the fixed account.
- ------------------------------ -------------------------------------------------
separate account value During the accumulation period, your Contract's
value in the separate account, which equals the
total value in each subaccount.
- ------------------------------ -------------------------------------------------
1
<PAGE>
- ------------------------------ -------------------------------------------------
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 portfolio hold assets
under the Contract during the accumulation
period. Other subaccounts corresponding to each
portfolio will hold assets after the maturity
date if you select a variable annuity option.
- ------------------------------ -------------------------------------------------
surrender The termination of a Contract at the option of
the owner.
- ------------------------------ -------------------------------------------------
valuation date/ Each day on which the NYSE is open for trading,
business day 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. When we use the term "business
day," it has the same meaning as valuation date.
- ------------------------------ -------------------------------------------------
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.
- ------------------------------ -------------------------------------------------
Western Reserve Western Reserve Life Assurance Co. of Ohio.
(we, us, our)
- ------------------------------ -------------------------------------------------
2
<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 purchase 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 successor owner may be named in the Contract application or in a written
notice. The successor owner will become the new owner upon the owner's death, if
the owner is not the annuitant and dies before the annuitant. If no successor
owner survives the owner and the owner dies before the annuitant, the owner's
estate will become the owner.
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 or successor 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 or naming a new successor owner cancels any prior
choice of successor 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 purchase 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 Western
Reserve makes 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 a fund and to substitute
shares of another portfolio of a 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 a 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.
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.
3
<PAGE>
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 Scale G 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
DEATH OF OWNER. Federal tax law requires that if any owner (including any
successor 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) an 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 on
page 6 for a detailed description of these rules. Other rules may apply to
qualified Contracts.
If an owner is not the annuitant and dies before the annuitant:
o if no successor owner 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 successor owner is alive and is the owner's spouse, the Contract
will continue with the spouse as the new owner; or
o if the successor owner is alive and is not the owner's spouse, the
successor owner will become the new owner. The cash value must be
distributed either:
o within five years of the former owner's death; or
4
<PAGE>
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.
If the annuitant who is not an owner 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. If a successor owner is
named and is the owner's spouse, the successor owner will automatically become
the new annuitant and this Contract will continue. If the annuitant dies during
the accumulation period and an 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. The new owner generally must surrender the
Contract for the annuity value within five years of death.
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 on page 6.)
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 withdrawal
during the five-year period. That partial withdrawal must be made at the time
option (1) is elected. No withdrawal charge will apply to this withdrawal; (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 withdrawal
charge 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.
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 the request is received at our administrative office
and is 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.
5
<PAGE>
NON-PARTICIPATING
The Contract will not share in Western Reserve's surplus earnings; no dividends
will be paid.
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 purchase
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 or waived fees
and charges including, but not limited to, the withdrawal charge and the annual
Contract 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 funds and their 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 funds) 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. 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 purchase payments 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. 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.
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
6
<PAGE>
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 intothe Contracts and 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 sections 401(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),and for IRAs under section 408(a), 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 purchase 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 withdrawals 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 sectopm
408(b) of the Code contain such provisions. If your Contract is used in
connection with an IRA, only rollover or transfer contributions are permitted.
No regular contributions may be made. 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.
No part of the funds for an IRA, including a Roth 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 as an IRA under 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
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<PAGE>
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 to the rollover or conversion and to distributions
attributable thereto. 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 modified 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. As with the traditional IRA, only
rollover or transfer contributions are permitted. 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 of the individual 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 withdrawal 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 generally 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 purchase 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 purchase 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.
INVESTMENT EXPERIENCE
ACCUMULATION UNITS
Allocations of a purchase 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 purchase
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 a fund less any applicable charges or fees.
8
<PAGE>
Upon allocation to the selected subaccount of the separate account, purchase
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 purchase 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 withdrawals; 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 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 NYSE, on
each day the NYSE 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 1.25% of net assets for each day in the valuation
period and compensates us for certain mortality and expense risks. The
administrative charge is deducted at an annual rate of 0.15% 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 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.
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.
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<PAGE>
(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 the
administrative charge. This factor is equal, on an annual basis, to 1.40%
of the daily net asset value of the portfolio share held in that
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. See Annuity
Payment Options - Determination of the First Variable Payment on page 4, which
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
<TABLE>
<CAPTION>
<S> <C>
Where: A = Annuity unit value for the immediately preceding valuation period.
Assume.............................................................................. = $X
B = Net investment 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
</TABLE>
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
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
Then, the first monthly variable annuity payment = $XY = $Z
--------
1,000
FORMULA AND ILLUSTRATION FOR DETERMINING THE NUMBER OF ANNUITY UNITS
REPRESENTED BY EACH MONTHLY VARIABLE ANNUITY PAYMENT
Number of annuity units = A
-
B
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
Then, the number of annuity units = $X = Z
---
$Y
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<PAGE>
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. Morgan 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 $35 annual Contract charge, calculated on the
basis of an average Contract size of $64,172, which translates into a charge of
0.05%. 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 withdrawal charge that may be assessed at the
time of withdrawal in an amount ranging up to 8% of the requested withdrawal
amount. The specific withdrawal charge percentage applicable to a particular
withdrawal depends on the length of time purchase payments have been held under
the Contract and whether withdrawals have been made previously during that
Contract year. (See Expenses--Withdrawal Charge on page 21 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 the 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 WRL J.P. Morgan Money Market, the types and quality of
portfolio securities held by WRL J.P. Morgan Money Market and its operating
expenses. For the seven days ended December 31, 1999, the yield of the WRL J.P.
Morgan Money Market subaccount was 3.74%, and the effective yield was 3.81%,
assuming no surrender.
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:
a-b
YIELD = 2[ (---- + 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.
11
<PAGE>
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 $35 annual Contract charge, calculated on the basis of an average
Contract size of $64,172, which translates into a charge of 0.05%. The
calculations do not take into account any premium taxes or any transfer or
withdrawal charges.
Premium taxes currently range from 0% to 3.5% of purchase payments depending
upon the jurisdiction in which the Contract is delivered. A withdrawal charge
may be assessed at the time of withdrawal in an amount ranging up to 8% of the
requested withdrawal amount, with the specific percentage applicable to a
particular withdrawal depending on the length of time purchase payments were
held under the Contract, and whether withdrawals had been made previously during
that Contract year. (See Expenses--Withdrawal Charge on page 21 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, 1999,
the yield for the WRL AEGON Bond subaccount was 4.44%, assuming no surrender.
TOTAL RETURNS
The total return quotations set forth in the prospectus for all of these
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, five, and ten-year periods, (or, while a subaccount has
been in existence for a period of less than one, five or 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 first date any subaccount
investing in an underlying portfolio 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, adjusted to reflect current subaccount
charges, 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 of these subaccounts, except
the WRL J.P. Morgan Money Market subaccount, the calculations take into account
all current fees that are charged under the Contract to all owner accounts
during the accumulation period. Such fees include the mortality and expense risk
charge of 1.25%, the administrative charge of 0.15%, and the $35 annual Contract
charge, calculated on the basis of an average Contract size of $64,172, which
translates into a charge of 0.05%. 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 or withdrawal charges
that may be applicable to a particular Contract.
OTHER PERFORMANCE DATA
We may present the total return data stated in the prospectus on a
non-standardized basis. This means that the data will not be reduced by the
withdrawal charge under the Contract and that the data may be presented for
different time periods and for different purchase payment amounts.
NON-STANDARDIZED PERFORMANCE DATA WILL ONLY BE DISCLOSED IF STANDARDIZED
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
investing in the underlying portfolios. 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 1.25%, the administrative
12
<PAGE>
charge of 0.15% and the $35 annual Contract charge (based on an average Contract
size of $64,172, the annual Contract charge translates into a charge of 0.05%).
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 purchase 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 purchase 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.
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 Rating Services, Moody's Investors Service, Inc. 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 funds or their 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
13
<PAGE>
of the National Association of Securities Dealers, Inc. AFSG will not be
compensated for its services as principal underwriter of the Contracts.
AFSG will receive the 12b-1 fees assessed against the Fidelity VIP Funds' shares
held for the Contracts as compensation for providing certain shareholder support
services. AFSG will also receive an additional fee based on the value of shares
of the Fidelity VIP Funds held for the Contracts as compensation for providing
certain recordkeeping services.
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 7% of
purchase payments. In addition, broker/dealers may receive trail commissions of
0.20% of the annuity value (excluding the fixed account) in each Contract year,
starting at the end of the first quarter of the second Contract year, provided
the Contract has an annuity value of $25,000 or more in the subaccounts. These
commissions are not deducted from purchase payments. 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 funds.
Additional protection for the assets of the separate account is provided by a
blanket bond issued to AEGON USA, Inc. ("AEGON USA") in the aggregate amount
of $12 million, covering all of the employees of AEGON USA 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.
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.,
Senior Vice President, General Counsel and Assistant Secretary of Western
Reserve.
INDEPENDENT ACCOUNTANTS
The accounting firm of PricewaterhouseCoopers LLP, independent certified public
accountants, provided audit services to the separate account for the year ended
December 31, 1999. The principal business address of PricewaterhouseCoopers LLP
is 400 North Ashley Street, Suite 2800, Tampa, Florida 33602-4319. The
accounting firm of Ernst & Young LLP, independent auditors, provided audit
services to Western Reserve for the year ended December 31, 1999. 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
14
<PAGE>
assets held in the separate account.
Financial statements for Western Reserve as of December 31, 1999 and 1998 and
for each of the three years in the period ended December 31, 1999 have been
prepared on the basis of statutory accounting principles, rather than generally
accepted accounting principles.
15
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Western Reserve Life Assurance Co. of Ohio and
Contract Owners of the WRL Series Annuity Account
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
each of the Subaccounts constituting the WRL Series Annuity Account (a separate
account of Western Reserve Life Assurance Co. of Ohio ("WRL")) at December 31,
1999, the results of each of their operations, the changes in each of their net
assets and financial highlights for each of the periods indicated, in
conformity with accounting principles generally accepted in the United States.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of WRL's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 16, 2000
<PAGE>
WRL SERIES ANNUITY ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES
AT DECEMBER 31, 1999
ALL AMOUNTS (EXCEPT PER UNIT AMOUNTS) IN THOUSANDS
<TABLE>
<CAPTION>
WRL WRL WRL WRL
J.P. MORGAN AEGON JANUS JANUS
MONEY MARKET BOND GROWTH GLOBAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C>
ASSETS:
Investment in WRL Series Fund, Inc.:
Shares ............................................... 367,330 11,747 34,589 38,303
======= ====== ====== ======
Cost ................................................. $ 367,330 $ 135,532 $ 1,620,829 $ 837,123
========= ========= =========== ===========
Investment, at net asset value ........................ $ 367,330 $ 124,601 $ 2,697,769 $ 1,434,873
Transfers receivable from depositor ................... 866 0 982 820
--------- --------- ----------- -----------
Total assets ......................................... 368,196 124,601 2,698,751 1,435,693
--------- --------- ----------- -----------
LIABILITIES:
Accrued expenses ...................................... 0 0 0 0
Transfers payable to depositor ........................ (1,878) (435) (1,415) (500)
--------- --------- ----------- -----------
Total liabilities .................................... (1,878) (435) (1,415) (500)
--------- --------- ----------- -----------
Net assets ........................................... $ 366,318 $ 124,166 $ 2,697,336 $ 1,435,193
========= ========= =========== ===========
NET ASSETS CONSISTS OF:
Contract Owners' equity:
Class A ............................................. $ 96,984 $ 37,241 $ 1,166,818 $ 458,385
Class B ............................................. 269,284 86,875 1,530,405 976,752
Class C ............................................. 0 0 0 0
Class D ............................................. 0 0 0 0
Depositor's equity:
Class A ............................................. 0 0 0 0
Class B ............................................. 0 0 59 0
Class C ............................................. 25 25 27 28
Class D ............................................. 25 25 27 28
--------- --------- ----------- -----------
Net assets applicable to units outstanding ......... $ 366,318 $ 124,166 $ 2,697,336 $ 1,435,193
========= ========= =========== ===========
Contract Owners' units:
Class A ............................................. 6,518 1,843 11,831 8,767
Class B ............................................. 21,724 6,281 32,274 18,875
Class C ............................................. 0 0 0 0
Class D ............................................. 0 0 0 0
Depositor's units:
Class A ............................................. 0 0 0 0
Class B ............................................. 0 0 1 0
Class C ............................................. 3 3 3 3
Class D ............................................. 3 3 3 3
--------- --------- ----------- -----------
Units outstanding .................................. 28,248 8,130 44,112 27,648
========= ========= =========== ===========
Accumulation unit value - Class A ................... $ 14.88 $ 20.20 $ 98.62 $ 52.29
========= ========= =========== ===========
Accumulation unit value - Class B ................... $ 12.40 $ 13.83 $ 47.42 $ 51.75
========= ========= =========== ===========
Accumulation unit value - Class C ................... $ 10.05 $ 9.98 $ 10.87 $ 11.39
========= ========= =========== ===========
Accumulation unit value - Class D ................... $ 10.05 $ 9.98 $ 10.87 $ 11.39
========= ========= =========== ===========
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES
AT DECEMBER 31, 1999
ALL AMOUNTS (EXCEPT PER UNIT AMOUNTS) IN THOUSANDS
<TABLE>
<CAPTION>
WRL WRL WRL
LKCM VKAM ALGER WRL
STRATEGIC EMERGING AGGRESSIVE AEGON
TOTAL RETURN GROWTH GROWTH BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C>
ASSETS:
Investments in WRL Series Fund, Inc.:
Shares ............................................... 30,439 27,834 22,415 6,993
====== ====== ====== =====
Cost ................................................. $ 444,233 $ 742,889 $ 464,568 $ 85,165
========= =========== ========= ========
Investment, at net asset value ........................ $ 512,796 $ 1,280,534 $ 745,871 $ 88,532
Transfers receivable from depositor ................... 353 1,389 277 0
--------- ----------- --------- --------
Total assets ......................................... 513,149 1,281,923 746,148 88,532
--------- ----------- --------- --------
LIABILITIES:
Accrued expenses ...................................... 0 0 0 0
Transfers payable to depositor ........................ (48) (148) (32) (94)
--------- ----------- --------- --------
Total liabilities .................................... (48) (148) (32) (94)
--------- ----------- --------- --------
Net assets ........................................... $ 513,101 $ 1,281,775 $ 746,116 $ 88,438
========= =========== ========= ========
NET ASSETS CONSISTS OF:
Contract Owners' equity:
Class A ............................................. $ 156,928 $ 390,626 $ 170,691 $ 21,830
Class B ............................................. 356,072 891,089 575,367 66,558
Class C ............................................. 0 0 0 0
Class D ............................................. 0 0 0 0
Depositor's equity:
Class A ............................................. 0 0 0 0
Class B ............................................. 49 0 0 0
Class C ............................................. 26 30 29 25
Class D ............................................. 26 30 29 25
--------- ----------- --------- --------
Net assets applicable to units outstanding ......... $ 513,101 $ 1,281,775 $ 746,116 $ 88,438
========= =========== ========= ========
Contract Owners' units:
Class A ............................................. 7,040 6,154 3,898 1,453
Class B ............................................. 16,135 14,179 13,252 4,467
Class C ............................................. 0 0 0 0
Class D ............................................. 0 0 0 0
Depositor's units:
Class A ............................................. 0 0 0 0
Class B ............................................. 2 0 0 0
Class C ............................................. 3 3 3 3
Class D ............................................. 3 3 3 3
--------- ----------- --------- --------
Units outstanding .................................. 23,183 20,339 17,156 5,926
========= =========== ========= ========
Accumulation unit value - Class A ................... $ 22.29 $ 63.48 $ 43.79 $ 15.03
========= =========== ========= ========
Accumulation unit value - Class B ................... $ 22.07 $ 62.85 $ 43.42 $ 14.90
========= =========== ========= ========
Accumulation unit value - Class C ................... $ 10.32 $ 12.11 $ 11.70 $ 10.00
========= =========== ========= ========
Accumulation unit value - Class D ................... $ 10.32 $ 12.11 $ 11.70 $ 10.00
========= =========== ========= ========
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES
AT DECEMBER 31, 1999
ALL AMOUNTS (EXCEPT PER UNIT AMOUNTS) IN THOUSANDS
<TABLE>
<CAPTION>
WRL
FEDERATED WRL WRL WRL
GROWTH & DEAN ASSET C.A.S.E. NWQ
INCOME ALLOCATION GROWTH VALUE EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C>
ASSETS:
Investment in WRL Series Fund, Inc.:
Shares ............................................... 5,239 18,679 4,183 8,647
===== ====== ===== =====
Cost ................................................. $ 64,802 $ 250,586 $ 61,945 $ 117,027
======== ========= ======== =========
Investment, at net asset value ........................ $ 57,131 $ 226,587 $ 65,682 $ 110,415
Transfers receivable from depositor ................... 1 0 0 0
-------- --------- -------- ---------
Total assets ......................................... 57,132 226,587 65,682 110,415
-------- --------- -------- ---------
LIABILITIES:
Accrued expenses ...................................... 0 0 0 0
Transfers payable to depositor ........................ (25) (342) (83) (314)
-------- --------- -------- ---------
Total liabilities .................................... (25) (342) (83) (314)
-------- --------- -------- ---------
Net assets ........................................... $ 57,107 $ 226,245 $ 65,599 $ 110,101
======== ========= ======== =========
NET ASSETS CONSISTS OF:
Contract Owners' equity:
Class A ............................................. $ 11,318 $ 59,161 $ 14,425 $ 32,947
Class B ............................................. 45,739 167,034 51,124 77,102
Class C ............................................. 0 0 0 0
Class D ............................................. 0 0 0 0
Depositor's equity:
Class A ............................................. 0 0 0 0
Class B ............................................. 0 0 0 0
Class C ............................................. 25 25 25 26
Class D ............................................. 25 25 25 26
-------- --------- -------- ---------
Net assets applicable to units outstanding ......... $ 57,107 $ 226,245 $ 65,599 $ 110,101
======== ========= ======== =========
Contract Owners' units:
Class A ............................................. 742 3,845 684 2,371
Class B ............................................. 3,024 10,939 3,137 5,579
Class C ............................................. 0 0 0 0
Class D ............................................. 0 0 0 0
Depositor's units:
Class A ............................................. 0 0 0 0
Class B ............................................. 0 0 0 0
Class C ............................................. 3 3 3 3
Class D ............................................. 3 3 3 3
-------- --------- -------- ---------
Units outstanding .................................. 3,772 14,790 3,827 7,956
======== ========= ======== =========
Accumulation unit value - Class A ................... $ 15.26 $ 15.38 $ 21.10 $ 13.90
======== ========= ======== =========
Accumulation unit value - Class B ................... $ 15.13 $ 15.27 $ 16.30 $ 13.82
======== ========= ======== =========
Accumulation unit value - Class C ................... $ 10.07 $ 9.91 $ 10.05 $ 10.42
======== ========= ======== =========
Accumulation unit value - Class D ................... $ 10.07 $ 9.91 $ 10.05 $ 10.42
======== ========= ======== =========
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES
AT DECEMBER 31, 1999
ALL AMOUNTS (EXCEPT PER UNIT AMOUNTS) IN THOUSANDS
<TABLE>
<CAPTION>
WRL
GE/SCOTTISH WRL WRL
EQUITABLE WRL THIRD J.P. MORGAN
INTERNATIONAL GE AVENUE REAL ESTATE
EQUITY U.S. EQUITY VALUE SECURITIES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C>
ASSETS:
Investment in WRL Series Fund, Inc.:
Shares ............................................... 1,850 9,657 1,495 243
===== ===== ===== ===
Cost ................................................. $ 23,929 $ 142,695 $ 13,720 $ 2,057
======== ========= ======== ========
Investment, at net asset value ........................ $ 26,415 $ 152,501 $ 15,626 $ 1,955
Transfers receivable from depositor ................... 0 195 0 130
-------- --------- -------- --------
Total assets ......................................... 26,415 152,696 15,626 2,085
-------- --------- -------- --------
LIABILITIES:
Accrued expenses ...................................... 0 0 0 0
Transfers payable to depositor ........................ (14) (19) (115) 0
-------- --------- -------- --------
Total liabilities .................................... (14) (19) (115) 0
-------- --------- -------- --------
Net assets ........................................... $ 26,401 $ 152,677 $ 15,511 $ 2,085
======== ========= ======== ========
NET ASSETS CONSISTS OF:
Contract Owners' equity:
Class A ............................................. $ 5,881 $ 32,459 $ 5,309 $ 207
Class B ............................................. 20,464 120,166 10,148 1,386
Class C ............................................. 0 0 0 0
Class D ............................................. 0 0 0 0
Depositor's equity:
Class A ............................................. 0 0 0 200
Class B ............................................. 0 0 0 240
Class C ............................................. 28 26 27 26
Class D ............................................. 28 26 27 26
-------- --------- -------- --------
Net assets applicable to units outstanding ......... $ 26,401 $ 152,677 $ 15,511 $ 2,085
======== ========= ======== ========
Contract Owners' units:
Class A ............................................. 403 1,823 505 26
Class B ............................................. 1,408 6,781 968 173
Class C ............................................. 0 0 0 0
Class D ............................................. 0 0 0 0
Depositor's units:
Class A ............................................. 0 0 0 25
Class B ............................................. 0 0 0 30
Class C ............................................. 3 3 3 3
Class D ............................................. 3 3 3 3
-------- --------- -------- --------
Units outstanding .................................. 1,817 8,610 1,479 260
======== ========= ======== ========
Accumulation unit value - Class A ................... $ 14.60 $ 17.80 $ 10.51 $ 8.02
======== ========= ======== ========
Accumulation unit value - Class B ................... $ 14.54 $ 17.72 $ 10.48 $ 8.00
======== ========= ======== ========
Accumulation unit value - Class C ................... $ 11.12 $ 10.42 $ 10.66 $ 10.40
======== ========= ======== ========
Accumulation unit value - Class D ................... $ 11.12 $ 10.42 $ 10.66 $ 10.40
======== ========= ======== ========
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES
AT DECEMBER 31, 1999
ALL AMOUNTS (EXCEPT PER UNIT AMOUNTS) IN THOUSANDS
<TABLE>
<CAPTION>
WRL WRL WRL WRL
GOLDMAN SACHS GOLDMAN SACHS T. ROWE PRICE T. ROWE PRICE
GROWTH SMALL CAP DIVIDEND GROWTH SMALL CAP
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C>
ASSETS:
Investment in WRL Series Fund, Inc.:
Shares ............................................... 612 214 886 660
=== === === ===
Cost ................................................. $ 6,229 $ 2,267 $ 8,474 $ 7,269
======== ======== ======== ========
Investment, at net asset value ........................ $ 7,196 $ 2,395 $ 8,207 $ 8,850
Transfers receivable from depositor ................... 40 23 1 45
-------- -------- -------- --------
Total assets ......................................... 7,236 2,418 8,208 8,895
-------- -------- -------- --------
LIABILITIES:
Accrued expenses ...................................... 0 0 0 0
Transfers payable to depositor ........................ 0 0 0 0
-------- -------- -------- --------
Total liabilities .................................... 0 0 0 0
-------- -------- -------- --------
Net assets ........................................... $ 7,236 $ 2,418 $ 8,208 $ 8,895
======== ======== ======== ========
NET ASSETS CONSISTS OF:
Contract Owners' equity:
Class A ............................................. $ 1,055 $ 167 $ 1,605 $ 3,669
Class B ............................................. 5,574 1,644 6,117 4,587
Class C ............................................. 0 0 0 0
Class D ............................................. 0 0 0 0
Depositor's equity:
Class A ............................................. 262 262 207 240
Class B ............................................. 291 291 229 343
Class C ............................................. 27 27 25 28
Class D ............................................. 27 27 25 28
-------- -------- -------- --------
Net assets applicable to units outstanding ......... $ 7,236 $ 2,418 $ 8,208 $ 8,895
======== ======== ======== ========
Contract Owners' units:
Class A ............................................. 91 14 175 267
Class B ............................................. 479 141 667 334
Class C ............................................. 0 0 0 0
Class D ............................................. 0 0 0 0
Depositor's units:
Class A ............................................. 23 23 23 18
Class B ............................................. 25 25 25 25
Class C ............................................. 3 3 3 3
Class D ............................................. 3 3 3 3
-------- -------- -------- --------
Units outstanding .................................. 624 209 896 650
======== ======== ======== ========
Accumulation unit value - Class A ................... $ 11.65 $ 11.64 $ 9.18 $ 13.73
======== ======== ======== ========
Accumulation unit value - Class B ................... $ 11.64 $ 11.63 $ 9.17 $ 13.72
======== ======== ======== ========
Accumulation unit value - Class C ................... $ 10.73 $ 10.89 $ 9.87 $ 11.40
======== ======== ======== ========
Accumulation unit value - Class D ................... $ 10.73 $ 10.89 $ 9.87 $ 11.40
======== ======== ======== ========
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES
AT DECEMBER 31, 1999
ALL AMOUNTS (EXCEPT PER UNIT AMOUNTS) IN THOUSANDS
<TABLE>
<CAPTION>
WRL WRL WRL
SALOMON PILGRIM BAXTER DREYFUS
ALL CAP MID CAP GROWTH MID CAP
SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C>
ASSETS:
Investment in WRL Series Fund, Inc.:
Shares ............................................... 561 1,809 283
=== ===== ===
Cost ................................................. $ 6,031 $ 22,992 $ 2,891
======== ========= ========
Investment, at net asset value ........................ $ 6,271 $ 32,102 $ 3,029
Transfers receivable from depositor ................... 22 222 50
-------- --------- --------
Total assets ......................................... 6,293 32,324 3,079
-------- --------- --------
LIABILITIES:
Accrued expenses ...................................... 0 0 0
Transfers payable to depositor ........................ 0 0 0
-------- --------- --------
Total liabilities .................................... 0 0 0
-------- --------- --------
Net assets ........................................... $ 6,293 $ 32,324 $ 3,079
======== ========= ========
NET ASSETS CONSISTS OF:
Contract Owners' equity:
Class A ............................................. $ 1,116 $ 6,660 $ 561
Class B ............................................. 4,581 25,604 1,962
Class C ............................................. 0 0 0
Class D ............................................. 0 0 0
Depositor's equity:
Class A ............................................. 258 0 239
Class B ............................................. 286 0 265
Class C ............................................. 26 30 26
Class D ............................................. 26 30 26
-------- --------- --------
Net assets applicable to units outstanding ......... $ 6,293 $ 32,324 $ 3,079
======== ========= ========
Contract Owners' units:
Class A ............................................. 97 377 53
Class B ............................................. 400 1,452 185
Class C ............................................. 0 0 0
Class D ............................................. 0 0 0
Depositor's units:
Class A ............................................. 23 0 23
Class B ............................................. 25 0 25
Class C ............................................. 3 3 3
Class D ............................................. 3 3 3
-------- --------- --------
Units outstanding .................................. 551 1,835 292
======== ========= ========
Accumulation unit value - Class A ................... $ 11.46 $ 17.65 $ 10.63
======== ========= ========
Accumulation unit value - Class B ................... $ 11.45 $ 17.63 $ 10.62
======== ========= ========
Accumulation unit value - Class C ................... $ 10.46 $ 12.09 $ 10.51
======== ========= ========
Accumulation unit value - Class D ................... $ 10.46 $ 12.09 $ 10.51
======== ========= ========
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
ALL AMOUNTS IN THOUSANDS
<TABLE>
<CAPTION>
WRL WRL WRL WRL
J.P. MORGAN AEGON JANUS JANUS
MONEY MARKET BOND GROWTH GLOBAL
SUBACCOUNT(1) SUBACCOUNT(1) SUBACCOUNT(1) SUBACCOUNT(1)
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividend income ........................................... $ 11,065 $ 7,190 $ 39,761 $ 0
Capital gain distributions ................................ 0 0 431,307 93,912
-------- --------- --------- ---------
Total investment income .................................. 11,065 7,190 471,068 93,912
-------- --------- --------- ---------
EXPENSES:
Mortality and expense risk:
Class A ................................................. 885 546 11,640 4,131
Class B ................................................. 2,243 1,266 15,310 9,006
Class C ................................................. 0 0 0 0
Class D ................................................. 0 0 0 0
-------- --------- --------- ---------
Total expenses ......................................... 3,128 1,812 26,950 13,137
-------- --------- --------- ---------
Net investment income (loss) ............................. 7,937 5,378 444,118 80,775
-------- --------- --------- ---------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investment securities ......... 0 1,119 159,503 75,281
Change in unrealized appreciation (depreciation) .......... 0 (12,394) 370,303 425,741
-------- --------- --------- ---------
Net gain (loss) on investment securities ................. 0 (11,275) 529,806 501,022
-------- --------- --------- ---------
Net increase (decrease) in net assets resulting
from operations ....................................... $ 7,937 $ (5,897) $ 973,924 $ 581,797
======== ========= ========= =========
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
ALL AMOUNTS IN THOUSANDS
<TABLE>
<CAPTION>
WRL WRL WRL
LKCM VKAM ALGER WRL
STRATEGIC EMERGING AGGGRESSIVE AEGON
TOTAL RETURN GROWTH GROWTH BALANCED
SUBACCOUNT(1) SUBACCOUNT(1) SUBACCOUNT(1) SUBACCOUNT(1)
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividend income ........................................... $ 10,373 $ 5,955 $ 32,212 $ 1,817
Capital gain distributions ................................ 32,562 174,041 48,122 0
--------- --------- --------- --------
Total investment income .................................. 42,935 179,996 80,334 1,817
--------- --------- --------- --------
EXPENSES:
Mortality and expense risk:
Class A ................................................. 1,949 3,036 1,538 272
Class B ................................................. 4,673 7,170 5,178 914
Class C ................................................. 0 0 0 0
Class D ................................................. 0 0 0 0
--------- --------- --------- --------
Total expenses ......................................... 6,622 10,206 6,716 1,186
--------- --------- --------- --------
Net investment income (loss) ............................. 36,313 169,790 73,618 631
--------- --------- --------- --------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investment securities ......... 25,051 98,709 38,716 2,671
Change in unrealized appreciation (depreciation) .......... (11,686) 366,224 174,915 (2,221)
--------- --------- --------- --------
Net gain (loss) on investment securities ................. 13,365 464,933 213,631 450
--------- --------- --------- --------
Net increase (decrease) in net assets resulting
from operations ....................................... $ 49,678 $ 634,723 $ 287,249 $ 1,081
========= ========= ========= ========
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
ALL AMOUNTS IN THOUSANDS
<TABLE>
<CAPTION>
WRL
FEDERATED WRL WRL WRL
GROWTH & DEAN ASSET C.A.S.E. NWQ
INCOME ALLOCATION GROWTH VALUE EQUITY
SUBACCOUNT(1) SUBACCOUNT(1) SUBACCOUNT(1) SUBACCOUNT(1)
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividend income ....................................... $ 3,843 $ 7,767 $ 6,318 $ 987
Capital gain distributions ............................ 500 1,374 0 1,702
--------- ---------- -------- -------
Total investment income .............................. 4,343 9,141 6,318 2,689
--------- ---------- -------- -------
EXPENSES:
Mortality and expense risk:
Class A ............................................. 170 929 177 456
Class B ............................................. 697 2,982 642 1,237
Class C ............................................. 0 0 0 0
Class D ............................................. 0 0 0 0
--------- ---------- -------- -------
Total expenses ..................................... 867 3,911 819 1,693
--------- ---------- -------- -------
Net investment income (loss) ......................... 3,476 5,230 5,499 996
--------- ---------- -------- -------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investment securities ..... (221) 8,077 1,994 (949)
Change in unrealized appreciation (depreciation) ...... (7,068) (33,009) 8,116 6,231
--------- ---------- -------- -------
Net gain (loss) on investment securities ............. (7,289) (24,932) 10,110 5,282
--------- ---------- -------- -------
Net increase (decrease) in net assets resulting
from operations ................................... $ (3,813) $ (19,702) $ 15,609 $ 6,278
========= ========== ======== =======
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
ALL AMOUNTS IN THOUSANDS
<TABLE>
<CAPTION>
WRL
GE/SCOTTISH WRL WRL
EQUITABLE WRL THIRD J.P. MORGAN
INTERNATIONAL GE AVENUE REAL ESTATE
EQUITY U.S. EQUITY VALUE SECURITIES
SUBACCOUNT(1) SUBACCOUNT(1) SUBACCOUNT(1) SUBACCOUNT(1)
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividend income ....................................... $ 95 $ 4,587 $ 436 49
Capital gain distributions ............................ 1,234 6,500 0 0
------- -------- ------- --
Total investment income .............................. 1,329 11,087 436 49
------- -------- ------- --
EXPENSE:
Mortality and expense risk:
Class A ............................................. 73 344 71 6
Class B ............................................. 288 1,385 131 24
Class C ............................................. 0 0 0 0
Class D ............................................. 0 0 0 0
------- -------- ------- --
Total expenses ..................................... 361 1,729 202 30
------- -------- ------- --
Net investment income (loss) ......................... 968 9,358 234 19
------- -------- ------- --
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investment securities ..... 3,571 7,340 (823) (165)
Change in unrealized appreciation (depreciation) ...... 1,811 2,118 2,530 (34)
------- -------- ------- ----
Net gain (loss) on investment securities ............. 5,382 9,458 1,707 (199)
------- -------- ------- ----
Net increase (decrease) in net assets resulting
from operations ................................... $ 6,350 $ 18,816 $ 1,941 $ (180)
======= ======== ======= =======
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
ALL AMOUNTS IN THOUSANDS
<TABLE>
<CAPTION>
WRL WRL WRL WRL
GOLDMAN SACHS GOLDMAN SACHS T. ROWE PRICE T. ROWE PRICE
GROWTH SMALL CAP DIVIDEND GROWTH SMALL CAP
SUBACCOUNT(1) SUBACCOUNT(1) SUBACCOUNT(1) SUBACCOUNT(1)
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividend income ........................................... $ 0 $ 83 $ 0 $ 270
Capital gain distributions ................................ 0 0 0 0
------ ----- ------- -------
Total investment income .................................. 0 83 0 270
------ ----- ------- -------
EXPENSES:
Mortality and expense risk:
Class A ................................................. 7 5 9 20
Class B ................................................. 30 11 36 33
Class C ................................................. 0 0 0 0
Class D ................................................. 0 0 0 0
------ ----- ------- -------
Total expenses ......................................... 37 16 45 53
------ ----- ------- -------
Net investment income (loss) ............................. (37) 67 (45) 217
------ ----- ------- -------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investment securities ......... 38 206 (100) 404
Change in unrealized appreciation (depreciation) .......... 967 128 (267) 1,581
------ ----- ------- -------
Net gain (loss) on investment securities ................. 1,005 334 (367) 1,985
------ ----- ------- -------
Net increase (decrease) in net assets resulting
from operations ....................................... $ 968 $ 401 $ (412) $ 2,202
====== ===== ======= =======
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
ALL AMOUNTS IN THOUSANDS
<TABLE>
<CAPTION>
WRL WRL WRL
SALOMON PILGRIM BAXTER DREYFUS
ALL CAP MID CAP GROWTH MID CAP
SUBACCOUNT(1) SUBACCOUNT(1) SUBACCOUNT(1)
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividend income ........................................... $ 187 $ 87 $ 0
Capital gain distributions ................................ 0 0 0
----- -------- -----
Total investment income .................................. 187 87 0
----- -------- -----
EXPENSES:
Mortality and expense risk:
Class A ................................................. 9 21 3
Class B ................................................. 28 84 8
Class C ................................................. 0 0 0
Class D ................................................. 0 0 0
----- -------- -----
Total expenses ......................................... 37 105 11
----- -------- -----
Net investment income (loss) ............................. 150 (18) (11)
----- -------- -----
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investment securities ......... 224 1,363 8
Change in unrealized appreciation (depreciation) .......... 240 9,110 138
----- -------- -----
Net gain (loss) on investment securities ................. 464 10,473 146
----- -------- -----
Net increase (decrease) in net assets resulting
from operations ....................................... $ 614 $ 10,455 $ 135
===== ======== =====
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
ALL AMOUNTS IN THOUSANDS
<TABLE>
<CAPTION>
WRL WRL
J.P. MORGAN AEGON
MONEY MARKET BOND
SUBACCOUNT SUBACCOUNT
------------------------- -------------------------
DECEMBER 31, DECEMBER 31,
------------------------- -------------------------
1999(1) 1998 1999(1) 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..................... $ 7,937 $ 5,242 $ 5,378 $ 5,213
Net gain (loss) on investment securities ......... 0 0 (11,275) 3,752
--------- --------- --------- ---------
Net increase (decrease) in net assets
resulting from operations ....................... 7,937 5,242 (5,897) 8,965
--------- --------- --------- ---------
CAPITAL UNIT TRANSACTIONS:
Proceeds from units sold (transferred) ........... 291,332 89,466 6,238 39,699
--------- --------- --------- ---------
Less cost of units redeemed:
Administrative charges .......................... 87 67 67 74
Policy loans .................................... 151 10 1 9
Surrender benefits .............................. 73,392 51,046 18,318 15,360
Death benefits .................................. 2,150 2,489 516 1,002
--------- --------- --------- ---------
75,780 53,612 18,902 16,445
--------- --------- --------- ---------
Increase (decrease) in net assets from
capital unit transactions ...................... 215,552 35,854 (12,664) 23,254
--------- --------- --------- ---------
Net increase (decrease) in net assets ........... 223,489 41,096 (18,561) 32,219
Depositor's equity contribution
(net redemption) ................................ 50 0 50 0
NET ASSETS:
Beginning of year ................................ 142,779 101,683 142,677 110,458
--------- --------- --------- ---------
End of year ...................................... $ 366,318 $ 142,779 $ 124,166 $ 142,677
========= ========= ========= =========
<CAPTION>
WRL
JANUS
GROWTH
SUBACCOUNT
------------------------------
DECEMBER 31,
------------------------------
1999(1) 1998
-------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ..................... $ 444,118 $ (3,071)
Net gain (loss) on investment securities ......... 529,806 619,001
----------- -----------
Net increase (decrease) in net assets
resulting from operations ....................... 973,924 615,930
----------- -----------
CAPITAL UNIT TRANSACTIONS:
Proceeds from units sold (transferred) ........... 283,212 176,685
----------- -----------
Less cost of units redeemed:
Administrative charges .......................... 1,134 924
Policy loans .................................... 1,099 276
Surrender benefits .............................. 192,295 145,324
Death benefits .................................. 8,618 6,422
----------- -----------
203,146 152,946
----------- -----------
Increase (decrease) in net assets from
capital unit transactions ...................... 80,066 23,739
----------- -----------
Net increase (decrease) in net assets ........... 1,053,990 639,669
Depositor's equity contribution
(net redemption) ................................ 96 0
NET ASSETS:
Beginning of year ................................ 1,643,250 1,003,581
----------- -----------
End of year ...................................... $ 2,697,336 $ 1,643,250
=========== ===========
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
ALL AMOUNTS IN THOUSANDS
<TABLE>
<CAPTION>
WRL
JANUS
GLOBAL
SUBACCOUNT
---------------------------
DECEMBER 31,
---------------------------
1999(1) 1998
-------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ..................... $ 80,775 $ 22,977
Net gain (loss) on investment securities ......... 501,022 153,591
----------- ---------
Net increase (decrease) in net assets
resulting from operations ....................... 581,797 176,568
----------- ---------
CAPITAL UNIT TRANSACTIONS:
Proceeds from units sold (transferred) ........... 123,780 84,146
----------- ---------
Less cost of units redeemed:
Administrative charges .......................... 566 531
Policy loans .................................... 596 169
Surrender benefits .............................. 88,761 67,089
Death benefits .................................. 3,381 2,884
----------- ---------
93,304 70,673
----------- ---------
Increase (decrease) in net assets from
capital unit transactions ...................... 30,476 13,473
----------- ---------
Net increase (decrease) in net assets ........... 612,273 190,041
Depositor's equity contribution
(net redemption) ................................ 50 0
NET ASSETS:
Beginning of year ................................ 822,870 632,829
----------- ---------
End of year ...................................... $ 1,435,193 $ 822,870
=========== =========
<CAPTION>
WRL
LKCM WRL
STRATEGIC VKAM
TOTAL RETURN EMERGING GROWTH
SUBACCOUNT SUBACCOUNT
------------------------- ---------------------------
DECEMBER 31, DECEMBER 31,
------------------------- ---------------------------
1999(1) 1998 1999(1) 1998
------------ ------------ -------------- ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..................... $ 36,313 $ 14,285 $ 169,790 $ 13,033
Net gain (loss) on investment securities ......... 13,365 22,007 464,933 135,100
--------- --------- ----------- ---------
Net increase (decrease) in net assets
resulting from operations ....................... 49,678 36,292 634,723 148,133
--------- --------- ----------- ---------
CAPITAL UNIT TRANSACTIONS:
Proceeds from units sold (transferred) ........... 22,908 53,733 132,553 52,394
--------- --------- ----------- ---------
Less cost of units redeemed:
Administrative charges .......................... 235 257 456 370
Policy loans .................................... 130 75 425 81
Surrender benefits .............................. 46,748 41,421 65,473 39,571
Death benefits .................................. 1,980 2,375 2,456 1,824
--------- --------- ----------- ---------
49,093 44,128 68,810 41,846
--------- --------- ----------- ---------
Increase (decrease) in net assets from
capital unit transactions ...................... (26,185) 9,605 63,743 10,548
--------- --------- ----------- ---------
Net increase (decrease) in net assets ........... 23,493 45,897 698,466 158,681
Depositor's equity contribution
(net redemption) ................................ 97 0 50 0
NET ASSETS:
Beginning of year ................................ 489,511 443,614 583,259 424,578
--------- --------- ----------- ---------
End of year ...................................... $ 513,101 $ 489,511 $ 1,281,775 $ 583,259
========= ========= =========== =========
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
ALL AMOUNTS IN THOUSANDS
<TABLE>
<CAPTION>
WRL WRL WRL
ALGER AEGON FEDERATED
AGGRESSIVE GROWTH BALANCED GROWTH & INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------- ----------------------- -----------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------------------- ----------------------- -----------------------
1999(1) 1998 1999(1) 1998 1999(1) 1998
------------ ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..................... $ 73,618 $ 15,953 $ 631 $ 848 $ 3,476 $ 2,617
Net gain (loss) on investment securities ......... 213,631 99,018 450 2,982 (7,289) (1,401)
--------- --------- -------- -------- --------- --------
Net increase (decrease) in net assets
resulting from operations ....................... 287,249 114,971 1,081 3,830 (3,813) 1,216
--------- --------- -------- -------- --------- --------
CAPITAL UNIT TRANSACTIONS:
Proceeds from units sold (transferred) ........... 112,487 61,019 16,567 21,611 (1,114) 22,549
--------- --------- -------- -------- --------- --------
Less costs of units redeemed:
Administrative charges .......................... 330 253 48 47 38 37
Policy loans .................................... 277 191 24 34 5 15
Surrender benefits .............................. 39,958 23,320 7,558 7,504 6,215 5,368
Death benefits .................................. 1,354 922 378 334 408 342
--------- --------- -------- -------- --------- --------
41,919 24,686 8,008 7,919 6,666 5,762
--------- --------- -------- -------- --------- --------
Increase (decrease) in net assets from
capital unit transactions ...................... 70,568 36,333 8,559 13,692 (7,780) 16,787
--------- --------- -------- -------- --------- --------
Net increase (decrease) in net assets ........... 357,817 151,304 9,640 17,522 (11,593) 18,003
Depositor's equity contribution
(net redemption) ................................ 50 0 50 0 50 0
NET ASSETS:
Beginning of year ................................ 388,249 236,945 78,748 61,226 68,650 50,647
--------- --------- -------- -------- --------- --------
End of year ...................................... $ 746,116 $ 388,249 $ 88,438 $ 78,748 $ 57,107 $ 68,650
========= ========= ======== ======== ========= ========
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
ALL AMOUNTS IN THOUSANDS
<TABLE>
<CAPTION>
WRL WRL
DEAN ASSET C.A.S.E.
ALLOCATION GROWTH
SUBACCOUNT SUBACCOUNT
-------------------------- ------------------------
DECEMBER 31, DECEMBER 31,
-------------------------- ------------------------
1999(1) 1998 1999(1) 1998
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..................... $ 5,230 $ 26,761 $ 5,499 $ 4,303
Net gain (loss) on investment securities ......... (24,932) (7,555) 10,110 (3,980)
--------- --------- -------- --------
Net increase (decrease) in net asset
resulting from operations ....................... (19,702) 19,206 15,609 323
--------- --------- -------- --------
CAPITAL UNIT TRANSACTIONS:
Proceeds from units sold (transferred) ........... (48,724) 60,662 3,993 5,436
--------- --------- -------- --------
Less cost of units redeemed:
Administrative charges .......................... 141 145 41 33
Policy loans .................................... 62 61 23 17
Surrender benefits .............................. 27,289 27,240 5,232 3,062
Death benefits .................................. 1,211 1,105 498 578
--------- --------- -------- --------
28,703 28,551 5,794 3,690
--------- --------- -------- --------
Increase (decrease) in net assets from
capital unit transactions ...................... (77,427) 32,111 (1,801) 1,746
--------- --------- -------- --------
Net increase (decrease) in net assets ........... (97,129) 51,317 13,808 2,069
Depositor's equity contribution
(net redemption) ................................ 50 0 50 0
NET ASSETS:
Beginning of year ................................ 323,324 272,007 51,741 49,672
--------- --------- -------- --------
End of year ...................................... $ 226,245 $ 323,324 $ 65,599 $ 51,741
========= ========= ======== ========
<CAPTION>
WRL
NWQ
VALUE EQUITY
SUBACCOUNT
--------------------------
DECEMBER 31,
--------------------------
1999(1) 1998
------------ -------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ..................... $ 996 $ 10,027
Net gain (loss) on investment securities ......... 5,282 (22,340)
--------- ---------
Net increase (decrease) in net asset
resulting from operations ....................... 6,278 (12,313)
--------- ---------
CAPITAL UNIT TRANSACTIONS:
Proceeds from units sold (transferred) ........... (15,351) 11,585
--------- ---------
Less cost of units redeemed:
Administrative charges .......................... 73 84
Policy loans .................................... 32 64
Surrender benefits .............................. 11,160 14,233
Death benefits .................................. 468 682
--------- ---------
11,733 15,063
--------- ---------
Increase (decrease) in net assets from
capital unit transactions ...................... (27,084) (3,478)
--------- ---------
Net increase (decrease) in net assets ........... (20,806) (15,791)
Depositor's equity contribution
(net redemption) ................................ 50 0
NET ASSETS:
Beginning of year ................................ 130,857 146,648
--------- ---------
End of year ...................................... $ 110,101 $ 130,857
========= =========
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
ALL AMOUNT IN THOUSANDS
<TABLE>
<CAPTION>
WRL
GE/SCOTTISH EQUITABLE
INTERNATIONAL EQUITY
SUBACCOUNT
-------------------------
DECEMBER 31,
-------------------------
<S> <C> <C>
1999(1) 1998
------ ----
OPERATIONS:
Net investment income (loss) ..................... $ 968 $ (299)
Net gain (loss) on investment securities ......... 5,382 2,052
--------- --------
Net increase (decrease) in net assets
resulting from operations ....................... 6,350 1,753
--------- --------
CAPITAL UNIT TRANSACTIONS:
Proceeds from units sold (transferred) ........... (4,546) 9,266
--------- --------
Less cost of units redeemed:
Administrative charges .......................... 14 13
Policy loans .................................... 9 26
Surrender benefits .............................. 1,520 1,407
Death benefits .................................. 69 207
--------- --------
1,612 1,653
--------- --------
Increase (decrease) in net assets from
capital unit transactions ...................... (6,158) 7,613
--------- --------
Net increase (decrease) in net assets ........... 192 9,366
Depositor's equity contribution
(net redemption) ................................ 50 (725)
NET ASSETS:
Beginning of year ................................ 26,159 17,518
--------- --------
End of year ...................................... $ 26,401 $ 26,159
========= ========
<CAPTION>
WRL WRL
GE THIRD AVENUE
U.S. EQUITY VALUE
SUBACCOUNT SUBACCOUNT
---------------------------- ---------------------------
DECEMBER 31, DECEMBER 31,
---------------------------- ---------------------------
<S> <C> <C> <C> <C>
1999(1) 1998 1999(1) 1998(1)
------ ---- ------ ------
OPERATIONS:
Net investment income (loss) ..................... $ 9,358 $ 2,698 $ 234 $ (118)
Net gain (loss) on investment securities ......... 9,458 10,725 1,707 (991)
---------- -------- --------- ---------
Net increase (decrease) in net assets
resulting from operations ....................... 18,816 13,423 1,941 (1,109)
---------- -------- --------- ---------
CAPITAL UNIT TRANSACTIONS:
Proceeds from units sold (transferred) ........... 47,958 52,247 (406) 16,606
---------- -------- --------- ---------
Less cost of units redeemed:
Administrative charges .......................... 54 25 5 4
Policy loans .................................... 29 22 2 0
Surrender benefits .............................. 10,589 7,153 978 453
Death benefits .................................. 350 386 133 0
---------- -------- --------- ---------
11,022 7,586 1,118 457
---------- -------- --------- ---------
Increase (decrease) in net assets from
capital unit transactions ...................... 36,936 44,661 (1,524) 16,149
---------- -------- --------- ---------
Net increase (decrease) in net assets ........... 55,752 58,084 417 15,040
Depositor's equity contribution
(net redemption) ................................ 50 (408) (246) 300
NET ASSETS:
Beginning of year ................................ 96,875 39,199 15,340 0
---------- -------- --------- ---------
End of year ...................................... $ 152,677 $ 96,875 $ 15,511 $ 15,340
========== ======== ========= =========
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
ALL AMOUNTS IN THOUSANDS
<TABLE>
<CAPTION>
WRL WRL WRL WRL
J.P. MORGAN GOLDMAN SACHS GOLDMAN SACHS T. ROWE PRICE
REAL ESTATE SECURITIES GROWTH SMALL CAP DIVIDEND GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------------------- --------------- --------------- ----------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
----------------------- --------------- --------------- ----------------
1999(1) 1998(1) 1999(1) 1999(1) 1999(1)
----------- ----------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..................... $ 19 $ (10) $ (37) $ 67 $ (45)
Net gain (loss) on investment securities ......... (199) (165) 1,005 334 (367)
------- ------- ------- ------- -------
Net increase (decrease) in net assets
resulting from operations ....................... (180) (175) 968 401 (412)
------- ------- ------- ------- -------
CAPITAL UNIT TRANSACTIONS:
Proceeds from units sold (transferred) ........... 430 1,484 5,819 1,512 8,269
------- ------- ------- ------- -------
Less cost of units redeemed:
Administrative charges .......................... 1 0 0 0 0
Policy loans .................................... 0 0 0 0 0
Surrender benefits .............................. 70 14 75 18 174
Death benefits .................................. 0 0 0 0 0
------- ------- ------- ------- -------
71 14 75 18 174
------- ------- ------- ------- -------
Increase (decrease) in net assets from
capital unit transactions ...................... 359 1,470 5,744 1,494 8,095
------- ------- ------- ------- -------
Net increase (decrease) in net assets ........... 179 1,295 6,712 1,895 7,683
Depositor's equity contribution
(net redemption) ................................ 11 600 524 523 525
NET ASSETS:
Beginning of year ................................ 1,895 0 0 0 0
------- ------- ------- ------- -------
End of year ...................................... $ 2,085 $ 1,895 $ 7,236 $ 2,418 $ 8,208
======= ======= ======= ======= =======
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
ALL AMOUNTS IN THOUSANDS
<TABLE>
<CAPTION>
WRL WRL WRL WRL
T. ROWE PRICE SALOMON PILGRIM BAXTER DREYFUS
SMALL CAP ALL CAP MID CAP GROWTH MID CAP
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- -------------- ---------------- -------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
--------------- -------------- ---------------- -------------
1999(1) 1999(1) 1999(1) 1999(1)
--------------- -------------- ---------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..................... $ 217 $ 150 $ (18) $ (11)
Net gain (loss) on investment securities ......... 1,985 464 10,473 146
------- ------- -------- -------
Net increase (decrease) in net assets
resulting from operations ....................... 2,202 614 10,455 135
------- ------- -------- -------
CAPITAL UNIT TRANSACTIONS:
Proceeds from units sold (transferred) ........... 6,412 5,251 22,426 2,434
------- ------- -------- -------
Less cost of units redeemed:
Administrative charges .......................... 1 1 2 0
Policy loans .................................... 0 0 0 0
Surrender benefits .............................. 180 94 384 14
Death benefits .................................. 0 0 0 0
------- ------- -------- -------
181 95 386 14
------- ------- -------- -------
Increase (decrease) in net assets from
capital unit transactions ...................... 6,231 5,156 22,040 2,420
------- ------- -------- -------
Net increase (decrease) in net assets ........... 8,433 5,770 32,495 2,555
Depositor's equity contribution
(net redemption) ................................ 462 523 (171) 524
NET ASSETS:
Beginning of year ................................ 0 0 0 0
------- ------- -------- -------
End of year ...................................... $ 8,895 $ 6,293 $ 32,324 $ 3,079
======= ======= ======== =======
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
WRL J.P. MORGAN MONEY MARKET SUBACCOUNT
------------------------------------------------------------------------
DECEMBER 31,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CLASS A UNITS:
Accumulation unit value, beginning of year ......... $ 14.37 $ 13.82 $ 13.29 $ 12.80 $ 12.29
Income from operations:
Net investment income (loss) ..................... 0.51 0.55 0.53 0.49 0.51
Net realized and unrealized gain (loss) on
investment ...................................... 0.00 0.00 0.00 0.00 0.00
-------- -------- -------- -------- --------
Net income (loss) from operations ............... 0.51 0.55 0.53 0.49 0.51
-------- -------- -------- -------- --------
Accumulation unit value, end of year ............... $ 14.88 $ 14.37 $ 13.82 $ 13.29 $ 12.80
======== ======== ======== ======== ========
Total return ....................................... 3.55 % 3.99 % 4.00 % 3.81 % 4.12 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 96,984 $ 48,797 $ 39,531 $ 51,141 $ 41,596
Ratio of net investment income (loss) to average
net assets ....................................... 3.52 % 3.89 % 3.92 % 3.72 % 4.03 %
WRL AEGON BOND SUBACCOUNT
--------------------------------------------------------------------
DECEMBER 31,
--------------------------------------------------------------------
1999 1998 1997 1996 1995
------------- ------------- ------------- ------------- ------------
CLASS A UNITS:
Accumulation unit value, beginning of year ......... $ 21.08 $ 19.52 $ 18.11 $ 18.31 $ 15.08
Income from operations:
Net investment income (loss) ..................... 0.76 0.82 0.73 0.77 0.83
Net realized and unrealized gain (loss) on
investment ...................................... (1.64) 0.74 0.68 (0.97) 2.40
-------- -------- -------- -------- --------
Net income (loss) from operations ............... (0.88) 1.56 1.41 (0.20) 3.23
-------- -------- -------- -------- --------
Accumulation unit value, end of year ............... $ 20.20 $ 21.08 $ 19.52 $ 18.11 $ 18.31
======== ======== ======== ======== ========
Total return ....................................... (4.14)% 7.96% 7.80% (1.10)% 21.46%
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 37,241 $ 50,893 $ 46,082 $ 45,516 $ 54,109
Ratio of net investment income (loss) to average
net assets ....................................... 3.69 % 4.02% 3.95% 4.34% 4.94%
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
WRL JANUS GROWTH SUBACCOUNT
----------------------------------------------------------------------------
DECEMBER 31,
----------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
CLASS A UNITS:
Accumulation unit value, beginning of year ......... $ 62.54 $ 38.50 $ 33.17 $ 28.47 $ 19.60
Income from operations:
Net investment income (loss) ..................... 15.61 (0.08) 3.42 1.64 2.35
Net realized and unrealized gain (loss) on
investment ...................................... 20.47 24.12 1.91 3.06 6.52
---------- -------- -------- -------- --------
Net income (loss) from operations ............... 36.08 24.04 5.33 4.70 8.87
---------- -------- -------- -------- --------
Accumulation unit value, end of year ............... $ 98.62 $ 62.54 $ 38.50 $ 33.17 $ 28.47
========== ======== ======== ======== ========
Total return ....................................... 57.69% 62.43% 16.09% 16.50% 45.29%
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $1,166,818 $817,014 $ 571,456 $ 576,115 $ 532,646
Ratio of net investment income (loss) to average
net assets ....................................... 20.94% (0.18)% 9.36% 5.22% 9.81%
WRL JANUS GLOBAL SUBACCOUNT
----------------------------------------------------------------------------
DECEMBER 31,
----------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------------- -------------- -------------- -------------- --------------
CLASS A UNITS:
Accumulation unit value, beginning of year ......... $ 30.94 $ 24.10 $ 20.55 $ 16.29 $ 13.40
Income from operations:
Net investment income (loss) ..................... 2.84 0.83 2.55 1.62 0.42
Net realized and unrealized gain (loss) on
investment ...................................... 18.51 6.01 1.00 2.64 2.47
---------- -------- -------- -------- --------
Net income (loss) from operations ............... 21.35 6.84 3.55 4.26 2.89
---------- -------- -------- -------- --------
Accumulation unit value, end of year ............... $ 52.29 $ 30.94 $ 24.10 $ 20.55 $ 16.29
========== ======== ======== ======== ========
Total return ....................................... 68.98 % 28.40 % 17.28 % 26.15 % 21.53 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 458,385 $ 298,285 $ 261,317 $ 221,185 $ 141,425
Ratio of net investment income (loss) to average
net assets ....................................... 7.93 % 2.97 % 11.01 % 8.60 % 2.89 %
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
WRL LKCM STRATEGIC TOTAL RETURN SUBACCOUNT
--------------------------------------------------------------------------
DECEMBER 31,
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
CLASS A UNITS:
Accumulation unit value, beginning of year ......... $ 20.14 $ 18.60 $ 15.46 $ 13.61 $ 11.06
Income from operations:
Net investment income (loss) ..................... 1.52 0.56 1.34 0.68 0.59
Net realized and unrealized gain (loss) on
investment ...................................... 0.63 0.98 1.80 1.17 1.96
-------- -------- -------- -------- --------
Net income (loss) from operations ............... 2.15 1.54 3.14 1.85 2.55
-------- -------- -------- -------- --------
Accumulation unit value, end of year ............... $ 22.29 $ 20.14 $ 18.60 $ 15.46 $ 13.61
======== ======== ======== ======== ========
Total return ....................................... 10.68 % 8.28 % 20.34 % 13.57 % 23.11 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $156,928 $ 160,783 $ 164,259 $ 136,789 $ 116,374
Ratio of net investment income (loss) to average
net assets ....................................... 7.33 % 2.95 % 7.83 % 4.75 % 4.74 %
WRL VKAM EMERGING GROWTH SUBACCOUNT
--------------------------------------------------------------------------
DECEMBER 31,
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- -------------- -------------- -------------- --------------
CLASS A UNITS:
Accumulation unit value, beginning of year ......... $ 31.33 $ 23.10 $ 19.26 $ 16.40 $ 11.31
Income from operations:
Net investment income (loss) ..................... 8.33 0.69 1.85 0.63 0.51
Net realized and unrealized gain (loss) on
investment ...................................... 23.82 7.54 1.99 2.23 4.58
-------- -------- -------- -------- --------
Net income (loss) from operations ............... 32.15 8.23 3.84 2.86 5.09
-------- -------- -------- -------- --------
Accumulation unit value, end of year ............... $ 63.48 $ 31.33 $ 23.10 $ 19.26 $ 16.40
======== ======== ======== ======== ========
Total return ....................................... 102.62 % 35.63 % 19.95 % 17.41 % 44.97 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 390,626 $ 201,838 $ 165,848 $ 143,282 $ 115,797
Ratio of net investment income (loss) to average
net assets ....................................... 21.35 % 2.69 % 8.73 % 3.42 % 3.68 %
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
WRL ALGER AGGRESSIVE GROWTH SUBACCOUNT
-----------------------------------------------------------------------
DECEMBER 31,
-----------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CLASS A UNITS:
Accumulation unit value, beginning of year ......... $ 26.23 $ 17.86 $ 14.56 $ 13.35 $ 9.79
Income from operations:
Net investment income (loss) ..................... 4.29 1.13 1.42 0.25 0.29
Net realized and unrealized gain (loss) on
investment ...................................... 13.27 7.24 1.88 0.96 3.27
-------- -------- -------- -------- --------
Net income (loss) from operations ............... 17.56 8.37 3.30 1.21 3.56
-------- -------- -------- -------- --------
Accumulation unit value, end of year ............... $ 43.79 $ 26.23 $ 17.86 $ 14.56 $ 13.35
======== ======== ======== ======== ========
Total return ....................................... 66.92 % 46.84 % 22.71 % 9.07 % 36.31 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $170,691 $ 106,742 $ 74,544 $ 63,843 $ 65,666
Ratio of net investment income (loss) to average
net assets ....................................... 13.95 % 5.39 % 8.51 % 1.77 % 2.28 %
WRL AEGON BALANCED SUBACCOUNT
----------------------------------------------------------------------
DECEMBER 31,
----------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- ------------- ------------- ------------- -------------
CLASS A UNITS:
Accumulation unit value, beginning of year ......... $ 14.77 $ 13.99 $ 12.09 $ 11.06 $ 9.35
Income from operations:
Net investment income (loss) ..................... 0.12 0.17 1.32 0.26 0.29
Net realized and unrealized gain (loss) on
investment ...................................... 0.14 0.61 0.58 0.77 1.42
-------- -------- -------- -------- --------
Net income (loss) from operations ............... 0.26 0.78 1.90 1.03 1.71
-------- -------- -------- -------- --------
Accumulation unit value, end of year ............... $ 15.03 $ 14.77 $ 13.99 $ 12.09 $ 11.06
======== ======== ======== ======== ========
Total return ....................................... 1.75 % 5.60 % 15.65 % 9.34 % 18.31 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 21,830 $ 19,730 $ 17,324 $ 13,598 $ 11,343
Ratio of net investment income (loss) to average
net assets ....................................... 0.82 % 1.19 % 10.01 % 2.29 % 2.85 %
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
WRL FEDERATED GROWTH & INCOME SUBACCOUNT
---------------------------------------------------------------------
DECEMBER 31,
---------------------------------------------------------------------
1999 1998 1997 1996 1995
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CLASS A UNITS:
Accumulation unit value, beginning of year ......... $ 16.17 $ 15.89 $ 12.91 $ 11.71 $ 9.46
Income from operations:
Net investment income (loss) ..................... 0.83 0.66 2.06 0.50 0.45
Net realized and unrealized gain (loss) on
investment ...................................... (1.74) (0.38) 0.92 0.70 1.80
-------- -------- -------- -------- --------
Net income (loss) from operations ............... (0.91) 0.28 2.98 1.20 2.25
-------- -------- -------- -------- --------
Accumulation unit value, end of year ............... $ 15.26 $ 16.17 $ 15.89 $ 12.91 $ 11.71
======== ======== ======== ======== ========
Total return ....................................... (5.64)% 1.77 % 23.10 % 10.25 % 23.70 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 11,318 $ 16,502 $ 14,056 $ 12,397 $ 11,890
Ratio of net investment income (loss) to average
net assets ....................................... 5.27 % 4.17 % 14.87 % 4.17 % 4.26 %
WRL DEAN ASSET ALLOCATION SUBACCOUNT
--------------------------------------------------------------------
DECEMBER 31,
--------------------------------------------------------------------
1999 1998 1997 1996 1995(1)
------------- ------------- ------------- ------------- ------------
CLASS A UNITS:
Accumulation unit value, beginning of year ......... $ 16.51 $ 15.43 $ 13.40 $ 11.86 $ 10.00
Income from operations:
Net investment income (loss) ..................... 0.32 1.40 1.02 0.46 0.58
Net realized and unrealized gain (loss) on
investment ...................................... (1.45) (0.32) 1.01 1.08 1.28
-------- -------- -------- -------- --------
Net income (loss) from operations ............... (1.13) 1.08 2.03 1.54 1.86
-------- -------- -------- -------- --------
Accumulation unit value, end of year ............... $ 15.38 $ 16.51 $ 15.43 $ 13.40 $ 11.86
======== ======== ======== ======== ========
Total return ....................................... (6.81)% 6.98 % 15.14 % 13.00 % 18.61 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 59,161 $ 85,428 $ 77,923 $ 62,195 $ 34,910
Ratio of net investment income (loss) to average
net assets ....................................... 1.95 % 8.72 % 6.99 % 3.71 % 5.25 %
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
WRL C.A.S.E. GROWTH SUBACCOUNT
------------------------------------------------------------
DECEMBER 31,
------------------------------------------------------------
1999 1998 1997 1996(1)
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
CLASS A UNITS:
Accumulation unit value, beginning of year ......... $ 15.96 $ 15.77 $ 13.88 $ 12.87
Income from operations:
Net investment income (loss) ..................... 1.62 1.27 3.15 0.39
Net realized and unrealized gain (loss) on
investment ...................................... 3.52 (1.08) (1.26) 0.62
-------- -------- -------- --------
Net income (loss) from operations ............... 5.14 0.19 1.89 1.01
-------- -------- -------- --------
Accumulation unit value, end of year ............... $ 21.10 $ 15.96 $ 15.77 $ 13.88
======== ======== ======== ========
Total return ....................................... 32.18 % 1.20 % 13.60 % 7.84 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 14,425 $ 14,161 $ 17,677 $ 3,612
Ratio of net investment income (loss) to average
net assets ....................................... 8.55 % 8.11 % 20.61 % 4.43 %
WRL NWQ VALUE EQUITY SUBACCOUNT
------------------------------------------------------------
DECEMBER 31,
------------------------------------------------------------
1999 1998 1997 1996(1)
------------- ------------- ------------- ------------
CLASS A UNITS:
Accumulation unit value, beginning of year ......... $ 13.04 $ 13.86 $ 11.22 $ 10.00
Income from operations:
Net investment income (loss) ..................... 0.13 0.89 0.07 0.02
Net realized and unrealized gain (loss) on
investment ...................................... 0.73 (1.71) 2.57 1.20
-------- -------- -------- --------
Net income (loss) from operations ............... 0.86 ( 0.82) 2.64 1.22
-------- -------- -------- --------
Accumulation unit value, end of year ............... $ 13.90 $ 13.04 $ 13.86 $ 11.22
======== ======== ======== ========
Total return ....................................... 6.61 % ( 5.96)% 23.49 % 12.25 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 32,947 $ 38,640 $ 49,376 $ 16,679
Ratio of net investment income (loss) to average
net assets ....................................... 0.92 % 6.44 % 0.55 % 0.30 %
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
WRL GE/SCOTTISH EQUITABLE WRL GE
INTERNATIONAL EQUITY SUBACCOUNT U.S. EQUITY SUBACCOUNT
-------------------------------------- ----------------------------------------
DECEMBER 31, DECEMBER 31,
-------------------------------------- ----------------------------------------
1999 1998 1997(1) 1999 1998 1997(1)
------------ ------------ ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A UNITS:
Accumulation unit value, beginning of year ...... $ 11.83 $ 10.62 $ 10.00 $ 15.22 $ 12.54 $ 10.00
Income from operations:
Net investment income (loss) .................. 0.49 (0.14) (0.05) 1.21 0.54 0.75
Net realized and unrealized gain (loss) on
investment .................................. 2.28 1.35 0.67 1.37 2.14 1.79
-------- -------- -------- -------- -------- --------
Net income (loss) from operations ............ 2.77 1.21 0.62 2.58 2.68 2.54
-------- -------- -------- -------- -------- --------
Accumulation unit value, end of year ............ $ 14.60 $ 11.83 $ 10.62 $ 17.80 $ 15.22 $ 12.54
======== ======== ======== ======== ======== ========
Total return .................................... 23.40 % 11.45 % 6.17 % 16.94 % 21.35 % 25.44 %
Ratios and supplemental data:
Net assets at end of year (in thousands) ....... $ 5,881 $ 6,783 $ 6,377 $ 32,459 $ 23,419 $ 12,377
Ratio of net investment income (loss) to average
net assets ................................... 4.08 % (1.16)% (0.52)% 7.35 % 3.90 % 6.37 %
WRL J.P. MORGAN
WRL THIRD AVENUE REAL ESTATE SECURITIES
VALUE SUBACCOUNT SUBACCOUNT
---------------------------- --------------------------
DECEMBER 31, DECEMBER 31,
---------------------------- --------------------------
1999 1998(1) 1999 1998(1)
------------- ------------ ----------- ------------
CLASS A UNITS:
Accumulation unit value, beginning of year ......... $ 9.20 $ 10.00 $ 8.44 $ 10.00
Income from operations:
Net investment income (loss) ..................... 0.15 (0.08) 0.03 (0.07)
Net realized and unrealized gain (loss)
oninvestment .................................... 1.16 (0.72) (0.45) (1.49)
-------- -------- ------- --------
Net income (loss) from operations ............... 1.31 (0.80) (0.42) (1.56)
-------- -------- ------- --------
Accumulation unit value, end of year ............... $ 10.51 $ 9.20 $ 8.02 $ 8.44
======== ======== ======= ========
Total return ....................................... 14.28 % (7.99)% (4.97)% (15.65)%
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 5,309 $ 5,921 $ 407 $ 571
Ratio of net investment income (loss) to average
net assets ....................................... 1.58 % (0.89)% 0.42 % (1.26)%
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
WRL WRL
GOLDMAN SACHS GOLDMAN SACHS
GROWTH SUBACCOUNT SMALL CAP SUBACCOUNT
------------------- ---------------------
DECEMBER 31, DECEMBER 31,
------------------- ---------------------
1999(1) 1999(1)
------------------- ---------------------
<S> <C> <C>
CLASS A UNITS:
Accumulation unit value, beginning of year ......... $ 10.00 $ 10.00
Income from operations:
Net investment income (loss) ..................... (0.09) 0.23
Net realized and unrealized gain (loss) on
investment ...................................... 1.74 1.41
-------- --------
Net income (loss) from operations ............... 1.65 1.64
-------- --------
Accumulation unit value, end of year ............... $ 11.65 $ 11.64
======== ========
Total return ....................................... 16.52 % 16.42 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 1,317 $ 429
Ratio of net investment income (loss) to average
net assets ....................................... (1.25)% 3.36 %
WRL WRL
T. ROWE PRICE DIVIDEND T. ROWE PRICE
GROWTH SUBACCOUNT SMALL CAP SUBACCOUNT
------------------------ ---------------------
DECEMBER 31, DECEMBER 31,
------------------------ ---------------------
1999(1) 1999(1)
------------------------ ---------------------
CLASS A UNITS:
Accumulation unit value, beginning of year .......... $ 10.00 $ 10.00
Income from operations:
Net investment income (loss) ...................... (0.08) 0.47
Net realized and unrealized gain (loss) on
investment ....................................... (0.74) 3.26
-------- --------
Net income (loss) from operations ................ (0.82) 3.73
-------- --------
Accumulation unit value, end of year ................ $ 9.18 $ 13.73
======== ========
Total return ........................................ (8.17)% 37.33 %
Ratios and supplemental data:
Net assets at end of year (in thousands) ........... $ 1,812 $ 3,909
Ratio of net investment income (loss) to average
net assets ........................................ (1.25)% 6.22 %
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
WRL WRL WRL
SALOMON ALL CAP PILGRIM BAXTER MID CAP DREYFUS MID CAP
SUBACCOUNT GROWTH SUBACCOUNT SUBACCOUNT
----------------- ------------------------ ----------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
----------------- ------------------------ ----------------
1999(1) 1999(1) 1999(1)
----------------- ------------------------ ----------------
CLASS A UNITS:
<S> <C> <C> <C>
Accumulation unit value, beginning of year ......... $ 10.00 $ 10.00 $ 10.00
Income from operations:
Net investment income (loss) ..................... 0.37 (0.02) (0.08)
Net realized and unrealized gain (loss) on
investment ...................................... 1.09 7.67 0.71
-------- -------- --------
Net income (loss) from operations ............... 1.46 7.65 0.63
-------- -------- --------
Accumulation unit value, end of year ............... $ 11.46 $ 17.65 $ 10.63
======== ======== ========
Total return ....................................... 14.60 % 76.51 % 6.30 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 1,374 $ 6,660 $ 800
Ratio of net investment income (loss) to average
net assets ....................................... 5.20 % (0.22)% (1.25)%
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
WRL J.P. MORGAN MONEY MARKET SUBACCOUNT
----------------------------------------------------------------------
DECEMBER 31,
----------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CLASS B UNITS:
Accumulation unit value, beginning of year ......... $ 11.99 $ 11.55 $ 11.12 $ 10.73 $ 10.32
Income from operations:
Net investment income (loss) ..................... 0.41 0.44 0.43 0.39 0.41
Net realized and unrealized gain (loss) on
investment ...................................... 0.00 0.00 0.00 0.00 0.00
-------- ------- ------- ------- -------
Net income (loss) from operations ............... 0.41 0.44 0.43 0.39 0.41
-------- ------- ------- ------- -------
Accumulation unit value, end of year ............... $ 12.40 $ 11.99 $ 11.55 $ 11.12 $ 10.73
======== ======= ======= ======= =======
Total return ....................................... 3.39 % 3.83 % 3.84 % 3.65 % 3.96 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 269,284 $ 93,982 $ 62,152 $ 58,415 $ 28,524
Ratio of net investment income (loss) to average
net assets ....................................... 3.37 % 3.72 % 3.78 % 3.57 % 3.89 %
WRL AEGON BOND SUBACCOUNT
-------------------------------------------------------------------------
DECEMBER 31,
-------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------- ------------- ------------ -----------
CLASS B UNITS:
Accumulation unit value, beginning of year ......... $ 14.45 $ 13.41 $ 12.46 $ 12.61 $ 10.40
Income from operations:
Net investment income (loss) ..................... 0.59 0.60 0.67 0.56 0.64
Net realized and unrealized gain (loss) on
investment ...................................... (1.21) 0.44 0.28 (0.71) 1.57
------- ------- ------- ------- -------
Net income (loss) from operations ............... (0.62) 1.04 0.95 (0.15) 2.21
------- ------- ------- ------- -------
Accumulation unit value, end of year ............... $ 13.83 $ 14.45 $ 13.41 $ 12.46 $ 12.61
======= ======= ======= ======= =======
Total return ....................................... (4.29)% 7.80 % 7.64 % (1.25)% 21.28 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $86,875 $ 91,784 $ 64,376 $38,055 $32,772
Ratio of net investment income (loss) to average
net assets ....................................... 4.16 % 4.31 % 5.26 % 4.60 % 5.45 %
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
WRL JANUS GROWTH SUBACCOUNT
----------------------------------------------------------------------------
DECEMBER 31,
----------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
CLASS B UNITS:
Accumulation unit value, beginning of year ......... $ 30.12 $ 18.57 $ 16.02 $ 13.77 $ 9.49
Income from operations:
Net investment income (loss) ..................... 8.20 (0.08) 1.87 0.95 1.30
Net realized and unrealized gain (loss) on
investment ...................................... 9.10 11.63 0.68 1.30 2.98
---------- -------- -------- -------- --------
Net income (loss) from operations ............... 17.30 11.55 2.55 2.25 4.28
---------- -------- -------- -------- --------
Accumulation unit value, end of year ............... $ 47.42 $ 30.12 $ 18.57 $ 16.02 $ 13.77
========== ======== ======== ======== ========
Total return ....................................... 57.45 % 62.19 % 15.91 % 16.32 % 45.08 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $1,530,464 $ 826,236 $ 432,125 $ 317,705 $ 198,139
Ratio of net investment income (loss) to average
net assets ....................................... 22.70 % (0.33)% 10.53 % 6.21 % 11.07 %
WRL JANUS GLOBAL SUBACCOUNT
--------------------------------------------------------------------------
DECEMBER 31,
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- -------------- -------------- -------------- --------------
CLASS B UNITS:
Accumulation unit value, beginning of year ......... $ 30.67 $ 23.92 $ 20.43 $ 16.22 $ 13.36
Income from operations:
Net investment income (loss) ..................... 3.02 0.88 2.85 1.79 0.43
Net realized and unrealized gain (loss) on
investment ...................................... 18.06 5.87 0.64 2.42 2.43
-------- -------- -------- -------- --------
Net income (loss) from operations ............... 21.08 6.75 3.49 4.21 2.86
-------- -------- -------- -------- --------
Accumulation unit value, end of year ............... $ 51.75 $ 30.67 $ 23.92 $ 20.43 $ 16.22
======== ======== ======== ======== ========
Total return ....................................... 68.73 % 28.21 % 17.10 % 25.96 % 21.35 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $976,752 $ 524,585 $ 371,512 $ 227,955 $ 111,958
Ratio of net investment income (loss) to average
net assets ....................................... 8.45 % 3.16 % 12.33 % 9.45 % 2.96 %
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
WRL LKCM STRATEGIC TOTAL RETURN SUBACCOUNT
--------------------------------------------------------------------------
DECEMBER 31,
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
CLASS B UNITS:
Accumulation unit value, beginning of year ......... $ 19.97 $ 18.47 $ 15.37 $ 13.56 $ 11.03
Income from operations:
Net investment income (loss) ..................... 1.54 0.59 1.42 0.94 0.59
Net realized and unrealized gain (loss) on
investment ...................................... 0.56 0.91 1.68 0.87 1.94
-------- -------- -------- -------- --------
Net income (loss) from operations ............... 2.10 1.50 3.10 1.81 2.53
-------- -------- -------- -------- --------
Accumulation unit value, end of year ............... $ 22.07 $ 19.97 $ 18.47 $ 15.37 $ 13.56
======== ======== ======== ======== ========
Total return ....................................... 10.51 % 8.11 % 20.16 % 13.40 % 22.93 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $356,121 $ 328,728 $ 279,355 $ 196,305 $ 101,651
Ratio of net investment income (loss) to average
net assets ....................................... 7.46 % 3.11 % 8.31 % 6.55 % 4.76 %
WRL VKAM EMERGING GROWTH SUBACCOUNT
--------------------------------------------------------------------------
DECEMBER 31,
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- -------------- -------------- -------------- --------------
CLASS B UNITS:
Accumulation unit value, beginning of year ......... $ 31.06 $ 22.94 $ 19.15 $ 16.34 $ 11.29
Income from operations:
Net investment income (loss) ..................... 8.95 0.72 2.00 0.73 0.54
Net realized and unrealized gain (loss) on
investment ...................................... 22.84 7.40 1.79 2.08 4.51
-------- -------- -------- -------- --------
Net income (loss) from operations ............... 31.79 8.12 3.79 2.81 5.05
-------- -------- -------- -------- --------
Accumulation unit value, end of year ............... $ 62.85 $ 31.06 $ 22.94 $ 19.15 $ 16.34
======== ======== ======== ======== ========
Total return ....................................... 102.31 % 35.42 % 19.77 % 17.23 % 44.75 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $891,089 $ 381,421 $ 258,730 $ 179,589 $ 105,115
Ratio of net investment income (loss) to average
net assets ....................................... 22.92 % 2.80 % 9.45 % 3.96 % 3.85 %
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
WRL ALGER AGGRESSIVE GROWTH SUBACCOUNT
-------------------------------------------------------------------------
DECEMBER 31,
-------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
CLASS B UNITS:
Accumulation unit value, beginning of year ......... $ 26.05 $ 17.77 $ 14.50 $ 13.31 $ 9.78
Income from operations:
Net investment income (loss) ..................... 4.68 1.17 1.60 0.31 0.40
Net realized and unrealized gain (loss) on
investment ...................................... 12.69 7.11 1.67 0.88 3.13
-------- -------- -------- -------- --------
Net income (loss) from operations ............... 17.37 8.28 3.27 1.19 3.53
-------- -------- -------- -------- --------
Accumulation unit value, end of year ............... $ 43.42 $ 26.05 $ 17.77 $ 14.50 $ 13.31
======== ======== ======== ======== ========
Total return ....................................... 66.67 % 46.62 % 22.52 % 8.91 % 36.10 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 575,367 $ 281,507 $ 162,401 $ 100,832 $ 60,420
Ratio of net investment income (loss) to average
net assets ....................................... 15.21 % 5.57 % 9.55 % 2.22 % 3.04 %
WRL AEGON BALANCED SUBACCOUNT
---------------------------------------------------------------------
DECEMBER 31,
---------------------------------------------------------------------
1999 1998 1997 1996 1995
------------- ------------- ------------- ------------- -------------
CLASS B UNITS:
Accumulation unit value, beginning of year ......... $ 14.67 $ 13.91 $ 12.05 $ 11.03 $ 9.34
Income from operations:
Net investment income (loss) ..................... 0.10 0.17 1.40 0.30 0.32
Net realized and unrealized gain (loss) on
investment ...................................... 0.13 0.59 0.46 0.72 1.37
-------- -------- -------- -------- --------
Net income (loss) from operations ............... 0.23 0.76 1.86 1.02 1.69
-------- -------- -------- -------- --------
Accumulation unit value, end of year ............... $ 14.90 $ 14.67 $ 13.91 $ 12.05 $ 11.03
======== ======== ======== ======== ========
Total return ....................................... 1.59 % 5.45 % 15.47 % 9.18 % 18.13 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 66,558 $ 59,018 $ 43,902 $ 28,734 $ 16,069
Ratio of net investment income (loss) to average
net assets ....................................... 0.69 % 1.19 % 10.72 % 2.69 % 3.16 %
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
WRL FEDERATED GROWTH & INCOME SUBACCOUNT
-------------------------------------------------------------------------
DECEMBER 31,
-------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
CLASS B UNITS:
Accumulation unit value, beginning of year ......... $ 16.06 $ 15.80 $ 12.85 $ 11.68 $ 9.45
Income from operations:
Net investment income (loss) ..................... 0.87 0.66 2.52 0.68 0.47
Net realized and unrealized gain (loss) on
investment ...................................... (1.80) (0.40) 0.43 0.49 1.76
-------- -------- -------- -------- --------
Net income (loss) from operations ............... (0.93) 0.26 2.95 1.17 2.23
-------- -------- -------- -------- --------
Accumulation unit value, end of year ............... $ 15.13 $ 16.06 $ 15.80 $ 12.85 $ 11.68
======== ======== ======== ======== ========
Total return ....................................... (5.78)% 1.62 % 22.92 % 10.08 % 23.52 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 45,739 $ 52,148 $ 36,591 $ 19,972 $ 10,086
Ratio of net investment income (loss) to average
net assets ....................................... 5.55 % 4.20 % 18.15 % 5.68 % 4.50 %
WRL DEAN ASSET ALLOCATION SUBACCOUNT
------------------------------------------------------------------------
DECEMBER 31,
------------------------------------------------------------------------
1999 1998 1997 1996 1995(1)
-------------- -------------- -------------- -------------- ------------
CLASS B UNITS:
Accumulation unit value, beginning of year ......... $ 16.41 $ 15.36 $ 13.36 $ 11.84 $ 10.00
Income from operations:
Net investment income (loss) ..................... 0.29 1.43 1.06 0.47 0.82
Net realized and unrealized gain (loss) on
investment ...................................... (1.43) (0.38) 0.94 1.05 1.02
-------- -------- -------- -------- --------
Net income (loss) from operations ............... (1.14) 1.05 2.00 1.52 1.84
-------- -------- -------- -------- --------
Accumulation unit value, end of year ............... $ 15.27 $ 16.41 $ 15.36 $ 13.36 $ 11.84
======== ======== ======== ======== ========
Total return ....................................... (6.95)% 6.82 % 14.97 % 12.83 % 18.43 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $167,034 $ 237,896 $ 194,084 $ 125,177 $ 72,300
Ratio of net investment income (loss) to average
net assets ....................................... 1.78 % 8.92 % 7.30 % 3.72 % 7.29 %
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
WRL C.A.S.E. GROWTH SUBACCOUNT
------------------------------------------------------------
DECEMBER 31,
------------------------------------------------------------
1999 1998 1997 1996(1)
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
CLASS B UNITS:
Accumulation unit value, beginning of year ......... $ 12.35 $ 12.22 $ 10.77 $ 10.00
Income from operations:
Net investment income (loss) ..................... 1.37 1.06 1.34 0.36
Net realized and unrealized gain (loss) on
investment ...................................... 2.58 (0.93) 0.11 0.41
-------- -------- -------- --------
Net income (loss) from operations ............... 3.95 0.13 1.45 0.77
-------- -------- -------- --------
Accumulation unit value, end of year ............... $ 16.30 $ 12.35 $ 12.22 $ 10.77
======== ======== ======== ========
Total return ....................................... 31.98 % 1.05 % 13.43 % 7.73 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 51,124 $ 37,580 $ 31,995 $ 12,542
Ratio of net investment income (loss) to average
net assets ....................................... 9.34 % 8.79 % 11.31 % 5.46 %
WRL NWQ VALUE EQUITY SUBACCOUNT
------------------------------------------------------------
DECEMBER 31,
------------------------------------------------------------
1999 1998 1997 1996(1)
------------- ------------- ------------- ------------
CLASS B UNITS:
Accumulation unit value, beginning of year ......... $ 12.98 $ 13.83 $ 11.21 $ 10.00
Income from operations:
Net investment income (loss) ..................... 0.10 0.91 0.08 0.02
Net realized and unrealized gain (loss) on
investment ...................................... 0.74 (1.76) 2.54 1.19
-------- -------- -------- --------
Net income (loss) from operations ............... 0.84 (0.85) 2.62 1.21
-------- -------- -------- --------
Accumulation unit value, end of year ............... $ 13.82 $ 12.98 $ 13.83 $ 11.21
======== ======== ======== ========
Total return ....................................... 6.45 % (6.10)% 23.30 % 12.13 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 77,102 $ 92,217 $ 97,272 $ 23,759
Ratio of net investment income (loss) to average
net assets ....................................... 0.75 % 6.63 % 0.63 % 0.33 %
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
WRL GE/SCOTTISH EQUITABLE
INTERNATIONAL EQUITY SUBACCOUNT
-----------------------------------------
DECEMBER 31,
-----------------------------------------
1999 1998 1997(1)
------------- ------------- -------------
<S> <C> <C> <C>
CLASS B UNITS:
Accumulation unit value, beginning of year ...... $ 11.80 $ 10.60 $ 10.00
Income from operations:
Net investment income (loss) .................. 0.43 (0.15) (0.06)
Net realized and unrealized gain (loss) on
investment ................................... 2.31 1.35 0.66
-------- -------- --------
Net income (loss) from operations ............ 2.74 1.20 0.60
-------- -------- --------
Accumulation unit value, end of year ............ $ 14.54 $ 11.80 $ 10.60
======== ======== ========
Total return .................................... 23.22 % 11.28 % 6.01 %
Ratios and supplemental data:
Net assets at end of year (in thousands) ....... $ 20,464 $ 19,376 $ 11,141
Ratio of net investment income (loss) to average
net assets .................................... 3.54 % (1.31)% (0.58)%
WRL GE
U.S. EQUITY SUBACCOUNT
-----------------------------------------
DECEMBER 31,
-----------------------------------------
1999 1998 1997(1)
-------------- ------------- ------------
CLASS B UNITS:
Accumulation unit value, beginning of year ...... $ 15.18 $ 12.53 $ 10.00
Income from operations:
Net investment income (loss) .................. 1.21 0.62 0.95
Net realized and unrealized gain (loss) on
investment ................................... 1.33 2.03 1.58
-------- -------- --------
Net income (loss) from operations ............ 2.54 2.65 2.53
-------- -------- --------
Accumulation unit value, end of year ............ $ 17.72 $ 15.18 $ 12.53
======== ======== ========
Total return .................................... 16.76 % 21.16 % 25.26 %
Ratios and supplemental data:
Net assets at end of year (in thousands) ....... $ 120,166 $ 73,456 $ 26,822
Ratio of net investment income (loss) to average
net assets .................................... 7.40 % 4.55 % 7.99 %
WRL J.P. MORGAN
WRL THIRD AVENUE REAL ESTATE SECURITIES
VALUE SUBACCOUNT SUBACCOUNT
-------------------------- -------------------------
DECEMBER 31, DECEMBER 31,
-------------------------- -------------------------
1999 1998(1) 1999 1998(1)
------------- ------------ ------------ ------------
CLASS B UNITS:
Accumulation unit value, beginning of year ...... $ 9.19 $ 10.00 $ 8.43 $ 10.00
Income from operations:
Net investment income (loss) .................. 0.14 (0.09) 0.08 (0.08)
Net realized and unrealized gain (loss) on
investment ................................... 1.15 (0.72) (0.51) (1.49)
-------- -------- ------- --------
Net income (loss) from operations ............ 1.29 (0.81) (0.43) (1.57)
-------- -------- ------- --------
Accumulation unit value, end of year ............ $ 10.48 $ 9.19 $ 8.00 $ 8.43
======== ======== ======= ========
Total return .................................... 14.11 % (8.13)% (5.11)% (15.73)%
Ratios and supplemental data:
Net assets at end of year (in thousands) ....... $ 10,148 $ 9,419 $ 1,626 $ 1,324
Ratio of net investment income (loss) to average
net assets .................................... 1.54 % (1.03)% 1.01 % (1.41)%
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
WRL WRL
GOLDMAN SACHS GOLDMAN SACHS
GROWTH SUBACCOUNT SMALL CAP SUBACCOUNT
------------------- ---------------------
DECEMBER 31, DECEMBER 31,
------------------- ---------------------
1999(1) 1999(1)
------------------- ---------------------
<S> <C> <C>
CLASS B UNITS:
Accumulation unit value, beginning of year ......... $ 10.00 $ 10.00
Income from operations:
Net investment income (loss) ..................... (0.10) 0.44
Net realized and unrealized gain (loss) on
investment ...................................... 1.74 1.19
-------- --------
Net income (loss) from operations ............... 1.64 1.63
-------- --------
Accumulation unit value, end of year ............... $ 11.64 $ 11.63
======== ========
Total return ....................................... 16.40 % 16.31 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 5,865 $ 1,935
Ratio of net investment income (loss) to average
net assets ....................................... (1.40)% 6.35 %
WRL WRL
T. ROWE PRICE DIVIDEND T. ROWE PRICE
GROWTH SUBACCOUNT SMALL CAP SUBACCOUNT
------------------------ ---------------------
DECEMBER 31, DECEMBER 31,
------------------------ ---------------------
1999(1) 1999(1)
------------------------ ---------------------
CLASS B UNITS:
Accumulation unit value, beginning of year ......... $ 10.00 $ 10.00
Income from operations:
Net investment income (loss) ..................... (0.09) 0.36
Net realized and unrealized gain (loss) on
investment ...................................... (0.74) 3.36
-------- --------
Net income (loss) from operations ............... (0.83) 3.72
-------- --------
Accumulation unit value, end of year ............... $ 9.17 $ 13.72
======== ========
Total return ....................................... (8.27)% 37.19 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 6,346 $ 4,930
Ratio of net investment income (loss) to average
net assets ....................................... (1.40)% 4.79 %
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
WRL WRL WRL
SALOMON ALL CAP PILGRIM BAXTER MID CAP DREYFUS MID CAP
SUBACCOUNT GROWTH SUBACCOUNT SUBACCOUNT
----------------- ------------------------ ----------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
----------------- ------------------------ ----------------
1999(1) 1999(1) 1999(1)
----------------- ------------------------ ----------------
<S> <C> <C> <C>
CLASS B UNITS:
Accumulation unit value, beginning of year ......... $ 10.00 $ 10.00 $ 10.00
Income from operations:
Net investment income (loss) ..................... 0.40 (0.02) (0.09)
Net realized and unrealized gain (loss) on
investment ...................................... 1.05 7.65 0.71
-------- -------- --------
Net income (loss) from operations ............... 1.45 7.63 0.62
-------- -------- --------
Accumulation unit value, end of year ............... $ 11.45 $ 17.63 $ 10.62
======== ======== ========
Total return ....................................... 14.49 % 76.33 % 6.20 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 4,867 $ 25,604 $ 2,227
Ratio of net investment income (loss) to average
net assets ....................................... 5.63 % (0.26)% (1.40)%
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
WRL WRL WRL WRL
J.P. MORGAN AEGON JANUS JANUS
MONEY MARKET BOND GROWTH GLOBAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------- -------------- -------------- -------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
-------------- -------------- -------------- -------------
1999(1) 1999(1) 1999(1) 1999(1)
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
CLASS C UNITS:
Accumulation unit value, beginning of year ......... $ 10.00 $ 10.00 $ 10.00 $ 10.00
Income from operations:
Net investment income (loss) ..................... 0.05 0.56 1.59 0.64
Net realized and unrealized gain (loss) on
investment ...................................... 0.00 (0.58) (0.72) 0.75
-------- -------- -------- --------
Net income (loss) from operations ............... 0.05 (0.02) 0.87 1.39
-------- -------- -------- --------
Accumulation unit value, end of year ............... $ 10.05 $ 9.98 $ 10.87 $ 11.39
======== ======== ======== ========
Total return ....................................... 0.46 % (0.21)% 8.70 % 13.87 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 25 $ 25 $ 27 $ 28
Ratio of net investment income (loss) to average
net assets ....................................... 5.28 % 64.13 % 173.48 % 70.01 %
WRL
LKCM WRL WRL WRL
STRATEGIC VKAM ALGER AEGON
TOTAL RETURN EMERGING GROWTH AGGRESSIVE GROWTH BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------- ----------------- ------------------- -------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
-------------- ----------------- ------------------- -------------
1999(1) 1999(1) 1999(1) 1999(1)
-------------- ----------------- ------------------- -------------
CLASS C UNITS:
Accumulation unit value, beginning of year ......... $ 10.00 $ 10.00 $ 10.00 $ 10.00
Income from operations:
Net investment income (loss) ..................... 0.55 1.56 1.01 0.15
Net realized and unrealized gain (loss) on
investment ...................................... (0.23) 0.55 0.69 (0.15)
-------- -------- -------- --------
Net income (loss) from operations ............... 0.32 2.11 1.70 0.00
-------- -------- -------- --------
Accumulation unit value, end of year ............... $ 10.32 $ 12.11 $ 11.70 $ 10.00
======== ======== ======== ========
Total return ....................................... 3.16 % 21.08 % 17.05 % 0.01 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 26 $ 30 $ 29 $ 25
Ratio of net investment income (loss) to average
net assets ....................................... 61.80 % 163.83 % 106.09 % 16.83 %
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
WRL WRL WRL WRL
FEDERATED DEAN ASSET C.A.S.E. NWQ
GROWTH & INCOME ALLOCATION GROWTH VALUE EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------------- -------------- -------------- -------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
----------------- -------------- -------------- -------------
1999(1) 1999(1) 1999(1) 1999(1)
----------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
CLASS C UNITS:
Accumulation unit value, beginning of year ......... $ 10.00 $ 10.00 $ 10.00 $ 10.00
Income from operations:
Net investment income (loss) ..................... 0.47 0.28 0.54 0.20
Net realized and unrealized gain (loss) on
investment ...................................... (0.40) (0.37) (0.49) 0.22
-------- -------- -------- --------
Net income (loss) from operations ............... 0.07 (0.09) 0.05 0.42
-------- -------- -------- --------
Accumulation unit value, end of year ............... $ 10.07 $ 9.91 $ 10.05 $ 10.42
======== ======== ======== ========
Total return ....................................... 0.74 % (0.93)% 0.53 % 4.21 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 25 $ 25 $ 25 $ 26
Ratio of net investment income (loss) to average
net assets ....................................... 54.01 % 32.57 % 61.53 % 22.95 %
WRL
GE/SCOTTISH EQUITABLE
INTERNATIONAL EQUITY
SUBACCOUNT
-----------------------
DECEMBER 31,
-----------------------
1999(1)
-----------------------
CLASS C UNITS:
Accumulation unit value, beginning of year .......... $ 10.00
Income from operations:
Net investment income (loss) ...................... 0.53
Net realized and unrealized gain (loss) on
investment ....................................... 0.59
---------
Net income (loss) from operations ................ 1.12
---------
Accumulation unit value, end of year ................ $ 11.12
=========
Total return ........................................ 11.24 %
Ratios and supplemental data:
Net assets at end of year (in thousands) ........... $ 28
Ratio of net investment income (loss) to average
net assets ........................................ 57.96 %
WRL WRL WRL
GE THIRD AVENUE J.P. MORGAN
U.S. EQUITY VALUE REAL ESTATE SECURITIES
SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------- -------------- -----------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
-------------- -------------- -----------------------
1999(1) 1999(1) 1999(1)
-------------- -------------- -----------------------
CLASS C UNITS:
Accumulation unit value, beginning of year .......... $ 10.00 $ 10.00 $ 10.00
Income from operations:
Net investment income (loss) ...................... 0.62 0.11 0.00
Net realized and unrealized gain (loss) on
investment ....................................... (0.20) 0.55 0.40
--------- --------- ---------
Net income (loss) from operations ................ 0.42 0.66 0.40
--------- --------- ---------
Accumulation unit value, end of year ................ $ 10.42 $ 10.66 $ 10.40
========= ========= =========
Total return ........................................ 4.24 % 6.60 % 3.98 %
Ratios and supplemental data:
Net assets at end of year (in thousands) ........... $ 26 $ 27 $ 26
Ratio of net investment income (loss) to average
net assets ........................................ 69.78 % 12.46 % 0.00 %
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
WRL WRL WRL WRL
GOLDMAN SACHS GOLDMAN SACHS T. ROWE PRICE T. ROWE PRICE
GROWTH SMALL CAP DIVIDEND GROWTH SMALL CAP
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- --------------- ----------------- --------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
--------------- --------------- ----------------- --------------
1999(1) 1999(1) 1999(1) 1999(1)
--------------- --------------- ----------------- --------------
<S> <C> <C> <C> <C>
CLASS C UNITS:
Accumulation unit value, beginning of year ......... $ 10.00 $ 10.00 $ 10.00 $ 10.00
Income from operations:
Net investment income (loss) ..................... 0.00 0.49 0.00 0.35
Net realized and unrealized gain (loss) on
investment ...................................... 0.73 0.40 ( 0.13) 1.05
-------- -------- -------- --------
Net income (loss) from operations ............... 0.73 0.89 ( 0.13) 1.40
-------- -------- -------- --------
Accumulation unit value, end of year ............... $ 10.73 $ 10.89 $ 9.87 $ 11.40
======== ======== ======== ========
Total return ....................................... 7.31 % 8.91 % ( 1.28)% 13.98 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 27 $ 27 $ 25 $ 28
Ratio of net investment income (loss) to average
net assets ....................................... 0.00 % 54.08 % 0.00 % 38.09 %
WRL WRL WRL
SALOMON PILGRIM BAXTER DREYFUS
ALL CAP MID CAP GROWTH MID CAP
SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------- ---------------- -------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
-------------- ---------------- -------------
1999(1) 1999(1) 1999(1)
-------------- ---------------- -------------
CLASS C UNITS:
Accumulation unit value, beginning of year ......... $ 10.00 $ 10.00 $ 10.00
Income from operations:
Net investment income (loss) ..................... 0.34 0.03 0.00
Net realized and unrealized gain (loss) on
investment ...................................... 0.12 2.06 0.51
-------- -------- --------
Net income (loss) from operations ............... 0.46 2.09 0.51
-------- -------- --------
Accumulation unit value, end of year ............... $ 10.46 $ 12.09 $ 10.51
======== ======== ========
Total return ....................................... 4.59 % 20.92 % 5.10 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 26 $ 30 $ 26
Ratio of net investment income (loss) to average
net assets ....................................... 38.27 % 3.47 % 0.00 %
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
WRL WRL WRL WRL
J.P. MORGAN AEGON JANUS JANUS
MONEY MARKET BOND GROWTH GLOBAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------- -------------- -------------- -------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
-------------- -------------- -------------- -------------
1999(1) 1999(1) 1999(1) 1999(1)
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
CLASS D UNITS:
Accumulation unit value, beginning of year ......... $ 10.00 $ 10.00 $ 10.00 $ 10.00
Income from operations:
Net investment income (loss) ..................... 0.05 0.56 1.59 0.64
Net realized and unrealized gain (loss) on
investment ...................................... 0.00 (0.58) (0.72) 0.75
-------- -------- -------- --------
Net income (loss) from operations ............... 0.05 (0.02) 0.87 1.39
-------- -------- -------- --------
Accumulation unit value, end of year ............... $ 10.05 $ 9.98 $ 10.87 $ 11.39
======== ======== ======== ========
Total return ....................................... 0.46 % (0.21)% 8.70 % 13.87 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 25 $ 25 $ 27 $ 28
Ratio of net investment income (loss) to average
net assets ....................................... 5.28 % 64.13 % 173.48 % 70.01 %
WRL
LKCM WRL WRL WRL
STRATEGIC VKAM ALGER AEGON
TOTAL RETURN EMERGING GROWTH AGGRESSIVE GROWTH BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------- ----------------- ------------------- -------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
-------------- ----------------- ------------------- -------------
1999(1) 1999(1) 1999(1) 1999(1)
-------------- ----------------- ------------------- -------------
CLASS D UNITS:
Accumulation unit value, beginning of year ......... $ 10.00 $ 10.00 $ 10.00 $ 10.00
Income from operations:
Net investment income (loss) ..................... 0.55 1.56 1.01 0.15
Net realized and unrealized gain (loss) on
investment ...................................... (0.23) 0.55 0.69 (0.15)
-------- -------- -------- --------
Net income (loss) from operations ............... 0.32 2.11 1.70 0.00
-------- -------- -------- --------
Accumulation unit value, end of year ............... $ 10.32 $ 12.11 $ 11.70 $ 10.00
======== ======== ======== ========
Total return ....................................... 3.16 % 21.08 % 17.05 % 0.01 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 26 $ 30 $ 29 $ 25
Ratio of net investment income (loss) to average
net assets ....................................... 61.80 % 163.83 % 106.09 % 16.83 %
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
WRL WRL WRL WRL
FEDERATED DEAN C.A.S.E. NWQ
GROWTH & INCOME ASSET ALLOCATION GROWTH VALUE EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------------- ------------------ -------------- -------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
----------------- ------------------ -------------- -------------
1999(1) 1999(1) 1999(1) 1999(1)
----------------- ------------------ -------------- -------------
<S> <C> <C> <C> <C>
CLASS D UNITS:
Accumulation unit value, beginning of year ......... $ 10.00 $ 10.00 $ 10.00 $ 10.00
Income from operations:
Net investment income (loss) ..................... 0.47 0.28 0.54 0.20
Net realized and unrealized gain (loss) on
investment ...................................... (0.40) (0.37) (0.49) 0.22
-------- -------- -------- --------
Net income (loss) from operations ............... 0.07 (0.09) 0.05 0.42
-------- -------- -------- --------
Accumulation unit value, end of year ............... $ 10.07 $ 9.91 $ 10.05 $ 10.42
======== ======== ======== ========
Total return ....................................... 0.74 % (0.93)% 0.53 % 4.21 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 25 $ 25 $ 25 $ 26
Ratio of net investment income (loss) to average
net assets ....................................... 54.01 % 32.57 % 61.53 % 22.95 %
WRL
GE/SCOTTISH EQUITABLE
INTERNATIONAL EQUITY
SUBACCOUNT
-----------------------
DECEMBER 31,
-----------------------
1999(1)
-----------------------
CLASS D UNITS:
Accumulation unit value, beginning of year .......... $ 10.00
Income from operations:
Net investment income (loss) ...................... 0.53
Net realized and unrealized gain (loss) on
investment ....................................... 0.59
---------
Net income (loss) from operations ................ 1.12
---------
Accumulation unit value, end of year ................ $ 11.12
=========
Total return ........................................ 11.24 %
Ratios and supplemental data:
Net assets at end of year (in thousands) ........... $ 28
Ratio of net investment income (loss) to average
net assets ........................................ 57.96 %
WRL WRL WRL
GE THIRD AVENUE J.P. MORGAN
U.S. EQUITY VALUE REAL ESTATE SECURITIES
SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------- -------------- -----------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
-------------- -------------- -----------------------
1999(1) 1999(1) 1999(1)
-------------- -------------- -----------------------
CLASS D UNITS:
Accumulation unit value, beginning of year .......... $ 10.00 $ 10.00 $ 10.00
Income from operations:
Net investment income (loss) ...................... 0.62 0.11 0.00
Net realized and unrealized gain (loss) on
investment ....................................... (0.20) 0.55 0.40
--------- --------- ---------
Net income (loss) from operations ................ 0.42 0.66 0.40
--------- --------- ---------
Accumulation unit value, end of year ................ $ 10.42 $ 10.66 $ 10.40
========= ========= =========
Total return ........................................ 4.24 % 6.60 % 3.98 %
Ratios and supplemental data:
Net assets at end of year (in thousands) ........... $ 26 $ 27 $ 26
Ratio of net investment income (loss) to average
net assets ........................................ 69.78 % 12.46 % 0.00 %
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
WRL WRL WRL WRL
GOLDMAN SACHS GOLDMAN SACHS T. ROWE PRICE T. ROWE PRICE
GROWTH SMALL CAP DIVIDEND GROWTH SMALL CAP
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- --------------- ----------------- --------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
--------------- --------------- ----------------- --------------
1999(1) 1999(1) 1999(1) 1999(1)
--------------- --------------- ----------------- --------------
<S> <C> <C> <C> <C>
CLASS D UNITS:
Accumulation unit value, beginning of year ......... $ 10.00 $ 10.00 $ 10.00 $ 10.00
Income from operations:
Net investment income (loss) ..................... 0.00 0.49 0.00 0.35
Net realized and unrealized gain (loss) on
investment ...................................... 0.73 0.40 ( 0.13) 1.05
-------- -------- -------- --------
Net income (loss) from operations ............... 0.73 0.89 ( 0.13) 1.40
-------- -------- -------- --------
Accumulation unit value, end of year ............... $ 10.73 $ 10.89 $ 9.87 $ 11.40
======== ======== ======== ========
Total return ....................................... 7.31 % 8.91 % ( 1.28)% 13.98 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 27 $ 27 $ 25 $ 28
Ratio of net investment income (loss) to average
net assets ....................................... 0.00 % 54.08 % 0.00 % 38.09 %
WRL WRL WRL
SALOMON PILGRIM BAXTER DREYFUS
ALL CAP MID CAP GROWTH MID CAP
SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------- ---------------- -------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
-------------- ---------------- -------------
1999(1) 1999(1) 1999(1)
-------------- ---------------- -------------
CLASS D UNITS:
Accumulation unit value, beginning of year ......... $ 10.00 $ 10.00 $ 10.00
Income from operations:
Net investment income (loss) ..................... 0.34 0.03 0.00
Net realized and unrealized gain (loss) on
investment ...................................... 0.12 2.06 0.51
-------- -------- --------
Net income (loss) from operations ............... 0.46 2.09 0.51
-------- -------- --------
Accumulation unit value, end of year ............... $ 10.46 $ 12.09 $ 10.51
======== ======== ========
Total return ....................................... 4.59 % 20.92 % 5.10 %
Ratios and supplemental data:
Net assets at end of year (in thousands) .......... $ 26 $ 30 $ 26
Ratio of net investment income (loss) to average
net assets ....................................... 38.27 % 3.47 % 0.00 %
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 1999
NOTE 1 -- ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
The WRL Series Annuity Account (the "Annuity Account"), was established as a
variable accumulation deferred annuity separate account of Western Reserve Life
Assurance Co. of Ohio ("WRL" or the "depositor") and is registered as a unit
investment trust under the Investment Company Act of 1940, as amended. The
Annuity Account encompasses various contract types:
Class A:
WRL Freedom Variable Annuity
WRL Freedom Attainer
Class B:
WRL Freedom Bellwether
WRL Freedom Conqueror
WRL Freedom Creator
WRL Freedom Premier
Class C:
WRL Freedom Premier
WRL Freedom Access
Class D:
WRL Freedom Access
Each contract type contains twenty-three investment options referred to as
subaccounts. Each subaccount invests in the corresponding Portfolio of the WRL
Series Fund, Inc. (collectively referred to as the "Fund" and individually as a
"Portfolio"), a registered management investment company under the Investment
Company Act of 1940, as amended.
The Fund has entered into annually renewable investment advisory agreements for
each Portfolio with WRL Investment Management, Inc. ("WRL Management") as
investment adviser. Costs incurred in connection with the advisory services
rendered by WRL Management are paid by each Portfolio. WRL Management has
entered into sub-advisory agreements with various management companies
("Sub-Advisers"), some of which are affiliates of WRL. Each sub-adviser is
compensated directly by WRL Management.
Effective May 1, 1999 the names on the following subaccounts were changed:
SUBACCOUNT FORMERLY
- -------------------------- ----------------------------------
WRL J.P. Morgan Money Money Market Subaccount
Market
WRL AEGON Bond Bond Subaccount
WRL Janus Growth Growth Subaccount
WRL Janus Global Global Subaccount
WRL LKCM Strategic Strategic Total Return Subaccount
Total Return
WRL VKAM Emerging Emerging Growth Subaccount
Growth
WRL Alger Aggressive Aggressive Growth Subaccount
Growth
WRL AEGON Balanced Balanced Subaccount
WRL Federated Growth & Growth & Income Subaccount
Income
WRL Dean Asset Tactical Asset Allocation
Allocation Subaccount
WRL C.A.S.E. Growth C.A.S.E. Growth Subaccount
WRL NWQ Value Equity Value Equity Subaccount
WRL GE/Scottish International Equity Subaccount
Equitable International
Equity
WRL GE U.S. Equity U.S. Equity Subaccount
WRL Third Avenue Value Third Avenue Value Subaccount
WRL J.P. Morgan Real Real Estate Securities Subaccount
Estate Securities
On January 20, 1999, the Annuity Account received approval from the Securities
and Exchange Commission pursuant to an exemptive order (Rel. No. IC - 23657)
for the substitution of securities issued by WRL Series Fund, Inc., and held by
the Annuity Account to support individual flexible premium
<PAGE>
WRL SERIES ANNUITY ACCOUNT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 1999
NOTE 1 -- (CONTINUED)
deferred variable annuity contracts, investments were transferred from the
Global Sector Subaccount to the WRL Janus Global Subaccount.
The Financial Statements reflect a full twelve month period for each year
reported on, except as follows:
CLASS A AND CLASS B
SUBACCOUNT INCEPTION DATE
- ---------------------------------------- ---------------
WRL Dean Asset Allocation 01/03/1995
WRL C.A.S.E. Growth 05/01/1996
WRL NWQ Value Equity 05/01/1996
WRL GE/Scottish Equitable International
Equity 01/02/1997
WRL GE U.S. Equity 01/02/1997
WRL Third Avenue Value 01/02/1998
WRL J.P. Morgan Real Estate Securities 05/01/1998
WRL Goldman Sachs Growth 05/03/1999
WRL T. Rowe Price Dividend Growth 05/03/1999
WRL T. Rowe Price Small Cap 05/03/1999
WRL Salomon All Cap 05/03/1999
WRL Pilgrim Baxter Mid Cap Growth 05/03/1999
WRL Dreyfus Mid Cap 05/03/1999
On May 3, 1999, the inception date of the following subaccounts, WRL made
initial contributions totaling $ 3,500,000 to the Annuity Account. The
respective amounts of the contributions and units received are as follows:
CLASS A AND CLASS B
SUBACCOUNT CONTRIBUTION UNITS
- ----------------------------------- -------------- ---------
WRL Goldman Sachs Growth $ 250,000 25,000
WRL Goldman Sachs Small Cap 250,000 25,000
WRL T. Rowe Price Dividend Growth 250,000 25,000
WRL T. Rowe Price Small Cap 250,000 25,000
WRL Salomon All Cap 250,000 25,000
WRL Pilgrim Baxter Mid Cap Growth 250,000 25,000
WRL Dreyfus Mid Cap 250,000 25,000
On November 30, 1999, the inception date of Class C and Class D subaccounts,
WRL made initial contributions of $ 25,000 for 2,500 units for each subaccount
totaling $ 1,150,000 to the Annuity Account.
The Annuity Account holds assets to support the benefits under certain flexible
payment variable accumulation deferred annuity contracts (the "Contracts")
issued by WRL. The Annuity Account equity transactions are accounted for using
the appropriate effective date at the corresponding accumulation unit value.
The following significant accounting policies, which are in conformity with
accounting principles generally accepted in the United States, have been
consistently applied in the preparation of the Annuity Account Financial
Statements. The preparation of the Financial Statements required management to
make estimates and assumptions that affect the reported amounts and
disclosures. Actual results could differ from those estimates.
A. VALUATION OF INVESTMENTS AND SECURITIES TRANSACTIONS
Investments in the Fund's shares are valued at the closing net asset value
("NAV") per share of the underlying Portfolio, as determined by the Fund.
Investment transactions are accounted for on the trade date at the Portfolio
NAV next determined after receipt of sale or redemption orders without sales
charges. Dividend income and capital gains distributions are recorded on the
ex-dividend date. The cost of investments sold is determined on a first-in,
first-out basis.
B. FEDERAL INCOME TAXES
The operations of the Annuity Account are a part of and are taxed with the
total operations of WRL, which is taxed as a life insurance company under the
Internal Revenue Code. Under the current Internal Revenue Code, the investment
income of the Annuity Account, including realized and unrealized capital gains,
is not taxable to WRL. Accordingly, no provision for Federal income taxes has
been made.
NOTE 2 -- CHARGES AND DEDUCTIONS
Charges are assessed by WRL in connection with the issuance and administration
of the Contracts.
A. CONTRACT CHARGES
No deduction for sales expenses is made from the purchase payments. A
contingent deferred sales charge may, however, be assessed against contract
values when withdrawn or surrendered. On each anniversary through maturity
date, WRL will deduct an annual contract charge as partial compensation for
providing administrative services under the Contracts.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 1999
NOTE 2 -- (CONTINUED)
B. SUBACCOUNT CHARGES
A daily charge as a percentage of average daily net assets is assessed to
compensate WRL for assumption of mortality and expense risks and administrative
services in connection with issuance and administration of the Contracts. This
charge (not assessed at the individual contract level) effectively reduces the
value of a unit outstanding during the year. The following reflects the annual
rate for daily charges as assessed by each Annuity Account class:
Class A 1.25%
Class B 1.40%
Class C 1.65%
Class D 1.80%
NOTE 3 -- DIVIDEND DISTRIBUTIONS
Dividends are not declared by the Annuity Account, since the increase in the
value of the underlying investment in the Fund is reflected daily in the
accumulation unit price used to calculate the equity value within the Annuity
Account. Consequently, a dividend distribution by the underlying Fund does not
change either the accumulation unit price or equity values within the Annuity
Account.
NOTE 4 --SECURITIES TRANSACTIONS
Securities transactions for the year ended December 31, 1999, are as follows
(in thousands):
PURCHASES PROCEEDS
OF FROM SALES
SUBACCOUNT SECURITIES OF SECURITIES
- --------------------------------- ------------ --------------
WRL J.P. Morgan Money Market $ 864,574 $ 640,263
WRL AEGON Bond 41,367 48,922
WRL Janus Growth 777,038 252,442
WRL Janus Global 290,487 178,616
WRL LKCM Strategic Total Return 83,858 73,967
WRL VKAM Emerging Growth 426,493 193,184
WRL Alger Aggressive Growth 228,337 83,885
WRL AEGON Balanced 22,833 13,544
WRL Federated Growth & Income 16,326 21,412
WRL Dean Asset Allocation 19,892 91,702
WRL C.A.S.E. Growth 51,139 47,220
WRL NWQ Value Equity 49,991 75,921
WRL GE/Scottish Equitable
International Equity 195,762 200,996
WRL GE U.S. Equity 93,027 46,602
WRL Third Avenue Value 6,186 7,602
WRL J.P. Morgan Real Estate
Securities 5,862 5,414
WRL Goldman Sachs Growth 7,723 1,532
WRL Goldman Sachs Small Cap 6,670 4,609
WRL T. Rowe Price Dividend
Growth 10,188 1,614
WRL T. Rowe Price Small Cap 15,157 8,292
WRL Salomon All Cap 11,652 5,845
WRL Pilgrim Baxter Mid Cap
Growth 29,715 8,086
WRL Dreyfus Mid Cap 3,974 1,091
NOTE 5 -- FINANCIAL HIGHLIGHTS
Per unit information has been computed using average units outstanding
throughout the year. Total return is not annualized for periods less than one
year. The ratio of net investment income (loss) to average net assets is
annualized for periods less than one year.
<PAGE>
WRL SERIES ANNUITY ACCOUNT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 1999
NOTE 6 -- EQUITY TRANSACTIONS
(All amounts in thousands)
<TABLE>
<CAPTION>
WRL
J.P. MORGAN
MONEY MARKET
SUBACCOUNT
-----------------------------
DECEMBER 31,
-----------------------------
1999(1) 1998
--------------- -------------
<S> <C> <C>
UNIT ACTIVITY:
Class A:
Units outstanding - beginning of year ................................ 3,396 2,861
Units issued ......................................................... 15,925 12,716
Units redeemed ....................................................... (12,803) (12,181)
------- -------
Units outstanding - end of year ...................................... 6,518 3,396
======= =======
Class B:
Units outstanding - beginning of year ................................ 7,839 5,383
Units issued ......................................................... 109,714 42,233
Units redeemed ....................................................... (95,829) (39,777)
------- -------
Units outstanding - end of year ...................................... 21,724 7,839
======= =======
Class C:
Units outstanding - beginning of year ................................ 0
Units issued ......................................................... 3
Units redeemed ....................................................... 0
-------
Units outstanding - end of year ...................................... 3
=======
Class D:
Units outstanding - beginning of year ................................ 0
Units issued ......................................................... 3
Units redeemed ....................................................... 0
-------
Units oustanding - end of year ....................................... 3
=======
CAPITAL UNITS TRANSACTIONS BY CLASS:
Class A:
Proceeds from units issued ........................................... $ 232,910 $ 179,547
Cost of units redeemed ............................................... (187,224) (172,316)
------------ ----------
Increase (decrease) in net assets from capital unit transactions ..... $ 45,686 $ 7,231
============ ==========
Class B:
Proceeds from units issued ........................................... $ 1,338,148 $ 498,610
Cost of units redeemed ............................................... (1,168,282) (469,987)
------------ ----------
Increase (decrease) in net assets from capital unit transactions ..... $ 169,866 $ 28,623
============ ==========
Class C:
Proceeds from units issued ........................................... $ 25
Cost of units redeemed ............................................... 0
------------
Increase (decrease) in net assets from capital unit transactions ..... $ 25
============
Class D:
Proceeds from units issued ........................................... $ 25
Cost of units redeemed ............................................... 0
------------
Increase (decrease) in net assets from capital unit transactions ..... $ 25
============
WRL WRL
AEGON JANUS
BOND GROWTH
SUBACCOUNT SUBACCOUNT
--------------------------- ---------------------------
DECEMBER 31, DECEMBER 31,
--------------------------- ---------------------------
1999(1) 1998 1999(1) 1998
-------------- ------------ ------------- -------------
UNIT ACTIVITY:
Class A:
Units outstanding - beginning of year ................................ 2,415 2,360 13,063 14,842
Units issued ......................................................... 739 1,411 2,081 2,325
Units redeemed ....................................................... (1,311) (1,356) (3,313) (4,104)
------ ------ ------ ------
Units outstanding - end of year ...................................... 1,843 2,415 11,831 13,063
====== ====== ====== ======
Class B:
Units outstanding - beginning of year ................................ 6,351 4,801 27,435 23,273
Units issued ......................................................... 4,449 5,846 18,424 14,632
Units redeemed ....................................................... (4,519) (4,296) (13,584) (10,470)
------ ------ ------- -------
Units outstanding - end of year ...................................... 6,281 6,351 32,275 27,435
====== ====== ======= =======
Class C:
Units outstanding - beginning of year ................................ 0 0
Units issued ......................................................... 3 3
Units redeemed ....................................................... 0 0
------ -------
Units outstanding - end of year ...................................... 3 3
====== =======
Class D:
Units outstanding - beginning of year ................................ 0 0
Units issued ......................................................... 3 3
Units redeemed ....................................................... 0 0
------ -------
Units oustanding - end of year ....................................... 3 3
====== =======
CAPITAL UNITS TRANSACTIONS BY CLASS:
Class A:
Proceeds from units issued ........................................... $ 15,202 $ 29,044 $ 152,871 $ 115,049
Cost of units redeemed ............................................... (26,921) (27,598) (244,654) (196,117)
---------- --------- ---------- ----------
Increase (decrease) in net assets from capital unit transactions ..... $ (11,719) $ 1,446 $ (91,783) $ (81,068)
========== ========= ========== ==========
Class B:
Proceeds from units issued ........................................... $ 62,733 $ 82,089 $ 658,516 $ 349,932
Cost of units redeemed ............................................... (63,678) (60,281) (486,621) (245,125)
---------- --------- ---------- ----------
Increase (decrease) in net assets from capital unit transactions ..... $ (945) $ 21,808 $ 171,895 $ 104,807
========== ========= ========== ==========
Class C:
Proceeds from units issued ........................................... $ 25 $ 25
Cost of units redeemed ............................................... 0 0
---------- ----------
Increase (decrease) in net assets from capital unit transactions ..... $ 25 $ 25
========== ==========
Class D:
Proceeds from units issued ........................................... $ 25 $ 25
Cost of units redeemed ............................................... 0 0
---------- ----------
Increase (decrease) in net assets from capital unit transactions ..... $ 25 $ 25
========== ==========
</TABLE>
<PAGE>
WRL SERIES ANNUITY ACCOUNT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 1999
NOTE 6 -- (continued)
(All amounts in thousands)
<TABLE>
<CAPTION>
WRL
JANUS
GLOBAL
SUBACCOUNT
-----------------------------
DECEMBER 31,
-----------------------------
1999(1) 1998
-------------- --------------
<S> <C> <C>
UNIT ACTIVITY:
Class A:
Units outstanding - beginning of year ................................ 9,640 10,843
Units issued ......................................................... 1,729 2,177
Units redeemed ....................................................... (2,602) (3,380)
------ ------
Units outstanding - end of year ...................................... 8,767 9,640
====== ======
Class B:
Units outstanding - beginning of year ................................ 17,105 15,530
Units issued ......................................................... 11,751 8,478
Units redeemed ....................................................... (9,981) (6,903)
------ ------
Units outstanding - end of year ...................................... 18,875 17,105
====== ======
Class C:
Units outstanding - beginning of year ................................ 0
Units issued ......................................................... 3
Units redeemed ....................................................... 0
------
Units outstanding - end of year ...................................... 3
======
Class D:
Units outstanding - beginning of year ................................ 0
Units issued ......................................................... 3
Units redeemed ....................................................... 0
------
Units oustanding - end of year ....................................... 3
======
CAPITAL UNITS TRANSACTIONS BY CLASS:
Class A:
Proceeds from units issued ........................................... $ 61,533 $ 60,997
Cost of units redeemed ............................................... (92,690) (93,858)
---------- ----------
Increase (decrease) in net assets from capital unit transactions ..... $ (31,157) $ (32,861)
========== ==========
Class B:
Proceeds from units issued ........................................... $ 418,291 $ 236,884
Cost of units redeemed ............................................... (356,658) (190,550)
---------- ----------
Increase (decrease) in net assets from capital unit transactions ..... $ 61,633 $ 46,334
========== ==========
Class C:
Proceeds from units issued ........................................... $ 25
Cost of units redeemed ............................................... 0
----------
Increase (decrease) in net assets from capital unit transactions ..... $ 25
==========
Class D:
Proceeds from units issued ........................................... $ 25
Cost of units redeemed ............................................... 0
----------
Increase (decrease) in net assets from capital unit transactions ..... $ 25
==========
(All amounts in thousands)
WRL WRL
LKCM VKAM
STRATEGIC EMERGING
TOTAL RETURN GROWTH
SUBACCOUNT SUBACCOUNT
----------------------------- -------------
DECEMBER 31, DECEMBER 31,
----------------------------- -------------
1999(1) 1998 1999(1)
-------------- -------------- -------------
UNIT ACTIVITY:
Class A:
Units outstanding - beginning of year ................................ 7,983 8,831 6,443
Units issued ......................................................... 1,196 1,416 2,008
Units redeemed ....................................................... (2,139) (2,264) (2,297)
------ ------ ------
Units outstanding - end of year ...................................... 7,040 7,983 6,154
====== ====== ======
Class B:
Units outstanding - beginning of year ................................ 16,462 15,125 12,279
Units issued ......................................................... 6,053 5,389 10,810
Units redeemed ....................................................... (6,378) (4,052) (8,910)
------ ------ ------
Units outstanding - end of year ...................................... 16,137 16,462 14,179
====== ====== ======
Class C:
Units outstanding - beginning of year ................................ 0 0
Units issued ......................................................... 3 3
Units redeemed ....................................................... 0 0
------ ------
Units outstanding - end of year ...................................... 3 3
====== ======
Class D:
Units outstanding - beginning of year ................................ 0 0
Units issued ......................................................... 3 3
Units redeemed ....................................................... 0 0
------ ------
Units oustanding - end of year ....................................... 3 3
====== ======
CAPITAL UNITS TRANSACTIONS BY CLASS:
Class A:
Proceeds from units issued ........................................... $ 24,844 $ 27,037 $ 79,034
Cost of units redeemed ............................................... (44,414) (43,014) (88,629)
---------- ---------- ----------
Increase (decrease) in net assets from capital unit transactions ..... $ (19,570) $ (15,977) $ (9,595)
========== ========== ==========
Class B:
Proceeds from units issued ........................................... $ 124,950 $ 101,973 $ 422,476
Cost of units redeemed ............................................... (131,518) (76,391) (349,138)
---------- ---------- ----------
Increase (decrease) in net assets from capital unit transactions ..... $ (6,568) $ 25,582 $ 73,338
========== ========== ==========
Class C:
Proceeds from units issued ........................................... $ 25 $ 25
Cost of units redeemed ............................................... 0 0
---------- ----------
Increase (decrease) in net assets from capital unit transactions ..... $ 25 $ 25
========== ==========
Class D:
Proceeds from units issued ........................................... $ 25 $ 25
Cost of units redeemed ............................................... 0 0
---------- ----------
Increase (decrease) in net assets from capital unit transactions ..... $ 25 $ 25
========== ==========
(All amounts in thousands)
WRL
VKAM
EMERGING GROWTH
SUBACCOUNT
--------------
DECEMBER 31,
--------------
1998
--------------
UNIT ACTIVITY:
Class A:
Units outstanding - beginning of year ................................ 7,180
Units issued ......................................................... 1,612
Units redeemed ....................................................... (2,349)
------
Units outstanding - end of year ...................................... 6,443
======
Class B:
Units outstanding - beginning of year ................................ 11,279
Units issued ......................................................... 6,337
Units redeemed ....................................................... (5,337)
------
Units outstanding - end of year ...................................... 12,279
======
Class C:
Units outstanding - beginning of year ................................
Units issued .........................................................
Units redeemed .......................................................
Units outstanding - end of year ......................................
Class D:
Units outstanding - beginning of year ................................
Units issued .........................................................
Units redeemed .......................................................
Units oustanding - end of year .......................................
CAPITAL UNITS TRANSACTIONS BY CLASS:
Class A:
Proceeds from units issued ........................................... $ 41,762
Cost of units redeemed ............................................... (59,102)
----------
Increase (decrease) in net assets from capital unit transactions ..... $ (17,340)
==========
Class B:
Proceeds from units issued ........................................... $ 162,954
Cost of units redeemed ............................................... (135,066)
----------
Increase (decrease) in net assets from capital unit transactions ..... $ 27,888
==========
Class C:
Proceeds from units issued ...........................................
Cost of units redeemed ...............................................
Increase (decrease) in net assets from capital unit transactions .....
Class D:
Proceeds from units issued ...........................................
Cost of units redeemed ...............................................
Increase (decrease) in net assets from capital unit transactions .....
</TABLE>
<PAGE>
WRL SERIES ANNUITY ACCOUNT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 1999
NOTE 6 -- (continued)
(All amounts in thousands)
<TABLE>
<CAPTION>
WRL
ALGER
AGGRESSIVE GROWTH
SUBACCOUNT
---------------------------
DECEMBER 31,
---------------------------
1999(1) 1998
------------- -------------
<S> <C> <C>
UNIT ACTIVITY:
Class A:
Units outstanding - beginning of year ........................... 4,069 4,173
Units issued .................................................... 1,440 1,588
Units redeemed .................................................. (1,611) (1,692)
------ ------
Units outstanding - end of year ................................. 3,898 4,069
====== ======
Class B:
Units outstanding - beginning of year ........................... 10,807 9,141
Units issued .................................................... 8,405 6,364
Units redeemed .................................................. (5,960) (4,698)
------ ------
Units outstanding - end of year ................................. 13,252 10,807
====== ======
Class C:
Units outstanding - beginning of year ........................... 0
Units issued .................................................... 3
Units redeemed .................................................. 0
------
Units outstanding - end of year ................................. 3
======
Class D:
Units outstanding - beginning of year ........................... 0
Units issued .................................................... 3
Units redeemed .................................................. 0
------
Units oustanding - end of year .................................. 3
======
CAPITAL UNITS TRANSACTIONS BY CLASS:
Class A:
Proceeds from units issued ...................................... $ 44,279 $ 33,380
Cost of units redeemed .......................................... (48,859) (34,274)
---------- ---------
Increase (decrease) in net assets from capital unit transactions $ (4,580) $ (894)
========== =========
Class B:
Proceeds from units issued ...................................... $ 257,678 $ 134,461
Cost of units redeemed .......................................... (182,530) (97,234)
---------- ---------
Increase (decrease) in net assets from capital unit transactions $ 75,148 $ 37,227
========== =========
Class C:
Proceeds from units issued ...................................... $ 25
Cost of units redeemed .......................................... 0
----------
Increase (decrease) in net assets from capital unit transactions $ 25
==========
Class D:
Proceeds from units issued ...................................... $ 25
Cost of units redeemed .......................................... 0
----------
Increase (decrease) in net assets from capital unit transactions $ 25
==========
WRL WRL
AEGON FEDERATED
BALANCED GROWTH & INCOME
SUBACCOUNT SUBACCOUNT
------------------------- -------------------------
DECEMBER 31, DECEMBER 31,
------------------------- -------------------------
1999(1) 1998 1999(1) 1998
------------ ------------ ------------- -----------
UNIT ACTIVITY:
Class A:
Units outstanding - beginning of year ........................... 1,336 1,239 1,021 885
Units issued .................................................... 688 652 225 654
Units redeemed .................................................. (571) (555) (504) (518)
----- ----- ----- ----
Units outstanding - end of year ................................. 1,453 1,336 742 1,021
===== ===== ===== =====
Class B:
Units outstanding - beginning of year ........................... 4,024 3,157 3,248 2,316
Units issued .................................................... 2,279 2,021 1,704 2,664
Units redeemed .................................................. (1,836) (1,154) (1,928) (1,732)
------ ------ ------ ------
Units outstanding - end of year ................................. 4,467 4,024 3,024 3,248
====== ====== ====== ======
Class C:
Units outstanding - beginning of year ........................... 0 0
Units issued .................................................... 3 3
Units redeemed .................................................. 0 0
------ ------
Units outstanding - end of year ................................. 3 3
====== ======
Class D:
Units outstanding - beginning of year ........................... 0 0
Units issued .................................................... 3 3
Units redeemed .................................................. 0 0
------ ------
Units oustanding - end of year .................................. 3 3
====== ======
CAPITAL UNITS TRANSACTIONS BY CLASS:
Class A:
Proceeds from units issued ...................................... $ 10,368 $ 9,298 $ 3,553 $ 10,307
Cost of units redeemed .......................................... (8,530) (7,930) (7,926) (8,136)
--------- --------- --------- ---------
Increase (decrease) in net assets from capital unit transactions $ 1,838 $ 1,368 $ (4,373) $ 2,171
========= ========= ========= =========
Class B:
Proceeds from units issued ...................................... $ 33,951 $ 28,613 $ 26,708 $ 41,704
Cost of units redeemed .......................................... (27,230) (16,289) (30,115) (27,088)
--------- --------- --------- ---------
Increase (decrease) in net assets from capital unit transactions $ 6,721 $ 12,324 $ (3,407) $ 14,616
========= ========= ========= =========
Class C:
Proceeds from units issued ...................................... $ 25 $ 25
Cost of units redeemed .......................................... 0 0
--------- ---------
Increase (decrease) in net assets from capital unit transactions $ 25 $ 25
========= =========
Class D:
Proceeds from units issued ...................................... $ 25 $ 25
Cost of units redeemed .......................................... 0 0
--------- ---------
Increase (decrease) in net assets from capital unit transactions $ 25 $ 25
========= =========
</TABLE>
<PAGE>
WRL SERIES ANNUITY ACCOUNT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 1999
NOTE 6 -- (continued)
(All amounts in thousands)
<TABLE>
<CAPTION>
WRL WRL
DEAN ASSET C.A.S.E.
ALLOCATION GROWTH
SUBACCOUNT SUBACCOUNT
--------------------------- --------------------------
DECEMBER 31, DECEMBER 31,
--------------------------- --------------------------
1999(1) 1998 1999(1) 1998
-------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
UNIT ACTIVITY:
Class A:
Units outstanding - beginning of year ........................... 5,174 5,049 887 1,121
Units issued .................................................... 850 1,544 789 538
Units redeemed .................................................. (2,179) (1,419) (992) (772)
------ ------ ---- -----
Units outstanding - end of year ................................. 3,845 5,174 684 887
====== ====== ==== =====
Class B:
Units outstanding - beginning of year ........................... 14,496 12,633 3,043 2,618
Units issued .................................................... 3,195 5,679 3,570 1,879
Units redeemed .................................................. (6,752) (3,816) (3,476) (1,454)
------ ------ ------ ------
Units outstanding - end of year ................................. 10,939 14,496 3,137 3,043
====== ====== ====== ======
Class C:
Units outstanding - beginning of year ........................... 0 0
Units issued .................................................... 3 3
Units redeemed .................................................. 0 0
------ ------
Units outstanding - end of year ................................. 3 3
====== ======
Class D:
Units outstanding - beginning of year ........................... 0 0
Units issued .................................................... 3 3
Units redeemed .................................................. 0 0
------ ------
Units oustanding - end of year .................................. 3 3
====== ======
CAPITAL UNITS TRANSACTIONS BY CLASS:
Class A:
Proceeds from units issued ...................................... $ 13,824 $ 24,856 $ 15,227 $ 8,282
Cost of units redeemed .......................................... (35,141) (22,698) (18,868) (12,019)
---------- --------- --------- ---------
Increase (decrease) in net assets from capital unit transactions $ (21,317) $ 2,158 $ (3,641) $ (3,737)
========== ========= ========= =========
Class B:
Proceeds from units issued ...................................... $ 51,728 $ 90,625 $ 52,397 $ 22,803
Cost of units redeemed .......................................... (107,838) (60,672) (50,557) (17,320)
---------- --------- --------- ---------
Increase (decrease) in net assets from capital unit transactions $ (56,110) $ 29,953 $ 1,840 $ 5,483
========== ========= ========= =========
Class C:
Proceeds from units issued ...................................... $ 25 $ 25
Cost of units redeemed .......................................... 0 0
---------- ---------
Increase (decrease) in net assets from capital unit transactions $ 25 $ 25
========== =========
Class D:
Proceeds from units issued ...................................... $ 25 $ 25
Cost of units redeemed .......................................... 0 0
---------- ---------
Increase (decrease) in net assets from capital unit transactions $ 25 $ 25
========== =========
WRL
NWQ
VALUE EQUITY
SUBACCOUNT
----------------------------
DECEMBER 31,
----------------------------
1999(1) 1998
-------------- -------------
UNIT ACTIVITY:
Class A:
Units outstanding - beginning of year ........................... 2,964 3,562
Units issued .................................................... 1,392 2,145
Units redeemed .................................................. (1,985) (2,743)
------ ------
Units outstanding - end of year ................................. 2,371 2,964
====== ======
Class B:
Units outstanding - beginning of year ........................... 7,103 7,035
Units issued .................................................... 5,308 5,002
Units redeemed .................................................. (6,832) (4,934)
------ ------
Units outstanding - end of year ................................. 5,579 7,103
====== ======
Class C:
Units outstanding - beginning of year ........................... 0
Units issued .................................................... 3
Units redeemed .................................................. 0
------
Units outstanding - end of year ................................. 3
======
Class D:
Units outstanding - beginning of year ........................... 0
Units issued .................................................... 3
Units redeemed .................................................. 0
------
Units oustanding - end of year .................................. 3
======
CAPITAL UNITS TRANSACTIONS BY CLASS:
Class A:
Proceeds from units issued ...................................... $ 19,668 $ 29,077
Cost of units redeemed .......................................... (27,513) (36,336)
---------- ---------
Increase (decrease) in net assets from capital unit transactions $ (7,845) $ (7,259)
========== =========
Class B:
Proceeds from units issued ...................................... $ 75,522 $ 69,109
Cost of units redeemed .......................................... (94,761) (65,328)
---------- ---------
Increase (decrease) in net assets from capital unit transactions $ (19,239) $ 3,781
========== =========
Class C:
Proceeds from units issued ...................................... $ 25
Cost of units redeemed .......................................... 0
----------
Increase (decrease) in net assets from capital unit transactions $ 25
==========
Class D:
Proceeds from units issued ...................................... $ 25
Cost of units redeemed .......................................... 0
----------
Increase (decrease) in net assets from capital unit transactions $ 25
==========
</TABLE>
<PAGE>
WRL SERIES ANNUITY ACCOUNT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 1999
NOTE 6 -- (continued)
(All amounts in thousands)
<TABLE>
<CAPTION>
WRL
GE/SCOTTISH EQUITABLE
INTERNATIONAL EQUITY
SUBACCOUNT
--------------------------
DECEMBER 31,
--------------------------
1999(1) 1998
------------- ------------
<S> <C> <C>
UNIT ACTIVITY:
Class A:
Units outstanding - beginning of year ........................... 573 601
Units issued .................................................... 281 665
Units redeemed .................................................. (451) (693)
---- ----
Units outstanding - end of year ................................. 403 573
==== ====
Class B:
Units outstanding - beginning of year ........................... 1,642 1,051
Units issued .................................................... 17,277 1,776
Units redeemed .................................................. (17,511) (1,185)
------- ------
Units outstanding - end of year ................................. 1,408 1,642
======= ======
Class C:
Units outstanding - beginning of year ........................... 0
Units issued .................................................... 3
Units redeemed .................................................. 0
-------
Units outstanding - end of year ................................. 3
=======
Class D:
Units outstanding - beginning of year ........................... 0
Units issued .................................................... 3
Units redeemed .................................................. 0
-------
Units oustanding - end of year .................................. 3
=======
CAPITAL UNITS TRANSACTIONS BY CLASS:
Class A:
Proceeds from units issued ...................................... $ 3,420 $ 7,942
Cost of units redeemed .......................................... (5,503) (8,214)
---------- ---------
Increase (decrease) in net assets from capital unit transactions $ (2,083) $ (272)
========== =========
Class B:
Proceeds from units issued ...................................... $ 205,933 $ 20,738
Cost of units redeemed .......................................... (210,008) (13,578)
---------- ---------
Increase (decrease) in net assets from capital unit transactions $ (4,075) $ 7,160
========== =========
Class C:
Proceeds from units issued ...................................... $ 25
Cost of units redeemed .......................................... 0
----------
Increase (decrease) in net assets from capital unit transactions $ 25
==========
Class D:
Proceeds from units issued ...................................... $ 25
Cost of units redeemed .......................................... 0
----------
Increase (decrease) in net assets from capital unit transactions $ 25
==========
WRL WRL
GE THIRD AVENUE
U.S. EQUITY VALUE
SUBACCOUNT SUBACCOUNT
-------------------------- -------------------------
DECEMBER 31, DECEMBER 31,
-------------------------- -------------------------
1999(1) 1998 1999(1) 1998(1)
------------- ------------ ------------- -----------
UNIT ACTIVITY:
Class A:
Units outstanding - beginning of year ........................... 1,538 987 644 0
Units issued .................................................... 1,742 1,779 344 992
Units redeemed .................................................. (1,457) (1,228) (483) (348)
------ ------ ---- ----
Units outstanding - end of year ................................. 1,823 1,538 505 644
====== ====== ==== ====
Class B:
Units outstanding - beginning of year ........................... 4,840 2,141 1,025 0
Units issued .................................................... 6,339 5,244 746 1,702
Units redeemed .................................................. (4,398) (2,545) (803) (677)
------ ------ ----- -----
Units outstanding - end of year ................................. 6,781 4,840 968 1,025
====== ====== ===== =====
Class C:
Units outstanding - beginning of year ........................... 0 0
Units issued .................................................... 3 3
Units redeemed .................................................. 0 0
------ -----
Units outstanding - end of year ................................. 3 3
====== =====
Class D:
Units outstanding - beginning of year ........................... 0 0
Units issued .................................................... 3 3
Units redeemed .................................................. 0 0
------ -----
Units oustanding - end of year .................................. 3 3
====== =====
CAPITAL UNITS TRANSACTIONS BY CLASS:
Class A:
Proceeds from units issued ...................................... $ 28,757 $ 24,458 $ 3,180 $ 9,565
Cost of units redeemed .......................................... (23,900) (17,106) (4,457) (3,245)
--------- --------- --------- --------
Increase (decrease) in net assets from capital unit transactions $ 4,857 $ 7,352 $ (1,277) $ 6,320
========= ========= ========= ========
Class B:
Proceeds from units issued ...................................... $ 103,550 $ 71,783 $ 6,830 $ 16,395
Cost of units redeemed .......................................... (71,471) (34,882) (7,373) (6,266)
--------- --------- --------- --------
Increase (decrease) in net assets from capital unit transactions $ 32,079 $ 36,901 $ (543) $ 10,129
========= ========= ========= ========
Class C:
Proceeds from units issued ...................................... $ 25 $ 25
Cost of units redeemed .......................................... 0 0
--------- ---------
Increase (decrease) in net assets from capital unit transactions $ 25 $ 25
========= =========
Class D:
Proceeds from units issued ...................................... $ 25 $ 25
Cost of units redeemed .......................................... 0 0
--------- ---------
Increase (decrease) in net assets from capital unit transactions $ 25 $ 25
========= =========
</TABLE>
<PAGE>
WRL SERIES ANNUITY ACCOUNT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 1999
NOTE 6 -- (continued)
(All amounts in thousands)
<TABLE>
<CAPTION>
WRL
J.P. MORGAN
REAL ESTATE SECURITIES
SUBACCOUNT
-----------------------
DECEMBER 31,
-----------------------
1999(1) 1998(1)
----------- -----------
<S> <C> <C>
UNIT ACTIVITY:
Class A:
Units outstanding - beginning of year .................................. 68 0
Units issued ........................................................... 29 84
Units redeemed ......................................................... (46) (16)
--- ---
Units outstanding - end of year ........................................ 51 68
=== ===
Class B:
Units outstanding - beginning of year .................................. 157 0
Units issued ........................................................... 711 302
Units redeemed ......................................................... (665) (145)
---- ----
Units outstanding - end of year ........................................ 203 157
==== ====
Class C:
Units outstanding - beginning of year .................................. 0
Units issued ........................................................... 3
Units redeemed ......................................................... 0
----
Units outstanding - end of year ........................................ 3
====
Class D:
Units outstanding - beginning of year .................................. 0
Units issued ........................................................... 3
Units redeemed ......................................................... 0
----
Units oustanding - end of year ......................................... 3
====
CAPITAL UNITS TRANSACTIONS BY CLASS:
Class A:
Proceeds from units issued ............................................. $ 250 $ 784
Cost of units redeemed ................................................. (381) (151)
-------- --------
Increase (decrease) in net assets from capital unit transactions ....... $ (131) $ 633
======== ========
Class B:
Proceeds from units issued ............................................. $ 6,089 $ 2,659
Cost of units redeemed ................................................. (5,638) (1,222)
-------- --------
Increase (decrease) in net assets from capital unit transactions ....... $ 451 $ 1,437
======== ========
Class C:
Proceeds from units issued ............................................. $ 25
Cost of units redeemed ................................................. 0
--------
Increase (decrease) in net assets from capital unit transactions ....... $ 25
========
Class D:
Proceeds from units issued ............................................. $ 25
Cost of units redeemed ................................................. 0
--------
Increase (decrease) in net assets from capital unit transactions ....... $ 25
========
WRL WRL WRL
GOLDMAN SACHS GOLDMAN SACHS T. ROWE PRICE
GROWTH SMALL CAP DIVIDEND GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- --------------- ----------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
--------------- --------------- ----------------
1999(1) 1999(1) 1999(1)
--------------- --------------- ----------------
UNIT ACTIVITY:
Class A:
Units outstanding - beginning of year .................................. 0 0 0
Units issued ........................................................... 162 244 224
Units redeemed ......................................................... (48) (207) (26)
--- ---- ---
Units outstanding - end of year ........................................ 114 37 198
=== ==== ===
Class B:
Units outstanding - beginning of year .................................. 0 0 0
Units issued ........................................................... 679 437 925
Units redeemed ......................................................... (175) (271) (233)
---- ---- ----
Units outstanding - end of year ........................................ 504 166 692
==== ==== ====
Class C:
Units outstanding - beginning of year .................................. 0 0 0
Units issued ........................................................... 3 3 3
Units redeemed ......................................................... 0 0 0
---- ---- ----
Units outstanding - end of year ........................................ 3 3 3
==== ==== ====
Class D:
Units outstanding - beginning of year .................................. 0 0 0
Units issued ........................................................... 3 3 3
Units redeemed ......................................................... 0 0 0
---- ---- ----
Units oustanding - end of year ......................................... 3 3 3
==== ==== ====
CAPITAL UNITS TRANSACTIONS BY CLASS:
Class A:
Proceeds from units issued ............................................. $ 1,614 $ 2,469 $ 2,140
Cost of units redeemed ................................................. (489) (2,190) (239)
-------- -------- --------
Increase (decrease) in net assets from capital unit transactions ....... $ 1,125 $ 279 $ 1,901
======== ======== ========
Class B:
Proceeds from units issued ............................................. $ 6,881 $ 4,542 $ 8,844
Cost of units redeemed ................................................. (1,788) (2,854) (2,175)
-------- -------- --------
Increase (decrease) in net assets from capital unit transactions ....... $ 5,093 $ 1,688 $ 6,669
======== ======== ========
Class C:
Proceeds from units issued ............................................. $ 25 $ 25 $ 25
Cost of units redeemed ................................................. 0 0 0
-------- -------- --------
Increase (decrease) in net assets from capital unit transactions ....... $ 25 25 $ 25
======== ======== ========
Class D:
Proceeds from units issued ............................................. $ 25 $ 25 $ 25
Cost of units redeemed ................................................. 0 0 0
-------- -------- --------
Increase (decrease) in net assets from capital unit transactions ....... $ 25 $ 25 $ 25
======== ======== ========
</TABLE>
<PAGE>
WRL SERIES ANNUITY ACCOUNT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 1999
NOTE 6 -- (continued)
(All amounts in thousands)
<TABLE>
<CAPTION>
WRL WRL WRL WRL
T. ROWE PRICE SALOMON PILGRIM BAXTER DREYFUS
SMALL CAP ALL CAP MID CAP GROWTH MID CAP
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- -------------- ---------------- -------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
--------------- -------------- ---------------- -------------
1999(1) 1999(1) 1999(1) 1999(1)
--------------- -------------- ---------------- -------------
<S> <C> <C> <C> <C>
UNIT ACTIVITY:
Class A:
Units outstanding - beginning of year ........................... 0 0 0 0
Units issued .................................................... 609 351 467 80
Units redeemed .................................................. (324) (231) (90) (4)
---- ---- --- ---------
Units outstanding - end of year ................................. 285 120 377 76
==== ==== === =========
Class B:
Units outstanding - beginning of year ........................... 0 0 0 0
Units issued .................................................... 929 863 2,223 428
Units redeemed .................................................. (570) (438) (771) (218)
---- ---- ----- ---------
Units outstanding - end of year ................................. 359 425 1,452 210
==== ==== ===== =========
Class C:
Units outstanding - beginning of year ........................... 0 0 0 0
Units issued .................................................... 3 3 3 3
Units redeemed .................................................. 0 0 0 0
---- ---- ----- ---------
Units outstanding - end of year ................................. 3 3 3 3
==== ==== ===== =========
Class D:
Units outstanding - beginning of year ........................... 0 0 0 0
Units issued .................................................... 3 3 3 3
Units redeemed .................................................. 0 0 0 0
---- ---- ----- ---------
Units oustanding - end of year .................................. 3 3 3 3
==== ==== ===== =========
CAPITAL UNITS TRANSACTIONS BY CLASS:
Class A:
Proceeds from units issued ...................................... $ 6,520 $ 3,654 $ 5,562 $ 807
Cost of units redeemed .......................................... (3,636) (2,516) (1,159) (44)
-------- -------- --------- ---------
Increase (decrease) in net assets from capital unit transactions $ 2,884 $ 1,138 $ 4,403 $ 763
======== ======== ========= =========
Class B:
Proceeds from units issued ...................................... $ 10,097 $ 9,161 $ 27,496 $ 4,276
Cost of units redeemed .......................................... (6,338) (4,670) (10,080) (2,145)
-------- -------- --------- ---------
Increase (decrease) in net assets from capital unit transactions $ 3,759 $ 4,491 $ 17,416 $ 2,131
======== ======== ========= =========
Class C:
Proceeds from units issued ...................................... $ 25 $ 25 $ 25 $ 25
Cost of units redeemed .......................................... 0 0 0 0
-------- -------- --------- ---------
Increase (decrease) in net assets from capital unit transactions $ 25 $ 25 25 $ 25
======== ======== ========= =========
Class D:
Proceeds from units issued ...................................... $ 25 $ 25 $ 25 $ 25
Cost of units redeemed .......................................... 0 0 0 0
-------- -------- --------- ---------
Increase (decrease) in net assets from capital unit transactions $ 25 $ 25 $ 25 $ 25
======== ======== ========= =========
</TABLE>
<PAGE>
Report of Independent Auditors
The Board of Directors
Western Reserve Life Assurance Co. of Ohio
We have audited the accompanying statutory-basis balance sheets of Western
Reserve Life Assurance Co. of Ohio (wholly owned indirectly by AEGON N.V.) as of
December 31, 1999 and 1998, and the related statutory-basis statements of
operations, changes in capital and surplus, and cash flows for each of the three
years in the period ended December 31, 1999. Our audits also included the
statutory-basis financial statement schedules required by Regulation S-X,
Article 7. These financial statements and schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits. We did not audit the
"Separate Account Assets" and "Separate Account Liabilities" in the
statutory-basis balance sheets of the Company. The Separate Account financial
statements were audited by other auditors whose reports have been furnished to
us, and our opinion, insofar as it relates to the data included for the Separate
Accounts, is based solely upon the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of other auditors provide a
reasonable basis for our opinion.
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Insurance Department of the State of Ohio, which practices
differ from generally accepted accounting principles. The variances between such
practices and generally accepted accounting principles are also described in
Note 1. The effects on the financial statements of these variances are not
reasonably determinable but are presumed to be material.
In our opinion, because of the effects of the matter described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of Western Reserve Life Assurance Co. of Ohio at December 31, 1999 and 1998, or
the results of its operations or its cash flows for each of the three years in
the period ended December 31, 1999.
<PAGE>
However, in our opinion, based on our audits and the reports of other auditors,
the financial statements referred to above present fairly, in all material
respects, the financial position of Western Reserve Life Assurance Co. of Ohio
at December 31, 1999 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting practices prescribed or permitted by the Insurance
Department of the State of Ohio. Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic statutory-basis
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
ERNST & YOUNG LLP
Des Moines, Iowa
February 18, 2000
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
-----------------------------------
<S> <C> <C>
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Aggregate reserves for policies and contracts:
Life $ 302,138 $ 231,596
Annuity 268,864 265,418
Policy and contract claim reserves 9,269 9,233
Other policyholders' funds 38,633 38,080
Remittances and items not allocated 20,686 20,569
Federal income taxes payable 5,873 5,716
Asset valuation reserve 3,809 2,848
Interest maintenance reserve 7,866 9,684
Short-term note payable to affiliate 17,100 44,200
Payable to affiliate 964 37,907
Other liabilities 49,478 31,151
Separate account liabilities 11,582,656 6,997,456
-----------------------------------
Total liabilities 12,307,336 7,693,858
Commitments and contingencies (NOTE 11)
Capital and surplus:
Common stock, $1.00 par value, 3,000,000 shares authorized and 2,500,000
shares issued and outstanding at December 31, 1999 and 1,500,000 shares
authorized, issued and outstanding at December 31, 1998
2,500 1,500
Paid-in surplus 120,107 120,107
Unassigned surplus 62,309 21,973
-----------------------------------
Total capital and surplus 184,916 143,580
-----------------------------------
Total liabilities and capital and surplus $12,492,252 $7,837,438
===================================
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
Western Reserve Life Assurance Co. of Ohio
Balance Sheets - Statutory Basis
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
-----------------------------------
<S> <C> <C>
ADMITTED ASSETS
Cash and invested assets:
Cash and short-term investments $ 23,932 $ 73,808
Bonds 119,731 184,697
Common stocks:
Affiliated entities (cost: 1999 and 1998 - $243) 2,156 704
Other (cost: 1999 and 1998 - $302) 358 384
Mortgage loans on real estate 9,698 9,916
Home office properties 34,066 34,583
Investment properties 11,078 11,594
Policy loans 182,975 112,982
Other invested assets - 396
-----------------------------------
Total cash and invested assets 383,994 429,064
Premiums deferred and uncollected 785 900
Accrued investment income 1,638 2,867
Transfers from separate accounts due or accrued 463,721 350,633
Cash surrender value of life insurance policies 47,518 45,445
Other assets 6,614 9,239
Separate account assets 11,587,982 6,999,290
-----------------------------------
Total admitted assets $12,492,252 $7,837,438
===================================
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
Western Reserve Life Assurance Co. of Ohio
Statements of Operations - Statutory Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
-----------------------------------------------
<S> <C> <C> <C>
Revenues:
Premiums and other considerations, net of reinsurance:
Life $ 584,729 $ 476,053 $ 394,370
Annuity 1,104,525 794,841 822,149
Net investment income 39,589 36,315 40,013
Amortization of interest maintenance reserve 1,751 744 1,576
Commissions and expense allowances on reinsurance ceded
4,178 15,333 11
Income from fees associated with investment management,
administration and contract guarantees for separate
accounts 19,620 72,817 -
Other income 44,366 67,751 3,016
-----------------------------------------------
1,798,758 1,463,854 1,261,135
Benefits and expenses:
Benefits paid or provided for:
Life 35,591 42,982 28,060
Surrender benefits 689,535 551,528 431,939
Other benefits 32,201 31,280 28,112
Increase (decrease) in aggregate reserves for policies
and contracts:
Life 70,542 42,940 29,485
Annuity 3,446 (30,872) (35,940)
Other (121) 32,178 794
-----------------------------------------------
831,194 670,036 482,450
Insurance expenses:
Commissions 246,334 205,939 179,106
General insurance expenses 112,536 102,611 70,546
Taxes, licenses and fees 19,019 15,545 13,101
Net transfers to separate accounts 540,443 475,435 519,214
Other expenses - 59 21
-----------------------------------------------
918,332 799,589 781,988
-----------------------------------------------
1,749,526 1,469,625 1,264,438
-----------------------------------------------
Gain (loss) from operations before federal income
tax expense (benefit) and net
realized capital gains (losses)
on investments 49,232 (5,771) (3,303)
Federal income tax expense (benefit) 11,816 (347) 469
-----------------------------------------------
Gain (loss) from operations before net realized capital gains
(losses) on investments 37,416 (5,424) (3,772)
Netrealized capital gains (losses) on investments (net of
related federal income taxes and amounts transferred to
interest maintenance reserve) (716) 1,494 747
-----------------------------------------------
Net income (loss) $ 36,700 $ (3,930) $ (3,025)
===============================================
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
Western Reserve Life Assurance Co. of Ohio
Statements of Changes in Capital and Surplus - Statutory Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
TOTAL
CAPITAL
COMMON PAID-IN UNASSIGNED AND
STOCK SURPLUS SURPLUS SURPLUS
------------- ---------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Balance at January 1, 1997 $1,500 $ 68,015 $26,041 $ 95,556
Net loss - - (3,025) (3,025)
Change in non-admitted assets - - (702) (702)
Change in asset valuation reserve - - 3,274 3,274
Change in surplus in separate accounts
- - (2,115) (2,115)
Change in reserve valuation - - (1,872) (1,872)
Capital contribution - 20,000 - 20,000
Tax effect of capital loss carry-forward
utilized by affiliates - - 3,747 3,747
------------- ---------------- ----------------- ---------------
Balance at December 31, 1997 1,500 88,015 25,348 114,863
Net loss - - (3,930) (3,930)
Change in net unrealized capital gains - - 248 248
Change in non-admitted assets - - (1,815) (1,815)
Change in asset valuation reserve - - (412) (412)
Change in surplus in separate accounts - - (341) (341)
Change in reserve valuation - - (2,132) (2,132)
Capital contribution - 32,092 - 32,092
Settlement of prior period tax returns - - 353 353
Tax benefits on stock options exercised - - 4,654 4,654
------------- ---------------- ----------------- ---------------
Balance at December 31, 1998 1,500 120,107 21,973 143,580
Net income - - 36,700 36,700
Change in net unrealized capital gains - - 1,421 1,421
Change in non-admitted assets - - 703 703
Change in asset valuation reserve - - (961) (961)
Change in surplus in separate accounts - - 451 451
Transfer from unassigned surplus to common
stock (stock dividend) 1,000 - (1,000) -
Settlement of prior period tax returns - - 1,000 1,000
Tax benefits on stock options exercised - - 2,022 2,022
------------- ---------------- ----------------- ---------------
Balance at December 31, 1999 $2,500 $120,107 $62,309 $184,916
============= ================ ================= ===============
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
Western Reserve Life Assurance Co. of Ohio
Statements of Cash Flows - Statutory Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
----------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Premiums and other considerations, net of reinsurance $1,738,870 $1,356,732 $1,223,898
Net investment income 44,235 38,294 43,802
Life and accident and health claims (35,872) (44,426) (26,005)
Surrender benefits and other fund withdrawals (689,535) (551,528) (431,939)
Other benefits to policyholders (32,642) (31,231) (28,147)
Commissions, other expenses and other taxes (382,372) (326,080) (262,901)
Net transfers to separate accounts (628,762) (461,982) (596,347)
Federal income taxes received (paid) (9,637) 11,956 5,006
Interest paid - - (731)
Other, net (21,054) (7,109) (14,901)
----------------------------------------------
Net cash used in operating activities (16,769) (15,374) (88,265)
INVESTING ACTIVITIES
Proceeds from investments sold, matured or repaid:
Bonds and preferred stocks 114,177 143,449 146,963
Mortgage loans on real estate 212 221 2,116
Other 18 - -
----------------------------------------------
114,407 143,670 149,079
Cost of investments acquired
Bonds and preferred stocks (49,279) (68,202) (40,418)
Common stocks - (93) (150)
Mortgage loans on real estate (1) (5,313) (891)
Real estate (286) (26,213) (12,002)
Policy loans (69,993) (36,241) (24,137)
Other (855) (414) -
----------------------------------------------
(120,414) (136,476) (77,598)
----------------------------------------------
Net cash provided by (used in) investing activities (6,007) 7,194 71,481
FINANCING ACTIVITIES
Issuance (payment) of short-term note payable to
affiliate, net (27,100) 36,000 8,200
Capital contribution - 32,092 20,000
----------------------------------------------
Net cash provided by (used in) financing activities (27,100) 68,092 28,200
----------------------------------------------
Increase (decrease) in cash and short-term investments (49,876) 59,912 11,416
Cash and short-term investments at beginning of year 73,808 13,896 2,480
----------------------------------------------
Cash and short-term investments at end of year $ 23,932 $ 73,808 $ 13,896
==============================================
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements - Statutory-Basis
(Dollars in thousands)
December 31, 1999
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Western Reserve Life Assurance Co. of Ohio ("the Company") is a stock life
insurance company and is a wholly-owned subsidiary of First AUSA Life Insurance
Company which, in turn, is a wholly-owned subsidiary of AEGON USA, Inc.
("AEGON"). AEGON is an indirect wholly-owned subsidiary of AEGON N.V., a holding
company organized under the laws of The Netherlands.
NATURE OF BUSINESS
The Company operates predominantly in the variable universal life and variable
annuity areas of the life insurance business. The Company is licensed in 49
states, District of Columbia, Puerto Rico and Guam. Sales of the Company's
products are through financial planners, independent representatives, financial
institutions and stockbrokers. The majority of the Company's new life insurance
written and a substantial portion of new annuities written is done through one
marketing organization; the Company expects to maintain this relationship for
the foreseeable future.
BASIS OF PRESENTATION
The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported in the
financial statements and accompanying notes. Such estimates and assumptions
could change in the future as more information becomes known, which could impact
the amounts reported and disclosed herein.
The accompanying financial statements have been prepared in conformity with
accounting practices prescribed or permitted by the Insurance Department of the
State of Ohio ("Insurance Department"), which practices differ from generally
accepted accounting principles. The more significant of these differences are as
follows: (a) bonds are generally reported at amortized cost rather than
segregating the portfolio into held-to-maturity (reported at amortized cost),
available-for-sale (reported at fair value), and trading (reported at fair
value) classifications; (b) acquisition costs of acquiring new business are
expensed as incurred rather than deferred and amortized over the life of the
policies; (c) policy reserves on traditional life products are based on
statutory mortality rates and interest which may differ from reserves based on
reasonable assumptions of expected mortality, interest, and withdrawals which
include a provision for possible unfavorable deviation from such assumptions;
(d) policy reserves on certain investment products use discounting methodologies
utilizing statutory interest rates rather than full account values; (e)
reinsurance amounts are netted against the corresponding asset or
<PAGE>
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements - Statutory-Basis (continued)
(Dollars in thousands)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
liability rather than shown as gross amounts on the balance sheet; (f) deferred
income taxes are not provided for the difference between the financial statement
amounts and income tax bases of assets and liabilities; (g) net realized gains
or losses attributed to changes in the level of interest rates in the market are
deferred and amortized over the remaining life of the bond or mortgage loan,
rather than recognized as gains or losses in the statement of operations when
the sale is completed; (h) potential declines in the estimated realizable value
of investments are provided for through the establishment of a
formula-determined statutory investment reserve (reported as a liability),
changes to which are charged directly to surplus, rather than through
recognition in the statement of operations for declines in value, when such
declines are judged to be other than temporary; (i) certain assets designated as
"non-admitted assets" have been charged to unassigned surplus rather than being
reported as assets; (j) revenues for universal life and investment products
consist of the entire premiums received rather than policy charges for the cost
of insurance, policy administration charges, amortization of policy initiation
fees and surrender charges assessed; (k) pension expense is recorded as amounts
are paid rather than accrued and expensed during the periods in which the
employers provide service; (l) stock options settled in cash are recorded as an
expense of the Company's indirect parent rather than charged to current
operations; (m) adjustments to federal income taxes of prior years are charged
or credited directly to unassigned surplus, rather than reported as a component
of income tax expense in the statement of operations; and (n) the financial
statements of wholly-owned affiliates are not consolidated with those of the
Company. The effects of these variances have not been determined by the Company,
but are presumed to be material.
In 1998, the National Association of Insurance Commissioners (NAIC) adopted
codified statutory accounting principles ("Codification") effective January 1,
2001. Codification will likely change, to some extent, prescribed statutory
accounting practices and may result in changes to the accounting practices that
the Company uses to prepare its statutory-basis financial statements.
Codification will require adoption by the various states before it becomes the
prescribed statutory basis of accounting for insurance companies domesticated
within those states. Accordingly, before Codification becomes effective for the
Company, the State of Ohio must adopt Codification as the prescribed basis of
accounting on which domestic insurers must report their statutory-basis results
to the Insurance Department. At this time it is unclear whether the State of
Ohio will adopt Codification. However, based on current guidance, management
believes that the impact of Codification will not be material to the Company's
statutory-basis financial statements.
Other significant statutory accounting practices are as follows:
<PAGE>
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements - Statutory-Basis (continued)
(Dollars in thousands)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers all highly
liquid investments with remaining maturities of one year or less when purchased
to be cash equivalents.
INVESTMENTS
Investments in bonds (except those to which the Securities Valuation Office of
the NAIC has ascribed a value), mortgage loans on real estate and short-term
investments are reported at cost adjusted for amortization of premiums and
accrual of discounts. Amortization is computed using methods which result in a
level yield over the expected life of the investment. The Company reviews its
prepayment assumptions on mortgage and other asset backed securities at regular
intervals and adjusts amortization rates retrospectively when such assumptions
are changed due to experience and/or expected future patterns. Common stocks of
unaffiliated companies are carried at market, and the related unrealized capital
gains/(losses) are reported in unassigned surplus without any adjustment for
federal income taxes. Common stocks of the Company's wholly-owned affiliates are
recorded at the equity in net assets. Home office and investment properties are
reported at cost less allowances for depreciation. Depreciation is computed
principally by the straight-line method. Policy loans are reported at unpaid
principal. Other "admitted assets" are valued, principally at cost, as required
or permitted by Ohio Insurance Laws.
Realized capital gains and losses are determined on the basis of specific
identification and are recorded net of related federal income taxes. The Asset
Valuation Reserve (AVR) is established by the Company to provide for potential
losses in the event of default by issuers of certain invested assets. These
amounts are determined using a formula prescribed by the NAIC and are reported
as a liability. The formula for the AVR provides for a corresponding adjustment
for realized gains and losses. Under a formula prescribed by the NAIC, the
Company defers, in the Interest Maintenance Reserve (IMR), the portion of
realized gains and losses on sales of fixed income investments, principally
bonds and mortgage loans, attributable to changes in the general level of
interest rates and amortizes those deferrals over the remaining period to
maturity of the security.
During 1999, 1998 and 1997, net realized capital gains (losses) of $(67), $1,294
and $3,259, respectively, were credited to the IMR rather than being immediately
recognized in the statements of operations. Amortization of these net gains
aggregated $1,751, $744 and $1,576 for the years ended December 31, 1999, 1998
and 1997, respectively.
<PAGE>
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements - Statutory-Basis (continued)
(Dollars in thousands)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Interest income is recognized on an accrual basis. The Company does not accrue
income on bonds in default, mortgage loans on real estate in default and/or
foreclosure or which are delinquent more than twelve months, or real estate
where rent is in arrears for more than three months. Further, income is not
accrued when collection is uncertain. No investment income due and accrued has
been excluded for the years ended December 31, 1999, 1998 and 1997, with respect
to such practices.
AGGREGATE RESERVES FOR POLICIES
Life and annuity reserves are developed by actuarial methods and are determined
based on published tables using statutorily specified interest rates and
valuation methods that will provide, in the aggregate, reserves that are greater
than or equal to the minimum required by law.
The aggregate policy reserves for life insurance policies are based principally
upon the 1941, 1958 and 1980 Commissioners' Standard Ordinary Mortality Tables.
The reserves are calculated using interest rates ranging from 2.25 to 5.50
percent and are computed principally on the Net Level Premium Valuation and the
Commissioners' Reserve Valuation Methods. Reserves for universal life policies
are based on account balances adjusted for the Commissioners' Reserve Valuation
Method.
Deferred annuity reserves are calculated according to the Commissioners' Annuity
Reserve Valuation Method including excess interest reserves to cover situations
where the future interest guarantees plus the decrease in surrender charges are
in excess of the maximum valuation rates of interest. Reserves for immediate
annuities and supplementary contracts with life contingencies are equal to the
present value of future payments assuming interest rates ranging from 5.75 to
8.75 percent and mortality rates, where appropriate, from a variety of tables.
POLICY AND CONTRACT CLAIM RESERVES
Claim reserves represent the estimated accrued liability for claims reported to
the Company and claims incurred but not yet reported through the statement date.
These reserves are estimated using either individual case-basis valuations or
statistical analysis techniques. These estimates are subject to the effects of
trends in claim severity and frequency. The estimates are continually reviewed
and adjusted as necessary as experience develops or new information becomes
available.
<PAGE>
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements - Statutory-Basis (continued)
(Dollars in thousands)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SEPARATE ACCOUNTS
Assets held in trust for purchases of variable universal life and variable
annuity contracts and the Company's corresponding obligation to the contract
owners are shown separately in the balance sheets. The assets in the separate
accounts are valued at market. Income and gains and losses with respect to the
assets in the separate accounts accrue to the benefit of the policyholders and,
accordingly, the operations of the separate accounts are not included in the
accompanying financial statements. The separate accounts do not have any minimum
guarantees and the investment risks associated with market value changes are
borne entirely by the policyholders. The Company received variable contract
premiums of $1,675,642, $1,240,858 and $1,164,013 in 1999, 1998 and 1997,
respectively. All variable account contracts are subject to discretionary
withdrawal by the policyholder at the market value of the underlying assets less
the current surrender charge. Separate account contractholders have no claim
against the assets of the general account.
STOCK OPTION PLAN
AEGON N.V. sponsors a stock option plan for eligible employees of the Company.
Under this plan, certain employees have indicated a preference to immediately
sell shares received as a result of their exercise of the stock options; in
these situations, AEGON N.V. has settled such options in cash rather than
issuing stock to these employees. These cash settlements are paid by the
Company, and AEGON N.V. subsequently reimburses the Company for such payments.
Under statutory accounting principles, the Company does not record any expense
related to this plan, as the expense is recognized by AEGON N.V. However, the
Company is allowed to record a deduction in the consolidated tax return filed by
the Company and certain affiliates. The tax benefit of this deduction has been
credited directly to unassigned surplus.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1998 and 1997 financial
statements to conform to the 1999 presentation.
<PAGE>
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements - Statutory-Basis (continued)
(Dollars in thousands)
2. FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, DISCLOSURES ABOUT FAIR
VALUE OF FINANCIAL INSTRUMENTS, requires disclosure of fair value information
about financial instruments, whether or not recognized in the statutory-basis
balance sheet, for which it is practicable to estimate that value. In cases
where quoted market prices are not available, fair values are based on estimates
using present value or other valuation techniques. Those techniques are
significantly affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard, the derived fair value estimates
cannot be substantiated by comparisons to independent markets and, in many
cases, could not be realized in immediate settlement of the instrument.
Statement of Financial Accounting Standards No. 107 excludes certain financial
instruments and all nonfinancial instruments from its disclosure requirements
and allows companies to forego the disclosures when those estimates can only be
made at excessive cost. Accordingly, the aggregate fair value amounts presented
do not represent the underlying value of the Company.
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
CASH AND SHORT-TERM INVESTMENTS: The carrying amounts reported in the
statutory-basis balance sheet for these instruments approximate their fair
values.
INVESTMENT SECURITIES: Fair values for fixed maturity securities (including
redeemable preferred stocks) are based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair values are
estimated using values obtained from independent pricing services or (in the
case of private placements) are estimated by discounting expected future cash
flows using a current market rate applicable to the yield, credit quality,
and maturity of the investments. The fair values for equity securities are
based on quoted market prices.
MORTGAGE LOANS AND POLICY LOANS: The fair values for mortgage loans are
estimated utilizing discounted cash flow analyses, using interest rates
reflective of current market conditions and the risk characteristics of the
loans. The fair value of policy loans are assumed to equal their carrying
value.
INVESTMENT CONTRACTS: Fair values for the Company's liabilities under
investment-type insurance contracts are estimated using discounted cash flow
calculations, based on interest rates currently being offered for similar
contracts with maturities consistent with those remaining for the contracts
being valued.
<PAGE>
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements - Statutory-Basis (continued)
(Dollars in thousands)
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
Fair values for the Company's insurance contracts other than investment
contracts are not required to be disclosed. However, the fair values of
liabilities under all insurance contracts are taken into consideration in the
Company's overall management of interest rate risk, which minimizes exposure to
changing interest rates through the matching of investment maturities with
amounts due under insurance contracts.
The following sets forth a comparison of the fair values and carrying amounts of
the Company's financial instruments subject to the provisions of Statement of
Financial Accounting Standards No. 107:
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
-------------------------------- --------------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------------------------------- --------------------------------
ADMITTED ASSETS
<S> <C> <C> <C> <C>
Cash and short-term investments $ 23,932 $ 23,932 $ 73,808 $ 73,808
Bonds 119,731 119,076 184,697 192,556
Common stocks, other than affiliates 358 358 384 384
Mortgage loans on real estate 9,698 9,250 9,916 10,390
Policy loans 182,975 182,975 112,982 112,982
Separate account assets 11,587,982 11,587,982 6,999,290 6,999,290
LIABILITIES
Investment contract liabilities 301,403 294,342 297,349 294,105
Separate account annuities 8,271,548 8,079,141 5,096,680 5,038,296
3. INVESTMENTS
The carrying amount and estimated fair value of investments in debt securities
are as follows:
GROSS GROSS ESTIMATED
CARRYING UNREALIZED UNREALIZED FAIR
AMOUNT GAINS LOSSES VALUE
--------------------------------------------------------
DECEMBER 31, 1999
Bonds:
United States Government and agencies $ 4,755 $ 4 $ 66 $ 4,693
State, municipal and other government 2,185 12 - 2,197
Public utilities 13,134 129 368 12,895
Industrial and miscellaneous 52,997 1,213 1,208 53,002
Mortgage and other asset-backed securities 46,660 480 851 46,289
--------------------------------------------------------
Total bonds $119,731 $1,838 $2,493 $119,076
========================================================
</TABLE>
<PAGE>
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements - Statutory-Basis (continued)
(Dollars in thousands)
3. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
CARRYING UNREALIZED UNREALIZED FAIR
AMOUNT GAINS LOSSES VALUE
--------------------------------------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1998
Bonds:
United States Government and agencies $ 4,749 $ 83 $ - $ 4,832
State, municipal and other government 3,234 117 - 3,351
Public utilities 18,792 818 251 19,359
Industrial and miscellaneous 96,332 6,685 577 102,440
Mortgage and other asset-backed securities 61,590 1,235 251 62,574
--------------------------------------------------------
Total bonds $184,697 $8,938 $1,079 $192,556
========================================================
</TABLE>
The carrying amount and fair value of bonds at December 31, 1999 by contractual
maturity are shown below. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without penalties.
<TABLE>
<CAPTION>
ESTIMATED
CARRYING FAIR
AMOUNT VALUE
-------------------------------
<S> <C> <C>
Due in one year or less $ 10,521 $ 10,560
Due one through five years 32,248 31,993
Due five through ten years 17,342 17,104
Due after ten years 12,960 13,130
-------------------------------
73,071 72,787
Mortgage and other asset-backed securities 46,660 46,289
-------------------------------
$119,731 $119,076
===============================
A detail of net investment income is presented below:
YEAR ENDED DECEMBER 31
1999 1998 1997
----------------------------------------
Interest on bonds $12,094 $17,150 $25,723
Dividends on equity investments from subsidiaries 18,555 13,233 10,855
Interest on mortgage loans 746 499 478
Rental income on real estate 5,794 2,839 1,371
Interest on policy loans 9,303 6,241 4,656
Other investment income 414 540 26
----------------------------------------
Gross investment income 46,906 40,502 43,109
Investment expenses (7,317) (4,187) (3,096)
----------------------------------------
Net investment income $39,589 $36,315 $40,013
========================================
</TABLE>
<PAGE>
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements - Statutory-Basis (continued)
(Dollars in thousands)
3. INVESTMENTS (CONTINUED)
Proceeds from sales and maturities of debt securities and related gross realized
gains and losses were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
--------------------------------------------
<S> <C> <C> <C>
Proceeds $114,177 $143,449 $146,963
============================================
Gross realized gains $ 1,762 $ 4,641 $ 3,921
Gross realized losses 1,709 899 626
--------------------------------------------
Net realized gains $ 53 $ 3,742 $ 3,295
============================================
</TABLE>
At December 31, 1999, bonds with an aggregate carrying value of $4,152 were on
deposit with certain state regulatory authorities or were restrictively held in
bank custodial accounts for benefit of such state regulatory authorities, as
required by statute.
Realized investment gains (losses) and changes in unrealized gains (losses) for
investments are summarized below:
<TABLE>
<CAPTION>
REALIZED
---------------------------------------------
YEAR ENDED DECEMBER 31
1999 1998 1997
---------------------------------------------
<S> <C> <C> <C>
Debt securities $ 53 $3,742 $3,295
Other invested assets 18 (18) -
---------------------------------------------
71 3,724 3,295
Tax expense (854) (936) (711)
Transfer to interest maintenance reserve 67 (1,294) (3,259)
---------------------------------------------
Net realized gains (losses) $(716) $1,494 $ 747
=============================================
CHANGES IN UNREALIZED
---------------------------------------------
YEAR ENDED DECEMBER 31
1999 1998 1997
---------------------------------------------
Debt securities $(8,514) $(3,985) $(896)
Common stocks 1,426 248 -
---------------------------------------------
Change in unrealized appreciation (depreciation) $(7,088) $(3,737) $(896)
=============================================
</TABLE>
<PAGE>
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements - Statutory-Basis (continued)
(Dollars in thousands)
3. INVESTMENTS (CONTINUED)
Gross unrealized gains (losses) on common stocks were as follows:
UNREALIZED
--------------------------
DECEMBER 31
1999 1998
--------------------------
Unrealized gains $1,995 $579
Unrealized losses (26) (36)
--------------------------
Net unrealized gains $1,969 $543
==========================
During 1999, the Company did not issue any mortgage loans. The Company requires
all mortgagees to carry fire insurance equal to the value of the underlying
property.
During 1999, 1998 and 1997, no mortgage loans were foreclosed and transferred to
real estate. During 1999 and 1998, the Company held a mortgage loan loss reserve
in the asset valuation reserve of $110 and $112, respectively.
At December 31, 1999, the Company had no investments (excluding U. S. Government
guaranteed or insured issues) which individually represented more than ten
percent of capital and surplus and the asset valuation reserve, collectively.
4. REINSURANCE
The Company reinsures portions of certain insurance policies which exceed its
established limits, thereby providing a greater diversification of risk and
minimizing exposure on larger risks. The Company remains contingently liable
with respect to any insurance ceded, and this would become an actual liability
in the event that the assuming insurance company became unable to meet its
obligations under the reinsurance treaty.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
-----------------------------------------------------
<S> <C> <C> <C>
Direct premiums $1,748,265 $1,345,752 $1,219,271
Reinsurance assumed - 461 2,389
Reinsurance ceded (59,011) (75,319) (5,141)
-----------------------------------------------------
Net premiums earned $1,689,254 $1,270,894 $1,216,519
=====================================================
</TABLE>
<PAGE>
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements - Statutory-Basis (continued)
(Dollars in thousands)
4. REINSURANCE (CONTINUED)
The Company received reinsurance recoveries in the amount of $4,916, $5,260 and
$2,288 during 1999, 1998 and 1997, respectively. At December 31, 1999 and 1998,
estimated amounts recoverable from reinsurers that have been deducted from
policy and contract claim reserves totaled $1,557 and $1,003, respectively. The
aggregate reserves for policies and contracts were reduced for reserve credits
for reinsurance ceded at December 31, 1999 and 1998 of $3,487 and $2,849,
respectively.
5. INCOME TAXES
For federal income tax purposes, the Company joins in a consolidated tax return
filing with certain affiliated companies. Under the terms of a tax-sharing
agreement between the Company and its affiliates, the Company computes federal
income tax expense as if it were filing a separate income tax return, except
that tax credits and net operating loss carryforwards are determined on the
basis of the consolidated group. Additionally, the alternative minimum tax is
computed for the consolidated group and the resulting tax, if any, is allocated
back to the separate companies on the basis of the separate companies'
alternative minimum taxable income.
Federal income tax expense (benefit) differs from the amount computed by
applying the statutory federal income tax rate to gain (loss) from operations
before federal income tax expense (benefit) and realized capital gains (losses)
on investments for the following reasons:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------------
<S> <C> <C> <C>
Computed tax (benefit) at federal statutory rate (35%) $17,231 $(2,019) $(1,156)
Deferred acquisition costs - tax basis 11,344 9,672 9,164
Tax reserve valuation (2,272) 1,513 (194)
Excess tax depreciation (727) (442) (127)
Amortization of IMR (613) (260) (552)
Dividend received deduction (10,784) (6,657) (5,326)
Prior year over-accrual (3,167) (2,322) (1,541)
Other, net 804 168 201
------------------------------------------
Federal income tax expense (benefit) $11,816 $ (347) $ 469
==========================================
</TABLE>
Federal income tax expense (benefit) differs from the amount computed by
applying the statutory federal income tax rate to realized gains (losses) due to
the differences in book and tax asset bases at the time certain investments are
sold.
<PAGE>
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements - Statutory-Basis (continued)
(Dollars in thousands)
5. INCOME TAXES (CONTINUED)
Prior to 1984, as provided for under the Life Insurance Company Tax Act of 1959,
a portion of statutory income was not subject to current taxation, but was
accumulated for income tax purposes in a memorandum account referred to as the
policyholders' surplus account. No federal income taxes have been provided for
in the financial statements on income deferred in the policyholders' surplus
account ($293 at December 31, 1999). To the extent dividends are paid from the
amount accumulated in the policyholders' surplus account, net earnings would be
reduced by the amount of tax required to be paid. Should the entire amount in
the policyholders' surplus account become taxable, the tax thereon computed at
current rates would amount to approximately $103.
At December 31, 1996, the Company had capital loss carryforwards of
approximately $10,705, which were utilized by the Company's affiliates in the
consolidated tax return filing in 1997. This transaction resulted in a receipt
from the Company's affiliate of $3,747, which was credited directly to
unassigned surplus.
In 1999, the Company received $1,000 from its former parent, an unaffiliated
company, for reimbursement of prior period tax payments made by the Company but
owed by the former parent. In 1998, the Company reached a final settlement with
the Internal Revenue Service for 1994 and 1995 resulting in a tax refund of $300
and interest received of $53. Tax settlements for 1999 and 1998 were credited
directly to unassigned surplus.
6. POLICY AND CONTRACT ATTRIBUTES
A portion of the Company's policy reserves and other policyholders' funds relate
to liabilities established on a variety of the Company's products, primarily
separate accounts, that are not subject to significant mortality or morbidity
risk; however, there may be certain restrictions placed upon the amount of funds
that can be withdrawn without penalty. The amount of reserves on these products,
by withdrawal characteristics are summarized as follows:
<PAGE>
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements - Statutory-Basis (continued)
(Dollars in thousands)
6. POLICY AND CONTRACT ATTRIBUTES (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
--------------------------- ----------------------------
PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL
---------------- ---------- ----------------- ----------
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal with
market value adjustment $ 12,534 0% $ 12,810 0%
Subject to discretionary withdrawal at book
value less surrender charge 73,903 1 76,289 1
Subject to discretionary withdrawal at
market value 8,271,441 96 5,096,680 94
Subject to discretionary withdrawal at book
value (minimal or no charges or
adjustments) 217,372 3 210,270 4
Not subject to discretionary withdrawal
provision 15,433 0 15,681 1
---------------------------- ----------------------------
8,590,683 100% 5,411,730 100%
========== ==========
Less reinsurance ceded 1,581 1,131
---------------- -----------------
Total policy reserves on annuities and
deposit fund liabilities $8,589,102 $5,410,599
================ =================
</TABLE>
A reconciliation of the amounts transferred to and from the separate accounts is
presented below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------------
1999 1998 1997
---------------- ---------------- ---------------
<S> <C> <C> <C>
Transfers as reported in the summary of
operations of the separate accounts
statement:
Transfers to separate accounts $1,675,642 $1,240,858 $1,164,013
Transfers from separate accounts 1,056,207 774,690 646,477
---------------- ---------------- ---------------
Net transfers to separate accounts 619,435 466,168 517,536
Reconciling adjustments - change in accruals
for investment management, administration
fees and contract guarantees, reinsurance
and separate account surplus (78,992) 9,267 1,678
---------------- ---------------- ---------------
Transfers as reported in the summary of operations of
the life, accident and health annual statement
$ 540,443 $ 475,435 $ 519,214
================ ================ ===============
</TABLE>
<PAGE>
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements - Statutory-Basis (continued)
(Dollars in thousands)
6. POLICY AND CONTRACT ATTRIBUTES (CONTINUED)
Reserves on the Company's traditional life insurance products are computed using
mean reserving methodologies. These methodologies result in the establishment of
assets for the amount of the net valuation premiums that are anticipated to be
received between the policy's paid-through date to the policy's next anniversary
date. At December 31, 1999 and 1998, these assets (which are reported as
premiums deferred and uncollected) and the amounts of the related gross premiums
and loadings, are as follows:
<TABLE>
<CAPTION>
GROSS LOADING NET
-------------- ------------- ----------
<S> <C> <C> <C>
DECEMBER 31, 1999
Ordinary direct renewal business $1,017 $232 $785
-------------- ------------- -----------
$1,017 $232 $785
============== ============= ===========
DECEMBER 31, 1998
Ordinary direct renewal business $1,101 $201 $900
-------------- ------------- -----------
$1,101 $201 $900
============== ============= ===========
</TABLE>
In 1994, the NAIC enacted a guideline to clarify reserving methodologies for
contracts that require immediate payment of claims upon proof of death of the
insured. Companies were allowed to grade the effects of the change in reserving
methodologies over five years. A direct charge to surplus of $2,132 and $1,872
was made for the years ended December 31, 1998 and 1997, respectively, related
to the change in reserve methodology.
7. DIVIDEND RESTRICTIONS
The Company is subject to limitations, imposed by the State of Ohio, on the
payment of dividends to its parent company. Generally, dividends during any
twelve month period may not be paid; without prior regulatory approval, in
excess of the greater of (a) 10 percent of statutory capital and surplus as of
the preceding December 31, or (b) statutory gain from operations for the
preceding year. Subject to the availability of unassigned surplus at the time of
such dividend, the maximum payment which may be made in 2000, without the prior
approval of insurance regulatory authorities, is $36,700.
8. CAPITAL STRUCTURE
During 1999, the Company's Board of Director's approved an amendment to the
Company's Articles of Incorporation which increased the number of authorized
capital shares to 3,000,000. The Board of Directors also authorized a stock
dividend in the amount of $1,000, which was transferred from unassigned surplus.
This amendment and stock dividend were in response to a change in California law
which requires all life insurance companies which do business in the state to
have capital stock of at least $2,500.
<PAGE>
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements - Statutory-Basis (continued)
(Dollars in thousands)
9. RETIREMENT AND COMPENSATION PLANS
The Company's employees participate in a qualified benefit plan sponsored by
AEGON. The Company has no legal obligation for the plan. The Company recognizes
pension expense equal to its allocation from AEGON. The pension expense is
allocated among the participating companies based on the Statement of Financial
Accounting Standards No. 87 expense as a percent of salaries. The benefits are
based on years of service and the employee's compensation during the highest
five consecutive years of employment. Pension expense aggregated $1,105, $917
and $659 for the years ended December 31, 1999, 1998 and 1997, respectively. The
plan is subject to the reporting and disclosure requirements of the Employee
Retirement and Income Security Act of 1974.
The Company's employees also participate in a contributory defined contribution
plan sponsored by AEGON which is qualified under Section 401(k) of the Internal
Revenue Service Code. Employees of the Company who customarily work at least
1,000 hours during each calendar year and meet the other eligibility
requirements are participants of the plan. Participants may elect to contribute
up to fifteen percent of their salary to the plan. The Company will match an
amount up to three percent of the participant's salary. Participants may direct
all of their contributions and plan balances to be invested in a variety of
investment options. The plan is subject to the reporting and disclosure
requirements of the Employee Retirement and Income Security Act of 1974. Pension
expense related to this plan was $816, $632 and $448 for the years ended
December 31, 1999, 1998 and 1997, respectively.
AEGON sponsors supplemental retirement plans to provide the Company's senior
management with benefits in excess of normal pension benefits. The plans are
noncontributory and benefits are based on years of service and the employee's
compensation level. The plans are unfunded and nonqualified under the Internal
Revenue Code. In addition, AEGON has established incentive deferred compensation
plans for certain key employees of the Company. AEGON also sponsors an employee
stock option plan for individuals employed at least three years and a stock
purchase plan for its producers, with the participating affiliated companies
establishing their own eligibility criteria, producer contribution limits and
company matching formula. These plans have been accrued for or funded as deemed
appropriate by management of AEGON and the Company.
In addition to pension benefits, the Company participates in plans sponsored by
AEGON that provide postretirement medical, dental and life insurance benefits to
employees meeting certain eligibility requirements. Portions of the medical and
dental plans are contributory. The expenses of the postretirement plans
calculated on the pay-as-you-go basis are charged to affiliates in accordance
with an intercompany cost sharing arrangement. The Company expensed $81, $157
and $99 for the years ended December 31, 1999, 1998 and 1997, respectively.
<PAGE>
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements - Statutory-Basis (continued)
(Dollars in thousands)
10. RELATED PARTY TRANSACTIONS
The Company shares certain officers, employees and general expenses with
affiliated companies.
The Company receives data processing, investment advisory and management,
marketing and administration services from certain affiliates. During 1999, 1998
and 1997, the Company paid $16,905 $12,763 and $10,040, respectively, for such
services, which approximates their costs to the affiliates. The Company provides
office space, marketing and administrative services to certain affiliates.
During 1999, 1998 and 1997, the Company received $3,755, $5,125 and $4,395,
respectively, for such services, which approximates their cost.
Payable to affiliates and intercompany borrowings bear interest at the
thirty-day commercial paper rate of 5.06% at December 31, 1999. During 1999,
1998 and 1997, the Company paid net interest of $1,997, $1,090 and $364,
respectively, to affiliates.
The Company received capital contributions of $32,092 and $20,000 from its
parent in 1998 and 1997, respectively.
At December 31, 1999 and 1998, the Company had short-term note payables to an
affiliate of $17,100 and $44,200, respectively. Interest on these notes ranged
from 5.15% to 5.9% at December 31, 1999 and 5.13% to 5.54% at December 31, 1998.
During 1998, the Company purchased life insurance policies covering the lives of
certain employees of the Company. Premiums of $43,500 were paid to an affiliate
for these policies. At December 31, 1999 and 1998, the cash surrender value of
these policies was $47,518 and $45,445, respectively.
11. COMMITMENTS AND CONTINGENCIES
The Company is a party to legal proceedings incidental to its business. Although
such litigation sometimes includes substantial demands for compensatory and
punitive damages in addition to contract liability, it is management's opinion,
after consultation with counsel and a review of available facts, that damages
arising from such demands will not be material to the Company's financial
position.
<PAGE>
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements - Statutory-Basis (continued)
(Dollars in thousands)
11. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company is subject to insurance guaranty laws in the states in which it
writes business. These laws provide for assessments against insurance companies
for the benefit of policyholders and claimants in the event of insolvency of
other insurance companies. Assessments are charged to operations when received
by the Company except where right of offset against other taxes paid is allowed
by law; amounts available for future offsets are recorded as an asset on the
Company's balance sheet. The future obligation has been based on the most recent
information available from the National Organization of Life and Health
Insurance Guaranty Association. Potential future obligations for unknown
insolvencies are not determinable by the Company. The Company has established a
reserve of $3,498 and $3,489 and an offsetting premium tax benefit of $837 and
$828 at December 31, 1999 and 1998, respectively, for its estimated share of
future guaranty fund assessments related to several major insurer insolvencies.
The guaranty fund expense (credit) was $(20), $(74) and $0 at December 31, 1999,
1998 and 1997, respectively.
12. RECONCILIATION OF CAPITAL AND SURPLUS AND NET INCOME
The following table reconciles capital and surplus and net income as reported in
the 1998 Annual Statement filed with the Insurance Department of the State of
Ohio, to the amounts reported in the accompanying financial statements:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1998
-------------------------- --------------------------
TOTAL CAPITAL
AND SURPLUS NET INCOME/(LOSS)
-------------------------- --------------------------
<S> <C> <C>
Amounts reported in Annual Statement $148,038 $ 528
Adjustment to federal income tax benefit (4,458) (4,458)
-------------------------- --------------------------
Amounts reported herein $143,580 $(3,930)
========================== ==========================
</TABLE>
<PAGE>
Western Reserve Life Assurance Co. of Ohio
Summary of Investments - Other Than
Investments in Related Parties
(Dollars in thousands)
December 31, 1999
SCHEDULE I
<TABLE>
<CAPTION>
FAIR AMOUNT AT WHICH SHOWN
TYPE OF INVESTMENT COST (1) VALUE IN THE BALANCE SHEET
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIXED MATURITIES
Bonds:
United States Government and government
agencies and authorities $ 5,827 $ 5,820 $ 5,827
States, municipalities and political
subdivisions 7,110 7,275 7,110
Public utilities 13,134 12,895 13,134
All other corporate bonds 93,660 93,086 93,660
---------------------------------------------------------------
Total fixed maturities 119,731 119,076 119,731
EQUITY SECURITIES
Common stocks:
Affiliated entities 243 2,156 2,156
Industrial, miscellaneous and all other 302 358 358
---------------------------------------------------------------
Total equity securities 545 2,514 2,514
Mortgage loans on real estate 9,698 9,698
Real estate 45,144 45,144
Policy loans 182,975 182,975
Cash and short-term investments 23,932 23,932
------------------- -------------------------
Total investments $382,025 $383,994
=================== =========================
</TABLE>
(1) Original cost of equity securities and, as to fixed maturities, original
cost reduced by repayments and adjusted for amortization of premiums or
accruals of discounts.
<PAGE>
Western Reserve Life Assurance Co. of Ohio
Supplementary Insurance Information
(Dollars in thousands)
SCHEDULE III
<TABLE>
<CAPTION>
BENEFITS,
FUTURE POLICY POLICY AND NET CLAIMS, LOSSES OTHER
BENEFITS AND CONTRACT PREMIUM INVESTMENT AND SETTLEMENT OPERATING
EXPENSES LIABILITIES REVENUE INCOME* EXPENSES EXPENSES*
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Individual life $291,106 $ 9,152 $ 583,656 $10,754 $178,237 $261,284
Group life 11,032 100 1,073 706 1,437 599
Annuity 268,864 17 1,104,525 28,129 651,520 116,006
-------------------------------------------------------------------------------------------
$571,002 $ 9,269 $1,689,254 $39,589 $831,194 $377,889
===========================================================================================
YEAR ENDED DECEMBER 31, 1998
Individual life $221,050 $ 8,624 $ 474,120 $ 9,884 $122,542 $230,368
Group life 10,546 100 1,933 723 1,962 2,281
Annuity 265,418 509 794,841 25,708 545,532 91,505
-------------------------------------------------------------------------------------------
$497,014 $ 9,233 $1,270,894 $36,315 $670,036 $324,154
===========================================================================================
YEAR ENDED DECEMBER 31, 1997
Individual life $177,088 $ 9,533 $ 390,452 $13,742 $ 88,738 $176,303
Group life 9,435 805 3,918 810 3,986 3,292
Annuity 296,290 591 822,149 25,461 389,726 83,179
-------------------------------------------------------------------------------------------
$482,813 $10,929 $1,216,519 $40,013 $482,450 $262,774
===========================================================================================
</TABLE>
* Allocations of net investment income and other operating expenses are based on
a number of assumptions and estimates, and the results would change if
different methods were applied.
<PAGE>
Western Reserve Life Assurance Co. of Ohio
Reinsurance
(Dollars in thousands)
SCHEDULE IV
<TABLE>
<CAPTION>
PERCENTAGE OF
CEDED TO OTHER ASSUMED FROM NET AMOUNT ASSUMED
GROSS AMOUNT COMPANIES OTHER COMPANIES AMOUNT TO NET
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Life insurance in force $63,040,741 $11,297,250 $ - $51,743,494 0.0%
=====================================================================================
Premiums:
Individual life $ 604,628 $ 20,972 $ - $ 583,656 0.0%
Group life 1,383 310 - 1,073 0.0
Annuity 1,142,254 37,729 - 1,104,525 0.0
-------------------------------------------------------------------------------------
$ 1,748,265 $ 59,011 $ - $ 1,689,254 0.0%
=====================================================================================
YEAR ENDED DECEMBER 31, 1998
Life insurance in force $51,064,173 $ 9,862,460 $ - $ 41,201,713 0.0%
=====================================================================================
Premiums:
Individual life $ 493,633 $ 19,512 $ - $ 474,121 0.0%
Group life 1,691 220 461 1,932 23.8
Annuity 850,428 55,587 - 794,841 0.0
-------------------------------------------------------------------------------------
$ 1,345,752 $ 75,319 $ 461 $ 1,270,894 .03%
=====================================================================================
YEAR ENDED DECEMBER 31, 1997
Life insurance in force $ 40,221,361 $ 6,776,447 $ 2,692,822 $ 36,137,736 7.5%
=====================================================================================
Premiums:
Individual life $ 395,361 $ 4,910 $ - $ 390,452 0.0%
Group life 1,761 231 2,389 3,918 61.0
Annuity 822,149 - - 822,149 0.0
-------------------------------------------------------------------------------------
$ 1,219,271 $ 5,141 $ 2,389 $ 1,216,519 0.2%
=====================================================================================
</TABLE>
<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") are included in Part B.
(b) Exhibits
(1) Resolution of the Board of Directors of
Western Reserve establishing the separate
account. 1/
(2) Not Applicable.
(3) Distribution of Contracts
(a) Master Service and Distribution
Compliance Agreement. 1/
(b) Amendment to Master Service and
Distribution Compliance Agreement. 2/
(c) Form of Broker/Dealer Supervisory and
Service Agreement. 2/
(d) Principal Underwriting Agreement. 2/
(e) First Amendment to Principal
Underwriting Agreement. 2/
(4) (a) Specimen Flexible Payment Variable
Accumulation Deferred Annuity Contract.
3/
(b) Endorsements. (END00094, EA122,
END00101, END00102, END.88.07.90 and
EA121). 1/
(c) Endorsement (EA128). 4/
(5) Application for Flexible Payment Variable
Accumulation Deferred Annuity Contract. 1/
(6) (a) Second Amended Articles of Incorporation
of Western Reserve. 1/
(b) Certificate of First Amendment to Second
Amended Articles of Incorporation of
Western Reserve. 5/
(c) Amended Code of Regulations of Western
Reserve. 1/
(7) Not Applicable.
(8) (a) Participation Agreements Among Variable
Insurance Products Fund, Fidelity
Distributors Corporation and Western
Reserve Life Assurance Co. of Ohio dated
June 14, 1999. 6/
(b) Amendment No.1 dated March 15, 2000 to
Participation Agreement -Variable
Insurance Products Fund . 7/
(c) Participation Agreement Among Variable
Insurance Products Fund II, Fidelity
Distributors Corporation and Western
Reserve Life Assurance Co. of Ohio dated
June 14, 1997. 6/
(d) Amendment No.1 dated March 15, 2000 to
Participation Agreement -Variable
Insurance Products Fund II. 7/
C-1
<PAGE>
(e) Participation Agreement Among Variable
Insurance Products Fund III, Fidelity
Distributors Corporation and Western
Reserve Life Assurance Co. of Ohio dated
June 14, 1999. 6/
(f) Amendment No.1 dated March 15, 2000 to
Participation Agreement - Variable
Insurance Products Fund III. 7/
(9) Opinion and Consent of Thomas E. Pierpan,
Esq. as to Legality of Securities Being
Registered. 8/
(10) (a) Written Consent of Sutherland Asbill &
Brennan LLP.
(b) Written Consent of Ernst & Young LLP.
(c) Written Consent of
PricewaterhouseCoopers LLP.
(11) Not Applicable.
(12) Not Applicable.
(13) Schedules for Computation of Performance
Quotations. 9/
(14) Not Applicable.
(15) (a) Powers of Attorney.
(b) Power of Attorney - James R. Walker. 10/
- -------------------------------------
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. 4 to Form
N-4 dated April 21, 1999 (File No. 333-23359) and is incorporated herein by
reference.
3/ This exhibit was previously filed on Post-Effective Amendment No. 11 to
Form N-4 dated April 21, 1998 (File No. 33-49558) and is incorporated
herein by reference.
4/ This exhibit was previously filed on Post-Effective Amendment No. 3 to Form
N-4 dated April 22, 1999 (File No. 333-24959) and is incorporated herein by
reference.
5/ This exhibit was previously filed on Post-Effective Amendment No. 1 to Form
N-4 dated April 21, 2000 (File No. 333-82705) and is incorporated herein by
reference.
6/ This exhibit was previously filed on the Initial Registration Statement to
Form S-6 dated September 23, 1999 (File No. 333-57681) and is incorporated
herein by reference.
7/ This exhibit was previously filed on Pre-Effective Amendment No. 1 to Form
N-4 dated April 10, 2000 (File No. 333-93169) and is incorporated herein by
reference.
8/ This exhibit was previously filed on Post-Effective Amendment No. 10 to
Form N-4 dated December 22, 1997 (File No. 33-49550) and is incorporated
herein by reference.
9/ This exhibit was previously filed on Post-Effective Amendment No. 28 to
Form N-1A dated April 24, 1997 (File No. 33-507) and is incorporated herein
by reference.
10/ This exhibit was previously filed on Post-Effective Amendment No. 7 to Form
N-4 dated December 23, 1996 (File No. 33-49556) and is incorporated herein
by reference.
C-2
<PAGE>
Item 25. Directors and Officers of the Depositor
<TABLE>
<CAPTION>
<S> <C> <C>
Name Principal Business Address Position and Offices with Depositor
- ---- -------------------------- -----------------------------------
John R. Kenney (1) Chairman of the Board and
Chief Executive Officer
Jerome C. Vahl (1) Director and President
Lyman H. Treadway 30195 Chagrin Boulevard Director
Suite 210N
Cleveland, Ohio 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
William H. Geiger (1) Senior Vice President, Secretary,
Corporate Counsel and Group Vice
President - Compliance
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 (51.16%)
Transamerica Corporation and subsidiaries (100%) (DE)
AEGON Nederland N.V. - Netherlands corporation (100%)
AEGON NEVAK 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)(DE)
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%)
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<PAGE>
AEGON Funding Corp. (DE) (100%)
First AUSA Life Insurance Company - insurance holding co. (MD) (100%)
AUSA Life Insurance Company, Inc. - insurance (NY) (82.33%)
Life Investors Insurance Company of America - insurance (IA) (100%)
Bankers United Life Assurance Company - insurance (IA) (100%)
Great American Insurance Agency, Inc. (IA) (100%)
Life Investors Alliance, LLC (DE) (100%)
PFL Life Insurance Company - insurance (IA) (100%)
AEGON Financial Services Group, Inc. (MN) (100%)
AEGON Assignment Corporation of Kentucky (KY) (100%)
AEGON Assignment Corporation (IL) (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 Co. of Ohio - insurance (OH) (100%)
WRL Investment Management, Inc. - investment adviser (FL) (100%)
WRL Investment Services, Inc. - transfer agent (FL)(100%)
WRL Series Fund, Inc. - mutual fund (MD)
ISI Insurance Agency, Inc. and subsidiaries (CA) (100%)
AEGON Equity Group, Inc. (FL) (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%)
Monumental General Life Insurance Company of Puerto Rico (PR) (51%)
AUSA Holding Company - holding company (MD) (100%)
Monumental General Insurance Group, Inc. - holding company (MD) (100%)
Monumental General Administrators, Inc. (MD) (100%)
Executive Management and Consultant Services, Inc. - consulting
services (MD) (100%)
Trip Mate Insurance Agency, Inc. (KS) (100%)
Monumental General Mass Marketing, Inc. - marketing (MD) (100%)
AUSA Financial Markets, Inc. - marketing (IA) (100%)
Endeavor Group (CA) (100%)
Endeavor Management Company (CA) (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. - financial counseling for employees and
agents of affiliated companies (DE) (100%)
ORBA Insurance Services, Inc. (CA) (10.56%)
Zahorik Company, Inc. - broker-dealer (CA) (100%)
ZCI, Inc. (AL) (100%)
Long, Miller & Associates, L.L.C. (CA) (33-1/3%)
AEGON Asset Management Services, Inc. (DE) (100%)
InterSecurities, Inc. - broker-dealer (DE) (100%)
Associated Mariner Financial Group, Inc. - holding company (MI)
(100%)
Mariner Financial Services, Inc. - broker/dealer (MI)
(100%)
Associated Mariner Agency of Hawaii, Inc. - insurance agency
(MI) (100%)
Associated Mariner Agency of New Mexico, Inc. (MI) (100%)
Idex Investor Services, Inc. - shareholder services (FL) (100%)
Idex Management, Inc. - investment adviser (DE) (100%)
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<PAGE>
IDEX Mutual Funds - mutual fund (MA)
Diversified Investment Advisors, Inc. - investment adviser (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)
Creditor Resources, Inc. - credit insurance (MI) (100%)
CRC Creditor Resources Canadian Dealer Network Inc. - insurance
agency (Canada) (100%)
Weiner Agency, Inc. (MD) (100%)
AEGON USA Investment Management, Inc. - investment adviser (IA)
(100%)
AEGON USA Realty Advisors, Inc. - real estate investment services
(IA) (100%)
QSC Holding, Inc. (DE) (100%)
Landauer Realty Advisors, Inc. - real estate counseling (IA)
(100%)
Landauer Associates, Inc. - real estate counseling (DE) (100%)
Landauer Realty Associates, Inc. (TX) (100%)
Realty Information Systems, Inc. - information systems for real
estate investment management (IA) (100%)
USP Real Estate Investment Trust - real estate investment trust
(IA)
RCC Properties Limited Partnership (IA)
Item 27. Number of Contract Owners.
As of March 31, 2000, 18,001 nonqualified contracts and 38,716
qualified contracts were in force.
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 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,
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<PAGE>
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, 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:
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<PAGE>
(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 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
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<PAGE>
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.
(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,
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<PAGE>
trustee, officer, employee, or agent and shall inure to the benefit of the
heirs, executors, and administrators of such a person.
(7) The Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, trustee, officer, employee, or agent of another corporation
(including a subsidiary of this corporation), domestic or foreign, nonprofit
or for profit, partnership, joint venture, trust, or other enterprise against
any liability asserted against him and incurred by him in any such capacity
or arising out of his status as such, whether or not the corporation would
have the power to indemnify him against such liability under this section.
(8) As used in this section, references to "the corporation" include
all constituent corporations in a consolidation or merger and the new or
surviving corporation, so that any person who is or was a director, officer,
employee, or agent of such a constituent corporation, or is or was serving at
the request of such constituent corporation as a director, trustee, officer,
employee or agent of another corporation (including a subsidiary of this
corporation), domestic or foreign, nonprofit or for profit, partnership,
joint venture, trust, or other enterprise shall stand in the same position
under this article with respect to the new or surviving corporation as he
would if he had served the new or surviving corporation in the same capacity.
(9) The foregoing provisions of this article do not apply to any
proceeding against any trustee, investment manager or other fiduciary of an
employee benefit plan in such person's capacity as such, even though such
person may also be an agent of this corporation. The corporation may
indemnify such named fiduciaries of its employee benefit plans against all
costs and expenses, judgments, fines, settlements or other amounts actually
and reasonably incurred by or imposed upon said named fiduciary in connection
with or arising out of any claim, demand, action, suit or proceeding in which
the named fiduciary may be made a party by reason of being or having been a
named fiduciary, to the same extent it indemnifies an agent of the
corporation. To the extent that the corporation does not have the direct
legal power to indemnify, the corporation may contract with the named
fiduciaries of its employee benefit plans to indemnify them to the same
extent as noted above. The corporation may purchase and maintain insurance on
behalf of such named fiduciary covering any liability to the same extent that
it contracts to indemnify.
Amended Code of Regulations of Western Reserve
ARTICLE V
Indemnification of Directors and Officers
Each Director, officer and member of a committee of this Corporation,
and 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.
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<PAGE>
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, 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, AUSA Series Life Account and Transamerica
Occidental Life Separate Account VUL-3.
(a) Directors and Officers of AFSG
<TABLE>
<CAPTION>
<S> <C> <C>
Name Principal Business Address Position and Offices with Underwriter
---- -------------------------- -------------------------------------
Larry N. Norman (1) Director and President
Harvey E. Willis (1) Vice President and Secretary
Lisa Wachendorf (1) Director and Chief 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) Director and Vice President
Priscilla I. Hechler (2) Assistant Vice President and Assistant
Secretary
Thomas E. Pierpan (2) Assistant Vice President and Assistant
Secretary
Richard C. Hicks (2) Assistant Vice President and Assistant
Secretary
Gina A. Babka (2) Assistant Secretary
</TABLE>
- --------------------------------------
(1) 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499-0001
(2) 570 Carillon Parkway, St. Petersburg, Florida 33716-1202
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<PAGE>
(c) Compensation to Principal Underwriter
Not Applicable
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.
Registrant promises to file a post-effective amendment to the
Registration Statement as frequently as is necessary to ensure
that the audited financial statements in the Registration
Statement are never more than 16 months old for so long as
payments under the variable annuity contracts may be accepted.
Registrant furthermore agrees to include either as part of any
application to purchase a contract offered by the prospectus,
a space that an applicant can check to request a Statement of
Additional Information, or a post card or similar written
communication affixed to or included in the Prospectus that
the applicant can remove to send for a Statement of Additional
Information.
Registrant agrees to deliver any Statement of Additional
Information and any financial statements required to be made
available under this Form N-4 promptly upon written or oral
request.
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 certifies that it
meets all the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Post-Effective Amendment No. 13 to its 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 26th day of April, 2000.
WRL SERIES ANNUITY ACCOUNT
(Registrant)
By: /s/ John R. Kenney
------------------------------------------
John R. Kenney, Chairman of the Board and
Chief Executive Officer 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 and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 13 to this Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
<S> <C>
Signature Title Date
- --------- ----- ----
/s/ John R. Kenney Chairman of the Board and April 26, 2000
- -------------------------------- Chief Executive Officer
John R. Kenney (Principal Executive Officer)
/s/ Jerome C. Vahl Director and President April 26, 2000
- --------------------------------
Jerome C. Vahl
/s/ Lyman H. Treadway Director April 26, 2000
- --------------------------------
Lyman H. Treadway */
/s/Jack E. Zimmerman Director April 26, 2000
- --------------------------------
Jack E. Zimmerman */
/s/ James R. Walker Director April 26, 2000
- --------------------------------
James R. Walker */
<PAGE>
/s/ Alan M. Yaeger Executive Vice President, April 26, 2000
- -------------------------------- Actuary and Chief
Alan M. Yaeger Financial Officer
/s/ Allan J. Hamilton Vice President, Treasurer April 26, 2000
- -------------------------------- and Controller
Allan J. Hamilton
</TABLE>
*/ /s/ Thomas E. Pierpan
----------------------------
Signed by Thomas E. Pierpan
as Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
NO. OF EXHIBIT
- ------- ----------
10(a) Written Consent of Sutherland Asbill & Brennan LLP
10(b) Written Consent of Ernst & Young LLP
10(c) Written Consent of PricewaterhouseCoopers LLP
Exhibit 10(a)
Consent of Sutherland Asbill & Brennan LLP
<PAGE>
[S.A.B. Letterhead]
April 26. 2000
Board of Directors
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
570 Carillon Parkway
St. Petersburg, Florida 33716
Re: WRL Series Annuity Account
WRL Freedom Conqueror
File No. 33-49558/811-5672
Gentlemen:
We hereby consent to the use of our name under the caption "Legal
Matters" in the Statement of Additional Information contained in Post-Effective
Amendment No. 13 to the Registration Statement on Form N-4 (File No. 33-49558)
of the WRL Series Annuity Account filed by Western Reserve Life Assurance co. of
Ohio with the Securities and Exchange Commission. In giving this consent, we do
not admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933.
Very truly yours,
SUTHERLAND ASBILL & BRENNAN LLP
By: /s/ Stephen E. Roth
-----------------------
Stephen E. Roth
Exhibit 10(b)
Consent of Ernst & Young LLP
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent
Accountants" in the Statement of Additional Information and to the use of our
report dated February 18, 2000, with respect to the statutory-basis financial
statements and schedules of Western Reserve Life Assurance Co. of Ohio included
in Post-Effective Amendment No. 13 to the Registration Statement (Form N-4 No.
33-49558) and related Prospectus of WRL Series Annuity Account.
ERNST & YOUNG LLP
Des Moines, Iowa
April 24, 2000
Exhibit 10(c)
Consent of PricewaterhouseCoopers LLP
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form N-4 of our
report dated February 16, 2000, relating to the financial statements and
financial highlights of the sub-accounts constituting the WRL Series Annuity
Account, which appear in such Registration Statement. We also consent to the
reference to us under the heading "Independent Accountants" in such Registration
Statement.
PricewaterhouseCoopers LLP
Tampa, Florida
April 24, 2000
