As filed with the Securities and Exchange Commission on April 21, 2000
Registration Nos. 333-82705/811-5672
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. 1 (X)
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 76 (X)
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(Check appropriate box or boxes)
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
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
Title of securities being registered: Units of interest in the separate account
under flexible payment variable accumulation deferred annuity contracts.
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
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WRL FREEDOM PREMIER(SM)
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
Premier,(SM) a flexible payment variable accumulation deferred annuity contract.
Please read this prospectus and the 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:
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<CAPTION>
<S> <C>
WRL SERIES FUND, INC.
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 (formerly, WRL GE/Scottish Equitable WRL LKCM Strategic Total Return
International Equity)
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
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND (VIP)
Fidelity VIP Equity-Income Portfolio -- Service Class 2
VARIABLE INSURANCE PRODUCTS FUND II (VIP II)
Fidelity VIP II Contrafund(R) Portfolio -- Service Class 2
VARIABLE INSURANCE PRODUCTS FUND III (VIP III)
Fidelity VIP III Growth Opportunities Portfolio -- Service Class 2
If you would like more information about the WRL Freedom Premier,(SM) you
can obtain a free copy of the Statement of Additional Information ("SAI") dated
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.
PLEASE NOTE THAT THE CONTRACT AND THE FUNDS:
o ARE NOT BANK DEPOSITS
o ARE NOT FEDERALLY INSURED
o ARE NOT ENDORSED BY ANY BANK OR GOVERNMENT AGENCY
o ARE NOT GUARANTEED TO ACHIEVE THEIR GOAL
o INVOLVE RISKS, INCLUDING POSSIBLE LOSS OF PREMIUM
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
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DEFINITIONS OF SPECIAL TERMS ....................................... 1
SUMMARY ............................................................ 4
ANNUITY CONTRACT FEE TABLE ......................................... 11
EXAMPLES ........................................................... 13
1. THE ANNUITY CONTRACT ......................................... 15
The Contract .................................................. 15
Other Contracts ............................................... 16
2. ANNUITY PAYMENTS (THE INCOME PHASE) .......................... 16
Annuity Payment Options Under the Contract .................... 16
Fixed Annuity Payment Options ................................. 17
Variable Annuity Payment Options .............................. 18
Guaranteed Minimum Income Benefit Rider (the "Rider") ......... 19
3. PURCHASE ..................................................... 22
Contract Issue Requirements ................................... 22
Premium Payments .............................................. 22
Initial Premium Requirements .................................. 22
Additional Premium Payments ................................... 23
Maximum Annual Premium Payments ............................... 23
Allocation of Premium Payments ................................ 24
Right to Cancel Period ........................................ 24
Annuity Value ................................................. 25
Accumulation Units ............................................ 25
4. INVESTMENT CHOICES ........................................... 25
The Separate Account .......................................... 25
The Fixed Account ............................................. 27
Transfers ..................................................... 27
Dollar Cost Averaging Program ................................. 28
Asset Rebalancing Program ..................................... 29
Telephone or Fax Transactions ................................. 30
Third Party Investment Services ............................... 30
5. EXPENSES ..................................................... 31
Mortality and Expense Risk Charge ............................. 31
Administrative Charge ......................................... 31
Guaranteed Minimum Income Benefit Rider Charge ................ 31
Separate Account Annuitization Charge ......................... 32
Annual Contract Charge ........................................ 32
Transfer Charge ............................................... 32
Loan Processing Fee ........................................... 32
Premium Taxes ................................................. 33
Federal, State and Local Taxes ................................ 33
Surrender Charge .............................................. 33
Portfolio Management Fees ..................................... 37
Reduced or Waived Charges and Expenses to Employees ........... 37
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<TABLE>
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6. TAXES .............................................................. 37
Annuity Contracts in General ........................................ 37
Qualified and Nonqualified Contracts ................................ 38
Partial and Complete Surrenders -- Nonqualified Contracts ........... 39
Multiple Contracts .................................................. 39
Diversification and Distribution Requirements ....................... 39
Partial and Complete Surrenders -- Qualified Contracts .............. 40
Taxation of Death Benefit Proceeds .................................. 40
Annuity Payments .................................................... 41
Transfers, Assignments or Exchanges of Contracts .................... 41
Possible Tax Law Changes ............................................ 42
7. ACCESS TO YOUR MONEY ............................................... 42
Partial and Complete Surrenders ..................................... 42
Delay of Payment and Transfers ...................................... 43
Systematic Partial Surrenders ....................................... 43
Contract Loans for Qualified Contracts .............................. 44
8. PERFORMANCE ........................................................ 46
9. DEATH BENEFIT ...................................................... 47
When We Pay a Death Benefit ......................................... 47
When We Do Not Pay a Death Benefit .................................. 47
Standard Death Benefit (Option A) ................................... 48
Compounding Minimum Death Benefit (Option B) ........................ 49
Effect of Adjusted Partial Surrender on Certain Death Benefits ...... 49
Alternate Payment Elections Before the Maturity Date ................ 50
10. OTHER INFORMATION .................................................. 50
Ownership ........................................................... 50
Annuitant ........................................................... 50
Beneficiary ......................................................... 50
Assignment .......................................................... 51
Western Reserve Life Assurance Co. of Ohio .......................... 51
The Separate Account ................................................ 51
Voting Rights ....................................................... 52
Distribution of the Contracts ....................................... 52
Non-Participating Contract .......................................... 53
Variations in Contract Provisions ................................... 53
IMSA ................................................................ 53
Legal Proceedings ................................................... 53
Financial Statements ................................................ 53
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION ............. 54
APPENDIX A -- CONDENSED FINANCIAL INFORMATION ............................ 55
APPENDIX B -- HISTORICAL PERFORMANCE DATA ................................ 70
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DEFINITIONS OF SPECIAL TERMS
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accumulation The period between the Contract date and the maturity date while the
period Contract is in force.
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accumulation An accounting unit of measure we use to calculate subaccount values during
unit value the accumulation period.
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administrative Our administrative office and mailing address is P.O. Box 5068, Clearwater,
office 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 is the annuitant's age on his/her birthday
immediately preceding the Contract date. Attained age is
the issue age plus the number of completed Contract years.
When we use the term "age" in this 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 An accounting unit of measure we use to calculate annuity payments from the
value 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 the annual Contract charge, any
applicable premium taxes, any surrender charge, and any
Guaranteed Minimum Income Benefit Rider charge.
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Code The Internal Revenue Code of 1986, as amended.
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Contract date The later of the date on which the initial premium
payment is received or the date that the properly completed
application is received at Western Reserve's administrative
office. It is also the date when, depending on your state of
residence, we allocate your premium payment(s) either to the
reallocation account or to the fixed account and the
subaccounts you selected on your application. We measure
Monthiversaries, Contract years and Contract anniversaries
from the Contract date.
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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 During the accumulation period, your Contract's value in the fixed account.
value
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<TABLE>
<S> <C>
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 95th birthday.
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Monthiversary The same day in the month as the Contract date. When there
is no date in a calendar month that coincides with the
Contract date, the Monthiversary is the first day of the
next month.
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NYSE New York Stock Exchange.
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nonqualified Contracts issued other than in connection with retirement plans.
Contracts
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owner The person(s) entitled to exercise all rights under the Contract. The annuitant is
(you, your) the owner unless the application states otherwise, or unless a change of
ownership is made at a later time. Joint owners may be named, provided the
joint owners are husband and wife. Joint ownership is not available in all states.
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portfolio A separate investment portfolio of a fund.
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premium Amounts paid by an owner or on the owner's behalf to Western Reserve as
payments consideration for the benefits provided by the Contract. When we use the term
"premium payment" in this prospectus, it has the same
meaning as "net premium payment" in the Contract, which
means the premium payment less any applicable premium
taxes.
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qualified Contracts issued in connection with retirement plans that qualify for special
Contracts federal income tax treatment under the Code.
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reallocation The WRL J.P. Morgan Money Market subaccount.
account
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reallocation date The date shown on the schedule page of your Contract
when we reallocate all annuity value held in the
reallocation account to the fixed account and subaccounts
you selected. We place your premium in the reallocation
account only if your state requires us to return the full
premium in the event you exercise your right to cancel. In
all other states, the reallocation date is the Contract
date.
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separate account WRL Series Annuity Account, a separate account
composed of subaccounts established to receive and invest
premium payments not allocated to the fixed account.
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separate account During the accumulation period, your Contract's value in the separate account,
value which equals the total value in each subaccount.
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subaccount A subdivision of the separate account that invests
exclusively in the shares of a specified portfolio and
supports the Contracts. Subaccounts corresponding to each
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.
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surrender The termination of a Contract at the option of the owner.
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valuation date/ Each day on which the NYSE is open for trading, except when a subaccount's
business day 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.
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valuation period The period of time over which we determine the change
in the value of the subaccounts in order to price
accumulation units and annuity units. Each valuation period
begins at the close of normal trading on the NYSE (currently
4:00 p.m. Eastern time on each valuation date) and ends at
the close of normal trading of the NYSE on the next
valuation date.
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Western Reserve Western Reserve Life Assurance Co. of Ohio.
(we, us, our)
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</TABLE>
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SUMMARY
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THE SECTIONS IN THIS SUMMARY CORRESPOND TO SECTIONS IN THIS PROSPECTUS,
WHICH DISCUSS THE TOPICS IN MORE DETAIL. PLEASE READ THE ENTIRE PROSPECTUS
CAREFULLY.
1. THE ANNUITY CONTRACT
The WRL Freedom Premier(SM) is a flexible 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 3%, and may be more. We guarantee the interest, as well as
principal, on money placed in the fixed account.
You can transfer money between any of the investment choices during the
accumulation period, subject to certain limits on transfers from the fixed
account.
The Contract also allows you to select a compounding minimum death benefit
(see page 49) and a Guaranteed Minimum Income Benefit Rider (see page 19).
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 Contract's annuity
payment option you choose, and whether you choose the Guaranteed Minimum Income
Benefit Rider, 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, and will be reduced by the separate account
annuitization charge. You cannot annuitize until your Contract's fifth
anniversary.
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You may also elect a rider for an extra charge that guarantees a minimum
amount of income payments if you annuitize under one of the rider's variable
payment options. See Guaranteed Minimum Income Benefit Rider page 19.
3. PURCHASE
You can buy this Contract with $5,000 ($1,000 for traditional or Roth IRAs
and $50 for other qualified Contracts) under most circumstances. You can add as
little as $50 at any time during the accumulation period.
4. INVESTMENT CHOICES
You can invest your money in any of the 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:
WRL SERIES FUND, INC.
<TABLE>
<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
</TABLE>
<TABLE>
<S> <C> <C>
VARIABLE INSURANCE PRODUCTS FUND (VIP)
Fidelity VIP Equity-Income Portfolio -- Service Class 2
VARIABLE INSURANCE PRODUCTS FUND II (VIP II)
Fidelity VIP II Contrafund(R) Portfolio -- Service Class 2
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 premium payments to the fixed account. Unless
otherwise required by state law, we will limit your allocations or transfers to
the fixed account if the fixed account value following the allocation or
transfer would exceed $500,000. The fixed account is not available in all
states. Residents of Washington, Oregon, New Jersey and Massachusetts 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.
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5. EXPENSES
We do not take any deductions from premium payments at the time you buy the
Contract. You invest the full amount of each premium payment in one or more of
the investment choices.
During the accumulation period, we deduct a daily mortality and expense
risk charge of 1.00% (1.25% if you select the compounding minimum death benefit)
and a daily administrative charge of 0.40% each year from the money you have
invested in the subaccounts. During the income phase, if you elect a variable
annuity option, we deduct a separate account annuitization charge from your
subaccount assets at an annual rate of 1.40% in place of the mortality and
expense risk and administrative charges.
During the accumulation period, we deduct an annual Contract charge of $30
from the annuity value on each Contract anniversary and at the time of
surrender. We currently waive this charge if either your annuity value, or the
total premiums you have paid us, minus all partial surrenders, equals or exceeds
$50,000 on the Contract anniversary when this charge is payable. However, we
will deduct this charge from your annuity value if you surrender your Contract
completely.
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 pay your premium(s), or if you surrender the Contract or partially
surrender its value, or if we pay out death benefit proceeds, or if you begin to
receive regular annuity payments. We only charge you premium taxes in those
states that require us to pay premium taxes.
If you make a partial surrender or surrender your Contract completely, we
will deduct a surrender charge for premium payments surrendered within seven
years after we receive the premium payment. This charge is 7% of the amount that
must be surrendered if the surrender occurs within 24 months or less of our
receipt of the premium payment, and then declines gradually to 6% -- 25 through
36 months; 5% -- 37 through 48 months; 4% -- 49 through 60 months; 3% -- 61
through 72 months; 2% -- 73 through 84 months; and no surrender charge -- 85
months or more.
When we calculate surrender charges, we treat partial surrenders as coming
first from the oldest premium payment, then the next oldest and so forth. For
partial surrenders or systematic partial surrenders you make in any Contract
year, we will waive all or a portion of the surrender charge on partial
surrenders up to the maximum free amount. Partial surrenders in excess of the
maximum free amount will be subject to a surrender charge. We will deduct the
full surrender charge if you surrender your Contract completely. We waive this
charge under certain circumstances. See Expenses -- Surrender Charge on page 33
for how we calculate the surrender charge waiver.
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 charges
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currently range from 0.44% to 1.20% annually, depending on the portfolio. See
the Annuity Contract Fee Table on page 11 in this prospectus and the fund
prospectuses.
If you select the Guaranteed Minimum Income Benefit Rider (the "Rider"),
there is an annual charge during the accumulation phase of 0.30% of the minimum
annuitization value. We deduct the Rider charge from your annuity value on each
Contract anniversary and on the termination date of the Rider. We waive the
Rider charge if your annuity value on any Contract anniversary exceeds the Rider
charge waiver threshold (currently 2.0) times the minimum annuitization value.
If you annuitize under the Rider, we will assess a daily separate account
annuitization charge at an annual rate of 2.50% of the daily net assets in the
subaccounts; this charge will be reflected in your variable payments. The
separate account annuitization charge is paid in place of the mortality and
expense risk charge and the administrative charge. The Rider is not available in
all states.
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 also 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 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 surrender if it reduces the cash
value below $5,000. No partial surrenders may be made from the fixed account
without prior consent from us. Access to amounts held in qualified Contracts may
be restricted or prohibited. Surrender charges may apply. You may also have to
pay federal income tax and a penalty tax on any money you take out.
Partial surrenders may reduce the death benefit (and certain values under
the Rider) by more than the amount surrendered.
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
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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 will 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, the death benefit
will be the greatest of:
o the annuity value of your Contract on the death report day;
o the total premium payments you make to the Contract, reduced by
partial surrenders;
o the monthly step-up; or
o if selected, the compounding minimum death benefit.
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 17 and 18 for a description of the
annuity payment options. Please note that not all payment options provide for a
death benefit.
10. OTHER INFORMATION
RIGHT TO CANCEL PERIOD. You may return your Contract for a refund within 10
days after you receive it. In most states, the amount of the refund will be the
total premium payments we have received, plus (or minus) any gains (or losses)
in the amounts you invested in the subaccounts. If state law requires, we will
refund your original premium payment(s). In those states, we will place your
premium payment(s) in the reallocation account until the reallocation date shown
on your Contract schedule page. 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.
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ADDITIONAL FEATURES. This Contract has additional features that might
interest you. These include the following:
o REDUCED MINIMUM INITIAL PREMIUM PAYMENT (FOR NONQUALIFIED
CONTRACTS) -- You may make a minimum initial premium payment of $1,000,
rather than $5,000, if you indicate on your application that you
anticipate making minimum monthly payments of at least $100 by electronic
funds transfer.
o SYSTEMATIC PARTIAL SURRENDERS -- You can arrange to have money
automatically sent to you while your Contract is in the accumulation
period. You may take systematic partial surrenders monthly, quarterly,
semi-annually or annually without paying surrender charges. Amounts you
receive may be included in your gross income and, in certain
circumstances, may be subject to penalty taxes.
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 to 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, partial
surrenders and/or change the allocation of additional premium payments by
telephone or fax.
o NURSING CARE FACILITY WAIVER -- If you are confined to a nursing
care facility, you may take partial surrenders or surrender your Contract
completely without paying the surrender charge, under certain
circumstances.
o TERMINAL CONDITION WAIVER -- Under a terminal condition waiver, if
certain medically-related circumstances occur, we will allow you to fully
or partially surrender your money without a surrender charge.
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 44 for details.
o COMPOUNDING MINIMUM DEATH BENEFIT -- You may add this feature for
an additional charge. You must select this feature on your application.
This feature is not available to annuitants age 74 or older on the
Contract date. This feature ensures that any death benefit payable on the
death of the annuitant will be no less than total premium payments paid
for this Contract, plus interest at an effective annual rate of 6% (in
most states) from the date of the premium payment to the date of death,
less any adjusted partial surrender(s), including interest on any partial
surrender at the 6% rate from the date of partial surrender to the date
of death. Interest is not credited after your 81st birthday.
o GUARANTEED MINIMUM INCOME BENEFIT RIDER -- You may add this Rider
for an additional charge. It assures you of a minimum level of income in
the future,
9
<PAGE>
provided you satisfy certain conditions and annuitize under the variable
annuity payment options available in the Rider. This Rider is not
available in all states and may vary by state.
These features may not be available in all states and may not be suitable
for your particular situation.
Certain states place restrictions on access to the fixed account, on the
death benefit calculation, on the annuity payment options and on other features
of the Contract. Consult your agent and the Contract for details.
11. INQUIRIES
If you need more information, please contact us at:
Western Reserve Life
Administrative Office
Annuity Department
P.O. Box 9051
Clearwater, FL 33758-9051
1-800-851-9777
www.westernreserve.com
10
<PAGE>
ANNUITY CONTRACT FEE TABLE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OWNER TRANSACTION EXPENSES
<S> <C> <C>
Sales Load On Premium Payments........................None
Maximum Surrender Charge(1)(2)
(as a % of premium payments)..........................7%
Transfer Charge......................$10 After 12 Per Year
Loan Processing Fee(3)........................$30 Per Loan
Guaranteed Minimum Income
Benefit Rider Charge during the accumulation period
(optional)(4)......................................0.30%
==========================================================
ANNUAL CONTRACT CHARGE(2)(5).........$30 Per Contract Year
</TABLE>
<TABLE>
<CAPTION>
SEPARATE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE SEPARATE ACCOUNT VALUE
DURING THE ACCUMULATION PERIOD)
- -----------------------------------------------------
<S> <C>
UNDER STANDARD DEATH BENEFIT:
Mortality and Expense Risk Charge(6) ............... 1.00%
Administrative Charge(6) ........................... 0.40%
----
TOTAL SEPARATE ACCOUNT ANNUAL
EXPENSES ......................................... 1.40%
WITH COMPOUNDING MINIMUM DEATH BENEFIT ADDED:
Mortality and Expense Risk Charge(6) ............... 1.25%
Administrative Charge(6) ........................... 0.40%
----
TOTAL SEPARATE ACCOUNT ANNUAL
EXPENSES ......................................... 1.65%
</TABLE>
- --------------------------------------------------------------------------------
PORTFOLIO ANNUAL EXPENSES(7)
(as a percentage of average net assets and after expense reimbursements)
<TABLE>
<CAPTION>
MANAGEMENT OTHER
PORTFOLIO FEES EXPENSES
<S> <C> <C>
WRL SERIES FUND, INC.(8)(9)
WRL VKAM Emerging Growth 0.80% 0.07%
WRL T. Rowe Price Small Cap(10) 0.75% 0.25%
WRL Goldman Sachs Small Cap(10) 0.90% 0.10%
WRL Pilgrim Baxter Mid Cap Growth(10) 0.90% 0.10%
WRL Alger Aggressive Growth 0.80% 0.09%
WRL Third Avenue Value 0.80% 0.20%
WRL Value Line Aggressive Growth(11) 0.80% 0.20%
WRL GE International Equity(12) 1.00% 0.20%
WRL Janus Global(13) 0.80% 0.12%
WRL Great Companies -- Technology(SM)(11) 0.80% 0.20%
WRL Janus Growth(14) 0.80% 0.05%
WRL Goldman Sachs Growth(10) 0.90% 0.10%
WRL GE U.S. Equity 0.80% 0.13%
WRL Great Companies -- AmericaSM(11) 0.80% 0.20%
WRL Salomon All Cap(10) 0.90% 0.10%
WRL C.A.S.E. Growth 0.80% 0.20%
WRL Dreyfus Mid Cap(10) 0.85% 0.15%
WRL NWQ Value Equity 0.80% 0.10%
WRL T. Rowe Price Dividend Growth(10) 0.90% 0.10%
WRL Dean Asset Allocation 0.80% 0.07%
WRL LKCM Strategic Total Return 0.80% 0.06%
WRL J.P. Morgan Real Estate Securities 0.80% 0.20%
WRL Federated Growth & Income 0.75% 0.14%
WRL AEGON Balanced 0.80% 0.09%
WRL AEGON Bond 0.45% 0.08%
WRL J.P. Morgan Money Market 0.40% 0.04%
VARIABLE INSURANCE PRODUCTS FUND (VIP)(15)
Fidelity VIP Equity-Income Portfolio -- Service Class 2(16) 0.48% 0.10%
VARIABLE INSURANCE PRODUCTS FUND II (VIP II)(15)
Fidelity VIP II Contrafund (R)/ Portfolio -- Service Class 2(16) 0.58% 0.12%
VARIABLE INSURANCE PRODUCTS FUND III (VIP III)(15)
Fidelity VIP III Growth Opportunities Portfolio -- Service Class 2(16) 0.58% 0.13%
<CAPTION>
TOTAL PORTFOLIO
RULE 12B-1 ANNUAL
PORTFOLIO FEES EXPENSES
<S> <C> <C>
WRL SERIES FUND, INC.(8)(9)
WRL VKAM Emerging Growth N/A 0.87%
WRL T. Rowe Price Small Cap(10) N/A 1.00%
WRL Goldman Sachs Small Cap(10) N/A 1.00%
WRL Pilgrim Baxter Mid Cap Growth(10) N/A 1.00%
WRL Alger Aggressive Growth N/A 0.89%
WRL Third Avenue Value N/A 1.00%
WRL Value Line Aggressive Growth(11) N/A 1.00%
WRL GE International Equity(12) N/A 1.20%
WRL Janus Global(13) N/A 0.92%
WRL Great Companies -- Technology(SM)(11) N/A 1.00%
WRL Janus Growth(14) N/A 0.85%
WRL Goldman Sachs Growth(10) N/A 1.00%
WRL GE U.S. Equity N/A 0.93%
WRL Great Companies -- AmericaSM(11) N/A 1.00%
WRL Salomon All Cap(10) N/A 1.00%
WRL C.A.S.E. Growth N/A 1.00%
WRL Dreyfus Mid Cap(10) N/A 1.00%
WRL NWQ Value Equity N/A 0.90%
WRL T. Rowe Price Dividend Growth(10) N/A 1.00%
WRL Dean Asset Allocation N/A 0.87%
WRL LKCM Strategic Total Return N/A 0.86%
WRL J.P. Morgan Real Estate Securities N/A 1.00%
WRL Federated Growth & Income N/A 0.89%
WRL AEGON Balanced N/A 0.89%
WRL AEGON Bond N/A 0.53%
WRL J.P. Morgan Money Market N/A 0.44%
VARIABLE INSURANCE PRODUCTS FUND (VIP)(15)
Fidelity VIP Equity-Income Portfolio -- Service Class 2(16) 0.25% 0.83%
VARIABLE INSURANCE PRODUCTS FUND II (VIP II)(15)
Fidelity VIP II Contrafund (R)/ Portfolio -- Service Class 2(16) 0.25% 0.95%
VARIABLE INSURANCE PRODUCTS FUND III (VIP III)(15)
Fidelity VIP III Growth Opportunities Portfolio -- Service Class 2(16) 0.25% 0.96%
</TABLE>
(1) The surrender charge decreases based on the number of years since each
premium payment was made, from 7% in the first two years after the premium
payment was made to 0% in the eighth year after the premium payment was
made. To calculate surrender charges, the first premium payment made is
considered to come out first. This charge is waived under certain
circumstances.
11
<PAGE>
(2) We may reduce or waive the surrender charge and the annual Contract charge
for Contracts sold to groups of employees with the same employer, including
our directors, officers and full-time employees, or other groups where
sales to the group reduce our administrative expenses.
(3) Loans are available for qualified Contracts only. The loan fee is not
applicable in all states.
(4) This Rider is optional. You may add this Rider when we issue the Contract,
or within each 30-day period following each Contract anniversary. If you
add it, we will impose during the accumulation period an annual Rider
charge equal to 0.30% of the minimum annuitization value on each Contract
anniversary and on the termination date of the Rider (which includes
upgrades of the minimum annuitization value and Contract surrender). We may
change the Rider charge percentage in the future if you choose to upgrade
the minimum annuitization value, or for future issues of the Rider, but the
charge will never exceed 0.50% annually. We deduct the Rider charge from
the fixed account and from each subaccount in proportion to the amount of
the annuity value in each account. If the annuity value on any Contract
anniversary exceeds the Rider charge threshold (currently 2.0) times the
minimum annuitization value, we will waive the Rider charge otherwise
payable on that Contract anniversary. This Rider is not available in all
states.
If you later choose to annuitize under this Rider, we will impose a daily
separate account annuitization charge equal to an annual rate of 2.50% of
the daily net asset values in the subaccounts in place of the mortality and
expense risk and administrative charges. We may change this charge in the
future if you choose to upgrade the minimum annuitization value, or for
future issues of the Rider, but it will never be greater than 3.50%.
(5) We currently waive this charge if either the annuity value, or the total
premium payments, minus all partial surrenders, equals or exceeds $50,000
on the Contract anniversary for which the charge is payable. However, we
will deduct this charge from your annuity value if you surrender your
Contract completely.
(6) These charges apply to each subaccount. They do not apply to the fixed
account. The mortality and expense risk charge of 1.00% applies when you
have selected the standard death benefit. If you select the compounding
minimum death benefit, then the mortality and expense risk charge will
increase to 1.25%. These charges apply during the accumulation period.
After the maturity date, if you elect a variable annuity payment option, we
will deduct a daily separate account annuitization charge equal to an
annual rate of 1.40% of your subaccount assets in place of the mortality
and expense risk and administrative charges. If you select the Guaranteed
Minimum Income Benefit Rider, and you choose to annuitize under the Rider,
then we will impose a daily separate account annuitization charge equal to
an annual rate of 2.50% of the daily net asset values in the subaccounts,
in place of the mortality and expense risk and administrative charges.
(7) The fee table information relating to the portfolios was provided to
Western Reserve by the funds. Western Reserve has not independently
verified such information.
(8) 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.
(9) 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>
(10) Because these portfolios commenced operations on May 3, 1999, the
percentages set forth as "Other Expenses" and "Total Portfolio Annual
Expenses" are annualized.
12
<PAGE>
(11) Because these portfolios commenced operations on May 1, 2000, the
percentages set forth as "Other Expenses" and "Total Portfolio Annual
Expenses" are estimates.
(12) 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.
(13) 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.
(14) 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.
(15) 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.
(16) Service Class 2 expenses are based on estimated expenses for year 2000.
After the maturity date, if you elect a variable payment option, we will
charge a daily separate account annuitization charge equal to an annual rate of
1.40% of the daily net asset values in the subaccounts in place of the mortality
and expense risk and administrative charges. If you select the Guaranteed
Minimum Income Benefit Rider, and you choose to annuitize under the Rider, the
daily separate account annuitization charge will be 2.50% of the daily net asset
values in the subaccounts.
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 and assuming the Guaranteed Minimum Income
Benefit Rider has been selected.
The expense examples reflect mortality and expense risk and administrative
charges totaling 1.65% of subaccount value (assuming that the compounding
minimum death benefit has been added), the $30 annual Contract charge, plus the
Guaranteed Minimum Income Benefit Rider charge of 0.30% of minimum annuitization
value (MAV). In the examples, the annual Contract charge of $30 and the
Guaranteed Minimum Income Benefit Rider charge of 0.30% are charged at the end
of every Contract year.
13
<PAGE>
<TABLE>
<CAPTION>
IF YOU SURRENDER THE CONTRACT
AT THE END OF THE APPLICABLE
SUBACCOUNTS TIME PERIOD
<S> <C> <C> <C> <C>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- --------- ----------
WRL VKAM Emerging Growth $100 $152 $198 $336
WRL Goldman Sachs Small Cap 101 156 204 348
WRL T. Rowe Price Small Cap 101 156 204 348
WRL Pilgrim Baxter Mid Cap Growth 101 156 204 348
WRL Alger Aggressive Growth 100 153 199 338
WRL Third Avenue Value 101 156 204 348
WRL Value Line Aggressive Growth 101 156 204 348
WRL GE International Equity 103 162 214 367
WRL Janus Global 101 154 200 341
WRL Great Companies -- Technology(SM) 101 156 204 348
WRL Janus Growth 100 152 197 334
WRL Goldman Sachs Growth 101 156 204 348
WRL GE U.S. Equity 101 154 201 342
WRL Great Companies -- America(SM) 101 156 204 348
WRL Salomon All Cap 101 156 204 348
WRL C.A.S.E. Growth 101 156 204 348
WRL Dreyfus Mid Cap 101 156 204 348
WRL NWQ Value Equity 100 153 199 339
WRL T. Rowe Price Dividend Growth 101 156 204 348
WRL Dean Asset Allocation 100 152 198 336
WRL LKCM Strategic Total Return 100 152 197 335
WRL J.P. Morgan Real Estate Securities 101 156 204 348
WRL Federated Growth & Income 100 153 199 338
WRL AEGON Balanced 100 153 199 338
WRL AEGON Bond 97 142 181 303
WRL J.P. Morgan Money Market 96 140 176 294
Fidelity VIP Equity-Income Portfolio --
Service Class 2 100 151 196 332
Fidelity VIP II Contrafund (R)/ Portfolio --
Service Class 2 101 155 202 344
Fidelity VIP III Growth Opportunities
Portfolio -- Service Class 2 101 155 202 345
<CAPTION>
IF YOU ANNUITIZE* OR REMAIN
INVESTED IN THE CONTRACT AT THE
END OF THE APPLICABLE TIME
PERIOD OR IF YOU DO NOT
SURRENDER OR ANNUITIZE
SUBACCOUNTS UNDER THE CONTRACT
<S> <C> <C> <C> <C>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- --------- ---------
WRL VKAM Emerging Growth $30 $92 $158 $336
WRL Goldman Sachs Small Cap 31 96 164 348
WRL T. Rowe Price Small Cap 31 96 164 348
WRL Pilgrim Baxter Mid Cap Growth 31 96 164 348
WRL Alger Aggressive Growth 30 93 159 338
WRL Third Avenue Value 31 96 164 348
WRL Value Line Aggressive Growth 31 96 164 348
WRL GE International Equity 33 102 174 367
WRL Janus Global 31 94 160 341
WRL Great Companies -- Technology(SM) 31 96 164 348
WRL Janus Growth 30 92 157 334
WRL Goldman Sachs Growth 31 96 164 348
WRL GE U.S. Equity 31 94 161 342
WRL Great Companies -- America(SM) 31 96 164 348
WRL Salomon All Cap 31 96 164 348
WRL C.A.S.E. Growth 31 96 164 348
WRL Dreyfus Mid Cap 31 96 164 348
WRL NWQ Value Equity 30 93 159 339
WRL T. Rowe Price Dividend Growth 31 96 164 348
WRL Dean Asset Allocation 30 92 158 336
WRL LKCM Strategic Total Return 30 92 157 335
WRL J.P. Morgan Real Estate Securities 31 96 164 348
WRL Federated Growth & Income 30 93 159 338
WRL AEGON Balanced 30 93 159 338
WRL AEGON Bond 27 82 141 303
WRL J.P. Morgan Money Market 26 80 136 294
Fidelity VIP Equity-Income Portfolio --
Service Class 2 30 91 156 332
Fidelity VIP II Contrafund (R)/ Portfolio --
Service Class 2 31 95 162 344
Fidelity VIP III Growth Opportunities
Portfolio -- Service Class 2 31 95 162 345
</TABLE>
* You cannot annuitize your Contract 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.
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.
14
<PAGE>
The examples above assume that no transfer charges have been assessed. In
addition, the $30 annual Contract charge is reflected as a charge of 0.14%,
based on an average Contract size of $22,025. The Guaranteed Minimum Income
Benefit Rider charge has been calculated assuming a Rider charge of 0.30% of MAV
and assuming an MAV annual growth rate of 6%.
Financial Information. We have included in Appendix A a financial history
of the accumulation unit values for the subaccounts that reflect the cost of the
standard death benefit (total separate account annual expenses of 1.40%) and the
compounding minimum death benefit (total separate account annual expenses of
1.65%).
1. THE ANNUITY CONTRACT
THE CONTRACT
This prospectus describes the WRL Freedom Premier(SM) Variable Annuity
Contract offered by Western Reserve.
An annuity is a contract between you, the owner, and an insurance company
(in this case Western Reserve), where the insurance company promises to pay the
annuitant an income in the form of annuity payments. These payments begin after
the maturity date. (See Section 2 on page .) 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 investment 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 investment performance.
The Contract also contains a fixed account. Unless otherwise required by
state law, we will limit your allocation or transfers to the fixed account if
the fixed account value following the allocation or transfer would exceed
$500,000. The fixed account offers an interest rate that is guaranteed by
Western Reserve to equal at least 3% per year. There may be different interest
rates for each payment or transfer you direct to the fixed account which are
greater than the guaranteed rate. The interest rates we set will be credited for
periods of at least one year measured from each payment or transfer date.
The fixed account is not available in all states. Residents of Washington,
Oregon, New Jersey and Massachusetts may not direct or transfer any money to the
fixed account.
15
<PAGE>
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 95th 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 page 18) as a Variable Life Income with 10
years of guaranteed payments. You cannot change the annuity payment option after
the maturity date.
If you choose a variable payment option, you must specify how you want the
annuity proceeds divided among the subaccounts as of the maturity date. If you
do not specify, we will allocate the annuity proceeds in the same proportion as
the annuity value is allocated among the investment options on the maturity
date. After the maturity date, you may make transfers among the subaccounts, but
you may not make transfers from or to the fixed account; 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.
If you have added the Guaranteed Minimum Income Benefit Rider to your
Contract and choose to annuitize under the Rider, then you must select one of
the annuity payment options contained in the Rider.
Supplemental Contract. Once you annuitize and if you have selected a fixed
annuity payment option, the Contract will end and we will issue a supplemental
Contract to describe the terms of the option you selected. The supplemental
Contract will name who will receive the annuity payments and describe when the
annuity payments will be made.
ANNUITY PAYMENT OPTIONS UNDER THE CONTRACT
The Contract provides five annuity payment options that are described
below. You may choose any annuity payment option under your Contract. You can
choose to receive payments monthly, quarterly, semi-annually or annually.
16
<PAGE>
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 Without the Guaranteed Minimum Income
Benefit Rider. 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 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 daily separate account
annuitization charge equal to an annual rate of 1.40% of subaccount assets) 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 may not be 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
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o 10 or 20 Years Certain -- We will make level payments for the
longer of the annuitant's lifetime or 10 or 20 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.
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 or 20 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;
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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.
GUARANTEED MINIMUM INCOME BENEFIT RIDER (THE "RIDER")
The Rider assures you of a minimum level of income in the future by
guaranteeing a "minimum annuitization value" after a waiting period (currently,
10 years) from the date of purchasing or upgrading the Rider. By electing this
Rider, you are guaranteed a future minimum level of income under the Rider's
variable payment options based on the minimum annuitization value, regardless of
the performance of the underlying investment portfolios.
To purchase the Rider, you must elect it at issue or within 30 days after
any Contract anniversary. The Rider will be added to the Contract on the
Contract date or the Contract anniversary date. In addition, so long as the
waiting period is 10 years, you must purchase the Rider as of a Contract
anniversary before your 85th birthday. If we increase the length of the waiting
period, you would have to purchase the Rider on an earlier date. We will notify
you of any change in the length of the waiting period within 30 days of the
change.
Minimum Annuitization Value. If you purchase the Rider at issue, the
minimum annuitization value is:
o the initial annuity value on the date the Rider is issued, plus
o any additional premiums paid after the Rider is issued, minus
o an adjustment for any partial surrenders made after the date
the Rider is issued,
o accumulated at the annual growth rate.
If you purchase the Rider at a future Contract anniversary date, the
minimum annuitization value would be:
o the annuity value on the date the Rider is issued, plus
o any additional premiums paid after the Rider is issued, minus
o an adjustment for any partial surrenders made after the date
the Rider is issued
o accumulated at the annual growth rate.
Any premium taxes will also be deducted.
The annual growth rate is currently 6% per year. This rate may be less than
6% in some states. We may, at our discretion, change the rate in the future for
new riders, but the
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rate will never be less than 3% per year. Once the Rider is added to your
Contract, the annual growth rate, the Rider charge, the Rider charge waiver
threshold, the separate account annuitization charge and the waiting period
before you can annuitize under the Rider will not change unless you upgrade the
Rider. Partial surrenders may reduce the minimum annuitization value on a basis
greater than dollar-for-dollar. See the SAI for more information.
The minimum annuitization value is used to calculate the annuity payments
and charges under the Rider and adjustments to partial surrenders. This value
does not establish or guarantee an annuity value or guarantee performance of any
subaccount. IF YOU CHOOSE TO ANNUITIZE UNDER THE RIDER, WE WILL USE YOUR MINIMUM
ANNUITIZATION VALUE (LESS ANY OUTSTANDING LOAN AMOUNT AND ANY LOAN INTEREST YOU
OWE) -- NOT YOUR CURRENT ANNUITY VALUE EVEN IF IT IS GREATER -- TO DETERMINE THE
AMOUNT OF YOUR VARIABLE ANNUITY PAYMENTS UNDER THE RIDER. The minimum
annuitization value may not be used to annuitize with any of the annuity payment
options under the Contract.
Annuity Payment Options Under the Rider. The only payment options
available under the Rider are the following variable annuity options:
o Life Income -- An election may be made for "No Period Certain" or
"10 Years Certain." Payments will be made as long as the annuitant
is living. In the event of the death of the annuitant prior to the
end of the chosen period certain, the remaining period certain
payments will be continued to the beneficiary.
o Joint and Full Survivor -- An election may be made for "No Period
Certain" or "10 Years Certain." Payments will be made as long as
either the annuitant or joint annuitant is living. In the event of
the death of both the annuitant and joint annuitant prior to the end
of the chosen period certain, the remaining period certain payments
will be continued to the beneficiary.
Both before and after you annuitize under the Rider, you may transfer
values from one subaccount to another. After the maturity date, no transfers may
be made to or from the fixed account. There are no limitations on transfers
among the subaccounts after you annuitize under the Rider.
Minimum Annuitization Value Upgrade. With a 10-year waiting period, you can
elect, in writing, to upgrade the minimum annuitization value to the current
annuity value within 30 days after any Contract anniversary before your 85th
birthday (earlier if required by your state). For your convenience, we will put
the last date to upgrade on page one of the Rider.
If you elect to upgrade, the current Rider will terminate, we will assess
the Rider charge, and a new rider will be issued. The new rider will have a new
rider date, a new waiting period before you can annuitize under the rider, and
new guaranteed benefits and charges. The benefits and charges under the new
rider may not be as advantageous as the previous Rider's benefits and charges
prior to upgrading.
It generally will not be to your advantage to upgrade unless your annuity
value exceeds your minimum annuitization value on the applicable Contract
anniversary.
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Conditions to Annuitize under the Rider. You can only annuitize under the
Rider within 30 days after the end of the waiting period (currently the tenth
Contract anniversary after you select the Rider) or on a later Contract
anniversary. In the case of an upgrade of the minimum annuitization value, you
can only annuitize at the end of the new rider's waiting period (currently the
tenth Contract anniversary following the upgrade) or on a later Contract
anniversary. We may, at our discretion, change the waiting period in the future
if you choose to upgrade the minimum annuitization value, or for new issues of
the Rider. You cannot, however, annuitize under the Rider after the 30-day
period following the Contract anniversary after your 94th birthday (earlier if
required by your state). For your convenience, we will put the first and last
date to annuitize using the Rider on page one of the Rider.
NOTE CAREFULLY -- You may only annuitize under the Rider at the times indicated
above.
Guaranteed Minimum Income Benefit Rider. We guarantee that future annuity
payments under the Rider to be never less than the initial variable annuity
payment. See the SAI for information concerning the calculation of the initial
variable annuity payment. We will also "stabilize" the payments (hold them
constant) during each Contract year.
During the first Contract year after you annuitize under the Rider, each
payment will equal the initial payment. On each Contract anniversary thereafter,
the variable annuity payment will increase or decrease (but never below the
initial payment) depending on the performance of the subaccounts you selected,
and then be held constant at that amount for that Contract year. The payments
starting on each Contract anniversary will equal the greater of the initial
variable annuity payment or the payment that can be supported by the number of
annuity units in the subaccounts on the Contract anniversary. We will calculate
each subsequent payment using a 5% assumed investment return. The portfolio in
which you are invested must grow at a rate greater than the 5% assumed
investment return, plus the separate account annuitization charge of 2.50%, in
order to increase the dollar amount of variable annuity payments. See the SAI
for additional information concerning how payments are determined under the
Rider.
Rider Charge. Prior to annuitization, a Rider charge, currently 0.30%
annually of the minimum annuitization value, is deducted from the annuity value
on each Contract anniversary and if you surrender the Contract. We may change
the Rider charge percentage in the future if you choose to upgrade the minimum
annuitization value, or for future issues of the Rider, but it will never be
greater than 0.50% annually. We deduct the Rider charge from the fixed account
and from each subaccount in proportion to the amount of annuity value in each
account.
We will waive the Rider charge on any Contract anniversary if the annuity
value exceeds the Rider charge waiver threshold (currently 2.0) times the
minimum annuitization value. For instance, if your annuity value on the seventh
Contract anniversary is $100,000, your minimum annuitization value is $45,000
and the Rider charge waiver threshold is 2.0, we will waive the Rider charge on
that anniversary because $100,000 is greater than $90,000 ($45,000 x 2.0). We
may, at our discretion, change the Rider charge waiver threshold in the future
if you choose to upgrade the minimum annuitization value, or for future issues
of the Rider, but it will never be greater than 2.5 times the minimum
annuitization value.
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Separate Account Annuitization Charge. If you annuitize under the Rider, a
daily separate account annuitization charge, equal to an annual rate of 2.50% of
the daily net asset values in the subaccounts, is reflected in the amount of the
variable payments you receive. We may change the separate account annuitization
charge in the future, if you choose to upgrade the minimum annuitization value
or for future issues of the Rider, but it will never be greater than 3.50%. The
separate account annuitization charge is deducted in place of the Contract's
mortality and expense risk charge and the administrative charge.
Termination. The Rider is irrevocable. You have the option not to annuitize
under the Rider but we will not refund any charges you have paid and you will
not be able to use the minimum annuitization value. The Rider will terminate
upon the earliest of the following:
o annuitization (once the guaranteed minimum payments begin);
o the date you elect to upgrade (although a new irrevocable rider
will be issued);
o the date your Contract terminates;
o 30 days following the Contract anniversary after your 94th
birthday (earlier if required by your state); or
o the date you change the annuitant (although a new irrevocable
rider will be issued).
THE RIDER DOES NOT ESTABLISH OR GUARANTEE ANNUITY VALUE OR GUARANTEE
PERFORMANCE OF ANY SUBACCOUNT. Because the Rider is based on conservative
actuarial factors, the level of lifetime income that it guarantees may be less
than the level that might be provided by application of the annuity value at the
Contract's applicable annuity factors. Therefore, the Rider should be regarded
as a safety net. The costs of annuitizing under the Rider include the separate
account annuitization charge and also the lower levels inherent in the annuity
tables used for the minimum payouts. These costs should be balanced against the
benefits of a minimum payout level.
The Rider may vary by state and is not available in all states.
3. PURCHASE
CONTRACT ISSUE REQUIREMENTS
We will issue a Contract IF:
o we receive information we need to issue the Contract;
o we receive a minimum initial premium payment; and
o the annuitant is age 85 or younger.
PREMIUM PAYMENTS
You should make checks or drafts for premium payments payable only to
"Western Reserve Life" and send them to our administrative office. Your check or
draft must be honored in order for us to pay any associated payments and
benefits due under the Contract.
INITIAL PREMIUM REQUIREMENTS
The initial premium payment for nonqualified Contracts must be at least
$5,000. However, you may make a minimum initial premium payment of $1,000,
rather than $5,000,
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if you indicate on your application that you anticipate making minimum monthly
payments of at least $100 by electronic funds transfer. For traditional or Roth
IRAs the minimum initial premium payment is $1,000 and for qualified Contracts
other than traditional or Roth IRAs, the minimum initial premium payment is $50.
We will credit your initial premium payment to your Contract within two
business days after the day we receive it at our administrative office and your
complete Contract information. If we are unable to credit your initial premium
payment, we will contact you within five business days and explain why. We will
also return your initial premium payment at that time unless you tell us to keep
it. We will credit your initial premium payment as soon as we receive all
necessary application information.
The date on which we credit your initial premium payment to your Contract
is the Contract date. The Contract date is used to determine Contract years,
Contract months and Contract anniversaries.
If you wish to make premium 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 premium payments for any reason permitted
by law.
ADDITIONAL PREMIUM PAYMENTS
You are not required to make any additional premium payments. However, you
can make additional premium payments as often as you like during the lifetime of
the annuitant and prior to the maturity date. We will accept premium payments by
bank wire or check. Additional premium payments must be at least $50 ($100
monthly in the case of nonqualified Contracts with a $1,000 initial premium
payment and $1,000 if by wire). We will credit any additional premium 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 premium
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 PREMIUM PAYMENTS
We allow premium payments up to a total of $1,000,000 in any Contract year
without prior approval.
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ALLOCATION OF PREMIUM PAYMENTS
On the Contract date, we will allocate your premium payment to the
investment choices you selected on your application, or we will place your
premium payment(s) in the reallocation account until the reallocation date. See
Right to Cancel Period below. Your allocation must be in whole percentages which
must total 100%. We will allocate additional premium payments as you selected on
your application, unless you request a different allocation.
Unless otherwise required by state law, we will limit allocations and
transfers to the fixed account if the fixed account value following the
allocation or transfer would exceed $500,000.
You may change allocations for future additional premium payments by
writing or telephoning the administrative office, subject to the limitations
described under Telephone or Fax Transactions on page 30. The allocation change
will apply to premium payments received after the date we receive the change
request.
YOU SHOULD REVIEW PERIODICALLY HOW YOUR PAYMENTS ARE DIVIDED AMONG THE
SUBACCOUNTS BECAUSE MARKET CONDITIONS AND YOUR OVERALL FINANCIAL OBJECTIVES MAY
CHANGE.
RIGHT TO CANCEL PERIOD
You may return your Contract for a refund within 10 days after you receive
it. In most states, the amount of the refund will be the total premium payments
we have received, plus (or minus) any gains (or losses) in the amounts you
invested in the subaccounts. You will keep any gains, and bear any losses, on
amounts that you invested in the subaccounts. 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.
If your state requires us to return your initial premium in the event you
exercise your right to cancel, we will allocate the initial premium on the
Contract date to the reallocation account until the reallocation date shown on
your Contract schedule page. While held in the reallocation account, your
premium will be credited with gains and losses of the WRL J.P. Morgan Money
Market subaccount. The premium will remain in the reallocation account for the
number of days in your state's right to cancel period plus five days. Please
contact your agent for details concerning the right to cancel period for your
state.
On the first valuation date on or after the reallocation date, we will
reallocate all annuity value from the reallocation account to the fixed account
and/or subaccounts you selected on your application.
For states which do not require a full refund of the initial premium, the
reallocation date is the same as the Contract date, and we will allocate your
initial premium on the Contract date to the fixed account and/or subaccounts in
accordance with the instructions you gave us on your application.
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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 valuation
date 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 at the close
of normal trading on the NYSE, 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 partially surrender or transfer out of a
subaccount, or if we assess a transfer charge, annual Contract charge, any
surrender charge, or Guaranteed Minimum Income Benefit Rider 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.
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The Funds. Each subaccount invests exclusively in one portfolio of a fund.
The portfolios and their advisers or sub-advisers are listed below.
<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.
WRL 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 manager that are sold directly to the
public. You should not expect that the investment results of the other
portfolios and mutual funds will be comparable to the 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 PROSPECTUSES. YOU
SHOULD READ THE FUND PROSPECTUSES CAREFULLY BEFORE YOU INVEST.
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THE FIXED ACCOUNT
Premium 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 relates to the fixed account.
We guarantee that the interest credited to the fixed account will not be
less than 3% per year. We have no formula for determining fixed account current
interest rates. We establish the interest rate, at our sole discretion, for each
premium payment or transfer into the fixed account. Rates are guaranteed for at
least one year.
If you select the fixed account, your money will be placed with the other
general assets of Western Reserve. All assets in our general account are subject
to the general liabilities of our business operations. The amount of money you
are able to accumulate in the fixed account during the accumulation period
depends upon the total interest credited. The amount of annuity payments you
receive during the income phase under a fixed annuity option will remain level
for the entire income phase. You may not transfer money between the fixed
account and the subaccounts during the income phase.
When you request a transfer or partial surrender from the fixed account, we
will account for it on a first-in, first-out ("FIFO") basis, for purposes of
crediting your interest. This means that we will take the deduction from the
oldest money you have put in the fixed account. You may not make partial
surrenders from the fixed account unless we consent.
Unless otherwise required by state law, we will limit allocations and
transfers to the fixed account if the fixed account value following the
allocation or transfer would exceed $500,000.
The fixed account is not available in all states. Residents of Washington,
Oregon, New Jersey and Massachusetts 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 only 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.
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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 Washington,
Oregon, New Jersey and Massachusetts may not transfer any of their Contract
value to the fixed account.
Transfers may be made by telephone or fax, subject to limitations described
under Telephone or Fax Transactions on page 30.
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 before the close of our business day (usually
4:00 p.m. Eastern Time). If we receive your request at our administrative office
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 at least $100 monthly. To qualify, a minimum
of $5,000 must be in each subaccount from which we make transfers.
There is no charge for this program. These transfers do count towards the
12 free transfers allowed during each Contract year.
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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.
By transferring a set amount on a regular schedule instead of transferring
the total amount at one particular time, you may reduce the risk of investing in
the portfolios only when the price is high. Dollar cost averaging does not
guarantee a profit and it does not protect you from loss if market prices
decline.
If you establish dollar cost averaging from the fixed account, we may
credit higher interest rates for those dollar cost averaging amounts. We call
these "enhanced" fixed account interest rates, and they will apply only to those
amounts dollar cost averaged from the fixed account. These enhanced interest
rates will be credited monthly and will apply temporarily for varying time
periods. If you discontinue the dollar cost averaging program before its
completion, then the interest credited on amounts remaining in the dollar cost
averaging fixed account may be adjusted downward, but not below the minimum
guaranteed effective fixed account annual interest rate of 3%. The interest rate
adjustment will not apply to any interest already credited.
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, you elect to participate in any asset
allocation service provided by a third party or if you request any other
transfer. Asset rebalancing ignores amounts in the fixed account. You can choose
to rebalance monthly, quarterly, semi-annually, or annually.
To qualify for asset rebalancing, a minimum annuity value of $5,000 for an
existing Contract, or a minimum initial premium payment of $5,000, for a new
Contract, is required. Asset rebalancing does not guarantee gains, nor does it
assure that any subaccount will not have losses.
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.
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TELEPHONE OR FAX TRANSACTIONS
You may make transfers, request partial surrenders and change the
allocation of additional premium payments by telephone. Telephone partial
surrenders 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 partial surrenders for
you. If you do not want the ability to make transfers or partial surrenders by
telephone, you should notify us in writing.
You may make telephone transfers or request partial surrenders by calling
our toll-free number: 1-800-851-9777. You will be required to provide certain
information for identification purposes when you request a transaction by
telephone. 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
727-299-1648. 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.
THIRD PARTY INVESTMENT SERVICES
Western Reserve or an affiliate may provide administrative or other support
services to independent third parties you authorize to conduct transfers on your
behalf, or who provide recommendations as to how your subaccount values should
be allocated. This includes, but is not limited to, transferring subaccount
values among subaccounts in accordance with various investment allocation
strategies that these third parties employ. Such independent third parties may
or may not be appointed Western Reserve agents for the sale of Contracts.
WESTERN RESERVE DOES NOT ENGAGE ANY THIRD PARTIES TO OFFER INVESTMENT
ALLOCATION SERVICES OF ANY TYPE, SO THAT PERSONS OR FIRMS OFFERING SUCH SERVICES
DO SO INDEPENDENT FROM ANY AGENCY RELATIONSHIP THEY MAY HAVE WITH WESTERN
RESERVE FOR THE SALE OF
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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 of our risks 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 1.00% of the average daily net assets that you have invested
in each subaccount. If you add the compounding minimum death benefit, the
mortality and expense risk charge increases to 1.25%. This charge is deducted
daily from the subaccounts during the accumulation period. During the income
phase, if you elect a variable annuity option, we deduct a daily separate
account annuitization charge from your subaccount assets equal to an annual rate
of 1.40% in place of the mortality and expense risk and administrative charges.
If you annuitize under the Guaranteed Minimum Income Benefit Rider, we charge a
separate account annuitization charge, currently 2.50%, not to exceed 3.50%, in
place of the mortality and expense risk and administrative charges.
If this charge does not cover our actual mortality and expense risk costs,
we absorb the loss. Conversely, if the charge more than covers actual costs, the
excess is added to our surplus. We expect to profit from this charge. We may use
any profits to cover distribution costs.
ADMINISTRATIVE CHARGE
We deduct an annual administrative charge to cover the costs of
administering the Contracts. This charge is assessed daily and is equal to 0.40%
per year of the average daily net assets that you have invested in each
subaccount. This charge is deducted from the subaccounts during the accumulation
period.
GUARANTEED MINIMUM INCOME BENEFIT RIDER CHARGE
Prior to annuitization, a Rider charge, currently 0.30% annually of the
minimum annuitization value, is deducted from the annuity value on each Contract
anniversary and on
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the termination date of the Rider (including Contract surrender and upgrades of
minimum annuitization value). We may change the Rider charge percentage in the
future if you choose to upgrade the minimum annuitization value, or for future
issues of the Rider, but it will never be greater than 0.50% annually. We deduct
the Rider charge from the fixed account and from each subaccount in proportion
to the amount of annuity value in each account.
We will waive the Rider charge on any Contract anniversary if the annuity
value exceeds the Rider charge waiver threshold (currently 2.0) times the
minimum annuitization value. For instance, if your annuity value on the seventh
Contract anniversary is $100,000, your minimum annuitization value is $45,000
and the Rider charge waiver threshold is 2.0, we will waive the Rider charge on
that anniversary because $100,000 is greater than $90,000 ($45,000 x 2.0). We
may, at our discretion, change the Rider charge waiver threshold in the future
if you choose to upgrade the minimum annuitization value, or for future issues
of the Rider, but it will never be greater than 2.5 times the minimum
annuitization value.
SEPARATE ACCOUNT ANNUITIZATION CHARGE
If you annuitize under the Rider, a daily separate account annuitization
charge, equal to an annual rate of 2.50% of the daily net asset values in the
subaccounts, is reflected in the amount of the variable payments you receive. We
may change the separate account annuitization charge in the future if you choose
to upgrade the minimum annuitization value, or for future issues of the Rider,
but it will never be greater than 3.50%. The separate account annuitization
charge is deducted in place of the Contract's mortality and expense risk charge
and the administrative charge.
ANNUAL CONTRACT CHARGE
We deduct an annual Contract charge of $30 from your annuity value on each
Contract anniversary and at surrender. We deduct this charge from the fixed
account and each subaccount in proportion to the amount of annuity value in each
account. We deduct this charge to cover our costs of administering the
Contracts. We currently waive this charge if either the annuity value, or the
total premium payments, minus all partial surrenders (including any surrender
charges), equals or exceeds $50,000 on the Contract anniversary for which the
charge is payable.
TRANSFER CHARGE
You are allowed to make 12 free transfers per Contract year. If you make
more than 12 transfers per Contract year, we charge $10 for each additional
transfer. We deduct the charge from the amount transferred. Dollar cost
averaging and asset rebalancing transfers are considered transfers. All transfer
requests made on the same day are treated as a single request. We deduct the
charge to compensate us for the cost of processing the transfer.
LOAN PROCESSING FEE
If you take a Contract loan, we will impose a $30 loan processing fee. 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
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other expenses associated with establishing and administering the loan reserve.
Only qualified Contracts can take Contract loans.
PREMIUM TAXES
Some states assess premium taxes on the premium payments you make. A
premium tax is a regulatory tax that some states assess on the premium payments
made into a contract. If we should have to pay any premium tax, we may deduct
the tax from each premium 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 surrender; 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 premium payments:
<TABLE>
<CAPTION>
STATE QUALIFIED CONTRACTS NONQUALIFIED CONTRACTS
<S> <C> <C>
South Dakota 0.00% 1.25%
Wyoming 0.00% 1.00%
</TABLE>
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:
<TABLE>
<CAPTION>
STATE QUALIFIED CONTRACTS NONQUALIFIED CONTRACTS
<S> <C> <C>
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%
</TABLE>
FEDERAL, STATE AND LOCAL TAXES
We may in the future deduct charges from the Contract for any taxes we
incur because of the Contract. However, no deductions are being made at the
present time.
SURRENDER CHARGE
During the accumulation period, you may surrender part or all of the
annuity value. We impose a surrender charge to help us recover sales expenses,
including broker/dealer compensation and printing, sales literature and
advertising costs. We expect to profit from this charge. We deduct this charge
from your annuity value at the time you request the partial or complete
surrender.
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If you take a partial surrender or if you surrender your Contract
completely, we will deduct a surrender charge of up to 7.0% of premium payments
surrendered within seven years after we receive a premium payment. We calculate
the surrender charge on the full amount that must be withdrawn from your annuity
value in order to pay the surrender amount, including the surrender charge. To
calculate surrender charges, we treat surrenders as coming first from the oldest
premium payment, then the next oldest and so forth.
Unless we otherwise consent, the minimum amount available each time you
request a partial surrender is $500.
The following schedule shows the surrender charges that apply during the
seven years following each premium payment:
<TABLE>
<CAPTION>
NUMBER OF MONTHS SINCE SURRENDER
PREMIUM PAYMENT DATE CHARGE
<S> <C>
12 or less 7%
13 through 24 7%
25 through 36 6%
37 through 48 5%
49 through 60 4%
61 through 72 3%
73 through 84 2%
85 or more 0%
</TABLE>
Keep in mind that partial and complete surrenders may be taxable, and if
made before age 591/2, may be subject to a 10% federal penalty tax. For tax
purposes, partial and complete surrenders are considered to come from earnings
first.
There are two ways that you may make a partial surrender and we will not
deduct the full surrender charge:
1. Partial Surrenders Up to the Free Amount. During any Contract year, you
may request a partial surrender and we will not impose a surrender charge on any
amount up to the maximum free amount. However, if you later completely surrender
your Contract while surrender charges still apply, we will deduct from your
annuity value the charge we would have deducted if there had been no free amount
(does not apply to New Jersey residents). For the first partial surrender under
the Contract, the maximum free amount you can partially surrender without a
surrender charge is equal to (A) earnings in the Contract, plus (B) 10% of
premiums. For all subsequent partial surrenders, the maximum free amount you can
partially surrender without a surrender charge is (A) plus (B), adjusted to
reflect prior partial surrenders, according to the following formula:
(A) is equal to:
(i) the annuity value on the date of the partial surrender; plus
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(ii) any amounts previously surrendered using the calculation in (B)
below; plus
(iii) any amounts previously surrendered that were subject to surrender
charges; minus
(iv) the total of all premiums you have paid.
and
(B) is equal to:
(i) 10% of the annuity value on the date of the partial surrender; minus
(ii) any amounts you partially surrendered during the Contract year in
which you requested the partial surrender using the calculation in
(B)(i).
For example, assume that you make a $100,000 premium payment to your
Contract at issue and make no more premium payments. Also assume at the end of
the 13th Contract month there is an annuity value of $108,000 before a partial
surrender of $11,000 is taken out surrender charge free ($8,000 is surrender
charge free under (A) ($108,000 - $100,000 = $8,000), and $3,000 is surrender
charge free under (B) ($100,000 x 10% = $10,000 maximum amount under (B)). If,
at the end of the 19th Contract month, there is an annuity value of $106,000
before a partial surrender of $20,000 is taken out, the surrender charge on this
partial surrender will be calculated as follows:
(A)(i)-- $106,000 is the annuity value on the date of the partial
surrender; and is added to
(A)(ii)-- $3,000 is the amount of the surrender that occurred in the
13th month surrendered under (B) of the formula (see paragraph
above); plus
(A)(iii) -- $0 are amounts previously surrendered that were subject to
surrender charges; minus
(A)(iv) -- $100,000 is the total of all premiums paid.
The total for (A) is: $106,000 + $3,000 + $0 - $100,000 = $9,000
AND
(B)(i) -- $9,700 is 10% of the remaining annuity value following the
determination of (A) above on the date of partial surrender
[$106,000 - $9,000 = $97,000 (remaining annuity value) x 10% =
$9,700]; minus
(B)(ii) -- $3,000 is the amount partially surrendered under (B)(i). above
during the Contract year in which the current partial surrender
is requested.
The total for (B) is: $9,700 - $3,000 = $6,700.
The maximum amount of this partial surrender available without a surrender
charge is $9,000 (A) + $6,700 (B) = $15,700.
The portion of this partial surrender which is subject to a surrender
charge is $20,000 - $15,700 = $4,300.
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<PAGE>
The surrender charge is calculated to be $323.66 (7% of $4,624).
The total amount we will deduct from your annuity value for the surrender
will be $20,323.66 which includes the surrender charge. You will receive
$20,000.
2. Systematic Partial Surrenders. During any Contract year, you may make a
systematic partial surrender on a monthly, quarterly, semi-annual or annual
basis without paying surrender charges. Systematic partial surrenders must be at
least $50. The amount of the systematic partial surrender may not exceed 10% of
the annuity value at the time the surrender is made, divided by the number of
surrenders made per calendar year. We reserve the right to discontinue
systematic partial surrenders if any surrender would reduce your annuity value
below $5,000.
You may elect to begin or discontinue systematic partial surrenders at any
time. However, we must receive written notice at least 30 days prior to the date
systematic partial surrenders are to be discontinued. (See Systematic Partial
Surrenders on page 43.)
Nursing Care Facility Waiver. If your Contract contains a nursing care
facility waiver, we will waive the surrender charge, provided:
o you (or any joint owner) 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 satisfactory written evidence of your
confinement, including dates, at the time you make each request for
partial surrender or complete surrender.
We will waive the surrender charge under this waiver only for partial and
complete surrenders made during your confinement or within two months after your
confinement ends. This waiver may not be available in all states.
Terminal Condition Waiver. If your Contract contains a terminal condition
waiver, we will waive the surrender charge upon a complete or partial surrender,
provided:
o you (or any joint owner) is diagnosed with a terminal condition
after the Contract date;
o you (or any joint owner) provide a written statement acceptable
to us and signed by a physician;
o the written statement provides the physician's diagnosis and
prognosis of your (or any joint owner's) non-correctable medical
condition; and
o the written statement says with reasonable medical certainty that
the non-correctable medical condition will result in death within 12
months from the date of the written statement, taking into
consideration ordinary and reasonable medical care, advice and
treatment available in the same or similar communities.
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<PAGE>
We will waive all surrender charges upon receipt of a complete or partial
surrender request if you include such a written statement from a physician with
your request. The minimum amount that you may partially surrender under this
waiver is $1,000. If you request a complete surrender, or a partial surrender
for an amount that reduces the annuity value below the minimum balance required
under your Contract, we will pay you the Contract's complete annuity value and
your Contract will terminate. This waiver may not be 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 on page 11 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 surrender charge and annual Contract charge for
Contracts sold to large groups of full-time employees of the same employer,
including directors, officers and full-time employees of Western Reserve or its
affiliates, or other groups where sales to the group reduce our administrative
expenses.
6. TAXES
NOTE: Western Reserve has prepared the following information on federal
income taxes as a general discussion of the subject. It is not intended as tax
advice to any individual. You should consult your own tax advisor about your own
circumstances. We believe that the Contract qualifies as an annuity contract for
federal income tax purposes and the following discussion assumes it so
qualifies. We have included an additional discussion regarding taxes in the SAI.
ANNUITY CONTRACTS IN GENERAL
Deferred annuity contracts are a way of setting aside money for future
needs like retirement. Congress recognized how important saving for retirement
is and provided special rules in the Code for annuities.
Simply stated, these rules provide that you will not be taxed on the
earnings, if any, on the money held in your annuity Contract until you take the
money out. This is referred
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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 or complete surrender or as
annuity payments.
When a non-natural person (e.g., corporation or certain other entities
other than tax-qualified trusts) owns a nonqualified Contract, the Contract will
generally not be treated as an annuity for tax purposes.
QUALIFIED AND NONQUALIFIED CONTRACTS
If you purchase the Contract under an individual retirement annuity, a
403(b) plan, 457 plan, or pension or profit sharing plan, your Contract is
referred to as a qualified Contract.
If you purchase the Contract as an individual and not under a qualified
Contract, your Contract is referred to as a nonqualified Contract.
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 Plan (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, 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
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<PAGE>
Contract. You should consult your legal counsel or tax advisor if you are
considering purchasing a Contract for use with any retirement plan. We have
provided more detailed information on these plans and the tax consequences
associated with them in the SAI.
PARTIAL AND COMPLETE SURRENDERS -- NONQUALIFIED CONTRACTS
In general, if you make a partial or systematic surrender from your
Contract, the Code treats that surrender as first coming from earnings and then
from your premium payments. When you make a partial surrender you are taxed on
the amount of the surrender that is earnings. When you make a complete surrender
you are generally taxed on the amount that your surrender proceeds exceeds your
premiums paid. Loans, pledges and assignments are taxed in the same manner as
surrenders. Different rules apply for annuity payments.
In the event of a partial surrender or systematic partial surrender from,
or complete surrender of, a nonqualified Contract, we will withhold for tax
purposes the minimum amount required by law, unless the owner affirmatively
elects, before payments begin, to have either nothing withheld or a different
amount withheld.
The Code also provides that surrendered earnings may be subject to a
penalty. The amount of the penalty is equal to 10% of the amount that is
includable in income. Some surrenders will be exempt from the penalty. They
include any amounts:
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 premium payments made prior to August 14, 1982.
MULTIPLE CONTRACTS
All nonqualified, deferred annuity Contracts entered into after October 21,
1988 that we issue (or our affiliates issue) to the same owner during any
calendar year are to be treated as one annuity contract for purposes of
determining the amount includable in an individual's gross income. There may be
other situations in which the Treasury may conclude that it would be appropriate
to aggregate two or more annuity contracts purchased by the same owner. You
should consult a competent tax advisor before purchasing more than one Contract
or other annuity contracts.
DIVERSIFICATION AND DISTRIBUTION REQUIREMENTS
The Code provides that the underlying investments for a nonqualified
variable annuity must satisfy certain diversification requirements in order to
be treated as an annuity contract. 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
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<PAGE>
Roth IRA) must also meet certain distribution requirements during the owner's
life. These diversification and distribution requirements are discussed in the
SAI. We may modify the Contract to attempt to maintain favorable tax treatment.
PARTIAL 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 591/2, unless you
meet one of the exceptions to this rule. We have provided more information in
the SAI.
In the case of a partial surrender, systematic partial surrender, 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 premium payments paid by or on behalf of an
individual under a Contract which is not excluded from the individual's gross
income. For Contracts issued in connection with qualified plans, the "investment
in the contract" can be zero.
The Code limits distributions of premium 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 partially surrender the premium payments and not any
earnings.
Loans, pledges and assignments of qualified Contracts are taxed in the same
manner as surrenders from such Contracts.
TAXATION OF DEATH BENEFIT PROCEEDS
We may distribute amounts from the Contract because of the death of an
owner or the annuitant. Generally, such amounts are includable in the income of
the recipient:
o if distributed in a lump sum, these amounts are taxed in the
same manner as a complete 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 premium payments, less amounts received which were not
includable in gross income.
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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.
It is unclear whether your annuity payments under the Guaranteed Minimum
Income Benefit Rider will be treated as fixed payments or as variable payments,
for federal tax purposes. You should consult a competent tax advisor with
respect to this issue.
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.
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POSSIBLE TAX LAW CHANGES
Although the likelihood of legislative change is uncertain, there is always
the possibility that the tax treatment of the Contracts could change by
legislation or otherwise. You should consult a tax advisor with respect to legal
developments and their effect on the Contract.
7. ACCESS TO YOUR MONEY
PARTIAL AND COMPLETE SURRENDERS
You can have access to the money in your Contract in several ways:
o by making either a partial or complete surrender; or
o by taking annuity payments.
If you want to surrender your Contract completely, you will receive the
cash value, which equals the annuity value of your Contract, minus:
o any surrender charges;
o any premium taxes;
o any loans;
o the annual Contract charge; and
o the Guaranteed Minimum Income Benefit Rider charge, if applicable.
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 surrender at our administrative office, unless
you specify a later date in your request.
No partial surrender is permitted if it would reduce the cash value below
$5,000. You may not make partial surrenders from the fixed account unless we
consent. Unless you tell us otherwise, we will take the partial surrender from
each of the investment choices in proportion to the cash value.
Unless we otherwise consent, the minimum amount available each time you
request a partial surrender is $500.
Remember that any partial surrender you make will reduce the annuity value.
Under some circumstances, a partial surrender will reduce the death benefit (and
the minimum annuitization value if you selected the Guaranteed Minimum Income
Benefit Rider) by more than the dollar amount of the partial surrender. See
Section 9, Death Benefit, and the SAI for more details.
Income taxes, federal tax penalties and certain restrictions may apply to
any partial or 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
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surrender request. We will accept fax or telephone requests for partial
surrenders as long as the surrender proceeds are being sent to the address of
record. The maximum amount you may request by fax or telephone is $50,000.
When we incur extraordinary expenses, such as overnight mail expenses, for
expediting delivery of your partial or complete surrender payment, we will
deduct that charge from the payment. We charge $20 for an overnight delivery
($30 for Saturday delivery).
For your protection, we will require a signature guarantee for:
o all requests for partial or complete surrenders over $500,000; or
o where the partial or complete 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 surrender. Other restrictions will apply to Section 403(b)
qualified Contracts and Texas Optional Retirement Program Contracts. For more
information, call us at 1-800-851-9777.
DELAY OF PAYMENT AND TRANSFERS
Payment of any amount due from the separate account for a partial or
complete surrender, a death benefit, or the death of the owner of a nonqualified
Contract, will generally occur within seven business days from the date all
required information is received by us. We may be permitted to defer such
payment from the separate account if:
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.
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 or complete surrenders and loan amounts from
the fixed account for up to six months.
SYSTEMATIC PARTIAL SURRENDERS
You can elect to receive regular payments from your Contract without paying
surrender charges by using systematic partial surrenders. You can partially
surrender up to
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10% of your cash value annually (or up to 10% of your initial premium payment if
a new Contract), in equal monthly, quarterly, semi-annual or annual payments of
at least $50. Your initial premium payment, if a new Contract, or your annuity
value, if an existing Contract, must equal at least $25,000. We will not process
a systematic partial surrender if the cash value for the entire Contract would
be reduced below $5,000. No systematic partial surrenders are permitted from the
fixed account without our prior consent.
You may stop systematic partial surrenders at any time, but we must receive
written notice at least 30 days prior to the date systematic partial surrenders
are to be discontinued. We reserve the right to discontinue offering systematic
partial surrenders 30 days after we send you written notice.
Income taxes, federal tax penalties and other restrictions may apply to any
systematic partial surrender you receive.
CONTRACT LOANS FOR QUALIFIED CONTRACTS
You can take Contract loans during the accumulation period when the
Contract:
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
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 accrued
interest due on the loan
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exceed the amount in the loan reserve, we will withdraw the difference and
transfer it to the loan reserve. If the amount of the loan reserve exceeds the
amount of the outstanding Contract loan, we will withdraw the difference from
the loan reserve and transfer it in accordance with your current premium payment
allocation. We reserve the right to transfer the excess to the fixed account if
the amount used to establish the loan reserve was transferred from the fixed
account.
If all Contract loans and unpaid interest due on the loan exceeds the cash
value, we will mail to your last known address and to any assignee of record a
notice stating the amount due in order to reduce the loan amount so that the
loan no longer exceeds the cash value. If the excess amount is not paid within
31 days after we mail the notices, the Contract will terminate without value.
You can repay any Contract loan in full:
o while the Contract is in force, and
o during the accumulation period.
NOTE CAREFULLY: If you do not repay your Contract loan, we will subtract
the amount of the unpaid loan balance plus interest from:
o the amount of any death benefit proceeds; or
o the amount we pay upon a partial or complete surrender; or
o the amount we apply on the maturity date to provide annuity payments; or
o the minimum annuitization value if you selected the Guaranteed Minimum
Income Benefit Rider and elect to annuitize under the Rider.
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 surrender charge, will take
place.
This distribution will be reported as taxable to the Internal Revenue
Service, may be subject to income and penalty tax, and may cause the Contract
not to qualify under Section 403(b) of the Code.
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You may fax your loan request to us at 727-299-1620.
The loan date is the date we process the loan request. We charge a $30 fee
to cover loan processing and expenses associated with establishing and
administering the loan reserve (not applicable in all states). We reserve the
right to limit the number of Contract loans to one per Contract year.
Contract loans may not be available in all states.
8. PERFORMANCE
We periodically advertise performance of the subaccounts and investment
portfolios. We may disclose at least four different kinds of performance.
First, we may disclose 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 risk
charge, the administrative charge, the annual Contract charge and the surrender
charge. Charges for the optional Guaranteed Minimum Income Benefit Rider are not
deducted. 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 surrender 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 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.
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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:
o you are not the annuitant; and
o you die prior to the maturity date; and
o there is no surviving joint owner.
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 17 and 18 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;
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Then:
o you will become the new annuitant and the Contract will continue. In the
case of joint owners, the younger joint owner will automatically become
the annuitant.
If:
o you are not the annuitant; and
o you die prior to the maturity date;
Then:
o if there is a surviving joint owner, then the Contract will continue
with the surviving joint owner as sole owner;
o if the beneficiary is alive and is your spouse, the Contract will
continue with the spouse as the new owner; or
o if the beneficiary is alive and is not your spouse, the beneficiary will
become the new owner. This new owner generally must surrender the
Contract for the cash value within five years of your death.
NOTE CAREFULLY: If the surviving owner does not name a beneficiary or if no
beneficiary is alive, the owner's estate will become the new owner. The
Contract's cash value must generally be distributed within five years of your
death. If no probate estate is opened because the owner has precluded the
opening of a probate estate by means of a trust or other instrument, unless we
receive written notice of the trust as a successor owner signed prior to the
owner's death, that trust may not exercise ownership rights to the Contract. It
may be necessary to open a probate estate in order to exercise ownership rights
to the Contract if no successor owner is named in a written notice received by
us.
STANDARD DEATH BENEFIT (OPTION A)
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 or regulations.
If the annuitant dies during the accumulation period and if a death benefit
is payable, the standard death benefit will be the greatest of:
o the annuity value of your Contract on the death report day;
o the total premium payments you make to the Contract as of the death
report day, reduced by partial surrenders; or
o the monthly step-up: On each Monthiversary before the annuitant's 81st
birthday, a new "stepped-up" death benefit is determined. The stepped-up
death benefit is equal to:
o the highest annuity value on any Monthiversary before the annuitant's
81st birthday, increased for any premium payments you have made and
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decreased for any adjusted partial surrenders we have paid to
you, following the Monthiversary on which the highest annuity
value occurs.
The standard death benefit is not payable after the maturity date.
NOTE: the standard death benefit is referred to as:
o Option A in the Contract form; and
o Guaranteed Minimum Death Benefit in the Contract application.
COMPOUNDING MINIMUM DEATH BENEFIT (OPTION B)
On the Contract application, you may add the compounding minimum death
benefit to the Contract for an additional charge. This option is not available
to annuitants age 74 or older on the Contract date. This death benefit option is
only payable during the accumulation period and is not payable after the
maturity date. You may not select this option after the Contract has been
issued.
During the accumulation period, this option provides the greater of:
o the standard death benefit; or
o the compounding minimum death benefit. This benefit equals total
premium payments, plus interest at an effective annual rate of 6%
(in most states) from the date of the premium payment to the date of
death, less any adjusted partial surrender(s), including interest on
any partial surrender at the 6% rate from the date of partial surrender
to the date of death. Interest is not credited after the annuitant's
81st birthday. If you select this option, then the mortality and expense
risk charge will increase to 1.25%.
NOTE: the compounding minimum death benefit is referred to as:
o Option B in the Contract form; and
o Annual 6% Compound Death Benefit in the Contract application.
EFFECT OF ADJUSTED PARTIAL SURRENDER ON CERTAIN DEATH BENEFITS
When you request a partial surrender, we will reduce certain death benefits
under the Contract by an "adjusted partial surrender." Adjusted partial
surrenders will reduce:
o the compounding minimum death benefit, if selected; and
o the monthly step-up death benefit.
A partial surrender will reduce the compounding minimum death benefit, if
selected, and the monthly step-up death benefit, by the amount of the partial
surrender times the ratio of:
o the amount of the compounding minimum death benefit (and/or monthly
step-up death benefit) immediately before the partial surrender, to
o the annuity value immediately before the partial surrender.
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We have included a more detailed explanation of this adjustment in the SAI.
If the compounding minimum death benefit or the monthly step-up death
benefit is greater than the annuity value prior to the partial surrender, the
adjusted partial surrender may be more than the amount of your request. For this
reason, if a death benefit is paid after you have made a partial surrender, then
the total amount paid as the death benefit could be less than the total premium
payments.
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. Joint
owners may be named provided they are husband and wife. Joint ownership is not
available in all states.
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 co-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. You may change the beneficiary
during the
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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 beneficiary survives
the annuitant, the beneficiary'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.
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 policies of the separate account or Western
Reserve.
The assets of the separate account are held in Western Reserve's name on
behalf of the separate account and belong to Western Reserve. However, the
assets underlying the
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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
sales commissions in an amount equal to 6% of premium payments. In addition,
broker/dealers may receive trail commissions of 0.90% of the annuity value in
each Contract year, starting at the end of the first quarter of the eighth
Contract year, provided the Contract has an annuity value of $5,000 or more in
the subaccounts. These commissions are not deducted from premium payments.
Certain production, persistency and managerial bonuses may also be paid.
Alternatively, compensation schedules may be
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structured to pay lower compensation amounts on premium payments with trail
commissions starting at an earlier duration. 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.
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 Washington,
Oregon, New Jersey and Massachusetts 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 action lawsuits naming us as a defendant
or involving the separate account. In some lawsuits involving other insurers,
substantial damages have been sought and/or material settlement payments have
been made. Although the outcome of any litigation cannot be predicted with
certainty, we believe that at the present time there are no pending or
threatened lawsuits that are reasonably likely to have a material adverse impact
on the separate account, AFSG or Western Reserve.
FINANCIAL STATEMENTS
The financial statements of Western Reserve and the separate account are
included in the SAI.
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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 as follows:
o Four variable annuity contracts issued by Western Reserve with subaccount
classes that deduct a 1.40% separate account annual expense; and
o Two variable annuity contracts issued by Western Reserve with subaccount
classes that deduct a 1.65% separate account annual expense.
SUBACCOUNTS WITH SEPARATE ACCOUNT ANNUAL EXPENSES OF 1.40%:
<TABLE>
<CAPTION>
WRL J.P. MORGAN MONEY MARKET SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
12/3/1992(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
</TABLE>
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<TABLE>
<CAPTION>
WRL AEGON BOND SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
12/3/1992(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
</TABLE>
<TABLE>
<CAPTION>
WRL JANUS GROWTH SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
12/3/1992(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>
56
<PAGE>
<TABLE>
<CAPTION>
WRL JANUS GLOBAL SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
12/3/1992(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
</TABLE>
<TABLE>
<CAPTION>
WRL LKCM STRATEGIC TOTAL RETURN SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
3/1/1993(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
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
WRL VKAM EMERGING GROWTH SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
3/1/1993(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
</TABLE>
<TABLE>
<CAPTION>
WRL ALGER AGGRESSIVE GROWTH SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
3/1/1994(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>
58
<PAGE>
<TABLE>
<CAPTION>
WRL AEGON BALANCED SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
3/1/1994(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
12/31/199 $14.666 $14.900 4,467,001
</TABLE>
<TABLE>
<CAPTION>
WRL FEDERATED GROWTH & INCOME SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
3/1/1994(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
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
WRL DEAN ASSET ALLOCATION SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
1/3/1995(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
</TABLE>
<TABLE>
<CAPTION>
WRL C.A.S.E. GROWTH SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
5/1/1996(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>
<TABLE>
<CAPTION>
WRL NWQ VALUE EQUITY SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
5/1/1996(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
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
WRL GE INTERNATIONAL EQUITY SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
1/2/1997(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
</TABLE>
<TABLE>
<CAPTION>
WRL GE U.S. EQUITY SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
1/2/1997(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
</TABLE>
<TABLE>
<CAPTION>
WRL THIRD AVENUE VALUE SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
1/2/1998(1)-12/31/1998 $10.000 $ 9.187 1,025,234
12/31/1999 $ 9.187 $10.483 968,035
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
WRL J.P. MORGAN REAL ESTATE SECURITIES SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
5/1/1998(1)-12/31/1998 $10.000 $8.427 157,193
12/31/1999 $ 8.427 $7.996 203,365
</TABLE>
<TABLE>
<CAPTION>
WRL GOLDMAN SACHS GROWTH SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
5/3/1999(1)-12/31/1999 $10.000 $11.640 503,875
</TABLE>
<TABLE>
<CAPTION>
WRL GOLDMAN SACHS SMALL CAP SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
5/3/1999(1)-12/31/1999 $10.000 $11.631 166,378
</TABLE>
<TABLE>
<CAPTION>
WRL T. ROWE PRICE DIVIDEND GROWTH SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
5/3/1999(1)-12/31/1999 $10.000 $9.173 691,875
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
WRL T. ROWE PRICE SMALL CAP SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
5/3/1999(1)-12/31/1999 $10.000 $13.719 359,295
</TABLE>
<TABLE>
<CAPTION>
WRL SALOMON ALL CAP SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
5/3/1999(1)-12/31/1999 $10.000 $11.449 425,168
</TABLE>
<TABLE>
<CAPTION>
WRL PILGRIM BAXTER MID CAP GROWTH SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
5/3/1999(1)-12/31/1999 $10.000 $17.633 1,452,014
</TABLE>
<TABLE>
<CAPTION>
WRL DREYFUS MID CAP SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
5/3/1999(1)-12/31/1999 $10.000 $10.620 209,699
</TABLE>
63
<PAGE>
SUBACCOUNTS WITH SEPARATE ACCOUNT ANNUAL EXPENSES OF 1.65%:
<TABLE>
<CAPTION>
WRL J.P. MORGAN MONEY MARKET SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
11/29/1999(1)-12/31/1999 $10.000 $10.046 2,500
</TABLE>
<TABLE>
<CAPTION>
WRL AEGON BOND SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
11/29/1999(1)-12/31/1999 $10.000 $9.979 2,500
</TABLE>
<TABLE>
<CAPTION>
WRL JANUS GROWTH SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
11/29/1999(1)-12/31/1999 $10.000 $10.870 2,500
</TABLE>
<TABLE>
<CAPTION>
WRL JANUS GLOBAL SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
11/29/1999(1)-12/31/1999 $10.000 $11.387 2,500
</TABLE>
64
<PAGE>
<TABLE>
<CAPTION>
WRL LKCM STRATEGIC TOTAL RETURN SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
11/29/1999(1)-12/31/1999 $10.000 $10.316 2,500
</TABLE>
<TABLE>
<CAPTION>
WRL VKAM EMERGING GROWTH SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
11/29/1999(1)-12/31/1999 $10.000 $12.108 2,500
</TABLE>
<TABLE>
<CAPTION>
WRL ALGER AGGRESSIVE GROWTH SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
11/29/1999(1)-12/31/1999 $10.000 $11.705 2,500
</TABLE>
<TABLE>
<CAPTION>
WRL AEGON BALANCED SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
11/29/1999(1)-12/31/1999 $10.000 $10.001 2,500
</TABLE>
65
<PAGE>
<TABLE>
<CAPTION>
WRL FEDERATED GROWTH & INCOME SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
11/29/1999(1)-12/31/1999 $10.000 $10.074 2,500
</TABLE>
<TABLE>
<CAPTION>
WRL DEAN ASSET ALLOCATION SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
11/29/1999(1)-12/31/1999 $10.000 $9.907 2,500
</TABLE>
<TABLE>
<CAPTION>
WRL C.A.S.E. GROWTH SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
11/29/1999(1)-12/31/1999 $10.000 $10.053 2,500
</TABLE>
<TABLE>
<CAPTION>
WRL NWQ VALUE EQUITY SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
11/29/1999(1)-12/31/1999 $10.000 $10.421 2,500
</TABLE>
66
<PAGE>
<TABLE>
<CAPTION>
WRL GE INTERNATIONAL EQUITY SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
11/29/1999(1)-12/31/1999 $10.000 $11.124 2,500
</TABLE>
<TABLE>
<CAPTION>
WRL GE U.S. EQUITY SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
11/29/1999(1)-12/31/1999 $10.000 $10.424 2,500
</TABLE>
<TABLE>
<CAPTION>
WRL THIRD AVENUE VALUE SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
11/29/1999(1)-12/31/1999 $10.000 $10.660 2,500
</TABLE>
<TABLE>
<CAPTION>
WRL J.P. MORGAN REAL ESTATE SECURITIES SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
11/29/1999(1)-12/31/1999 $10.000 $10.398 2,500
</TABLE>
67
<PAGE>
<TABLE>
<CAPTION>
WRL GOLDMAN SACHS GROWTH SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
11/29/1999(1)-12/31/1999 $10.000 $10.731 2,500
</TABLE>
<TABLE>
<CAPTION>
WRL GOLDMAN SACHS SMALL CAP SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
11/29/1999(1)-12/31/1999 $10.000 $10.891 2,500
</TABLE>
<TABLE>
<CAPTION>
WRL T. ROWE PRICE DIVIDEND GROWTH SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
11/29/1999(1)-12/31/1999 $10.000 $9.872 2,500
</TABLE>
<TABLE>
<CAPTION>
WRL T. ROWE PRICE SMALL CAP SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
11/29/1999(1)-12/31/1999 $10.000 $11.398 2,500
</TABLE>
68
<PAGE>
<TABLE>
<CAPTION>
WRL SALOMON ALL CAP SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
11/29/1999(1)-12/31/1999 $10.000 $10.459 2,500
</TABLE>
<TABLE>
<CAPTION>
WRL PILGRIM BAXTER MID CAP GROWTH SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
11/29/1999(1)-12/31/1999 $10.000 $12.092 2,500
</TABLE>
<TABLE>
<CAPTION>
WRL DREYFUS MID CAP SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
11/29/1999(1)-12/31/1999 $10.000 $10.510 2,500
</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 Fidelity VIP Equity-Income Portfolio --
Service Class 2, (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.
69
<PAGE>
APPENDIX B
HISTORICAL PERFORMANCE DATA
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STANDARDIZED PERFORMANCE DATA
We may advertise historical yields and total returns for the subaccounts of
the separate account. These figures are based on historical earnings and will be
calculated according to guidelines from the SEC. They do not indicate future
performance.
WRL J.P. MORGAN MONEY MARKET SUBACCOUNT. The yield of the WRL J.P. Morgan
Money Market subaccount is the annualized income generated by an investment in
the subaccount over a specified seven-day period. The yield is calculated by
assuming that the income generated for that seven-day period, not including
capital changes or income other than investment income, is generated each
seven-day period over a 52-week period and is shown as a percentage of the
investment. The effective yield is calculated similarly but we assume that the
income earned is reinvested. The effective yield will be slightly higher than
the yield because of the compounding effect of this assumed reinvestment. For
the seven days ended December 31, 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 and selection of the standard death benefit.
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 under a Contract in the subaccount over a specified 30-day period.
The yield is calculated by assuming that the income generated by the investment
during that 30-day period is generated each 30-day period over a 12-month period
and is shown as a percentage of the investment.
The TOTAL RETURN of a subaccount assumes that an investment has been held
in 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 standardized
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
Tables 1 and 2 below. Although the Contract did not exist during the periods
shown in Tables 1 and 2, the returns of the subaccounts shown have been adjusted
to reflect current subaccount charges imposed under the Contract. Total returns
shown in Table 1 reflect deductions of 1.00% for the mortality and expense risk
charge for the standard death benefit, 0.40% for the administrative charge, $30
for the annual Contract charge and the applicable surrender charge (based on an
average Contract size of $22,025, the annual Contract charge translates into a
charge of 0.14%). Total returns shown in Table 2 reflect the standardized
70
<PAGE>
total returns of Table 1, adjusted to reflect 1.25% for the mortality and
expense risk charge (assuming selection of the compounding minimum death
benefit), 0.40% for the administrative charge, and $30 for the annual Contract
charge. THE OPTIONAL GUARANTEED MINIMUM INCOME BENEFIT RIDER CHARGE OF 0.30% OF
MINIMUM ANNUITIZATION VALUE ("MAV") HAS NOT BEEN DEDUCTED. Total returns also
assume a complete surrender of the Contract at the end of the period; therefore,
the surrender charge is deducted.
71
<PAGE>
<TABLE>
<CAPTION>
TABLE 1
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS OF THE SUBACCOUNTS
(ASSUMES SURRENDER AND SELECTION OF STANDARD DEATH BENEFIT
WITHOUT GUARANTEED MINIMUM DEATH BENEFIT RIDER)
(TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES: 1.40%)
1 YEAR 5 YEARS
ENDED ENDED
SUBACCOUNT 12/31/99 12/31/99
<S> <C> <C>
WRL J.P. Morgan Money Market* -3.75% 3.01%
WRL AEGON Bond -11.42% 5.20%
WRL Janus Growth 50.24% 37.69%
WRL Janus Global 61.50% 30.79%
WRL LKCM Strategic Total Return 3.36% 14.39%
WRL VKAM Emerging Growth 95.04% 40.73%
WRL Alger Aggressive Growth 59.45% 34.44%
WRL AEGON Balanced -5.55% 9.21%
WRL Federated Growth & Income -12.91% 9.27%
WRL Dean Asset Allocation -14.08% N/A
WRL C.A.S.E. Growth 24.80% N/A
WRL NWQ Value Equity -0.70% N/A
WRL GE International Equity 16.05% N/A
WRL GE U.S. Equity 9.60% N/A
WRL Third Avenue Value 6.95% N/A
WRL J.P. Morgan Real Estate Securities -12.24% N/A
WRL Goldman Sachs Growth N/A N/A
WRL Goldman Sachs Small Cap N/A N/A
WRL T. Rowe Price Dividend Growth N/A N/A
WRL T. Rowe Price Small Cap N/A N/A
WRL Salomon All Cap N/A N/A
WRL Pilgrim Baxter Mid Cap Growth N/A N/A
WRL Dreyfus Mid Cap N/A N/A
WRL Value Line Aggressive Growth N/A N/A
WRL Great Companies -- America(SM) N/A N/A
WRL Great Companies -- Technology(SM) N/A N/A
Fidelity VIP Equity-Income Portfolio --
Service Class 2 N/A N/A
Fidelity VIP II Contrafund(R) Portfolio --
Service Class 2 N/A N/A
Fidelity VIP III Growth Opportunities Portfolio --
Service Class 2 N/A N/A
<CAPTION>
10 YEARS INCEPTION OF THE SUBACCOUNT
ENDED SUBACCOUNT TO INCEPTION
SUBACCOUNT 12/31/99 12/31/99** DATE**
<S> <C> <C> <C>
WRL J.P. Morgan Money Market* 3.18% 3.44% 02/24/1989
WRL AEGON Bond 5.70% 6.39% 02/24/1989
WRL Janus Growth 21.79% 23.17% 02/24/1989
WRL Janus Global N/A 26.11% 12/03/1992
WRL LKCM Strategic Total Return N/A 12.10% 03/01/1993
WRL VKAM Emerging Growth N/A 30.74% 03/01/1993
WRL Alger Aggressive Growth N/A 28.40% 03/01/1994
WRL AEGON Balanced N/A 6.67% 03/01/1994
WRL Federated Growth & Income N/A 6.95% 03/01/1994
WRL Dean Asset Allocation N/A 8.24% 01/03/1995
WRL C.A.S.E. Growth N/A 16.52% 05/01/1995
WRL NWQ Value Equity N/A 8.08% 05/01/1996
WRL GE International Equity N/A 11.69% 01/02/1997
WRL GE U.S. Equity N/A 19.65% 01/02/1997
WRL Third Avenue Value N/A -1.17% 01/02/1998
WRL J.P. Morgan Real Estate Securities N/A -17.27% 05/01/1998
WRL Goldman Sachs Growth N/A 9.30% 05/03/1999
WRL Goldman Sachs Small Cap N/A 9.20% 05/03/1999
WRL T. Rowe Price Dividend Growth N/A -15.35% 05/03/1999
WRL T. Rowe Price Small Cap N/A 30.07% 05/03/1999
WRL Salomon All Cap N/A 7.39% 05/03/1999
WRL Pilgrim Baxter Mid Cap Growth N/A 69.17% 05/03/1999
WRL Dreyfus Mid Cap N/A -0.90% 05/03/1999
WRL Value Line Aggressive Growth N/A N/A 05/01/2000
WRL Great Companies -- America(SM) N/A N/A 05/01/2000
WRL Great Companies -- Technology(SM) N/A N/A 05/01/2000
Fidelity VIP Equity-Income Portfolio --
Service Class 2 N/A N/A 05/01/2000
Fidelity VIP II Contrafund(R)/ Portfolio --
Service Class 2 N/A N/A 05/01/2000
Fidelity VIP III Growth Opportunities Portfolio --
Service Class 2 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.
72
<PAGE>
<TABLE>
<CAPTION>
TABLE 2
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS OF THE SUBACCOUNTS
(ASSUMES SURRENDER AND SELECTION OF
COMPOUNDING MINIMUM DEATH BENEFIT
WITHOUT GUARANTEED MINIMUM DEATH BENEFIT RIDER)
(TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES: 1.65%)
1 YEAR 5 YEARS 10 YEARS INCEPTION OF THE SUBACCOUNT
ENDED ENDED ENDED SUBACCOUNT TO INCEPTION
SUBACCOUNT 12/31/99 12/31/99 12/31/99 12/31/99** DATE**
<S> <C> <C> <C> <C> <C>
WRL J.P. Morgan Money Market* -3.86% 2.64% 2.90% 3.16% 02/24/1989
WRL AEGON Bond -11.52% 4.82% 5.43% 6.11% 02/24/1989
WRL Janus Growth 50.07% 37.21% 21.43% 22.81% 02/24/1989
WRL Janus Global 61.32% 30.33% N/A 25.64% 12/03/1992
WRL LKCM Strategic Total Return 3.24% 13.99% N/A 11.68% 03/01/1993
WRL VKAM Emerging Growth 94.82% 40.24% N/A 30.26% 03/01/1993
WRL Alger Aggressive Growth 59.27% 33.97% N/A 27.94% 03/01/1994
WRL AEGON Balanced -5.65% 8.82% N/A 6.28% 03/01/1994
WRL Federated Growth & Income -13.01% 8.89% N/A 6.56% 03/01/1994
WRL Dean Asset Allocation -14.18% N/A N/A 7.86% 01/03/1995
WRL C.A.S.E. Growth 24.66% N/A N/A 16.23% 05/01/1995
WRL NWQ Value Equity 0.81% N/A N/A 7.72% 05/01/1996
WRL GE International Equity 15.92% N/A N/A 11.33% 01/02/1997
WRL GE U.S. Equity 9.48% N/A N/A 19.27% 01/02/1997
WRL Third Avenue Value 6.83% N/A N/A -1.44% 01/02/1998
WRL J.P. Morgan Real Estate Securities -12.34% N/A N/A -17.48% 05/01/1998
WRL Goldman Sachs Growth N/A N/A N/A 9.27% 05/03/1999
WRL Goldman Sachs Small Cap N/A N/A N/A 9.18% 05/03/1999
WRL T. Rowe Price Dividend Growth N/A N/A N/A -15.37% 05/03/1999
WRL T. Rowe Price Small Cap N/A N/A N/A 30.04% 05/03/1999
WRL Salomon All Cap N/A N/A N/A 7.36% 05/03/1999
WRL Pilgrim Baxter Mid Cap Growth N/A N/A N/A 69.14% 05/03/1999
WRL Dreyfus Mid Cap N/A N/A N/A -0.92% 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.
73
<PAGE>
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 advertise or 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 surrenders or annuity payments.
All non-standardized performance data will be advertised only if the
standardized performance data as shown in Tables 1 and 2 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 3 below. Total returns shown reflect
deductions of 1.00% for the mortality and expense risk charge for the standard
death benefit, 0.40% for the administrative charge and $30 for the annual
Contract charge (based on an average Contract size of $22,025, the annual
Contract charge translates into a charge of 0.14%). Total returns shown in Table
4 reflect the non-standardized total returns of Table 3 adjusted to reflect
1.25% for the mortality and expense risk charge (assuming selection of the
compounding minimum death benefit), 0.40% for the administrative charge, and $30
for the annual Contract charge. THE OPTIONAL GUARANTEED MINIMUM INCOME BENEFIT
RIDER CHARGE OF 0.30% OF MAV HAS NOT BEEN DEDUCTED. The non-standardized average
annual total return figures shown in Tables 3 and 4 are based on the assumption
that the Contract is not surrendered, and therefore the surrender charge is not
imposed.
74
<PAGE>
<TABLE>
<CAPTION>
TABLE 3
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
(ASSUMES NO SURRENDER AND SELECTION OF STANDARD DEATH BENEFIT
WITHOUT GUARANTEED MINIMUM INCOME BENEFIT RIDER)
(TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES: 1.40%)
1 YEAR 5 YEARS 10 YEARS INCEPTION OF THE SUBACCOUNT
ENDED ENDED ENDED SUBACCOUNT TO INCEPTION
SUBACCOUNT 12/31/99 12/31/99 12/31/99 12/31/99** DATE**
<S> <C> <C> <C> <C> <C>
WRL J.P. Morgan Money Market* 3.25% 3.71% 3.18% 3.44% 02/24/1989
WRL AEGON Bond -4.42% 5.84% 5.70% 6.39% 02/24/1989
WRL Janus Growth 57.24% 37.91% 21.79% 23.17% 02/24/1989
WRL Janus Global 68.50% 31.06% N/A 26.11% 12/03/1992
WRL LKCM Strategic Total Return 10.36% 14.85% N/A 12.25% 03/01/1993
WRL VKAM Emerging Growth 102.04% 40.94% N/A 30.80% 03/01/1993
WRL Alger Aggressive Growth 66.45% 34.69% N/A 28.55% 03/01/1994
WRL AEGON Balanced 1.45% 9.76% N/A 7.04% 03/01/1994
WRL Federated Growth & Income -5.91% 9.83% N/A 7.32% 03/01/1994
WRL Dean Asset Allocation -7.08% N/A N/A 8.82% 01/03/1995
WRL C.A.S.E. Growth 31.80% N/A N/A 17.00% 05/01/1995
WRL NWQ Value Equity 6.30% N/A N/A 9.17% 05/01/1996
WRL GE International Equity 23.05% N/A N/A 13.27% 01/02/1997
WRL GE U.S. Equity 16.60% N/A N/A 21.03% 01/02/1997
WRL Third Avenue Value 13.95% N/A N/A 2.33% 01/02/1998
WRL J.P. Morgan Real Estate Securities -5.24% N/A N/A -12.60% 05/01/1998
WRL Goldman Sachs Growth N/A N/A N/A 16.30% 05/03/1999
WRL Goldman Sachs Small Cap N/A N/A N/A 16.20% 05/03/1999
WRL T. Rowe Price Dividend Growth N/A N/A N/A -8.35% 05/03/1999
WRL T. Rowe Price Small Cap N/A N/A N/A 37.07% 05/03/1999
WRL Salomon All Cap N/A N/A N/A 14.39% 05/03/1999
WRL Pilgrim Baxter Mid Cap Growth N/A N/A N/A 76.17% 05/03/1999
WRL Dreyfus Mid Cap N/A N/A N/A 6.10% 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.
75
<PAGE>
<TABLE>
<CAPTION>
TABLE 4
NON-STANDARDIZED AVERAGE TOTAL RETURNS
(ASSUMES NO SURRENDER AND SELECTION OF
COMPOUNDING MINIMUM DEATH BENEFIT AND
WITHOUT GUARANTEED MINIMUM INCOME BENEFIT RIDER)
(TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES: 1.65%)
1 YEAR 5 YEARS 10 YEARS INCEPTION OF THE SUBACCOUNT
ENDED ENDED ENDED SUBACCOUNT TO INCEPTION
SUBACCOUNT 12/31/99 12/31/99 12/31/99 12/31/99** DATE**
<S> <C> <C> <C> <C> <C>
WRL J.P. Morgan Money Market* 3.14% 3.35% 2.90% 3.16% 02/24/1989
WRL AEGON Bond -4.52% 5.48% 5.43% 6.11% 02/24/1989
WRL Janus Growth 57.07% 37.43% 21.43% 22.81% 02/24/1989
WRL Janus Global 68.32% 30.61% N/A 25.64% 12/03/1992
WRL LKCM Strategic Total Return 10.24% 14.46% N/A 11.83% 03/01/1993
WRL VKAM Emerging Growth 101.82% 40.45% N/A 30.32% 03/01/1993
WRL Alger Aggressive Growth 66.27% 34.22% N/A 28.09% 03/01/1994
WRL AEGON Balanced 1.35% 9.38% N/A 6.66% 03/01/1994
WRL Federated Growth & Income -6.01% 9.45% N/A 6.93% 03/01/1994
WRL Dean Asset Allocation -7.18% N/A N/A 8.45% 01/03/1995
WRL C.A.S.E. Growth 31.66% N/A N/A 16.72% 05/01/1995
WRL NWQ Value Equity 6.19% N/A N/A 8.82% 05/01/1996
WRL GE International Equity 22.92% N/A N/A 12.93% 01/02/1997
WRL GE U.S. Equity 16.48% N/A N/A 20.67% 01/02/1997
WRL Third Avenue Value 13.83% N/A N/A 2.07% 01/02/1998
WRL J.P. Morgan Real Estate Securities -5.34% N/A N/A -12.80% 05/01/1998
WRL Goldman Sachs Growth N/A N/A N/A 16.27% 05/03/1999
WRL Goldman Sachs Small Cap N/A N/A N/A 16.18% 05/03/1999
WRL T. Rowe Price Dividend Growth N/A N/A N/A -8.37% 05/03/1999
WRL T. Rowe Price Small Cap N/A N/A N/A 37.04% 05/03/1999
WRL Salomon All Cap N/A N/A N/A 14.36% 05/03/1999
WRL Pilgrim Baxter Mid Cap Growth N/A N/A N/A 76.14% 05/03/1999
WRL Dreyfus Mid Cap N/A N/A N/A 6.08% 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.
76
<PAGE>
ADJUSTED HISTORICAL PORTFOLIO 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 through 4 of Appendix B.
77
<PAGE>
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<PAGE>
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<PAGE>
THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK
<PAGE>
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
WRL FREEDOM PREMIER(SM)
VARIABLE ANNUITY
Issued through
WRL SERIES ANNUITY ACCOUNT
Offered by
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
570 Carillon Parkway
St. Petersburg, Florida 33716
This Statement of Additional Information expands upon subjects discussed in the
current prospectus for the WRL Freedom Premier(SM) Variable Annuity offered by
Western Reserve Life Assurance Co. of Ohio. You may obtain a copy of the
prospectus dated May 1, 2000 by calling 1-800-851-9777, or by writing to the
administrative office, Western Reserve Life, Annuity Department, P.O. Box 9051,
Clearwater, Florida 33758-9051. The prospectus sets forth information that a
prospective investor should know before investing in a Contract. Terms used in
the current prospectus for the Contract are incorporated in this Statement of
Additional Information.
THIS STATEMENT OF ADDITIONAL INFORMATION ("SAI") IS NOT A PROSPECTUS AND SHOULD
BE READ ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACT AND THE WRL
SERIES ANNUITY ACCOUNT.
DATED: MAY 1, 2000
WRL00025
<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.................................................................................................... 7
Proof of Age, Gender and Survival............................................................................. 7
Non-Participating............................................................................................. 7
Employee and Agent Purchases.................................................................................. 7
CERTAIN FEDERAL INCOME TAX CONSEQUENCES ........................................................................... 7
Tax Status of the Contract.................................................................................... 7
Taxation of Western Reserve................................................................................... 10
INVESTMENT EXPERIENCE.............................................................................................. 10
Accumulation Units............................................................................................ 10
Accumulation Unit Value....................................................................................... 10
Annuity Unit Value and Annuity Payment Rates.................................................................. 11
Guaranteed Minimum Income Benefit Rider - Hypothetical Illustrations.......................................... 12
HISTORICAL PERFORMANCE DATA ....................................................................................... 13
Money Market Yields........................................................................................... 13
Other Subaccount Yields....................................................................................... 14
Total Returns................................................................................................. 14
Other Performance Data........................................................................................ 15
Advertising and Sales Literature.............................................................................. 15
PUBLISHED RATINGS.................................................................................................. 16
ADMINISTRATION..................................................................................................... 16
RECORDS AND REPORTS................................................................................................ 16
DISTRIBUTION OF THE CONTRACTS...................................................................................... 16
OTHER PRODUCTS..................................................................................................... 17
CUSTODY OF ASSETS.................................................................................................. 17
LEGAL MATTERS...................................................................................................... 17
INDEPENDENT ACCOUNTANTS............................................................................................ 17
OTHER INFORMATION.................................................................................................. 17
FINANCIAL STATEMENTS............................................................................................... 17
</TABLE>
<PAGE>
DEFINITIONS OF SPECIAL TERMS
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
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 Our administrative office and mailing address is P.O. Box 5068, Clearwater, Florida 33758-5068.
office Our street address is 570 Carillon Parkway, St. Petersburg, Florida 33716. Our phone number is
1-800-851-9777.
- ------------------------------------------------------------------------------------------------------------------------------------
age The issue age is the annuitant's age on his/her birthday immediately preceding the Contract
date. Attained age is the issue age plus the number of completed Contract years. When we use
the term "age" in this SAI, it has the same meaning as "attained age" 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 the annual Contract charge, any applicable premium taxes, any surrender
charge and any Guaranteed Minimum Income Benefit Rider charge.
- ------------------------------------------------------------------------------------------------------------------------------------
Code The Internal Revenue Code of 1986, as amended.
- ------------------------------------------------------------------------------------------------------------------------------------
Contract date The later of the date on which the initial premium payment is received or the date that the
properly completed application is received at Western Reserve's administrative office. It is
also the date when, depending on your state of residence, we allocate your premium payment(s)
either to the reallocation account or to the fixed account and the subaccounts you selected on
your application. We measure Monthiversaries, Contract years and Contract anniversaries from
the Contract date.
- ------------------------------------------------------------------------------------------------------------------------------------
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 95th birthday.
- ------------------------------------------------------------------------------------------------------------------------------------
Monthiversary The same day in the month as the Contract date. When there is no date in a calendar month that
coincides with the Contract date, the Monthiversary is the first day of the next month.
- ------------------------------------------------------------------------------------------------------------------------------------
NYSE New York Stock Exchange.
- ------------------------------------------------------------------------------------------------------------------------------------
nonqualified Contracts Contracts issued other than in connection with retirement plans.
- ------------------------------------------------------------------------------------------------------------------------------------
owner The person(s) entitled to exercise all rights under the Contract. The annuitant is the owner
(you, your) unless the application states otherwise, or unless a change of ownership is made at a later
time. Joint owners may be named, provided the joint owners are husband and wife. Joint
ownership is not available in all states.
- ------------------------------------------------------------------------------------------------------------------------------------
portfolio A separate investment portfolio of a fund.
- ------------------------------------------------------------------------------------------------------------------------------------
premium payments Amounts paid by an owner or on the owner's behalf to Western Reserve as consideration for the
benefits provided by the Contract. When we use the term "premium payment" in this SAI, it has
the same meaning as "net premium payment" in the Contract, which means the premium payment less
any applicable premium taxes.
- ------------------------------------------------------------------------------------------------------------------------------------
qualified Contracts Contracts issued in connection with retirement plans that qualify for special federal income tax
treatment under the Code.
- ------------------------------------------------------------------------------------------------------------------------------------
reallocation account The WRL J.P. Morgan Money Market subaccount.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
reallocation date The date shown on the schedule page of your Contract when we reallocate all annuity value held
in the reallocation account to the fixed account and subaccounts you selected. We place your
premium in the reallocation account only if your state requires us to return the full premium
in the event you exercise your right to cancel. In all other states, the reallocation date is
the Contract date.
- ------------------------------------------------------------------------------------------------------------------------------------
separate account WRL Series Annuity Account, a separate account composed of subaccounts established to receive
and invest premium payments not allocated to the fixed account.
- ------------------------------------------------------------------------------------------------------------------------------------
separate account value During the accumulation period, your Contract's value in the separate account, which equals the
total value in each subaccount.
- ------------------------------------------------------------------------------------------------------------------------------------
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, 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)
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</TABLE>
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 premium payment. While
the annuitant is living, the owner may: (1) assign the Contract; (2) surrender
the Contract; (3) amend or modify the Contract with Western Reserve's consent;
(4) receive annuity payments or name a payee to receive the payments; and (5)
exercise, receive and enjoy every other right and benefit contained in the
Contract. The exercise of these rights may be subject to the consent of any
assignee or irrevocable beneficiary; and of the owner's spouse in a community or
marital property state.
A joint owner may only be a spouse and may be named in the Contract application
or in a written notice. The surviving joint owner will become the sole owner
upon the other joint owner's death, if one joint owner dies before the
annuitant. If the surviving joint owner dies before the annuitant, the surviving
joint owner's estate will become the owner if no beneficiary is named and alive.
However, if a beneficiary is named and alive, the beneficiary will receive the
death benefit.
The owner may change the ownership of the Contract in a written notice. When
this change takes effect, all rights of ownership in the Contract will pass to
the new owner. A change of ownership may have tax consequences.
When there is a change of owner, the change will take effect as of the date
Western Reserve accepts the written notice. We assume no liability for any
payments made, or actions taken before a change is accepted, and shall not be
responsible for the validity or effect of any change of ownership. Changing the
owner cancels any prior choice of owner, but does not change the designation of
the beneficiary or the annuitant.
ENTIRE CONTRACT
The Contract and any endorsements thereon and the Contract application
constitute the entire contract between Western Reserve and the owner. All
statements in the application are representations and not warranties. No
statement will cause the Contract to be void or to be used in defense of a claim
unless contained in the application.
MISSTATEMENT OF AGE OR GENDER
If the age or gender of the annuitant has been misstated, Western Reserve will
change the annuity benefit payable to that which the premium payments would have
purchased for the correct age or gender. The dollar amount of any underpayment
Western Reserve makes shall be paid in full with the next payment due such
person or the beneficiary. The dollar amount of any overpayment made by Western
Reserve due to any misstatement shall be deducted from payments subsequently
accruing to such person or beneficiary. Any underpayment or overpayment will
include interest at 5% per year, from the date of the wrong payment to the date
of the adjustment. The age of the annuitant may be established at any time by
the submission of proof Western Reserve finds satisfactory.
ADDITION, DELETION, OR SUBSTITUTION OF INVESTMENTS
We reserve the right, subject to compliance with applicable law, to make
additions to, deletions from, or substitutions for the shares that are held by
the separate account or that the separate account may purchase. We reserve the
right to eliminate the shares of any portfolios of 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
3
<PAGE>
rights under the Contracts, the separate account may be operated as a management
company under the 1940 Act, or subject to any required approval, it may be
deregistered under the 1940 Act in the event such registration is no longer
required.
We reserve the right to change the investment objective of any subaccount.
Additionally, if required by law or regulation, we will not materially change an
investment objective of the separate account or of a portfolio designated for a
subaccount unless a statement of change is filed with and approved by the
appropriate insurance official of the state of Western Reserve's domicile, or
deemed approved in accordance with such law or regulation.
ANNUITY PAYMENT OPTIONS
During the lifetime of the annuitant and prior to the maturity date, the owner
may choose an annuity payment option or change the election. If no election is
made prior to the maturity date, annuity payments will be made under Payment
Option D as Variable Life Income with 10 years of guaranteed payments.
Thirty days prior to the maturity date, we will mail to the owner a notice and a
form upon which the owner can select allocation options for the annuity proceeds
as of the maturity date, which cannot be changed thereafter and will remain in
effect until the Contract terminates. If a separate account annuity option is
chosen, the owner must include in the written notice the subaccount allocation
of the annuity proceeds as of the maturity date. If we do not receive that form
or other written notice acceptable to us prior to the maturity date, the
Contract's existing allocation options will remain in effect until the Contract
terminates. The owner may also, prior to the maturity date, select or change the
frequency of annuity payments, which may be monthly, quarterly, semi-annually or
annually, provided that the annuity option and payment frequency provides for
payments of at least $20 per period. If none of these is possible, a lump sum
payment will be made.
DETERMINATION OF THE FIRST VARIABLE PAYMENT. The amount of the first variable
payment is determined by multiplying the annuity proceeds times the appropriate
rate for the variable option selected. The rates are based on the Society of
Actuaries 1983 Individual Mortality Table A with projection 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
ADJUSTED PARTIAL SURRENDER. A partial surrender will reduce the amount of your
monthly step-up death benefit or compounding minimum death benefit, if selected,
by an amount called the adjusted partial surrender. The reduction depends on the
relationship between the monthly step-up death benefit (or compounding minimum
death benefit), and annuity value. The adjusted partial surrender is the amount
of a partial surrender times the ratio of [(a) divided by (b)] where:
(a) is the amount of either death benefit prior to the excess partial surrender;
and
(b) is the annuity value prior to the excess partial surrender.
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<PAGE>
THE FOLLOWING EXAMPLES DESCRIBE THE EFFECT OF SURRENDER ON THE MONTHLY STEP-UP
DEATH BENEFIT OR COMPOUNDING MINIMUM DEATH BENEFIT, AND ANNUITY VALUE.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EXAMPLE 1
---------
(Assumed Facts for Example)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
$75,000 current monthly step-up death benefit (MSUDB) or compounding minimum death benefit (CMDB) before surrender
- ------------------------------------------------------------------------------------------------------------------------------------
$50,000 current annuity value before surrender
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$75,000 current death benefit (larger of annuity value and MSUDB or CMDB)
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6% current surrender charge percentage
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$15,000 requested partial surrender
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$10,000 surrender charge-free amount
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$5,000 excess partial surrender-EPS (amount subject to surrender charge)
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$319.15 surrender charge on EPS = 0.06*(5,319.15)
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$5,319.15 reduction in annuity value due to excess partial surrender = 5000 + 319.15
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$22,500 adjusted partial surrender = $15,000* (75,000/50,000)
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$52,500 new MSUDB or CMDB (after partial surrender) = 75,000 - 22,500
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$34,680.85 new annuity value (after partial surrender) = 50,000 - 15,319.15
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</TABLE>
SUMMARY:
Reduction in MSUDB or CMDB ......... = $22,500.00
Reduction in annuity value ......... = $15,319.15
NOTE: The MSUDB or CMDB is reduced more than the annuity value since the MSUDB
or CMDB was greater than the annuity value just prior to the partial surrender.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EXAMPLE 2
---------
(Assumed Facts for Example)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
$50,000 current monthly step-up death benefit (MSUDB) or compounding minimum death benefit (CMDB) before surrender
- ------------------------------------------------------------------------------------------------------------------------------------
$75,000 current annuity value before partial surrender
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$75,000 current death benefit (larger of annuity value and MSUDB or CMDB)
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6% current surrender charge percentage
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$15,000 requested partial surrender
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$11,250 surrender charge-free amount
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$3,750 excess partial surrender-EPS (amount subject to surrender charge)
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$239.36 surrender charge on EPS less EIA = 0.06* (3,989.36)
- ------------------------------------------------------------------------------------------------------------------------------------
$3,989.36 reduction in annuity value due to EPS = 3,750 + 239.36
- ------------------------------------------------------------------------------------------------------------------------------------
$15,000 adjusted partial surrender = $15,000* (75,000/75,000)
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$35,000 new MSUDB or CMDB (after partial surrender) = 50,000 -15,000
- ------------------------------------------------------------------------------------------------------------------------------------
$59,760.64 new annuity value (after partial surrender) = 75,000 -11,250 - 3,989.36
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SUMMARY:
Reduction in MSUDB or CMDB .........= $15,000.00
Reduction in annuity value .........= $15,239.36
5
<PAGE>
NOTE: The MSUDB or CMDB and annuity value are reduced by the same amount since
the annuity value was higher than the MSUDB or CMDB just prior to the partial
surrender.
DEATH OF OWNER. Federal tax law requires that if any owner (including any
surviving joint owner who has become a current owner) dies before the maturity
date, then the entire value of the Contract must generally be distributed within
five years of the date of death of such owner. Special rules apply where (1) the
spouse of the deceased owner is the sole beneficiary, (2) the owner is not a
natural person and the primary annuitant dies or is changed, or (3) any owner
dies after the maturity date. See Certain Federal Income Tax Consequences on
page 7 for a detailed description of these rules. Other rules may apply to
qualified Contracts.
If the owner (or a surviving joint owner) is not the annuitant and dies before
the annuitant:
o if no beneficiary is named and alive, the owner's estate will become the
new owner. The cash value must be distributed within five years of the
former owner's death;
o if the beneficiary is alive and is the owner's spouse, the Contract will
continue with the spouse as the new owner; or
o if the beneficiary is alive and is not the owner's spouse, the beneficiary
will become the new owner. The cash value must be distributed either:
o within five years of the former owner's death; or
o over the lifetime of the new owner, if a natural person, with payments
beginning within one year of the former owner's death; or
o over a period that does not exceed the life expectancy (as defined by
the Code and regulations adopted under the Code) of the new owner, if
a natural person, with payments beginning within one year of the
former owner's death.
DEATH OF ANNUITANT. Due proof of death of the annuitant is proof that the
annuitant who is an owner died prior to the commencement of annuity payments.
Upon receipt of this proof and an election of a method of settlement and return
of the Contract, the death benefit generally will be paid within seven days, or
as soon thereafter as we have sufficient information about the beneficiary to
make the payment. The beneficiary may receive the amount payable in a lump sum
cash benefit, or, subject to any limitation under any state or federal law,
rule, or regulation, under one of the annuity payment options unless a
settlement agreement is effective at the owner's death preventing such election.
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. In the event of joint
owners, the younger joint owner will automatically become the new annuitant and
this Contract will continue. If the annuitant dies during the accumulation
period and 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 7.)
If the beneficiary elects to receive the death benefit proceeds under option
(1), then: (a) we will allow the beneficiary to make only ONE partial surrender
during the five-year period. That surrender must be made at the time option (1)
is elected. No surrender charge will apply to this surrender; (b) we will allow
the beneficiary to make ONE transfer to and from the subaccounts and the fixed
account during the five-year period. That transfer must be made at the time
option (1) is elected; (c) we will deduct the annual Contract charge each year
during the five-year period; (d) we will not apply any surrender 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.
If there are joint owners, the annuitant is not the owner, and the one joint
owner dies prior to the maturity date, the surviving joint owner may surrender
the Contract at any time for the amount of the adjusted annuity value.
BENEFICIARY. The beneficiary designation in the application will remain in
effect until changed. The owner may change the designated beneficiary during the
annuitant's lifetime by sending written notice to us. The beneficiary's consent
to such change is not required unless the beneficiary was irrevocably designated
or law requires consent. (If an irrevocable beneficiary dies, the owner may then
designate a new beneficiary.) The change will take effect as of the date the
owner signs the written notice. We will not be liable for any
6
<PAGE>
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.
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 premium
payment to the Contract due to lower acquisition costs we experience on those
purchases. The credit will be reported to the Internal Revenue Service ("IRS")
as taxable income to the employee or registered representative. We may offer, in
our discretion, certain employer sponsored savings plans, reduced or waived fees
and charges including, but not limited to, the surrender 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.
7
<PAGE>
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 premiums and annuity
values and may be able to transfer among these accounts more frequently than in
such rulings. These differences could result in owners being treated as the
owners of the assets of the separate account. 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
beneficiarY. However, if such owner's death occurs prior to the maturity date,
and such owner's surviving spouse is named beneficiary, then the contract may be
continued with the surviving spouse as the new owner. If any owner is not a
natural person, then for purposes of these distribution requirements, the
primary annuitant shall be treated as an owner and any death or change of such
primary annuitant shall be treated as the death of the owner. The Contract
contains provisions intended to comply with these requirements of the Code. No
regulations interpreting these requirements of the Code have yet been issued and
thus no assurance can be given that the provisions contained in the Contracts
satisfy all such Code requirements. The provisions contained in the Contracts
will be reviewed and modified if necessary to maintain their compliance with the
Code requirements when clarified by regulation or otherwise.
WITHHOLDING. The portion of any distribution under a Contract that is includable
in gross income will be subject to federal income tax withholding unless the
recipient of such distribution elects not to have federal income tax withheld
and properly notifies us. For certain qualified Contracts, certain distributions
are subject to mandatory withholding. The withholding rate varies according to
the type of distribution and the owner's tax status. For qualified Contracts,
"eligible rollover distributions" from section 401(a) plans and section 403(b)
tax-sheltered annuities are subject to a mandatory federal income tax
withholding of 20%. An eligible rollover distribution is the taxable portion of
any distribution from such a plan, except certain distributions such as
distributions required by the Code or distributions in a specified annuity form.
The 20% withholding does not apply, however, if the owner chooses a "direct
rollover" from the plan to another tax-qualified plan or IRA.
QUALIFIED CONTRACTS. The qualified Contract is designed for use with several
types of tax-qualified retirement plans. The tax rules applicable to
participants and beneficiaries in tax-qualified retirement plans vary according
to the type of plan and the terms and conditions of the plan. Special favorable
tax treatment may be available for certain types of contributions and
distributions. Adverse tax consequences may result from contributions in excess
of specified limits; distributions prior to age 59 1/2 (subject to certain
exceptions); distributions that do not conform to specified commencement and
minimum distribution rules; and in other specified circumstances. Some
retirement plans are subject to distribution and other requirements that are not
incorporated into the 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.
8
<PAGE>
INDIVIDUAL RETIREMENT ANNUITIES. In order to qualify as a traditional individual
retirement annuity ("IRA") under section 408(b) of the Code, a Contract must
contain certain provisions: (i) the owner must be the annuitant; (ii) the
Contract generally is not transferable by the owner, e.g., the owner may not
designate a new owner, designate a contingent owner or assign the Contract as
collateral security; (iii) the total premium payments for any calendar year on
behalf of any individual may not exceed $2,000, except in the case of a rollover
amount or contribution under sections 402(c), 403(a)(4), 403(b)(8) or 408(d)(3)
of the Code; (iv) annuity payments or partial surrenders must begin no later
than April 1 of the calendar year following the calendar year in which the
annuitant attains age 70 1/2; (v) an annuity payment option with a period
certain that will guarantee annuity payments beyond the life expectancy of the
annuitant and the beneficiary may not be selected; (vi) certain payments of
death benefits must be made in the event the annuitant dies prior to the
distribution of the annuity value; and (vii) the entire interest of the owner is
non-forfeitable. Contracts intended to qualify as traditional IRAs under section
408(b) of the Code contain such provisions. 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. The IRS has not reviewed
the Contract for qualification as an IRA, and has not addressed in a ruling of
general applicability whether an enhanced death benefit provision, such as the
provision in the Contract, comports with IRA qualification requirements.
ROTH INDIVIDUAL RETIREMENT ANNUITIES (ROTH IRA). The Roth IRA, under section
408A of the Code, contains many of the same provisions as a traditional IRA.
However, there are some differences. First, the contributions are not deductible
and must be made in cash or as a rollover or transfer from another Roth IRA or
other IRA. A rollover from or conversion of an IRA to a Roth IRA may be subject
to tax and other special rules may apply 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 premium payments or the annuity value. The death
benefit could be characterized as an incidental benefit, the amount of which is
limited in any tax-sheltered annuity under section 403(b). Because the death
benefit may exceed this limitation, employers using the Contract in connection
with such plans should consult their tax advisor. Additionally, in accordance
with the requirements of the Code, section 403(b) annuities generally may not
permit distribution of (i) elective contributions made in years beginning after
December 31, 1988, (ii) earnings on those contributions, and (iii) earnings on
amounts attributed to elective contributions held as of the end of the last year
beginning before January 1, 1989. Distributions of such amounts will be allowed
only upon the death of the employee, on or after attainment of age 59 1/2,
separation from service, disability, or financial hardship, except that income
attributable to elective contributions may not be distributed in the case of
hardship.
CORPORATE PENSION AND PROFIT SHARING PLANS AND H.R. 10 PLANS. Sections 401(a)
and 403(a) of the Code permit corporate employers to establish various types of
retirement plans for employees and self-employed individuals to establish
qualified plans for themselves and their employees. Such retirement plans may
permit the purchase of the Contracts to accumulate retirement savings. Adverse
tax consequences to the plan, the participant or both may result if the Contract
is assigned or transferred to any individual as a means to provide benefit
payments. The Contract includes a death benefit that in some cases may exceed
the greater of the premium payments or the annuity value. The death benefit
could be characterized as an incidental benefit, the amount of which is limited
in a pension or profit-sharing plan. Because the death benefit may exceed this
limitation, employers using the Contract in connection with such plans should
consult their tax advisor.
DEFERRED COMPENSATION PLANS. Section 457 of the Code, while not actually
providing for a qualified plan (as that term is used in the Code), provides for
certain deferred compensation plans with respect to service for state
governments, local governments, political subdivisions, agencies,
instrumentalities and certain affiliates of such entities, and tax exempt
organizations. The Contracts can be used
9
<PAGE>
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 premium payment directed to a subaccount are credited in the
form of accumulation units. Each subaccount has a distinct accumulation unit
value. The number of units credited is determined by dividing the premium
payment or amount transferred to the subaccount by the accumulation unit value
of the subaccount as of the end of the valuation period during which the
allocation is made. For each subaccount, the accumulation unit value for a given
business day is based on the net asset value of a share of the corresponding
portfolio of a fund less any applicable charges or fees.
Upon allocation to the selected subaccount of the separate account, premium
payments are converted into accumulation units of the subaccount. At the end of
any valuation period, a subaccount's value is equal to the number of units that
your Contract has in the subaccount, multiplied by the accumulation unit value
of the subaccount.
The number of units that your Contract has in each subaccount is equal to:
1. The initial units purchased on the Contract date; plus
2. Units purchased at the time additional premium payments are allocated to
the subaccount; plus
3. Units purchased through transfers from another subaccount or the fixed
account; minus
4. Any units that are redeemed to pay for partial surrenders; minus
5. Any units that are redeemed as part of a transfer to another subaccount or
the fixed account; minus
6. Any units that are redeemed to pay the annual Contract charge, any premium
taxes, any Guaranteed Minimum Income Benefit Rider charge and any transfer
charge.
The value of an accumulation unit was arbitrarily established at $10.00 at the
inception of each subaccount. Thereafter, the value of an accumulation unit is
determined as of the close of the regular session of business on the 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 1.00% of net assets for each day in the valuation
period (1.25% if the compounding minimum death benefit is added) and compensates
us for certain mortality and expense risks. The administrative charge is
deducted at an annual rate of 0.40% of net assets for each day in the valuation
period and compensates us for certain administrative expenses. The accumulation
unit value may increase, decrease, or remain the same from valuation period to
valuation period.
10
<PAGE>
ANNUITY UNIT VALUE AND ANNUITY PAYMENT RATES
The discussion in this section assumes the Guaranteed Minimum Income Benefit
Rider (the "Rider") is not included in the Contract.
The amount of variable annuity payments will vary with annuity unit values.
Annuity unit values rise if the net investment performance of the subaccount
(that is, the portfolio performance minus subaccount fees and charges including
the separate account annuitization charge that will equal an annual rate of
1.40%) 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.
(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 separate account annuitization
charge. This factor is equal, on an annual basis, to 1.40% of
the daily net asset value of a 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> <C>
Where: A = Annuity unit value for the immediately preceding valuation period.
Assume............................................................................... = $X
B = Net investment experience factor for the valuation period for which the annuity unit
value is being calculated.
Assume................................................................................ = Y
C = A factor to neutralize the assumed interest rate of 5% built into the annuity tables used.
Assume................................................................................ = Z
</TABLE>
Then, the annuity unit value is:....$ XYZ = $Q
11
<PAGE>
FORMULA AND ILLUSTRATION FOR DETERMINING AMOUNT OF
FIRST MONTHLY VARIABLE ANNUITY PAYMENT
First monthly variable annuity payment = AB
------
$1,000
<TABLE>
<CAPTION>
<S> <C> <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> <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
GUARANTEED MINIMUM INCOME BENEFIT RIDER- HYPOTHETICAL ILLUSTRATIONS
This discussion assumes the Rider is included in the Contract.
The amounts shown below are hypothetical guaranteed minimum monthly payment
amounts under the Rider for a $100,000 premium when annuity payments do not
begin until the Contract anniversary indicated in the left-hand column. These
figures assume that there were no subsequent premium payments or partial
surrenders, that there were no premium taxes and that the $100,000 premium is
annuitized under the Rider. Six different annuity payment options are
illustrated: a male annuitant, a female annuitant and a joint and survivor
annuity, each on a life only and a life with 10-year certain basis. These
hypothetical illustrations assume that the annuitant is
(or both annuitants are) 60 years old when the Contract is issued, that the
annual growth rate is 6.0% (once established, an annual growth rate will not
change during the life of the Rider), and that there was no upgrade of the
minimum annuitization value. The figures below are based on an assumed
investment return of 3%. Subsequent payments will never be less than the amount
of the first payment (although subsequent payments will be calculated using a 5%
assumed investment return and a 2.50% daily separate account annuitization
charge, provided no upgrade in minimum annuitization value has occurred).
Illustrations of guaranteed minimum monthly payments based on other assumptions
will be provided upon request.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
RIDER ANNIVERSARY AT
EXERCISE DATE MALE FEMALE JOINT & SURVIVOR
- -------------------------------------------------------------------------------------------------------------------------------
LIFE ONLY LIFE 10 LIFE ONLY LIFE 10 LIFE ONLY LIFE 10
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10 (age 70) $ 1,135 $ 1,067 $ 976 $ 949 $ 854 $ 852
- -------------------------------------------------------------------------------------------------------------------------------
15 1,833 1,634 1,562 1,469 1,332 1,318
- -------------------------------------------------------------------------------------------------------------------------------
20 (age 80) 3,049 2,479 2,597 2,286 2,145 2,078
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Life Only = Life Annuity with No Period Certain
Life 10 = Life Annuity with 10 Years Certain
12
<PAGE>
These hypothetical illustrations should not be deemed representative of past or
future performance of any underlying variable investment option.
Partial surrenders will affect the minimum annuitization value as follows: Each
Contract year, partial surrenders up to the limit of the minimum annuitization
value on the last Contract anniversary multiplied by the annual growth rate
reduce the minimum annuitization value on a dollar-for-dollar basis. Partial
surrenders over this limit will reduce the minimum annuitization value by an
amount equal to the excess partial surrender amount multiplied by the ratio of
the minimum annuitization value immediately prior to the excess partial
surrender to the annuity value immediately prior to the excess partial
surrender.
The amount of the first payment provided by the Rider will be determined by
multiplying each $1,000 of minimum annuitization value by the applicable annuity
factor shown on Schedule I of the Rider. The applicable annuity factor depends
upon the annuitant's (and joint annuitant's, if any) gender (or without regard
to gender if required by law), age, and the Rider payment option selected and is
based on a guaranteed interest rate of 3% and the "1983 Table A" mortality table
improved to the year 2000 with projection Scale G. Subsequent payments will be
calculated as described in the Rider using a 5% assumed investment return.
Subsequent payments may fluctuate annually in accordance with the investment
performance of the subaccounts. However, subsequent payments are guaranteed to
never be less than the initial payment.
The scheduled payment on each subsequent Contract anniversary after
annuitization using the Rider will equal the greater of the initial payment or
the payment supportable by the annuity units in the selected subaccounts. The
supportable payment is equal to the number of variable annuity units in the
selected subaccounts multiplied by the variable annuity unit values in those
subaccounts on the date the payment is made. The variable annuity unit values
used to calculate the supportable payment will assume a 5% assumed investment
return. If the supportable payment at any payment date during a Contract year is
greater than the scheduled payment for that Contract year, the excess will be
used to purchase additional annuity units. Conversely, if the supportable
payment at any payment date during a Contract year is less than the scheduled
payment for that Contract year, then there will be a reduction in the number of
annuity units credited to the Contract to fund the deficiency. In the case of a
reduction, you will not participate as fully in the future investment
performance of the subaccounts you selected since fewer annuity units are
credited to your Contract. Purchases and reductions of annuity units will be
allocated to each subaccount on a proportionate basis.
We bear the risk that we will need to make payments if all annuity units have
been used in an attempt to maintain the scheduled payment at the initial payment
level. In such an event, we will make all future payments equal to the initial
payment. Once all the annuity units have been used, the amount of your payment
will not increase or decrease and will not depend upon the performance of any
subaccounts. To compensate us for this risk, the separate account annuitization
charge will be deducted.
HISTORICAL PERFORMANCE DATA
MONEY MARKET YIELDS
YIELD - The yield quotation set forth in the prospectus for the WRL J.P. Morgan
Money Market subaccount is for the seven days ended on the date of the most
recent balance sheet of the separate account included in the registration
statement, and is computed by determining the net change, exclusive of capital
changes and income other than investment income, in the value of a hypothetical
pre-existing account having a balance of one unit in the WRL J.P. Morgan Money
Market subaccount at the beginning of the period, subtracting a hypothetical
charge reflecting deductions from owner accounts, and dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return, and multiplying the base period return by (365/7) with the
resulting figure carried to at least the nearest hundredth of one percent.
EFFECTIVE YIELD - The effective yield quotation for the WRL J.P. Morgan Money
Market subaccount set forth in the prospectus is for the seven days ended on the
date of the most recent balance sheet of the separate account included in the
registration statement. The effective yield is computed by determining the net
change, exclusive of capital changes and income other than investment income, in
the value of a hypothetical pre-existing subaccount having a balance of one unit
in the WRL J.P. 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 $30 annual
13
<PAGE>
Contract charge, calculated on the basis of an average Contract size of $22,025,
which translates into a charge of 0.14%. The yield and effective yield
quotations do not reflect any deduction for premium taxes or transfer charges
that may be applicable to a particular Contract, nor do they reflect the
surrender charge that may be assessed at the time of surrender in an amount
ranging up to 7% of the requested amount. The specific surrender charge
percentage applicable to a particular surrender depends on the length of time
premium payments have been held under the Contract and whether surrenders have
been made previously during that Contract year. (See Expenses--Surrender Charge
on page 33 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 funds are
excluded from the calculation of yield.
The yield on amounts held in the WRL J.P. Morgan Money Market subaccount
normally will fluctuate on a daily basis. Therefore, the disclosed yield for any
given past period is not an indication or representation of future yields or
rates of return. The WRL J.P. Morgan Money Market subaccount actual yield is
affected by changes in interest rates on money market securities, average
portfolio maturity of the WRL J.P. Morgan Money Market, the types and quality of
portfolio securities held by the WRL J.P. Morgan Money Market and its operating
expenses. For the seven days ended December 31, 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 and selection of the standard death benefit.
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 a fund attributable to shares owned by
the subaccount.
B = expenses accrued for the period (net of reimbursement).
C = the average daily number of units outstanding during the period.
D = the maximum offering price per unit on the last day of the period.
For purposes of the yield quotations for all of the subaccounts, except the WRL
J.P. Morgan Money Market subaccount, the calculations take into account all fees
that are charged to all owner accounts during the accumulation period. Such fees
include the $30 annual Contract charge, calculated on the basis of a Contract
size of $22,025, which translates into a charge of 0.14%. The calculations
do not take into account any premium taxes or any transfer or surrender charges.
Premium taxes currently range from 0% to 3.5% of premium payments depending upon
the jurisdiction in which the Contract is delivered. A surrender charge may be
assessed at the time of surrender in an amount ranging up to 7% of the requested
amount, with the specific percentage applicable to a particular surrender
depending on the length of time premium payments were held under the Contract,
and whether surrenders had been made previously during that Contract year. (See
Expenses--Surrender Charge on page 33 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%.
TOTAL RETURNS
The total return quotations set forth in the prospectus for all subaccounts,
except the WRL J.P. Morgan Money Market subaccount, holding assets for the
Contracts during the accumulation period are average annual total return
quotations for the one, five, and ten-year periods (or, while a subaccount has
been in existence for a period of less than one, five and ten years, for such
lesser period) ended on the date of the most recent balance sheet of the
separate account, and for the period from the 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
14
<PAGE>
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of each period at the
end of each period.
For purposes of the total return quotations for all subaccounts, except the WRL
J.P. Morgan Money Market subaccount, the calculations take into account all
current fees that are charged under the Contract to all owner accounts during
the accumulation period except the 0.30% for the optional Rider. Such fees
include the mortality and expense risk charge, the administrative charge and the
$30 annual Contract charge, calculated on the basis of an average Contract size
of $22,025, which translates into a charge of 0.14%. (The calculations may also
reflect the mortality and expense risk charge for the compounding minimum death
benefit). The calculations do not reflect the 0.30% charge for the optional
Rider. The calculations also assume a complete surrender as of the end of the
particular period. The calculations do not reflect any deduction for premium
taxes or any transfer charge that may be applicable to a particular Contract.
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
surrender charge under the Contract and that the data may be presented for
different time periods and for different premium 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 1.00% (1.25% if the compounding minimum death benefit is added), the
administrative charge of 0.40%, the Rider charge of 0.30% and the $30 annual
Contract charge (based on an average Contract size of $22,025, the annual
Contract charge translates into a charge of 0.14%). Such data assumes a complete
surrender of the Contract at the end of the period. THE CHARGE FOR THE OPTIONAL
RIDER OF 0.30% OF THE MINIMUM ANNUITIZATION VALUE WILL NOT BE DEDUCTED.
ADVERTISING AND SALES LITERATURE
From time to time we may refer to the diversifying process of asset allocation
based on the Modern Portfolio Theory developed by Nobel Prize winning economist
Harry Markowitz. The basic assumptions of Modern Portfolio Theory are: (1) the
selection of individual investments has little impact on portfolio performance,
(2) market timing strategies seldom work, (3) markets are efficient, and (4)
portfolio selection should be made among asset classes. Modern Portfolio Theory
allows an investor to determine an efficient portfolio selection that may
provide a higher return with the same risk or the same return with lower risk.
When presenting the asset allocation process we may outline the process of
personal and investment risk analysis including determining individual risk
tolerances and a discussion of the different types of investment risk. We may
classify investors into four categories based on their risk tolerance and will
quote various industry experts on which types of investments are best suited to
each of the four risk categories. The industry experts quoted may include
Ibbotson Associates, CDA Investment Technologies, Lipper Analytical Services and
any other expert which has been deemed by us to be appropriate. We may also
provide an historical overview of the performance of a variety of investment
market indices, the performance of these indices over time, and the performance
of different asset classes, such as stocks, bonds, cash equivalents, etc. We may
also discuss investment volatility including the range of returns for different
asset classes and over different time horizons, and the correlation between the
returns of different asset classes. We may also discuss the basis of portfolio
optimization including the required inputs and the construction of efficient
portfolios using sophisticated computer-based techniques. Finally, we may
describe various investment strategies and methods of implementation, the
periodic rebalancing of diversified portfolios, the use of dollar cost averaging
techniques, a comparison of the tax impact of premium payments
15
<PAGE>
made on a "before tax" basis through a tax-qualified plan with those made on an
"after tax" basis outside of a tax-qualified plan, and a comparison of
tax-deferred versus non tax-deferred accumulation of premium payments.
As described in the prospectus, in general, an owner is not taxed on increases
in value under a Contract until a distribution is made under the Contract. As a
result, the Contract will benefit from tax deferral during the accumulation
period, as the annuity value may grow more rapidly than under a comparable
investment where certain increases in value are taxed on a current basis. From
time to time, we may use narrative, numerical or graphic examples to show
hypothetical benefits of tax deferral in advertising and sales literature.
PUBLISHED RATINGS
We may from time to time publish in advertisements, sales literature and reports
to owners, the ratings and other information assigned to it by one or more
independent rating organizations such as A.M. Best Company, Standard & Poor's
Insurance Ratings Services, Moody's Investors Service and Duff & Phelps Credit
Rating Co. A.M. Best's and Moody's ratings reflect their current opinion of the
relative financial strength and operating performance of an insurance company in
comparison to the norms of the life/health insurance industry. Standard &
Poor's, and Duff & Phelps provide ratings which measure the claims-paying
ability of insurance companies. These ratings are opinions of an operating
insurance company's financial capacity to meet the obligations of its insurance
contracts in accordance with their terms. Claims-paying ability ratings do not
refer to an insurer's ability to meet non-contract obligations such as debt or
commercial paper obligations. These ratings do not apply to the separate
account, its subaccounts, the 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 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 sales commissions in an amount equal to 6% of premium payments.
In addition, broker/dealers may receive trail commissions of 0.90% of the
annuity value (excluding the fixed account) in each Contract year, starting at
the end of the first quarter of the eighth Contract year, provided the Contract
has an annuity value of $5,000 or more in the subaccounts. These commissions are
not deducted from premium payments. Certain production, persistency and
managerial bonuses may also be paid. Alternatively, compensation schedules may
be structured to pay lower compensation amounts on premium payments with trail
commissions starting at an earlier duration. 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.
16
<PAGE>
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 returns of the selected subaccount(s). Western
Reserve's financial statements, which are included in this SAI, should be
considered only as bearing on our ability to meet our obligations under the
Contracts. They should not be considered as bearing on the investment
performance of the assets held in the separate account.
Financial statements for Western Reserve as of December 31, 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.
17
<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) Guaranteed Minimum Income Benefit
Rider (GIB01) 3/
(c) Terminal Illness Rider (EA132) 3/
(d) Nursing Care Facility Waiver
Endorsement (EA133) 3/
(e) Tax-Sheltered Annuity Endorsement
(EA125) 4/
(f) Endorsement - Contract Loan
Provisions (EA126) 4/
(g) Endorsement Dollar Cost Averaging
(EA134) 4/
(h) Endorsement - Asset Rebalancing
Program (EA135) 4/
(5) Application for Flexible Payment Variable
Accumulation Deferred Annuity Contract 5/
(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
(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/
C-1
<PAGE>
(d) Amendment No.1 dated March 15,
2000 to Participation Agreement
-Variable Insurance Products Fund
II 7/
(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 5/
(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 8/
(14) Not Applicable
(15) (a) Powers of Attorney 1/
(b) Power of Attorney - James R.
Walker 9/
- -------------------------------------
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 S-6 dated April 21, 1999 (File No. 333-23359) and is incorporated
herein by reference.
3/ This exhibit was previously filed on the Initial Registration Statement
on Form N-4 dated July 12, 1999 (File No. 333-82705) and is
incorporated herein by reference.
4/ This exhibit was previously filed on the Initial Registration Statement
on Form N-4 dated December 21, 1999 (File No. 333-93169) and is
incorporated herein by reference.
5/ This exhibit was previously filed on Pre-Effective Amendment No. 1 to
Form N-4 dated September 25, 1999 (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. 28 to
Form N-1A Registration Statement dated April 24, 1997 (File No. 33-507)
and is incorporated herein by reference.
9/ 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.
Item 25. Directors and Officers of the Depositor
<TABLE>
<CAPTION>
Name Principal Business Address Position and Offices with Depositor
- ---- -------------------------- -----------------------------------
<S> <C> <C>
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
</TABLE>
C-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
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%)
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%)
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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%)
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
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<PAGE>
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, 150 nonqualified contracts and 139
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, 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.
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<PAGE>
(3) To the extent that a director, trustee, officer, employee, or
agent has been successful on the merits or otherwise in defense of any
action, suit, or proceeding referred to in divisions (E)(1) and (2) of this
section, or in defense of any claim, issue, or matter therein, he shall be
indemnified against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection therewith.
(4) Any indemnification under divisions (E)(1) and (2) of this
section, unless ordered by a court, shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of
the director, trustee, officer, employee, or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth
in divisions (E)(1) and (2) of this section. Such determination shall be made
as follows:
(a) By a majority vote of a quorum consisting of directors of
the indemnifying corporation who were not and are not parties to or
threatened with any such action, suit, or proceeding;
(b) If the quorum described in division (E)(4)(a) of this
section is not obtainable or if a majority vote of a quorum of disinterested
directors so directs, in a written opinion by independent legal counsel other
than an attorney, or a firm having associated with it an attorney, who has
been retained by or who has performed services for the corporation, or any
person to be indemnified within the past five years;
(c) By the shareholders;
(d) By the court of common pleas or the court in which such
action, suit, or proceeding was brought.
Any determination made by the disinterested directors under division
(E)(4)(a) or by independent legal counsel under division (E)(4)(b) of this
section shall be promptly communicated to the person who threatened or
brought the action or suit by or in the right of the corporation under
division (E)(2) of this section, and within ten days after receipt of such
notification, such person shall have the right to petition the court of
common pleas or the court in which such action or suit was brought to review
the reasonableness of such determination.
(5)(a) Unless at the time of a director's act or omission that is the
subject of an action, suit or proceeding referred to in divisions (E)(1) and
(2) of this section, the articles or the regulations of a corporation state
by specific reference to this division that the provisions of this division
do not apply to the corporation and unless the only liability asserted
against a director in an action, suit, or proceeding referred to in divisions
(E)(1) and (2) of this section is pursuant to section 1701.95 of the Revised
Code, expenses, including attorney's fees, incurred by a director in
defending the action, suit, or proceeding shall be paid by the corporation as
they are incurred, in advance of the final disposition of the action, suit,
or proceeding upon receipt of an undertaking by or on behalf of the director
in which he agrees to do both of the following:
(i) Repay such amount if it is proved by clear and convincing
evidence in a court of competent jurisdiction that his action or failure to
act involved an act or omission undertaken with 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.
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<PAGE>
(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 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),
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<PAGE>
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,
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
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<PAGE>
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.
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
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<PAGE>
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.
(b) Directors and Officers of AFSG
<TABLE>
<CAPTION>
Name Principal Business Address Position and Offices with Underwriter
---- -------------------------- -------------------------------------
<S> <C> <C>
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
Nancy C. Hassett (2) 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
(c) Compensation to Principal Underwriter
Not Applicable
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<PAGE>
Item 30. Location of Accounts and Records
All accounts, books, or other documents required to be
maintained by Section 31(a) of the 1940 Act and the rules
promulgated thereunder are maintained by the Registrant
through Western Reserve, 570 Carillon Parkway, St. Petersburg,
Florida 33716.
Item 31. Management Services
Not Applicable
Item 32. Undertakings
Western Reserve hereby represents that the fees and charges
deducted under the Contracts, in the aggregate, are reasonable
in relation to the services rendered, the expenses expected to
be incurred, and the risks assumed by Western Reserve.
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. 1 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 19th 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. 1 to this Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ John R. Kenney Chairman of the Board and April 19, 2000
- ------------------------ Chief Executive Officer
John R. Kenney (Principal Executive Officer)
/s/ Allan J. Hamilton Vice President, Treasurer April 19, 2000
- ------------------------- and Controller
Allan J. Hamilton
/s/ Alan M. Yaeger Executive Vice President, April 19, 2000
- ---------------------- Actuary and Chief Financial
Alan M. Yaeger
/s/ Jerome C. Vahl Director and President April 19, 2000
- ----------------------
Jerome C. Vahl
/s/ Lyman H. Treadway Director April 19, 2000
- ------------------------
Lyman H. Treadway */
/s/ Jack E. Zimmerman Director April 19, 2000
- ------------------------
Jack E. Zimmerman */
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ James R. Walker Director April 19, 2000
- -------------------------
James R. Walker */
*/s/ Thomas E. Pierpan
- -------------------------
Signed by Thomas E. Pierpan
As Attorney-in-Fact
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<S> <C>
6(b) Certificate of First Amendment to Second Amended Articles of Incorporation
10(a) Written Consent of Sutherland Asbill & Brennan LLP
10(b) Written Consent of Ernst & Young LLP
10(c) Written Consent of PricewaterhouseCoopers LLP
</TABLE>
Exhibit (6)(b)
Certificate of First Amendment to the
Second Amended Articles of Incorporation of Western Reserve
<PAGE>
CERTIFICATE OF FIRST AMENDMENT TO
THE SECOND AMENDED ARTICLES OF INCORPORATION OF
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
John R. Kenney, President, and William H. Geiger, Secretary, of Western
Reserve Life Assurance Co. of Ohio, an Ohio Legal Reserve Life Insurance
Company, with its principal office located in Columbus, Ohio, do hereby certify
that the Board of Directors of said corporation, at a duly called meeting of the
Board on September 13, 1999, unanimously enacted a resolution adopting the
following First Amendment to the Second Amended Articles of Incorporation of
said Corporation, and that, on the same date, in lieu of a meeting and vote of
the sole shareholder, the sole shareholder has given written consent ratifying
such resolution and said Amendment, in accordance with the provisions of Section
3907.06 of the Ohio Revised Code, as follows:
RESOLVED that the paragraph Seventh of the Second Amended Articles of
Incorporation of Western Reserve Life Assurance Co. of Ohio be amended
in its entirety to read as follows:
SEVENTH: The maximum number of shares which the corporation is
authorized to have outstanding is 3,000,000 shares, all of
which have a par value of $1.00 per share, and are designated
as Capital Shares.
IN WITNESS WHEREOF, John R. Kenney and William H. Geiger have signed
this Certificate on this 13th day of September, 1999.
WESTERN RESERVE LIFE ASSURANCE
CO. OF OHIO, an Ohio Corporation
/s/ John R. Kenney
----------------------------------
John R. Kenney, President
/s/ William H. Geiger
---------------------------------
STATE OF FLORIDA William H. Geiger, Secretary
COUNTY OF PINELLAS
I, the undersigned, a Notary Public in and for said State and County, do
hereby certify that John R. Kenney and William H. Geiger, whose names are signed
to the foregoing instrument as President and Secretary, respectively, of Western
Reserve Life Assurance Co. of Ohio, and who are known to me, acknowledged before
me on this day that, being informed of the contents of the instrument, they as
such officers and with full authority, executed the same voluntarily for and as
the act of said Corporation.
Given under my hand and seal this 13th day of September, 1999.
/s/ Audrey L. Schroeder
---------------------------------
Notary Public
SEAL
My Commission Expires:
March 19, 2000
Exhibit 10(a)
Written Consent of Sutherland Asbill & Brennan LLP
<PAGE>
[S.A.B. Letterhead]
April 19, 2000
Board of Directors
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
570 Carillon Parkway
St. Petersburg, FL 33716
RE: WRL Series Annuity Account
WRL Freedom Premier
File Nos. 333-82705/811-5672
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. 1 to the Registration Statement on Form N-4 (File No. 333-82705)
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)
Written 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. 1 to the Registration Statement (Form N-4 No.
333-82705) and related Prospectus of WRL Series Annuity Account.
ERNST & YOUNG LLP
Des Moines, Iowa
April 17, 2000
Exhibit 10(c)
Written 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 17, 2000
