WRL FREEDOM ATTAINER/registered trademark/
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
Attainer/registered trademark/, a flexible payment variable accumulation
deferred annuity contract. Please read this prospectus and the mutual fund
prospectuses before you invest and keep them for future reference. This
Contract is available to individuals as well as to certain groups and
individual retirement plans.
You can put your money into 30 investment choices: a fixed account and 29
subaccounts of the WRL Series Annuity Account. Money you put in a subaccount is
invested exclusively in a single mutual fund portfolio. Your investments in the
portfolios are not guaranteed. You could lose your money. Money you direct into
the fixed account earns interest at a rate guaranteed by Western Reserve.
The 29 portfolios we currently offer through the subaccounts under this
Contract are:
<TABLE>
<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/registered trademark/ 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
Attainer/registered trademark/, 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:
/bullet/ ARE NOT BANK DEPOSITS
/bullet/ ARE NOT FEDERALLY INSURED
/bullet/ ARE NOT ENDORSED BY ANY BANK OR GOVERNMENT AGENCY
/bullet/ ARE NOT GUARANTEED TO ACHIEVE THEIR GOAL
/bullet/ INVOLVE RISKS, INCLUDING POSSIBLE LOSS OF PREMIUM
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
DEFINITIONS OF SPECIAL TERMS .............................................. 1
SUMMARY ................................................................... 3
ANNUITY CONTRACT FEE TABLE ................................................ 9
EXAMPLES .................................................................. 10
1. THE ANNUITY CONTRACT ................................................. 12
The Contract ......................................................... 12
Other Contracts ...................................................... 12
2. ANNUITY PAYMENTS (THE INCOME PHASE) .................................. 13
Annuity Payment Options Under the Contract ........................... 13
Fixed Annuity Payment Options ........................................ 14
Variable Annuity Payment Options ..................................... 15
3. PURCHASE ............................................................. 16
Contract Issue Requirements .......................................... 16
Purchase Payments .................................................... 16
Initial Purchase Requirements ........................................ 16
Additional Purchase Payments ......................................... 17
Maximum Annual Purchase Payments ..................................... 17
Allocation of Purchase Payments ...................................... 17
Right to Cancel Period ............................................... 17
Annuity Value ........................................................ 18
Accumulation Units ................................................... 18
4. INVESTMENT CHOICES ................................................... 18
The Separate Account ................................................. 18
The Fixed Account .................................................... 20
Transfers ............................................................ 20
Dollar Cost Averaging Program ........................................ 21
Asset Rebalancing Program ............................................ 22
Telephone or Fax Transactions ........................................ 22
Third Party Investment Services ...................................... 23
5. EXPENSES ............................................................. 23
Mortality and Expense Risk Charge .................................... 23
Administrative Charge ................................................ 24
Annual Contract Charge ............................................... 24
Transfer Charge ...................................................... 24
Loan Processing Fee .................................................. 24
Premium Taxes ........................................................ 24
Federal, State and Local Taxes ....................................... 25
Withdrawal Charge .................................................... 25
Portfolio Management Fees ............................................ 27
Reduced or Waived Charges and Expenses to Employees .................. 27
6. TAXES ................................................................ 27
Annuity Contracts in General ......................................... 27
Qualified and Nonqualified Contracts ................................. 28
Partial Withdrawals and Complete Surrenders -- Nonqualified Contracts 28
Multiple Contracts ................................................... 29
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Diversification and Distribution Requirements ...................... 29
Partial Withdrawals and Complete Surrenders -- Qualified Contracts . 29
Taxation of Death Benefit Proceeds ................................. 30
Annuity Payments ................................................... 30
Transfers, Assignments or Exchanges of Contracts ................... 31
Possible Tax Law Changes ........................................... 31
7. ACCESS TO YOUR MONEY ............................................... 32
Partial Withdrawals and Complete Surrenders ........................ 32
Delay of Payments and Transfers .................................... 33
Systematic Partial Withdrawals ..................................... 33
Contract Loans for Qualified Contracts ............................. 34
8. PERFORMANCE ........................................................ 36
9. DEATH BENEFIT ...................................................... 36
When We Pay a Death Benefit ........................................ 37
When We Do Not Pay a Death Benefit ................................. 37
Amount of Death Benefit During the Accumulation Period ............. 38
Alternate Payment Elections Before the Maturity Date ............... 39
10. OTHER INFORMATION .................................................. 40
Ownership .......................................................... 40
Annuitant .......................................................... 40
Beneficiary ........................................................ 40
Assignment ......................................................... 40
Western Reserve Life Assurance Co. of Ohio ......................... 40
The Separate Account ............................................... 41
Voting Rights ...................................................... 41
Distribution of the Contracts ...................................... 41
Non-Participating Contract ......................................... 42
Variations in Contract Provisions .................................. 42
IMSA ............................................................... 42
Legal Proceedings .................................................. 43
Financial Statements ............................................... 43
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION ............ 43
APPENDIX A -- CONDENSED FINANCIAL INFORMATION ........................... 44
APPENDIX B -- HISTORICAL PERFORMANCE DATA ............................... 54
</TABLE>
ii
<PAGE>
DEFINITIONS OF SPECIAL TERMS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
accumulation The period between the Contract date and the maturity date while the
period Contract is in force.
-------------------------------------------------------------------------------
accumulation An accounting unit of measure we use to calculate subaccount values during
unit value the accumulation period.
-------------------------------------------------------------------------------
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.
-------------------------------------------------------------------------------
age The issue age, which is annuitant's age on the birthday nearest the Contract
date, plus the number of completed Contract years. When we use the term
"age" in this prospectus, it has the same meaning as "attained age" in the
Contract.
-------------------------------------------------------------------------------
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 An accounting unit of measure we use to calculate annuity payments from the
value subaccounts after the maturity date.
-------------------------------------------------------------------------------
annuity value The sum of the separate account value and the fixed account value.
-------------------------------------------------------------------------------
beneficiary(ies) The person(s) you elect to receive the death benefit proceeds under the
Contract.
-------------------------------------------------------------------------------
cash value The annuity value less any applicable premium taxes and any withdrawal
charge.
-------------------------------------------------------------------------------
Code The Internal Revenue Code of 1986, as amended.
-------------------------------------------------------------------------------
Contract date The later of the date on which the initial purchase payment is received or the
date that the properly completed application is received at Western Reserve's
administrative office. We measure Contract years, Contract months and
Contract anniversaries from the Contract date.
-------------------------------------------------------------------------------
death report day The valuation date on which we have received both proof of annuitant's death
and your beneficiary's election regarding payment.
-------------------------------------------------------------------------------
fixed account An option to which you can direct your money under the Contract, other than
the separate account. It provides a guarantee of principal and interest. The
assets supporting the fixed account are held in the general account. The fixed
account is not available in all states.
-------------------------------------------------------------------------------
fixed account During the accumulation period, your Contract's value in the fixed account.
value
-------------------------------------------------------------------------------
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.
-------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
<TABLE>
<S> <C>
in force Condition under which the Contract is active and the owner is entitled to
exercise all rights under the Contract.
--------------------------------------------------------------------------------
maturity date The date on which the accumulation period ends and annuity payments begin.
The latest maturity date is the annuitant's 90th birthday.
--------------------------------------------------------------------------------
NYSE New York Stock Exchange.
--------------------------------------------------------------------------------
nonqualified Contracts issued other than in connection with retirement plans.
Contracts
--------------------------------------------------------------------------------
owner The person(s) entitled to exercise all rights under the Contract. The annuitant
(you, your) is the owner unless the application states otherwise, or unless a change of
ownership is made at a later time.
--------------------------------------------------------------------------------
portfolio A separate investment portfolio of a fund.
--------------------------------------------------------------------------------
purchase 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 "purchase payment" in this prospectus, it has the same meaning as "net
payment" in the Contract, which means the purchase payment less any
applicable premium taxes.
--------------------------------------------------------------------------------
qualified Contracts issued in connection with retirement plans that qualify for special
Contracts federal income tax treatment under the Code.
--------------------------------------------------------------------------------
separate account WRL Series Annuity Account, a separate account composed of subaccounts
established to receive and invest purchase payments not allocated to the fixed
account.
--------------------------------------------------------------------------------
separate account During the accumulation period, your Contract's value in the separate
value 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
business day subaccount's corresponding portfolio does not value its shares. Western
Reserve is open for business on each day that the NYSE is open. When we
use the term "business day," it has the same meaning as valuation date.
--------------------------------------------------------------------------------
valuation period The period of time over which we determine the change in the value of the
subaccounts in order to price accumulation units and annuity units. Each
valuation period begins at the close of normal trading on the NYSE (currently
4:00 p.m. Eastern time on each valuation date) and ends at the close of
normal trading of the NYSE on the next valuation date.
--------------------------------------------------------------------------------
Western Reserve Western Reserve Life Assurance Co. of Ohio.
(we, us, our)
--------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
SUMMARY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE SECTIONS IN THIS SUMMARY CORRESPOND TO SECTIONS IN THIS PROSPECTUS,
WHICH DISCUSS THE TOPICS IN MORE DETAIL. PLEASE READ THE ENTIRE PROSPECTUS
CAREFULLY.
1. THE ANNUITY CONTRACT
The WRL Freedom Attainer/registered trademark/ is a flexible payment
variable accumulation deferred annuity contract (the "Contract") offered by
Western Reserve. It is a contract between you, as the owner, and Western
Reserve, a life insurance company. The Contract provides a way for you to
invest on a tax-deferred basis in the subaccounts of the separate account and
the fixed account. We intend the Contract to be used to accumulate money for
retirement or other long-term investment purposes.
The Contract allows you to direct your money into any of the 29
subaccounts. Each subaccount invests exclusively in a single portfolio of a
fund. The money you invest in the subaccounts will fluctuate daily based on the
portfolio's investment results. The value of your investment in the subaccounts
is not guaranteed and may increase or decrease. You bear the investment risk
for amounts you invest in the subaccounts.
You can also direct money to the fixed account. Amounts in the fixed
account earn interest annually at a fixed rate that is guaranteed by us never
to be less than 4%, and may be more. We guarantee the interest, as well as
principal, on money placed in the fixed account.
You can transfer money between any of the investment choices during the
accumulation period, subject to certain limits on transfers from the fixed
account.
The Contract, like all deferred annuity contracts, has two phases: the
"accumulation period" and the "income phase." During the accumulation period,
earnings accumulate on a tax-deferred basis and are taxed as ordinary income
when you take them out of the Contract. The income phase starts on the maturity
date when you begin receiving regular payments from your Contract. The money
you can accumulate during the accumulation period, as well as the annuity
payment option you choose, will largely determine the amount of any income
payments you receive during the income phase.
2. ANNUITY PAYMENTS (THE INCOME PHASE)
The Contract allows you to receive income under one of five annuity
payment options. You may choose from fixed payment options or variable payment
options. If you select a variable payment option, the dollar amount of the
payments you receive may go up or down depending on the investment results of
the portfolios you invest in at that time. You cannot annuitize until your
Contract's fifth anniversary.
3. PURCHASE
You can buy this Contract with $5,000 ($1,000 for traditional or Roth IRAs
and $50 for other qualified Contracts) or more under most circumstances. You
can add as little as $50 at any time during the accumulation period.
3
<PAGE>
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>
VARIABLE INSURANCE PRODUCTS FUND (VIP)
Fidelity VIP Equity-Income Portfolio -- Service Class 2
VARIABLE INSURANCE PRODUCTS FUND II (VIP II)
Fidelity VIP II Contrafund/registered trademark/ Portfolio -- Service Class
2
VARIABLE INSURANCE PRODUCTS FUND III (VIP III)
Fidelity VIP III Growth Opportunities Portfolio -- Service Class 2
Depending upon market conditions, you can make or lose money in any of
these subaccounts. We reserve the right to offer other investment choices in
the future.
You can also allocate your purchase payments to the fixed account. The
fixed account is not available in all states. Residents of New Jersey and
Washington may not direct or transfer any money to the fixed account.
Transfers. You have the flexibility to transfer assets within your
Contract. At any time during the accumulation period you may transfer amounts
among the subaccounts and between the subaccounts and the fixed account.
Certain restrictions apply.
5. EXPENSES
We do not take any deductions from purchase payments at the time you buy
the Contract. You invest the full amount of each purchase payment in one or
more of the investment choices.
During the accumulation period and the income phase, we deduct a daily
mortality and expense risk charge of 1.10% and an administrative charge of
0.15% each year from the money you have invested in the subaccounts. The
mortality and expense risk charge will increase to 1.25% after the maturity
date of your Contract.
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.
4
<PAGE>
We impose a $10 charge per transfer if you make more than 12 transfers
among the subaccounts per Contract year.
We may deduct state premium taxes, which currently range from 0% to 3.50%,
when you make your purchase payments, if you surrender the Contract or
partially withdraw its value, or if we pay out death benefit proceeds, or if
you begin to receive regular annuity payments. We only charge you premium taxes
in those states that require us to pay premium taxes.
If you make a partial withdrawal or surrender your Contract completely, we
will deduct a withdrawal charge for purchase payments withdrawn within five
years after we receive a purchase payment. This charge is 6% of the amount that
must be withdrawn if the withdrawal occurs within two years of our receipt of
the purchase payment, and then declines gradually to 4% in the third year, 3%
in the fourth year and 2% in the fifth year.
When we calculate withdrawal charges, we treat withdrawals as coming first
from the oldest purchase payment, then the next oldest and so forth. For the
first withdrawal you make in any Contract year, we will waive that portion of
the withdrawal charge that is based on the first 10% of your Contract's annuity
value at the time of the withdrawal. Amounts of the first withdrawal in excess
of the first 10% of your Contract's annuity value and all subsequent
withdrawals you make during the Contract year will be subject to a withdrawal
charge. We deduct the full withdrawal charge if you surrender your Contract
completely. We waive this charge under certain circumstances. See Expenses --
Withdrawal Charge on page 25 for how we calculate the withdrawal charge waived.
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 currently range from 0.44% to 1.20% annually,
depending on the portfolio. See the Annuity Contract Fee Table on page 9 of
this prospectus and the fund prospectuses.
6. TAXES
The Contract's earnings are generally not taxed until you take them out.
For federal tax purposes, if you take money out during the accumulation period,
earnings come out first and are taxed as ordinary income. If you are younger
than 59 1/2 when you take money out, you may be charged a 10% federal penalty
tax on the earnings. The annuity payments you receive during the income phase
are considered partly a return of your original investment so that part of each
payment is not taxable as income until the "investment in the contract" has
been fully recovered. Different tax consequences may apply for a Contract used
in connection with a qualified retirement plan.
Death benefits are taxable and generally are included in the income of the
recipient as follows: if received under an annuity payment option, death
benefits are taxed in the same manner as annuity payouts; if not received under
an annuity option (for instance, if paid out in a lump sum), death benefits are
taxed in the same manner as a partial withdrawal or complete surrender.
5
<PAGE>
7. ACCESS TO YOUR MONEY
You can take some or all of your money out anytime during the accumulation
period. However, you may not take a partial withdrawal if it reduces the cash
value below $10,000. No partial withdrawals may be made from the fixed account
without prior consent from us. Access to amounts held in qualified Contracts
may be restricted or prohibited. Withdrawal charges may apply. You may also
have to pay federal income tax and a penalty tax on any money you take out.
Partial withdrawals may reduce the death benefit by more than the amount
withdrawn.
8. PERFORMANCE
The value of your Contract will vary up or down depending upon the
investment performance of the subaccounts you choose and will be reduced by
Contract fees and charges. We provide performance information in Appendix B and
in the SAI. Past performance does not guarantee future results.
9. DEATH BENEFIT
If you are both the owner and the annuitant and you die before the income
phase begins, your beneficiary will receive a death benefit. Death benefit
provisions may vary by state.
If you name different persons as owner and annuitant, you can affect
whether the death benefit is payable and who would receive it. Use care when
naming owners, annuitants and beneficiaries, and consult your agent if you have
questions.
If the annuitant dies during the accumulation period and before the sixth
Contract year, the death benefit will be the greater of:
/bullet/ the annuity value of your Contract on the death report day; or
/bullet/ the total purchase payments you make to the Contract, reduced by
partial withdrawals, credited with 5% on each Contract
anniversary (until you turn age 80), up to a maximum of 200% of
total purchase payments minus any partial withdrawals. (Please
note that the 5% credit is not available in all states.)
If the annuitant dies during the accumulation period and after the fifth
Contract year, the death benefit will be the greatest of:
/bullet/ the death benefits described above;
/bullet/ the annuity value of your Contract on the fifth Contract
anniversary, reduced by any partial withdrawals;
/bullet/ if your Contract was issued before May 1, 2000, the highest
annuity value as of any Contract anniversary occurring between
(a) the later of May 1, 2000 and the fifth Contract anniversary
and
(b) the earlier of:
/bullet/ the annuitant's date of death; or
/bullet/ the Contract anniversary nearest the annuitant's 80th
birthday.
6
<PAGE>
/bullet/ if your Contract was issued on or after May 1, 2000, the highest
annuity value as of any Contract anniversary occurring between
the fifth Contract anniversary and the earlier of:
/bullet/ the annuitant's date of death; or
/bullet/ the Contract anniversary nearest the annuitant's 80th
birthday.
The highest annuity value will be increased by purchase payments made and
decreased by adjusted partial withdrawals taken since the Contract
anniversary with the highest annuity value.
The death benefit payable, if any, on or after the maturity date depends
on the annuity payment option selected. See Fixed Annuity Payment Options and
Variable Annuity Payment Options on pages 14 and 15 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
generally be the total purchase payments we have received, plus (or minus) any
gains (or losses) in the amounts you invested in the subaccounts. You will keep
any gains, and bear any losses, on amounts that you invested in the
subaccounts. If state law requires, we will refund your original purchase
payment(s). We determine the value of the refund as of the date we receive the
returned Contract at our administrative office. We will pay the refund within 7
days after we receive your written notice of cancellation and the returned
Contract. The Contract will then be deemed void. In some states you may have
more than 10 days, and/or receive a different refund amount.
WHO SHOULD PURCHASE THE CONTRACT? We have designed this Contract for
people seeking long-term tax deferred accumulation of assets, generally for
retirement. This includes persons who have maximized their use of other
retirement savings methods, such as 401(k) plans and individual retirement
accounts. The tax-deferred feature is most attractive to people in high federal
and state tax brackets. You should not buy this Contract if you are looking for
a short-term investment or if you cannot take the risk of getting back less
money than you put in. If you are purchasing the Contract through a tax-favored
arrangement, including traditional IRAs and Roth IRAs, you should consider
carefully the costs and benefits of the Contract (including annuity income
benefits) before purchasing the Contract, since the tax-favored arrangement
itself provides tax-sheltered growth.
ADDITIONAL FEATURES. This Contract has additional features that might
interest you. These include the following:
/bullet/ REDUCED MINIMUM INITIAL PURCHASE PAYMENT (FOR NONQUALIFIED
CONTRACTS) -- You may make a minimum initial purchase payment of
$1,000, rather than $5,000, if you indicate on your application
that you anticipate making minimum monthly payments of at least
$100 by electronic funds transfer.
7
<PAGE>
/bullet/ SYSTEMATIC PARTIAL WITHDRAWALS -- You can arrange to have money
automatically sent to you monthly while your Contract is in the
accumulation period. You may take systematic partial withdrawals
monthly, quarterly, semi-annually or annually without paying
withdrawal charges. Amounts you receive may be included in your
gross income and, in certain circumstances, may be subject to
penalty taxes.
/bullet/ DOLLAR COST AVERAGING -- You can arrange to have a certain
amount of money automatically transferred monthly from one or any
combination of the fixed account, the WRL J.P. Morgan Money Market
or WRL AEGON Bond subaccounts to your choice of subaccounts. Dollar
cost averaging does not guarantee a profit and does not protect
against a loss if market prices decline.
/bullet/ ASSET REBALANCING -- We will, upon your request, automatically
transfer amounts periodically among the subaccounts on a regular
basis to maintain a desired allocation of the annuity value among
the various subaccounts.
/bullet/ TELEPHONE OR FAX TRANSACTIONS -- You may make transfers,
withdrawals and/or change the allocation of additional purchase
payments by telephone or fax.
/bullet/ NURSING CARE FACILITY WAIVER -- If you are confined to a nursing
care facility, you may take partial withdrawals or surrender your
Contract completely without paying the withdrawal charge, under
certain circumstances.
/bullet/ 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 34 for details.
These features are not available in all states and may not be suitable for
your particular situation.
Certain states place restrictions on access to the fixed account, on the
death benefit calculation, on the annuity payment options and on other features
of the Contract. Consult your agent and the Contract form for details.
11. INQUIRIES
If you need additional information, please contact us at:
Western Reserve Life
Administrative Office
Attention: Annuity Department
P.O. Box 9051
Clearwater, FL 33758-9051
1-800-851-9777
www.westernreserve.com
8
<PAGE>
ANNUITY CONTRACT FEE TABLE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OWNER TRANSACTION EXPENSES
- -----------------------------------------------------
Sales Load On Purchase Payments............... None
Maximum Withdrawal Charge(1)(2)
(as a % of purchase payments).............. 6%
Transfer Charge...............$10 After 12 Per Year
Loan Processing Fee(3).................$30 Per Loan
- -----------------------------------------------------
ANNUAL CONTRACT CHARGE(2)......$30 PerContract Year
<TABLE>
<CAPTION>
SEPARATE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE SEPARATE ACCOUNT VALUE)
- -----------------------------------------------------
<S> <C>
Mortality and Expense Risk Charge(4) ......... 1.10%
Administrative Charge(4) ..................... 0.15%
TOTAL SEPARATE ACCOUNT
ANNUAL EXPENSES ........................... 1.25%
</TABLE>
- --------------------------------------------------------------------------------
PORTFOLIO ANNUAL EXPENSES(5)
(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.(6)(7)
WRL VKAM Emerging Growth 0.80% 0.07%
WRL T. Rowe Price Small Cap(8) 0.75% 0.25%
WRL Goldman Sachs Small Cap(8) 0.90% 0.10%
WRL Pilgrim Baxter Mid Cap Growth(8) 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(9) 0.80% 0.20%
WRL GE International Equity(10) 1.00% 0.20%
WRL Janus Global(11) 0.80% 0.12%
WRL Great Companies -- Technology(SM)(9) 0.80% 0.20%
WRL Janus Growth(12) 0.80% 0.05%
WRL Goldman Sachs Growth(8) 0.90% 0.10%
WRL GE U.S. Equity 0.80% 0.13%
WRL Great Companies -- America(SM)(9) 0.80% 0.20%
WRL Salomon All Cap(8) 0.90% 0.10%
WRL C.A.S.E. Growth 0.80% 0.20%
WRL Dreyfus Mid Cap(8) 0.85% 0.15%
WRL NWQ Value Equity 0.80% 0.10%
WRL T. Rowe Price Dividend Growth(8) 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)(13)
Fidelity VIP Equity-Income Portfolio -- Service Class 2(14) 0.48% 0.10%
VARIABLE INSURANCE PRODUCTS FUND II (VIP II)(13)
Fidelity VIP II Contrafund/registered trademark/ Portfolio -- Service Class 2(14) 0.58% 0.12%
VARIABLE INSURANCE PRODUCTS FUND III (VIP III)(13)
Fidelity VIP III Growth Opportunities Portfolio -- Service Class 2(14) 0.58% 0.13%
<CAPTION>
TOTAL PORTFOLIO
RULE 12B-1 ANNUAL
PORTFOLIO FEES EXPENSES
<S> <C> <C>
WRL SERIES FUND, INC.(6)(7)
WRL VKAM Emerging Growth N/A 0.87%
WRL T. Rowe Price Small Cap(8) N/A 1.00%
WRL Goldman Sachs Small Cap(8) N/A 1.00%
WRL Pilgrim Baxter Mid Cap Growth(8) 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(9) N/A 1.00%
WRL GE International Equity(10) N/A 1.20%
WRL Janus Global(11) N/A 0.92%
WRL Great Companies -- Technology(SM)(9) N/A 1.00%
WRL Janus Growth(12) N/A 0.85%
WRL Goldman Sachs Growth(8) N/A 1.00%
WRL GE U.S. Equity N/A 0.93%
WRL Great Companies -- America(SM)(9) N/A 1.00%
WRL Salomon All Cap(8) N/A 1.00%
WRL C.A.S.E. Growth N/A 1.00%
WRL Dreyfus Mid Cap(8) N/A 1.00%
WRL NWQ Value Equity N/A 0.90%
WRL T. Rowe Price Dividend Growth(8) 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)(13)
Fidelity VIP Equity-Income Portfolio -- Service Class 2(14) 0.25% 0.83%
VARIABLE INSURANCE PRODUCTS FUND II (VIP II)(13)
Fidelity VIP II Contrafund/registered trademark/ Portfolio -- Service Class 2(14) 0.25% 0.95%
VARIABLE INSURANCE PRODUCTS FUND III (VIP III)(13)
Fidelity VIP III Growth Opportunities Portfolio -- Service Class 2(14) 0.25% 0.96%
</TABLE>
(1) The withdrawal 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 withdrawal charges, the first purchase payment made is
considered to come out first. This charge is waived under certain
circumstances.
(2) We may reduce or waive the withdrawal charge and the annual Contract
charge for Contracts sold to groups of employees with the same employer,
including our directors, officers and full-time employees, or other groups
where sales to the group reduce our administrative expenses.
(3) Loans are available for qualified Contracts only. This loan fee is not
applicable in all states.
(4) These charges apply to each subaccount. They do not apply to the fixed
account. These charges apply during the accumulation period and the income
phase. We will increase the mortality and expense risk charge to 1.25%
after the maturity date of your Contract.
9
<PAGE>
(5) The fee table information relating to the portfolios was provided to
Western Reserve by the funds. Western Reserve has not independently
verified such information.
(6) Effective January 1, 1997, the Board of the WRL Series Fund Inc. (the "WRL
Fund") authorized the WRL Fund to charge each portfolio of the WRL Fund an
annual Rule 12b-1 fee of up to 0.15% of each portfolio's average daily net
assets. However, the WRL Fund will not deduct the fee from any portfolio
before April 30, 2001. You will receive advance written notice if a Rule
12b-1 fee is to be deducted. See the WRL Fund prospectus for more details.
(7) WRL Investment Management, Inc. ("WRL Management"), the investment adviser
of the WRL Fund, has undertaken, until at least April 30, 2001, to pay
expenses on behalf of the portfolios of the WRL Fund, to the extent normal
total operating expenses of a portfolio exceed a stated percentage of the
WRL portfolio's average daily net assets. The expense limit, the amount
reimbursed by WRL Management during 1999, and the expense ratio without
the reimbursement are listed below for each portfolio:
<TABLE>
<CAPTION>
Expense Reimbursement Expense Ratio
Limit Amount Without Reimbursement
<S> <C> <C> <C>
WRL VKAM Emerging Growth ....................... 1.00% $ N/A N/A
WRL T. Rowe Price Small Cap .................... 1.00% 63,542 2.46%
WRL Goldman Sachs Small Cap .................... 1.00% 60,555 5.57%
WRL Pilgrim Baxter Mid Cap Growth .............. 1.00% 34,986 1.40%
WRL Alger Aggressive Growth .................... 1.00% N/A N/A
WRL Third Avenue Value ......................... 1.00% 10,734 1.06%
WRL Value Line Aggressive Growth ............... 1.00% N/A N/A
WRL GE International Equity .................... 1.20% 112,088 1.84%
WRL Janus Global ............................... 1.00% N/A N/A
WRL Great Companies -- Technology(SM)........... 1.00% N/A N/A
WRL Janus Growth ............................... 1.00% N/A N/A
WRL Goldman Sachs Growth ....................... 1.00% 49,677 2.68%
WRL GE U.S. Equity ............................. 1.00% N/A N/A
WRL Great Companies -- America(SM).............. 1.00% N/A N/A
WRL Salomon All Cap ............................ 1.00% 53,174 2.87%
WRL C.A.S.E. Growth ............................ 1.00% N/A N/A
WRL Dreyfus Mid Cap ............................ 1.00% 34,541 4.89%
WRL NWQ Value Equity ........................... 1.00% N/A N/A
WRL T. Rowe Price Dividend Growth .............. 1.00% 46,989 2.35%
WRL Dean Asset Allocation ...................... 1.00% N/A N/A
WRL LKCM Strategic Total Return ................ 1.00% N/A N/A
WRL J.P. Morgan Real Estate Securities ......... 1.00% 51,924 2.69%
WRL Federated Growth & Income .................. 1.00% N/A N/A
WRL AEGON Balanced ............................. 1.00% N/A N/A
WRL AEGON Bond ................................. 0.70% N/A N/A
WRL J.P. Morgan Money Market ................... 0.70% N/A N/A
</TABLE>
(8) Because these portfolios commenced operations on May 3, 1999, the
percentages set forth as "Other Expenses" and "Total Portfolio Annual
Expenses" are annualized.
(9) Because these portfolios commenced operations on May 1, 2000, the
percentages set forth as "Other Expenses" and "Total Portfolio Annual
Expenses" are estimates.
(10) The fee table reflects estimated 2000 expenses because the expense limit
for this portfolio will be reduced from 1.50% to 1.20% effective May 1,
2000.
(11) WRL Management currently waives 0.025% of its advisory fee on portfolio
average daily net assets over $2 billion (net fee -- 0.775%.) This waiver
will be terminated on June 25, 2000.
(12) WRL Management currently waives 0.025% of its advisory fee for the first
$3 billion of the portfolio's average daily net assets (net fee --
0.775%); and 0.05% for the portfolio's average daily net assets above $3
billion (net fee -- 0.75%). The fee table reflects estimated 2000 expenses
because of the termination of the fee waiver. This waiver will be
terminated on June 25, 2000.
(13) The 12b-1 fee deducted for the Variable Insurance Products Fund (VIP),
Variable Insurance Products Fund II (VIP II), and Variable Insurance
Products Fund III (VIP III) (the "Fidelity VIP Funds") covers certain
shareholder support services provided by companies selling variable
contracts investing in the Fidelity VIP Funds. The 12b-1 fees assessed
against the Fidelity VIP Funds shares held for the Contracts will be
remitted to AFSG Securities Corporation ("AFSG"), the principal
underwriter for the Contracts.
(14) Service Class 2 expenses are based on estimated expenses for year 2000.
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.
10
<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 $82 $108 $136 $250
WRL Goldman Sachs Small Cap 83 112 143 263
WRL T. Rowe Price Small Cap 83 112 143 263
WRL Pilgrim Baxter Mid Cap Growth 83 112 143 263
WRL Alger Aggressive Growth 82 108 137 252
WRL Third Avenue Value 83 112 143 263
WRL Value Line Aggressive Growth 83 112 143 263
WRL GE International Equity 85 118 153 283
WRL Janus Global 82 109 139 255
WRL Janus Growth 82 107 135 248
WRL Goldman Sachs Growth 83 112 143 263
WRL GE U.S. Equity 83 110 139 256
WRL Salomon All Cap 83 112 143 263
WRL C.A.S.E. Growth 83 112 143 263
WRL Dreyfus Mid Cap 83 112 143 263
WRL NWQ Value Equity 82 109 138 253
WRL T. Rowe Price Dividend Growth 83 112 143 263
WRL Great Companies -- America(SM) 83 112 143 263
WRL Great Companies --
Technology(SM) 83 112 143 263
WRL Dean Asset Allocation 82 108 136 250
WRL LKCM Strategic Total Return 82 108 136 249
WRL J.P. Morgan Real Estate Securities 83 112 143 263
WRL Federated Growth & Income 82 108 137 252
WRL AEGON Balanced 82 108 137 252
WRL AEGON Bond 79 98 119 215
WRL J.P. Morgan Money Market 78 95 114 205
Fidelity VIP Equity-Income Portfolio --
Service Class 2 82 107 134 246
Fidelity VIP II Contrafund/registered trademark/ Portfolio --
Service Class 2 83 110 140 258
Fidelity VIP III Growth Opportunities
Portfolio -- Service Class 2 83 111 141 259
<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 $22 $68 $116 $250
WRL Goldman Sachs Small Cap 23 72 123 263
WRL T. Rowe Price Small Cap 23 72 123 263
WRL Pilgrim Baxter Mid Cap Growth 23 72 123 263
WRL Alger Aggressive Growth 22 68 117 252
WRL Third Avenue Value 23 72 123 263
WRL Value Line Aggressive Growth 23 72 123 263
WRL GE International Equity 25 78 133 283
WRL Janus Global 22 69 119 255
WRL Janus Growth 22 67 115 248
WRL Goldman Sachs Growth 23 72 123 263
WRL GE U.S. Equity 23 70 119 256
WRL Salomon All Cap 23 72 123 263
WRL C.A.S.E. Growth 23 72 123 263
WRL Dreyfus Mid Cap 23 72 123 263
WRL NWQ Value Equity 22 69 118 253
WRL T. Rowe Price Dividend Growth 23 72 123 263
WRL Great Companies -- America(SM) 23 72 123 263
WRL Great Companies --
Technology(SM) 23 72 123 263
WRL Dean Asset Allocation 22 68 116 250
WRL LKCM Strategic Total Return 22 68 116 249
WRL J.P. Morgan Real Estate Securities 23 72 123 263
WRL Federated Growth & Income 22 68 117 252
WRL AEGON Balanced 22 68 117 252
WRL AEGON Bond 19 58 99 215
WRL J.P. Morgan Money Market 18 55 94 205
Fidelity VIP Equity-Income Portfolio --
Service Class 2 22 67 114 246
Fidelity VIP II Contrafund/registered trademark/ Portfolio --
Service Class 2 23 70 120 258
Fidelity VIP III Growth Opportunities
Portfolio -- Service Class 2 23 71 121 259
</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.
11
<PAGE>
The examples above assumes that no transfer charges have been assessed. In
addition, the $30 annual Contract charge is reflected as a charge of 0.05%
based on an average Contract size of $62,770.
Financial Information. We have included in Appendix A a financial history
of the accumulation unit values for the subaccounts.
1. THE ANNUITY CONTRACT
THE CONTRACT
This prospectus describes the WRL Freedom Attainer/registered trademark/
Variable Annuity Contract offered by Western Reserve.
An annuity is a contract between you, the owner, and an insurance company
(in this case Western Reserve), where the insurance company promises to pay you
an income in the form of annuity payments. These payments begin after the
maturity date. (See Section 2 on page 13.) Until the maturity date, your
annuity is in the accumulation period and the earnings are tax deferred. Tax
deferral means you generally are not taxed on your annuity until you take money
out of your annuity. After the maturity date, your annuity switches to the
income phase.
The Contract is a flexible payment variable accumulation deferred annuity.
You can use the Contract to accumulate funds for retirement or other long-term
financial planning purposes.
It is a "flexible payment" Contract because after you purchase it, you can
generally make additional investments of $50 or more at any time, until the
maturity date. But you are not required to make any additional investments.
The Contract is a "variable" annuity because the value of your Contract
can go up or down based on the performance of your investment choices. If you
select the variable annuity portion of the Contract, the amount of money you
are able to accumulate in your Contract during the accumulation period depends
upon the performance of your investment choices. If you elect to receive
variable annuity payments during the income phase of your Contract, the amount
of your annuity payments will also depend upon investment performance.
The Contract also contains a fixed account. The fixed account offers an
interest rate that is guaranteed by Western Reserve to equal at least 4% per
year. There may be different interest rates for each payment or transfer you
direct to the fixed account which are equal to or greater than the guaranteed
rate. The interest rates we set will be credited for periods of at least one
year measured from each payment or transfer date.
The fixed account is not available in all states. Residents of New Jersey
and Washington may not direct or transfer any money to the fixed account.
OTHER CONTRACTS
We offer other variable annuity contracts which also invest in the same
portfolios of the funds. These contracts may have different charges that could
affect subaccount
12
<PAGE>
performance and may offer different benefits more suitable to your needs. To
obtain more information about these contracts, contact your agent, or call us
at 1-800-851-9777.
2. ANNUITY PAYMENTS (THE INCOME PHASE)
You choose the date when annuity payments start under the Contract. This
is the maturity date. You can change this date by giving us 30 days written
notice. The maturity date cannot be earlier than the end of the fifth Contract
year. The maturity date cannot be later than the annuitant's 90th birthday. The
maturity date may be earlier for qualified Contracts.
Election of Annuity Payment Option. Before the maturity date, if the
annuitant is alive, you may choose an annuity payment option or change your
option. If you do not choose an annuity option by the maturity date, we will
make payments under Option D (see below) as a Variable Life Income with 10
years of guaranteed payments. You cannot change the annuity payment option
after the maturity date.
If you choose a variable payment option, you must specify how you want the
annuity proceeds divided among the subaccounts as of the maturity date. If you
do not specify, we will allocate the annuity proceeds in the same proportion as
the annuity value is allocated among the investment options on the maturity
date. After the maturity date, you may make transfers among the subaccounts,
but you may not make transfers from or to the fixed account; we may limit
subaccount transfers to one per Contract year.
Unless you specify otherwise, the annuitant named on the application will
receive the annuity payments. You can change the annuitant or add a joint
annuitant at any time before the maturity date, so long as we agree. If you do
not choose an annuitant, we will consider you to be the annuitant.
Supplemental Contract. Once you annuitize and if you have selected a fixed
payment option, the Contract will end and we will issue a supplemental Contract
to describe the terms of the option you selected. The supplemental Contract
will name who will receive the annuity payments and describe when the annuity
payments will be made.
ANNUITY PAYMENT OPTIONS UNDER THE CONTRACT
The Contract provides five annuity payment options that are described
below. You may choose any annuity payment option under your Contract. You can
choose to receive payments monthly, quarterly, semi-annually or annually.
We will use your "annuity proceeds" to provide these payments. The
"annuity proceeds" is your annuity value on the maturity date, less any premium
tax that may apply. If your annuity payment would be less than $20, then we
will pay you the annuity proceeds in one lump sum.
Fixed Annuity Income Payments. If you choose annuity payment Option A, B
or C, the dollar amount of each annuity payment will be fixed on the maturity
date and guaranteed by us. The payment amount will depend on three things:
13
<PAGE>
/bullet/ The amount of the annuity proceeds on the maturity date;
/bullet/ The interest rate we credit on those amounts (we guarantee a
minimum annual interest rate of 3%); and
/bullet/ The specific payment option you choose.
Variable Annuity Income Payments. If you choose variable annuity payment
Option D or E, the dollar amount of the first variable payment will be
determined in accordance with the annuity payment rates set forth in the
applicable table contained in the Contract. The dollar amount of each
additional variable payment will vary based on the investment performance of
the subaccount(s) you invest in and the Contract's assumed investment return of
5%. The dollar amount of each variable payment after the first may increase,
decrease or remain constant. If, after all charges are deducted, the actual
investment performance exactly matches the Contract's assumed investment return
of 5% at all times, then the dollar amount of the next variable annuity payment
would remain the same. If actual investment performance, after all charges are
deducted, exceeds the assumed investment return, then the amount of the
variable annuity payments would increase. But, if actual investment
performance, less charges, is lower than the 5% assumed investment return, then
the amount of the variable annuity payments would decrease. The portfolio in
which you are invested must grow at a rate at least equal to the 5% assumed
investment return (plus the mortality and expense risk charge of 1.25% annually
and the administrative charge of 0.15% annually) in order to avoid a decrease
in the dollar amount of variable annuity payments. For more information on how
variable annuity income payments are determined, see the SAI.
The annuity payment options are explained below. Some of the annuity
payment options 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.
/bullet/ No Period Certain-We will make level payments only during the
annuitant's lifetime; or
/bullet/ 10 Years Certain-We will make level payments for the longer of
the annuitant's lifetime or 10 years; or
/bullet/ Guaranteed Return of Annuity Proceeds-We will make level
payments for the longer of the annuitant's lifetime or until the
total dollar amount of payments we made to you equals the annuity
proceeds.
Payment Option C -- Joint and Survivor Life Income: Fixed Payments. We
will make level payments during the joint lifetime of the annuitant and a joint
annuitant of your choice. Payments will be made as long as either person is
living.
14
<PAGE>
VARIABLE ANNUITY PAYMENT OPTIONS
Payment Option D -- Variable Life Income. The annuity proceeds are used to
purchase variable annuity units in the subaccounts you select. You may choose
between:
/bullet/ No Period Certain - We will make variable payments only during
the annuitant's lifetime; or
/bullet/ 10 Years Certain - We will make variable payments for the longer
of the annuitant's lifetime or 10 years.
Payment Option E -- Variable Joint and Survivor Life Income. We will make
variable payments during the joint lifetime of the annuitant and a 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:
/bullet/ you choose Life Income with No Period Certain or a Joint and
Survivor Life Income (fixed or variable); and
/bullet/ the annuitant(s) dies, for example, before the due date of the
second annuity payment;
Then:
/bullet/ we may make only one annuity payment and there will be no death
benefit payable.
If:
/bullet/ you choose Fixed Installments, Life Income with 10 Years
Certain, Life Income with Guaranteed Return of Annuity Proceeds or
Variable Life Income with 10 Years Certain; and
/bullet/ the person receiving payments dies prior to the end of the
guaranteed period;
15
<PAGE>
Then:
/bullet/ the remaining guaranteed payments will be continued to that
person's beneficiary, or their value (determined at the date of
death) may be paid in a single sum.
We will not pay interest on amounts represented by uncashed annuity
payment checks if the postal or other delivery service is unable to deliver
checks to the annuitant's address of record. The annuitant is responsible to
keep Western Reserve informed of the annuitant's current address of record.
3. PURCHASE
CONTRACT ISSUE REQUIREMENTS
Western Reserve will issue a Contract IF:
/bullet/ we receive the information we need to issue the Contract;
/bullet/ we receive a minimum initial purchase payment; and
/bullet/ you are age 85 or younger and the annuitant is age 75 or
younger.
PURCHASE PAYMENTS
You should make checks or drafts for purchase payments payable only to
"Western Reserve Life" and send them to our administrative office. Your check
or draft must be honored in order for us to pay any associated payments and
benefits due under the Contract.
INITIAL PURCHASE REQUIREMENTS
The initial purchase payment for nonqualified Contracts must be at least
$5,000. However, you may make a minimum initial purchase payment of $1,000,
rather than $5,000, if you indicate on your application that you anticipate
making minimum monthly payments of at least $100 by electronic funds transfer.
For traditional or Roth IRAs, the minimum initial purchase payment is $1,000
and for qualified Contracts other than traditional or Roth IRAs, the minimum
initial purchase payment is $50.
We will credit your initial purchase payment to your Contract within two
business days after the day we receive it at our administrative office and your
complete Contract information. If we are unable to credit your initial purchase
payment, we will contact you within five business days and explain why. We will
also return your initial purchase payment at that time unless you tell us to
keep it. We will credit your initial purchase payment as soon as we receive all
necessary application information.
The date on which we credit your initial purchase payment to your Contract
is the Contract date. The Contract date is used to determine Contract years,
Contract months and Contract anniversaries.
16
<PAGE>
If you wish to make purchase payments by bank wire, please instruct your
bank to wire federal funds as follows:
All First Bank of Baltimore
ABA #: 052000113
For credit to: Western Reserve Life
Account #: 89539600
Owner's Name:
Contract Number:
Attention: Annuity Accounting
We may reject any application or purchase payments for any reason
permitted by law.
ADDITIONAL PURCHASE PAYMENTS
You are not required to make any additional purchase payments. However,
you can make additional purchase payments as often as you like during the
lifetime of the annuitant and prior to the maturity date. We will accept
purchase payments by bank wire or check. Additional purchase payments must be
at least $50 ($100 monthly in the case of nonqualified Contracts with a $1,000
initial purchase payment and $1,000 if by wire). We will credit any additional
purchase payments you make to your Contract at the accumulation unit value
computed at the end of the business day on which we receive them at our
administrative office. Our business day closes at 4:00 p.m. Eastern Time. If we
receive your purchase payments after the close of our business day, we will
calculate and credit them as of the close of the next business day.
MAXIMUM ANNUAL PURCHASE PAYMENTS
We allow purchase payments up to a total of $1,000,000 per Contract year
without prior approval.
ALLOCATION OF PURCHASE PAYMENTS
On the Contract date, we will allocate your purchase payment to the
investment choices you selected on your application. Your allocation must be in
whole percentages and must total 100%. We will allocate additional purchase
payments as you selected on your application, unless you request a different
allocation.
You may change allocations for future additional purchase payments by
writing or telephoning the administrative office, subject to the limitations
described below under Telephone or Fax Transactions on page 22. The allocation
change will apply to purchase payments received after the date we receive the
change request.
YOU SHOULD REVIEW PERIODICALLY HOW YOUR PAYMENTS ARE DIVIDED AMONG THE
SUBACCOUNTS BECAUSE MARKET CONDITIONS AND YOUR OVERALL FINANCIAL OBJECTIVES MAY
CHANGE.
RIGHT TO CANCEL PERIOD
You may return your Contract for a refund within 10 days after you receive
it. In most states, the amount of the refund will generally be the total
purchase payments we have
17
<PAGE>
received, plus (or minus) any gains (or losses) in the amounts you invested in
the subaccounts. You will keep any gains, and bear any losses, on amounts that
you invested in the subaccounts. If state law requires, we will refund your
original purchase payment(s). We determine the value of the refund as of the
date we receive the returned Contract at our administrative office. We will pay
the refund within 7 days after we receive your written notice of cancellation
and the returned Contract. The Contract will then be deemed void. In some
states you may have more than 10 days, and/or receive a different refund
amount.
ANNUITY VALUE
You should expect your annuity value to change from valuation period to
valuation period to reflect the investment performance of the portfolios, the
interest credited to your value in the fixed account, and the fees and charges
we deduct. A valuation period begins at the close of business on each business
day and ends at the close of business on the next succeeding valuation date. A
valuation date is any day the NYSE is open. Our business day closes when the
NYSE closes, usually 4:00 p.m. Eastern time. We observe the same holidays as
the NYSE.
ACCUMULATION UNITS
We measure the value of your Contract during the accumulation period by
using a measurement called an accumulation unit. During the income phase, we
use a measurement called an annuity unit. When you direct money into a
subaccount, we credit your Contract with accumulation units for that
subaccount. We determine how many accumulation units to credit by dividing the
dollar amount you direct to the subaccount by the subaccount's accumulation
unit value as of the end of that valuation date. If you withdraw or transfer
out of a subaccount, or if we assess a transfer charge, annual Contract charge
or any withdrawal charge, we subtract accumulation units from the subaccounts
using the same method.
Each subaccount's accumulation unit value was set at $10 when the
subaccount started. We recalculate the accumulation unit value for each
subaccount at the close of each valuation date. The new value reflects the
investment performance of the underlying portfolio and the daily deduction of
the mortality and expense risk charge and the administrative charge. For a
detailed discussion of how we determine accumulation unit values, see the SAI.
4. INVESTMENT CHOICES
THE SEPARATE ACCOUNT
The separate account currently consists of 29 subaccounts.
18
<PAGE>
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/registered trademark/ PORTFOLIO -- SERVICE CLASS 2
FIDELITY VIP III GROWTH OPPORTUNITIES PORTFOLIO -- SERVICE CLASS 2
</TABLE>
* Effective May 1, 2000, GE Asset Management Incorporated is the sole
sub-adviser.
The general public may not purchase these portfolios. Their investment
objectives and policies may be similar to other portfolios and mutual funds
managed by the same investment adviser or sub-adviser that are sold directly to
the public. You should not expect that the investment results of the other
portfolios and mutual funds would be similar to those portfolios offered by
this prospectus.
THERE IS NO ASSURANCE THAT A PORTFOLIO WILL ACHIEVE ITS STATED
OBJECTIVE(S). MORE DETAILED INFORMATION, INCLUDING AN EXPLANATION OF EACH
PORTFOLIO'S INVESTMENT OBJECTIVE, MAY BE FOUND IN THE FUND PROSPECTUSES. YOU
SHOULD READ THE FUND PROSPECTUSES CAREFULLY BEFORE YOU INVEST.
19
<PAGE>
THE FIXED ACCOUNT
Purchase payments you allocate to and amounts you transfer to the fixed
account become part of the general account of Western Reserve. Interests in the
general account have not been registered under the Securities Act of 1933 (the
"1933 Act"), nor is the general account registered as an investment company
under the Investment Company Act of 1940, as amended (the "1940 Act").
Accordingly, neither the general account nor any interests therein are
generally subject to the provisions of the 1933 Act or 1940 Act. Western
Reserve has been advised that the staff of the SEC has not reviewed the
disclosure in this prospectus which relate to the fixed account.
We guarantee that the interest credited to the fixed account will not be
less than 4% per year. We have no formula for determining fixed account
interest rates. We establish the interest rate, at our sole discretion, for
each purchase payment or transfer into the fixed account. Rates are guaranteed
for at least one year.
If you select the fixed account, your money will be placed with the other
general assets of Western Reserve. All assets in our general account are
subject to the general liabilities of our business operations. The amount of
money you are able to accumulate in the fixed account during the accumulation
period depends upon the total interest credited. The amount of annuity payments
you receive during the income phase under a fixed annuity option will remain
level for the entire income phase. You may not transfer money between the fixed
account and the subaccounts during the income phase.
When you request a transfer or partial withdrawal from the fixed account,
we will account for it on a first-in, first-out ("FIFO") basis, for purposes of
crediting your interest. This means that we will take the deduction from oldest
you have put in the fixed account. You may not make partial withdrawals from
the fixed account unless we consent.
The fixed account is not available in all states. Residents of New Jersey
and Washington may not direct or transfer any money to the fixed account.
TRANSFERS
During the accumulation period, you or your agent/registered
representative of record may make transfers from any subaccount. However, if
you elect the asset rebalancing program, you may not make any transfers if you
want to continue in the program. A transfer would automatically cancel your
participation in the asset rebalancing program. We may also limit "substantive"
transfers as discussed below.
Transfers from the fixed account are allowed once each Contract year. We
must receive written notice within 30 days after a Contract anniversary. The
amount that may be transferred is the greater of: (1) 25% of the dollar amount
in the fixed account, or (2) the amount you transferred out of the fixed
account in the previous Contract year.
During the income phase of your Contract, you may transfer values from one
subaccount to another. No transfers may be made to or from the fixed account.
The
20
<PAGE>
minimum amount that can be transferred during this phase is the lesser of $10
of monthly income, or the entire monthly income of the variable annuity units
in the subaccount from which the transfer is being made. We may limit
subaccount transfers to one per Contract year.
The fixed account is not available in all states. Residents of New Jersey
and Washington may not transfer any of their Contract value to the fixed
account.
Transfers may be made by telephone or fax, subject to limitations
described below under Telephone or Fax Transactions on page 22.
If you make more than 12 transfers from the subaccounts in any Contract
year, we will charge you $10 for each additional transfer you make during that
year. Currently, there is no charge for transfers from the fixed account.
Transfers to and from the subaccounts will be processed based on the
accumulation unit values determined at the end of the business day on which we
receive your written, telephoned, or faxed request at our administrative
office, provided we receive your request at our administrative office before
the close of our business day (usually 4:00 p.m. Eastern Time). If we receive
your request after the close of our business day, we will process the transfer
request using the accumulation unit value for the next business day.
The Contract's transfer privilege is not intended to afford owners a way
to speculate on short-term movements in the market. Excessive use of the
transfer privilege can potentially disrupt the management of the portfolios and
increase transaction costs. Accordingly, we have established a policy of
limiting excessive transfer activity. We will limit transfer activity to two
substantive transfers (at least 30 days apart) from each portfolio, except from
WRL J.P. Morgan Money Market, during any 12-month period. We interpret
"substantive" to mean either a dollar amount large enough to have a negative
impact on a portfolio's operations, or a series of movements between
portfolios. We will not limit non-substantive transfers.
We may, at any time, discontinue transfer privileges, modify our
procedures, or limit the number of transfers we permit.
DOLLAR COST AVERAGING PROGRAM
Dollar cost averaging allows you to transfer systematically a specific
amount each month from the fixed account, the WRL J.P. Morgan Money Market
subaccount, the WRL AEGON Bond subaccount or any combination of these accounts
to a different subaccount. You may specify the dollar amount to be transferred
monthly; however, you must transfer a total of $1,000 ($500 for New Jersey
residents). To qualify, a minimum of $10,000 must be in each subaccount from
which we make transfers.
There is no charge for this program. These transfers do count towards the
12 free transfers allowed during each Contract year.
If you make dollar cost averaging transfers from the fixed account, each
month you may transfer no more than 1/10th of the dollar amount in the fixed
account on the date you start dollar cost averaging.
21
<PAGE>
By transferring a set amount on a regular schedule instead of transferring
the total amount at one particular time, you may reduce the risk of investing
in the portfolios only when the price is high. Dollar cost averaging does not
guarantee a profit and it does not protect you from loss if market prices
decline.
We reserve the right to discontinue offering dollar cost averaging 30 days
after we send notice to you. Dollar cost averaging is not available if you have
elected the asset rebalancing program or if you elect to participate in any
asset allocation service provided by a third party.
ASSET REBALANCING PROGRAM
During the accumulation period you can instruct us to rebalance
automatically the amounts in your subaccounts to maintain your desired asset
allocation. This feature is called asset rebalancing and can be started and
stopped at any time free of charge. However, we will not rebalance if you are
in the dollar cost averaging program, 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 quarterly, semi-annually, or annually.
To qualify for asset rebalancing, a minimum annuity value of $10,000 for
an existing Contract, or a minimum initial purchase payment of $10,000 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.
TELEPHONE OR FAX TRANSACTIONS
You may make transfers, request partial withdrawals and change the
allocation of additional purchase payments by telephone. Telephone withdrawals
are not allowed in the following situations:
/bullet/ for qualified Contracts (except IRAs);
/bullet/ if the amount you want to withdraw is greater than $50,000; or
/bullet/ if the address of record has been changed within the past 10
days.
Upon instructions from you, the registered representative/agent of record
for your Contract may also make telephone transfers or withdrawals for you. If
you do not want the ability to make transfers or withdrawals by telephone, you
should notify us in writing.
You may make telephone transfers or withdrawals by calling our toll-free
number: 1-800-851-9777. You will be required to provide certain information for
identification
22
<PAGE>
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:
/bullet/ 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
/bullet/ To request a partial withdrawal, please fax your request to us at
727-299-1620.
We will not be responsible for transmittal problems which are not reported
to us within five business days. Any reports must be accompanied by proof of
the faxed transmittal.
Telephone or fax requests must be received before 4:00 p.m. Eastern time
to assure same-day pricing of the transaction. We may discontinue this option
at any time.
THIRD PARTY INVESTMENT SERVICES
Western Reserve or an affiliate may provide administrative or other
support services to independent third parties you authorize to conduct
transfers on your behalf, or who provide recommendations as to how your
subaccount values should be allocated. This includes, but is not limited to,
transferring subaccount values among subaccounts in accordance with various
investment allocation strategies that these third parties employ. Such
independent third parties may or may not be appointed Western Reserve agents
for the sale of Contracts.
WESTERN RESERVE DOES NOT ENGAGE ANY THIRD PARTIES TO OFFER INVESTMENT
ALLOCATION SERVICES OF ANY TYPE, SO THAT PERSONS OR FIRMS OFFERING SUCH
SERVICES DO SO INDEPENDENT FROM ANY AGENCY RELATIONSHIP THEY MAY HAVE WITH
WESTERN RESERVE FOR THE SALE OF CONTRACTS. WESTERN RESERVE THEREFORE TAKES NO
RESPONSIBILITY FOR THE INVESTMENT ALLOCATIONS AND TRANSFERS TRANSACTED ON YOUR
BEHALF BY SUCH THIRD PARTIES OR ANY INVESTMENT ALLOCATION RECOMMENDATIONS MADE
BY SUCH PARTIES.
Western Reserve does not currently charge you any additional fees for
providing these support services. Western Reserve reserves the right to
discontinue providing administrative and support services to owners utilizing
independent third parties who provide investment allocation and transfer
recommendations.
5. EXPENSES
There are charges and expenses associated with your Contract that reduce
the return on your investment in the Contract. Unless we indicate otherwise,
the expenses described below apply only during the accumulation period.
MORTALITY AND EXPENSE RISK CHARGE
We charge a fee as compensation for bearing certain mortality and expense
risks under the Contract. Examples include a guarantee of annuity rates, the
death benefits, certain
23
<PAGE>
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 1.10% of the
average daily net assets that you have invested in each subaccount. The
mortality and expense risk charge will increase to 1.25% after the maturity
date of your Contract. This charge is deducted daily from the subaccounts
during both the accumulation period and the income phase.
If this charge does not cover our mortality and expense risk costs, we
absorb the loss. Conversely, if the charge covers more than actual costs, the
excess is added to our surplus. We expect to profit from this charge. We may
use any profits to cover distribution costs.
ADMINISTRATIVE CHARGE
We deduct an annual administrative charge to cover the costs of
administering the Contracts. This charge is assessed daily and is equal to
0.15% per year of the daily net assets that you have invested in each
subaccount. This charge is deducted from the subaccounts during both the
accumulation period and the income phase.
ANNUAL CONTRACT CHARGE
We deduct an annual Contract charge of $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 the charge to cover our costs of administering the
Contract.
TRANSFER CHARGE
You are allowed to make 12 free transfers per Contract year. If you make
more than 12 transfers per Contract year, we charge $10 for each additional
transfer. We deduct the charge from the amount transferred. Dollar cost
averaging transfers and asset rebalancing are considered transfers. All
transfer requests made on the same day are treated as a single request. We
deduct the charge to compensate us for the cost of processing the transfer.
LOAN PROCESSING FEE
If you take a Contract loan, we will impose a $30 loan processing fee. You
have the option either to send us a $30 check for this fee or to have us deduct
the $30 from the loan amount. This fee is not applicable for all states. This
fee covers loan processing and other expenses associated with establishing and
administering the loan reserve. Only qualified Contracts can take Contract
loans.
PREMIUM TAXES
Some states assess premium taxes on the purchase payments you make. A
premium tax is a regulatory tax that some states assess on the purchase
payments made into a contract. If we should have to pay any premium tax, we may
deduct the tax from each purchase 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:
24
<PAGE>
/bullet/ you elect to begin receiving annuity payments;
/bullet/ you surrender the Contract;
/bullet/ you request a partial withdrawal; or
/bullet/ a death benefit is paid.
As of the date of this prospectus, the following states assess a premium
tax on all initial and subsequent purchase payments:
<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.
WITHDRAWAL CHARGE
During the accumulation period, you may withdraw part or all of the
Contract's annuity value. We impose a withdrawal charge to help us recover
sales expenses, including broker/dealer compensation and printing, sales
literature and advertising costs. We expect to profit from this charge. We
deduct this charge from your annuity value at the time you request the
withdrawal.
If you take a partial withdrawal or if you surrender your Contract
completely, we will deduct a withdrawal charge of up to 6.0% of purchase
payments withdrawn within five years after we receive a purchase payment. We
calculate the withdrawal charge on the full amount that must be withdrawn from
your annuity value in order to pay the withdrawal amount, including the
withdrawal charge. To calculate withdrawal charges, we treat withdrawals as
coming first from the oldest purchase payment, then the next oldest and so
forth.
For the first withdrawal you make in any Contract year, we waive that
portion of the withdrawal charge that is based on the first 10% of your
Contract's annuity value at the
25
<PAGE>
time of the withdrawal. Amounts of the first withdrawal in excess of the first
10% of your Contract's annuity value and all subsequent withdrawals you make
during the Contract year will be subject to a withdrawal charge. We will deduct
the full withdrawal charge if you surrender your Contract completely. We do not
assess withdrawal charges when you annuitize. We waive the withdrawal charge
under certain circumstances (see below).
The following schedule shows the withdrawal charges that apply during the
five years following each purchase payment:
<TABLE>
<CAPTION>
NUMBER OF YEARS SINCE WITHDRAWAL
PURCHASE PAYMENT DATE CHARGE
<S> <C>
0 - 2 6%
3 4%
4 3%
5 2%
Over 5 0%
</TABLE>
For example, assume your Contract's annuity value is $100,000 at the end
of the first year since your initial purchase payment and you withdraw $30,000
as your first withdrawal of the Contract year. Because the $30,000 is more than
10% of your Contract's annuity value ($10,000), you would pay a withdrawal
charge of $1,276.60 on the remaining $20,000 (6% of $21,276.60, which is
$20,000 plus the $1,276.60 withdrawal charge).
Keep in mind that withdrawals may be taxable, and if made before age
591/2, may be subject to a 10% federal penalty tax. For tax purposes,
withdrawals are considered to come from earnings first.
Systematic Partial Withdrawals. During any Contract year, you may make
systematic partial withdrawals on a monthly, quarterly, semi-annual or annual
basis without paying withdrawal charges. Systematic partial withdrawals must be
at least $200 ($50 if by direct deposit). The amount of the systematic partial
withdrawals may not exceed 10% of the annuity value at the time the withdrawal
is made, divided by the number of withdrawals made per calendar year. We
reserve the right to discontinue systematic partial withdrawals if any
surrender would reduce your annuity value below $10,000.
You may elect to begin or discontinue systematic partial withdrawals at
any time. However, we must receive written notice at least 30 days prior to the
date systematic partial withdrawals are to be discontinued. (See Systematic
Partial Withdrawals on page 33.)
Nursing Care Facility Waiver. If your Contract contains a nursing care
facility waiver, we will waive the withdrawal charge, provided:
/bullet/ you have been confined to a nursing care facility for 30
consecutive days or longer;
/bullet/ your confinement began after the Contract date; and
/bullet/ you provide us with written evidence of your confinement within
two months after your confinement begins.
We will waive the withdrawal charge under the endorsement only for partial
withdrawals and complete surrenders made during your confinement or within two
months after your confinement ends. This waiver may not be available in all
states.
26
<PAGE>
PORTFOLIO MANAGEMENT FEES
The value of the assets in each subaccount is reduced by the management
fees and expenses paid by the portfolios. Some portfolios also deduct 12b-1
fees from portfolio assets. A description of these fees and expenses is found
in the Annuity Contract Fee Table section on page 9 of this prospectus and in
the fund prospectuses.
Our affiliate, AFSG, the principal underwriter for the Contracts, will
receive the 12b-1 fees deducted from portfolio assets for providing shareholder
support services to the portfolios. We and our affiliates, including the
principal underwriter for the Contracts, may receive compensation from the
investment advisers, administrators, and/or distributors (and an affiliate
thereof) of the portfolios in connection with administrative or other services
and cost savings experienced by the investment advisers, administrators or
distributors. It is anticipated that such compensation will be based on assets
of the particular portfolios attributable to the Contract and may be
significant. Some advisers, administrators, distributors or portfolios may pay
us (and our affiliates) more than others.
REDUCED OR WAIVED CHARGES AND EXPENSES TO EMPLOYEES
We may reduce or waive the withdrawal charge and annual Contract charge
for Contracts sold to large groups of full-time employees of the same employer,
including directors, officers and full-time employees of Western Reserve and
its affiliates, or other groups where sales to the group reduce our
administrative expenses.
6. TAXES
NOTE: Western Reserve has prepared the following information on federal
income taxes as a general discussion of the subject. It is not intended as tax
advice to any individual. You should consult your own tax advisor about your
own circumstances. We believe that the Contract qualifies as an annuity
contract for federal income tax purposes and the following discussion assumes
it so qualifies. We have included an additional discussion regarding taxes in
the SAI.
ANNUITY CONTRACTS IN GENERAL
Deferred annuity contracts are a way of setting aside money for future
needs like retirement. Congress recognized how important saving for retirement
is and provided special rules in the Code for annuities.
Simply stated, these rules provide that you will not be taxed on the
earnings, if any, on the money held in your annuity Contract until you take the
money out. This is referred to as tax deferral. There are different rules as to
how you will be taxed depending on how you take the money out and the type of
Contract - qualified or nonqualified (discussed below).
You will generally not be taxed on increases in the value of your Contract
until a distribution occurs-either as a partial withdrawal, complete surrender
or as annuity payments.
27
<PAGE>
When a non-natural person (e.g., corporations or certain other entities
other than tax-qualified trusts) owns a nonqualified Contract, the Contract
will generally not be treated as an annuity for tax purposes.
QUALIFIED AND NONQUALIFIED CONTRACTS
If you purchase the Contract under an individual retirement annuity, a
403(b) plan, 457 plan, or pension or profit sharing plan, your Contract is
referred to as a qualified Contract.
If you purchase the Contract as an individual and not under a qualified
Contract, your Contract is referred to as a nonqualified Contract.
Because variable annuity contracts provide tax deferral whether purchased
as a qualified Contract or nonqualified Contract, you should consider whether
the features and benefits unique to variable annuities are appropriate for your
needs when purchasing a qualified Contract.
A qualified Contract may be used in connection with the following plans:
/bullet/ Individual Retirement Annuity (IRA): A traditional IRA allows
individuals to make contributions, which may be deductible, to the
Contract. A Roth IRA also allows individuals to make contributions
to the Contract, but it does not allow a deduction for
contributions. Roth IRA distributions may be tax-free if the owner
meets certain rules.
/bullet/ Tax-Sheltered Annuity (403(b) Plan): A 403(b) plan may be made
available to employees of certain public school systems and
tax-exempt organizations and permits contributions to the Contract
on a pre-tax basis.
/bullet/ Corporate Pension and Profit-Sharing and H.R. 10 Plans:
Employers and self-employed individuals can establish pension or
profit-sharing plans for their employees or themselves and make
contributions to the Contract on a pre-tax basis.
/bullet/ Deferred Compensation Plan (457 Plan): Certain governmental and
tax-exempt organizations can establish a plan to defer compensation
on behalf of their employees through contributions to the Contract.
There are limits on the amount of annual contributions you can make to
these plans. Other restrictions may apply. The terms of the plan may limit your
rights under a qualified Contract. You should consult your legal counsel or tax
advisor if you are considering purchasing a Contract for use with any
retirement plan. We have provided more detailed information on these plans and
the tax consequences associated with them in the SAI.
PARTIAL WITHDRAWALS AND COMPLETE SURRENDERS -- NONQUALIFIED CONTRACTS
In general, if you make a withdrawal (partial or systematic) from your
Contract, the Code treats that withdrawal as first coming from earnings and
then from your purchase
28
<PAGE>
payments. When you make a withdrawal you are taxed on the amount of the
withdrawal that is earnings. When you make a complete surrender you are
generally taxed on the amount that your surrender proceeds exceed your total
purchase payments. Loans, pledges and assignments are taxed in the same manner
as partial withdrawals and complete surrenders. Different rules apply for
annuity payments.
In the event of a partial withdrawal or systematic partial withdrawal
from, or complete surrender of, a nonqualified Contract, we will withhold for
tax purposes the minimum amount required by law, unless the owner affirmatively
elects, before payments begin, to have either nothing withheld or a different
amount withheld.
The Code also provides that withdrawn earnings may be subject to a
penalty. The amount of the penalty is equal to 10% of the amount that is
includable in income. Some withdrawals will be exempt from the penalty. They
include any amounts:
/bullet/ paid on or after the taxpayer reaches age 591/2;
/bullet/ paid after the owner dies;
/bullet/ paid if the taxpayer becomes totally disabled (as that term is
defined in the Code);
/bullet/ paid in a series of substantially equal payments made annually
(or more frequently) under a lifetime annuity;
/bullet/ paid under an immediate annuity; or
/bullet/ which come from purchase payments made prior to August 14, 1982.
MULTIPLE CONTRACTS
All nonqualified, deferred annuity contracts entered into after October
21, 1988 that we issue (or our affiliates issue) to the same owner during any
calendar year are to be treated as one annuity contract for purposes of
determining the amount includable in an individual's gross income. There may be
other situations in which the Treasury may conclude that it would be
appropriate to aggregate two or more annuity contracts purchased by the same
owner. You should consult a competent tax advisor before purchasing more than
one Contract or other annuity contracts.
DIVERSIFICATION AND DISTRIBUTION REQUIREMENTS
The Code provides that the underlying investments for a nonqualified
variable annuity must satisfy certain diversification requirements in order to
be treated as an annuity contract. Qualified and nonqualified Contracts must
meet certain distribution requirements upon an owner's death in order to be
treated as an annuity contract. A qualified Contract (except a Roth IRA) must
also meet certain distribution requirements during the owner's life. These
diversification and distribution requirements are discussed in the SAI. Western
Reserve may modify the Contract to attempt to maintain favorable tax treatment.
PARTIAL WITHDRAWALS AND COMPLETE SURRENDERS -- QUALIFIED CONTRACTS
The above information describing the taxation of nonqualified Contracts
does not apply to qualified Contracts. There are special rules that govern
qualified Contracts, including rules
29
<PAGE>
restricting when amounts can be paid from the Contracts and providing that a
penalty tax may be assessed on amounts distributed from the Contract prior to
the date you reach age 59 1/2, unless you meet one of the exceptions to this
rule. We have provided more information in the SAI.
In the case of a partial withdrawal, systematic partial withdrawal, or
complete surrender distributed to a participant or beneficiary under a qualifed
Contract (other than a Roth IRA or a qualified Contract under Section 457 of
the Code as to which there are special rules), a ratable portion of the amount
received is taxable, generally based on the ratio of the investment in the
Contract to the total annuity value. The "investment in the contract" generally
equals the portion, if any, of any purchase payments paid by or on behalf of an
individual under a Contract which is not excluded from the individual's gross
income. For Contracts issued in connection with qualified plans, the
"investment in the contract" can be zero.
The Code limits the distribution of purchase payments from certain 403(b)
Contracts. Distributions generally can only be made when an owner:
/bullet/ reaches age 59 1/2;
/bullet/ leaves his/her job;
/bullet/ dies; or
/bullet/ becomes disabled (as that term is defined in the Code); or
/bullet/ in the case of hardship. However, in the case of hardship, the
owner can only withdraw the purchase payments and not any
earnings.
Loans, pledges and assignments of qualified Contracts are taxed in the
same manner as withdrawals from such Contracts.
TAXATION OF DEATH BENEFIT PROCEEDS
We may distribute amounts from the Contract because of the death of an
owner or the annuitant. Generally, such amounts are includable in the income of
the recipient:
/bullet/ if distributed in a lump sum, these amounts are taxed in the
same manner as a full surrender; or
/bullet/ if distributed under an annuity payment option, these amounts
are taxed in the same manner as annuity payments.
For these purposes, the "investment in the contract" is not affected by
the owner's or annuitant's death. That is, the "investment in the contract"
remains generally the total purchase payments, less amounts received which were
not includable in gross income.
ANNUITY PAYMENTS
Although the tax consequences may vary depending on the annuity payment
option you select, in general, for nonqualified and certain qualified Contracts
(other than a Roth IRA as to which there are special rules), only a portion of
the annuity payments you receive will be includable in your gross income.
30
<PAGE>
The excludable portion of each annuity payment you receive generally will
be determined as follows:
/bullet/ Fixed payments - by dividing the "investment in the contract" on
the maturity date by the total expected value of the annuity
payments for the term of the payments. This is the percentage of
each annuity payment that is excludable.
/bullet/ Variable payments - by dividing the "investment in the contract"
on the maturity date by the total number of expected periodic
payments. This is the amount of each annuity payment that is
excludable.
The remainder of each annuity payment is includable in gross income. Once
the "investment in the contract" has been fully recovered, the full amount of
any additional annuity payments is includable in gross income.
If we permit you to select more than one annuity payment option, special
rules govern the allocation of the Contract's entire "investment in the
contract" to each such option, for purposes of determining the excludable
amount of each payment received under that option. We advise you to consult a
competent tax advisor as to the potential tax effects of allocating amounts to
any particular annuity payment option.
If, after the maturity date, annuity payments stop because of an
annuitant's death, the excess (if any) of the "investment in the contract" as
of the maturity date over the aggregate amount of annuity payments received
that was excluded from gross income is generally allowable as a deduction for
your last tax return.
TRANSFERS, ASSIGNMENTS OR EXCHANGES OF CONTRACTS
If you transfer your ownership or assign a Contract, designate an
annuitant or other beneficiary who is not also the owner, select certain
maturity dates, or change annuitants, you may trigger certain income or gift
tax consequences that are beyond the scope of this discussion. If you
contemplate any such transfer, assignment, selection, or change, you should
contact a competent tax advisor with respect to the potential tax effects of
such a transaction.
POSSIBLE TAX LAW CHANGES
Although the likelihood of legislative changes is uncertain, there is
always the possibility that the tax treatment of the Contracts could change by
legislation or otherwise. You should consult a tax advisor with respect to
legal developments and their effect on the Contract.
31
<PAGE>
7. ACCESS TO YOUR MONEY
PARTIAL WITHDRAWALS AND COMPLETE SURRENDERS
You can have access to the money in your Contract in several ways:
/bullet/ by making a withdrawal (either a partial withdrawal or complete
surrender); or
/bullet/ by taking annuity payments.
If you want to surrender your Contract completely, you will receive cash
value, which equals the annuity value of your Contract minus:
/bullet/ any withdrawal charges;
/bullet/ any premium taxes;
/bullet/ any loans; and
/bullet/ the annual Contract charge.
The cash value will be determined at the accumulation unit value next
determined as of the end of the business day (usually 4:00 p.m. Eastern Time)
on which we receive your request for partial withdrawal or complete surrender
at our administrative office, unless you specify a later date in your request.
No partial withdrawal is permitted if the withdrawal would reduce the cash
value below $10,000. You may not make partial withdrawals from the fixed
account unless we consent. Unless you tell us otherwise, we will take the
withdrawal from each of the investment choices in proportion to the cash value.
Remember that any withdrawal you make will reduce the annuity value. Under
some circumstances, a partial withdrawal will reduce the death benefit by more
than the dollar amount of the withdrawal. See Section 9, Death Benefit, and the
SAI for more details.
Income taxes, federal tax penalties and certain restrictions may apply to
any partial withdrawals or any complete surrender you make.
We must receive a properly completed surrender request which must contain
your original signature. If you live in a community property state, your spouse
must also sign the surrender request. We will accept fax or telephone requests
for partial withdrawals as long as the withdrawal proceeds are being sent to
the address of record. The maximum withdrawal amount you may request by fax or
telephone is $50,000.
When we incur extraordinary expenses, such as overnight mail expenses, for
expediting delivery of your partial withdrawal or complete surrender payment,
we will deduct that charge from the payment. We charge $20 for an overnight
delivery ($30 for Saturday delivery).
32
<PAGE>
For your protection, we will require a signature guarantee for:
/bullet/ all requests for partial withdrawals or surrenders over
$500,000; or
/bullet/ where the partial withdrawal or surrender proceeds will be sent
to an address other than the address of record.
All signature guarantees must be made by:
/bullet/ a national or state bank;
/bullet/ a member firm of a national stock exchange; or
/bullet/ any institution that is an eligible guarantor under SEC rules
and regulations.
Notarization is not an acceptable form of signature guarantee.
If the Contract's owner is not an individual, additional information may
be required. If you own a qualified Contract, the Code may require your spouse
to consent to any withdrawal. Other restrictions will apply to Section 403(b)
qualified Contracts and Texas Optional Retirement Program Contracts. For more
information, call us at 1-800-851-9777.
DELAY OF PAYMENTS AND TRANSFERS
Payment of any amount due from the separate account for a partial
withdrawal, a complete surrender, a death benefit, or the death of the owner of
a nonqualified Contract, will generally occur within seven business days from
the date all required information is received by us. We may be permitted to
defer such payment from the separate account if:
/bullet/ the NYSE is closed for other than usual weekends or holidays or
trading on the NYSE is otherwise restricted; or
/bullet/ an emergency exists as defined by the SEC or the SEC requires
that trading be restricted; or
/bullet/ the SEC permits a delay for the protection of owners.
In addition, transfers of amounts from the subaccounts may be deferred
under these circumstances.
Pursuant to the requirements of certain state laws, we reserve the right
to defer payment of transfers, partial withdrawals, complete surrenders and
loan amounts from the fixed account for up to six months.
SYSTEMATIC PARTIAL WITHDRAWALS
You can elect to receive regular payments from your Contract without
paying withdrawal charges by using systematic partial withdrawals. You can
withdraw up to 10% of your cash value annually in equal monthly, quarterly,
semi-annual or annual payments of at least $200 ($50 if by direct deposit).
Your initial purchase payment, if a new Contract, or your cash value, if an
existing Contract, must equal at least $25,000. We will not process a
systematic partial withdrawal if the cash value for the entire Contract would
be reduced below $10,000. No systematic partial withdrawals are permitted from
the fixed account.
33
<PAGE>
You may stop systematic partial withdrawals at any time, but we must
receive written notice at least 30 days prior to the date systematic partial
withdrawals are to be discontinued. We reserve the right to discontinue
offering systematic partial withdrawals 30 days after we send you written
notice.
Income taxes, federal tax penalties and other restrictions may apply to
any systematic partial withdrawal you receive.
CONTRACT LOANS FOR QUALIFIED CONTRACTS
You can take Contract loans during the accumulation period when the
Contract:
/bullet/ 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);
/bullet/ is purchased by a pension, profit-sharing, or other similar plan
qualified under section 401(a) of the Code (including Section
401(k) plans - please contact your plan administrator); and
/bullet/ has been in force for at least 10 days.
The maximum amount you may borrow against the Contract is the lesser of:
/bullet/ 50% of the annuity value; or
/bullet/ $50,000 reduced by the highest outstanding loan balance during
the one-year period immediately prior to the loan date. However, if
the annuity value is less than $20,000, the maximum you may borrow
against the Contract is the lesser of 80% of the annuity value or
$10,000.
The minimum loan amount is $1,000 (unless otherwise required by state
law). You are responsible for requesting and repaying loans that comply with
applicable tax requirements, and other laws, such as the Employment Retirement
Income Security Act of 1974 ("ERISA"). Accordingly, you should consult a
competent tax advisor before requesting a Contract loan.
The loan amount will be withdrawn from your investment choices and
transferred to the loan reserve. The loan reserve is part of the fixed account
and is used as collateral for all Contract loans. We reserve the right to
postpone distributing the loan amount from the fixed account for up to six
months, if required.
On each Contract anniversary we will compare the amount of the Contract
loan to the amount in the loan reserve. If all Contract loans and unpaid
interest due on the loan exceed the amount in the loan reserve, we will
withdraw the difference 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 purchase payment allocation. We reserve the right to transfer
the excess to the fixed account if the amount used to establish the loan
reserve was transferred from the fixed account.
34
<PAGE>
If all Contract loans and unpaid interest due on the loan exceed the cash
value, we will mail to your last known address and to any assignee of record a
notice stating the amount due in order to reduce the loan amount so that the
loan amount no longer exceeds the cash value. If the excess amount is not paid
within 31 days after we mail the notice, the Contract will terminate without
value.
You can repay any Contract loan in full:
/bullet/ while the Contract is in force; and
/bullet/ during the accumulation period.
NOTE CAREFULLY: If you do not repay your Contract loan, we will subtract
the amount of the unpaid loan plus interest from:
/bullet/ the amount of any death benefit proceeds; or
/bullet/ the amount we pay upon a partial withdrawal or complete
surrender; or
/bullet/ the amount we apply on the maturity date to provide annuity
payments.
You must pay interest on the loan at the rate of 6% per year. We deduct
interest in arrears. Amounts in the loan reserve will earn interest at a
minimum guaranteed effective annual interest rate of 4%. Principal and interest
must be repaid:
/bullet/ in level quarterly or monthly payments over a 5-year period; or
/bullet/ over a 10, 15 or 20-year period, if the loan is used to buy your
principal residence.
An extended repayment period cannot go beyond the year you turn 701/2.
If:
/bullet/ a repayment is not received within 31 days from the original due
date;
Then:
/bullet/ a distribution of all Contract loans and unpaid accrued
interest, and any applicable charges, including any withdrawal
charge, will take place.
This distribution will be reported as taxable to the Internal Revenue
Service, may be subject to income and penalty tax, and may cause the Contract
to not qualify under Section 403(b) of the Code.
You may fax your loan request to us at 727-299-1620.
The loan date is the date we process the loan request. We impose a $30 fee
to cover loan processing and expenses associated with establishing and
administering the loan reserve (not applicable in all states). We reserve the
right to limit the number of Contract loans to one per Contract year.
Contract loans may not be available in all states.
35
<PAGE>
8. PERFORMANCE
We periodically advertise performance of the subaccounts and investment
portfolios. We may disclose at least four different kinds of performance.
First, we may disclose standardized total return figures for the
subaccounts that reflect the deduction of all charges assessed during the
accumulation period under the Contract, including the mortality and expense
charge, the administrative charge, the annual Contract charge and the
withdrawal charge. THESE FIGURES ARE BASED ON THE ACTUAL HISTORICAL PERFORMANCE
OF THE SUBACCOUNTS INVESTING IN THE UNDERLYING PORTFOLIOS SINCE THEIR
INCEPTION, ADJUSTED TO REFLECT CURRENT CONTRACT CHARGES.
Second, we may disclose total return figures on a non-standardized basis.
This means that the data may be presented for different time periods and
different dollar amounts. The data will not be reduced by the withdrawal charge
currently assessed under the Contract. We will only disclose non-standardized
performance data if it is accompanied by standardized total return data.
Third, we may present historic performance data for the portfolios since
their inception reduced by some or all fees and charges under the Contract.
Such adjusted historic performance includes data that precedes the inception
dates of the subaccounts, but is designed to show the performance that would
have resulted if the Contract had been available during that time.
Fourth, we may include in our advertising and sales materials,
tax-deferred compounding charts and other hypothetical illustrations, which may
include comparisons of currently taxable and tax-deferred investment programs,
based on selected tax brackets.
The WRL Fund prospectus presents the total return of certain existing
SEC-registered funds that are managed by sub-advisers to the WRL portfolios.
These funds have investment objectives, policies and strategies that are
substantially similar to those of certain portfolios. We call the funds the
"Similar Sub-Adviser Funds." None of the fees and charges under the Contract
has been deducted from the performance data of the Similar Sub-Adviser Funds.
If Contract fees and charges were deducted, the investment returns would be
lower. The similar Sub-Adviser Funds are not available for investment under the
Contract.
Appendix B contains performance information that you may find useful. It
is divided into various parts, depending upon the type of performance
information shown. Future performance will vary and future results will not be
the same as the results shown.
9. DEATH BENEFIT
We will pay a death benefit to the beneficiary, under certain
circumstances, if you are both the owner and the annuitant and you die during
the accumulation period. (If you are not the annuitant, a death benefit may or
may not be paid. See below.) The beneficiary may choose an annuity payment
option or may choose to receive a lump sum.
36
<PAGE>
WHEN WE PAY A DEATH BENEFIT
Before the Maturity Date. We will pay a death benefit to your beneficiary
IF:
/bullet/ you are both the annuitant and the owner of the Contract; and
/bullet/ you die before the maturity date.
If the only beneficiary is your surviving spouse, then he or she may elect
to continue the Contract as the new annuitant and owner, instead of receiving
the death benefit.
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 14 and 15
for a description of the annuity payment options. Please note that not all
payment options provide for a death benefit.
If:
/bullet/ you are not the annuitant; and
/bullet/ you die on or after the maturity date; and
/bullet/ the entire interest in the Contract has not been paid to you;
Then:
/bullet/ any remaining value in the Contract will be distributed at least
as rapidly as under the method of distribution being used as of
the date of the owner's death.
WHEN WE DO NOT PAY A DEATH BENEFIT
No death benefit is paid in the following cases:
If:
/bullet/ you are not the annuitant; and
/bullet/ the annuitant dies prior to the maturity date;
Then:
/bullet/ you will become the new annuitant and the Contract will
continue.
If:
/bullet/ you are not the annuitant; and
/bullet/ you die prior to the maturity date;
37
<PAGE>
Then:
/bullet/ if the successor owner is alive and is the owner's spouse, that
person becomes the new owner and the Contract will continue;
/bullet/ if the successor owner is alive and is not the owner's spouse,
the successor owner will become the new owner. This new owner
generally must surrender the Contract for the cash value within
five years of the former owner's death; or
/bullet/ if the owner does not name a successor owner or no successor
owner is alive, the owner's estate will become the new owner and
cash value must generally be distributed within 5 years of the
former owner's death.
NOTE CAREFULLY. If no probate estate is opened because the owner has
precluded the opening of a probate estate by means of a trust or other
instrument, unless Western Reserve receives written notice of the trust as a
successor owner signed prior to the owner's death, that trust may not exercise
ownership rights to the Contract. It may be necessary to open a probate estate
in order to exercise ownership rights to the Contract if no contingent owner is
named in a written notice received by Western Reserve.
AMOUNT OF DEATH BENEFIT DURING THE ACCUMULATION PERIOD
Death benefit provisions may differ from state to state. The death benefit
may be paid as a lump sum or as annuity payments, but in all events will be
paid in accordance with any applicable federal and state laws, rules and
regulations.
If the annuitant dies during the accumulation period and if a death
benefit is payable, the death benefit will be the greatest of the following:
If:
/bullet/ the annuitant dies during the accumulation period and before the
sixth Contract year;
Then:
/bullet/ the death benefit will be the greater of:
/bullet/ the annuity value of your Contract on the death report day;
or
/bullet/ the total purchase payments you make to the Contract, reduced
by any partial withdrawals, credited with 5% on each Contract
anniversary (until you turn age 80), up to a maximum of 200% of
total purchase payments minus any partial withdrawals. (Please
note that the 5% credit is not available in all states.)
If:
/bullet/ the annuitant dies during the accumulation period and after the
fifth Contract year;
38
<PAGE>
Then:
/bullet/ the death benefit will be the greatest of:
/bullet/ the death benefits described above;
/bullet/ the annuity value of your Contract on the fifth Contract
anniversary, reduced by any partial withdrawals;
/bullet/ if your Contract was issued before May 1, 2000, the highest
annuity value as of any Contract anniversary occurring between
(a) the later of May 1, 2000 and the fifth Contract anniversary
and (b) the earlier of:
/bullet/ the annuitant's date of death; or
/bullet/ the Contract anniversary nearest the annuitant's 80th
birthday.
/bullet/ if your Contract was issued on or after May 1, 2000, the
highest annuity value as of any Contract anniversary occurring
between the fifth Contract anniversary and the earlier of:
/bullet/ the annuitant's date of death; or
/bullet/ the Contract anniversary nearest the annuitant's 80th
birthday.
The highest annuity value will be increased by purchase payments made and
decreased by adjusted partial withdrawals taken following the Contract
anniversary date with the highest annuity value. The adjusted partial
withdrawal is equal to (a) times (b) where:
/bullet/ (a) is the ratio of the death benefit to the annuity value,
calculated on the date the partial withdrawal is
processed, but prior to the processing; and
/bullet/ (b) is the amount of the partial withdrawal.
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.
39
<PAGE>
10. OTHER INFORMATION
OWNERSHIP
You, as owner of the Contract, exercise all rights under the Contract,
including the right to transfer ownership (subject to any assignee or
irrevocable beneficiary's consent). You can change the owner at any time by
notifying us in writing. An ownership change may be a taxable event.
ANNUITANT
The annuitant is the person named in the application to receive annuity
payments. If no person is named, the owner will be the annuitant. As of the
maturity date, and upon our agreement, the owner may change the annuitant or,
if either annuity Option C or Option E has been selected, add a 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. The beneficiary will
become the new owner when the owner is not the same person as the annuitant and
the owner dies before the annuitant. You may change the beneficiary during the
lifetime of the annuitant, subject to the rights of any irrevocable
beneficiary. Any change must be made in writing and received by us at our
administrative office and, if accepted, will be effective as of the date on
which the request was signed by the owner. Prior to the maturity date, if no
owner or beneficiary survives the annuitant, the owner's estate will be the
beneficiary. In the case of certain qualified Contracts, the Treasury
Regulations prescribe certain limitations on the designation of a beneficiary.
See the SAI for more details on the beneficiary.
ASSIGNMENT
You can also assign the Contract any time prior to the maturity date.
Western Reserve will not be bound by the assignment until we receive written
notice of the assignment. Western Reserve will not be liable for any payment or
other action we take in accordance with the Contract before we receive notice
of the assignment. An assignment may be a taxable event. There may be
limitations on your ability to assign a qualified Contract and such assignments
may be subject to tax penalties and taxed as distributions under the Code.
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
Western Reserve was incorporated under the laws of Ohio on October 1,
1957. It is engaged in the business of writing life insurance policies and
annuity contracts. Western Reserve is wholly-owned by First AUSA Life Insurance
Company, a stock life insurance company which is wholly-owned indirectly by
AEGON USA, Inc. ("AEGON USA"), which conducts most of its operations through
subsidiary companies engaged in the insurance business or in providing
non-insurance financial services. All of the stock of AEGON USA
40
<PAGE>
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 Contracts of the separate account or Western
Reserve.
The assets of the separate account are held in Western Reserve's name on
behalf of the separate account and belong to Western Reserve. However, the
assets underlying the Contracts are not chargeable with liabilities arising out
of any other business Western Reserve may conduct. The income, gains and
losses, realized and unrealized, from the assets allocated to each subaccount
are credited to and charged against that subaccount without regard to the
income, gains and losses from any other of our accounts or subaccounts.
Information about the separate account can be reviewed and copied at the
SEC's Public Reference Room in Washington, D.C. You may obtain information
about the operation of the public reference room by calling the SEC at
1-800-SEC-0330. In addition, the SEC maintains a web site (www.sec.gov) that
contains other information regarding the separate account.
VOTING RIGHTS
Western Reserve will vote all shares of the portfolios in accordance with
instructions we receive from you and other owners that have voting interests in
the portfolios. We will send you and other owners written requests for
instructions on how to vote those shares. When we receive those instructions,
we will vote all of the shares in accordance with those instructions. We will
vote shares for which no timely instructions were received in the same
proportion as the voting instructions we received. However, if we determine
that we are permitted to vote the shares in our own right, we may do so. Each
person having a voting interest will receive proxy material, reports, and other
materials relating to the appropriate portfolio. More information on voting
rights is provided in the SAI.
DISTRIBUTION OF THE CONTRACTS
AFSG is the principal underwriter of the Contracts. Like Western Reserve,
it is an indirect wholly-owned subsidiary of AEGON USA. It is located at 4333
Edgewood Road
41
<PAGE>
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 5% of purchase payments.
In addition, broker/dealers may receive trail commissions of 0.20% of the
annuity value in each Contract year, starting at the end of the first quarter
of the second Contract year, provided the Contract has an annuity value of
$25,000 or more in the subaccounts. These commissions are not deducted from
purchase payments. Certain production, persistency and managerial bonuses may
also be paid. Subject to applicable federal and state laws and regulations,
Western Reserve may also pay compensation to banks and other financial
institutions for their services in connection with the sale and servicing of
the Contracts. The level of such compensation will not exceed that paid to
broker/dealers for their sale of the Contracts. The offering of the Contracts
is continuous and Western Reserve does not anticipate discontinuing the
offering of the Contracts. However, Western Reserve reserves the right to do
so.
NON-PARTICIPATING CONTRACT
The Contract does not participate or share in the profits or surplus
earnings of Western Reserve. No dividends are payable on the Contract.
VARIATIONS IN CONTRACT PROVISIONS
Certain provisions of the Contracts may vary from the descriptions in this
prospectus in order to comply with different state laws. See your Contract for
variations since any such state variations will be included in your Contract or
in riders or endorsements attached to your Contract.
The fixed account is not available in all states. Residents of New Jersey
and Washington may not direct or transfer any money to the fixed account.
IMSA
We are a member of the Insurance Marketplace Standards Association
("IMSA"). IMSA is an independent, voluntary organization of life insurance
companies. It promotes high ethical standards in the sales and advertising of
individual life insurance and annuity products. Companies must undergo a
rigorous self and independent assessment of their
42
<PAGE>
practices to become a member of IMSA. The IMSA logo in our sales literature
shows our ongoing commitment to these standards.
LEGAL PROCEEDINGS
Western Reserve, like other life insurance companies, is involved in
lawsuits. We are not aware of any class lawsuits naming us as a defendant or
involving the separate account. In some lawsuits involving other insurers,
substantial damages have been sought and/or material settlement payments have
been made. Although the outcome of any litigation cannot be predicted with
certainty, we believe that at the present time there are no pending or
threatened lawsuits that are reasonably likely to have a material adverse
impact on the separate account, AFSG, or Western Reserve.
FINANCIAL STATEMENTS
The financial statements of Western Reserve and the separate account are
included in the SAI.
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
43
<PAGE>
APPENDIX A
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The accumulation unit values and the number of accumulation units
outstanding for each subaccount from the date of inception are shown in the
following tables. The number of accumulation units combines the units
outstanding for two variable annuity contracts issued by Western Reserve
through the subaccount.
<TABLE>
<CAPTION>
WRL J.P. MORGAN MONEY MARKET SUBACCOUNT(1)
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>
02/24/1989(2) - 12/31/1989 $10.000 $10.579 279,180
12/31/1990 $10.579 $11.235 1,774,514
12/31/1991 $11.235 $11.681 2,482,842
12/31/1992 $11.681 $11.888 3,459,934
12/31/1993 $11.888 $12.026 2,739,178
12/31/1994 $12.026 $12.294 4,499,778
12/31/1995 $12.294 $12.799 3,249,712
12/31/1996 $12.799 $13.287 3,848,980
12/31/1997 $13.287 $13.818 2,860,806
12/31/1998 $13.818 $14.369 3,395,945
12/31/1999 $14.369 $14.879 6,518,077
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
WRL AEGON BOND SUBACCOUNT(1)
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>
02/24/1989(2) - 12/31/1989 $10.000 $11.272 339,412
12/31/1990 $11.272 $11.831 598,466
12/31/1991 $11.831 $13.894 1,389,932
12/31/1992 $13.894 $14.650 3,565,475
12/31/1993 $14.650 $16.404 4,052,875
12/31/1994 $16.404 $15.076 3,130,365
12/31/1995 $15.076 $18.312 2,954,875
12/31/1996 $18.312 $18.110 2,513,342
12/31/1997 $18.110 $19.522 2,360,470
12/31/1998 $19.522 $21.076 2,414,683
12/31/1999 $21.076 $20.203 1,843,337
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
WRL JANUS GROWTH SUBACCOUNT(1)
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>
02/24/1989(2) - 12/31/1989 $10.000 $13.399 2,127,009
12/31/1990 $13.399 $13.210 5,538,622
12/31/1991 $13.210 $20.848 13,667,137
12/31/1992 $20.848 $21.072 26,351,578
12/31/1993 $21.072 $21.639 26,573,194
12/31/1994 $21.639 $19.595 20,917,559
12/31/1995 $19.595 $28.471 18,708,618
12/31/1996 $28.471 $33.168 17,369,775
12/31/1997 $33.168 $38.503 14,841,891
12/31/1998 $38.503 $62.542 13,063,412
12/31/1999 $62.542 $98.623 11,831,098
</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>
12/03/1992(3) - 12/31/1992 $10.000 $10.152 25,000
12/31/1993 $10.152 $13.537 5,121,285
12/31/1994 $13.537 $13.403 10,796,779
12/31/1995 $13.403 $16.289 8,682,451
12/31/1996 $16.289 $20.548 10,764,227
12/31/1997 $20.548 $24.098 10,843,759
12/31/1998 $24.098 $30.943 9,639,964
12/31/1999 $30.943 $52.288 8,766,540
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
WRL LKCM STRATEGIC TOTAL RETURN SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
3/01/1993(3) - 12/31/1993 $10.000 $11.254 4,340,344
12/31/1994 $11.254 $11.055 8,015,123
12/31/1995 $11.055 $13.610 8,550,697
12/31/1996 $13.610 $15.457 8,849,836
12/31/1997 $15.457 $18.601 8,830,827
12/31/1998 $18.601 $20.140 7,983,192
12/31/1999 $20.140 $22.291 7,040,002
</TABLE>
<TABLE>
<CAPTION>
WRL VKAM EMERGING GROWTH SUBACCOUNT
NUMBER OF
ACCUMULATION ACCUMULATION
UNIT VALUE AT ACCUMULATION UNITS
BEGINNING OF UNIT VALUE AT OUTSTANDING AT
PERIOD END OF PERIOD END OF PERIOD
<S> <C> <C> <C>
3/01/1993(3) - 12/31/1993 $10.000 $12.367 4,719,227
12/31/1994 $12.367 $11.315 7,378,138
12/31/1995 $11.315 $16.403 7,059,547
12/31/1996 $16.403 $19.258 7,440,062
12/31/1997 $19.258 $23.099 7,179,790
12/31/1998 $23.099 $31.329 6,442,520
12/31/1999 $31.329 $63.478 6,153,697
</TABLE>
47
<PAGE>
<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>
3/01/1994(3) - 12/31/1994 $10.000 $ 9.792 1,869,106
12/31/1995 $ 9.792 $13.347 4,919,998
12/31/1996 $13.347 $14.558 4,385,416
12/31/1997 $14.558 $17.864 4,172,912
12/31/1998 $17.864 $26.232 4,069,236
12/31/1999 $26.232 $43.787 3,898,221
</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>
3/01/1994(3) - 12/31/1994 $10.000 $ 9.348 983,274
12/31/1995 $ 9.348 $11.060 1,005,549
12/31/1996 $11.060 $12.094 1,124,365
12/31/1997 $12.094 $13.986 1,238,709
12/31/1998 $13.986 $14.770 1,335,853
12/31/1999 $14.770 $15.027 1,452,658
</TABLE>
48
<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>
3/01/1994(3) - 12/31/1994 $10.000 $ 9.463 561,868
12/31/1995 $ 9.463 $11.705 995,803
12/31/1996 $11.705 $12.905 960,652
12/31/1997 $12.905 $15.887 884,769
12/31/1998 $15.887 $16.168 1,020,628
12/31/1999 $16.168 $15.256 741,824
</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>
1/03/1995(3) - 12/31/1995 $10.000 $11.861 2,943,255
12/31/1996 $11.861 $13.403 4,640,509
12/31/1997 $13.403 $15.432 5,049,374
12/31/1998 $15.432 $16.509 5,174,480
12/31/1999 $16.509 $15.385 3,845,498
</TABLE>
49
<PAGE>
<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>
5/01/1995(3) - 12/31/1995 $10.000 $11.964 165,502
12/31/1996 $11.964 $13.883 634,664
12/31/1997 $13.883 $15.771 1,120,896
12/31/1998 $15.771 $15.960 887,289
12/31/1999 $15.960 $21.096 683,768
</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>
5/01/1996(3) - 12/31/1996 $10.000 $11.225 1,485,890
12/31/1997 $11.225 $13.861 3,562,149
12/31/1998 $13.861 $13.035 2,964,277
12/31/1999 $13.035 $13.896 2,370,920
</TABLE>
<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>
1/02/1997(3) - 12/31/1997 $10.000 $10.617 600,633
12/31/1998 $10.617 $11.832 573,292
12/31/1999 $11.832 $14.601 402,792
</TABLE>
50
<PAGE>
<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>
1/02/1997(3) - 12/31/1997 $10.000 $12.544 986,655
12/31/1998 $12.544 $15.222 1,538,482
12/31/1999 $15.222 $17.801 1,823,459
</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>
1/02/1998(3) - 12/31/1998 $10.000 $ 9.201 643,581
12/31/1999 $ 9.201 $10.515 504,953
</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>
5/01/1998(3) - 12/31/1998 $10.000 $8.435 67,648
12/31/1999 $ 8.435 $8.016 50,784
</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>
5/03/1999(3) - 12/31/1999 $10.000 $11.652 113,020
</TABLE>
51
<PAGE>
<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>
5/03/1999(3) - 12/31/1999 $10.000 $11.642 36,799
</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>
5/03/1999(3) - 12/31/1999 $10.000 $9.183 197,282
</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>
5/03/1999(3) - 12/31/1999 $10.000 $13.733 284,595
</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>
5/03/1999(3) - 12/31/1999 $10.000 $11.460 119,851
</TABLE>
52
<PAGE>
<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>
5/03/1999(3) - 12/31/1999 $10.000 $17.651 377,306
</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>
5/03/1999(3) - 12/31/1999 $10.000 $10.630 75,244
</TABLE>
(1) The commencement of operations of these subaccounts was February 24, 1989.
(2) Initial date these subaccounts were offered for investment under the
Contract.
(3) Commencement of operations of these subaccounts.
Because the WRL Value Line Aggressive Growth, WRL Great Companies --
America(SM) and WRL Great Companies -- Technology(SM) portfolios did not
commence operations until May 1, 2000, and because the Fidelity VIP
Equity-Income Portfolio -- Service Class 2, Fidelity VIP II
Contrafund/registered trademark/ 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.
53
<PAGE>
APPENDIX B
HISTORICAL PERFORMANCE DATA
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STANDARDIZED PERFORMANCE DATA
Western Reserve may advertise historical yields and total returns for the
subaccounts of the separate account. These figures are based on historical
earnings and will be calculated according to guidelines from the SEC. They do
not indicate future performance.
WRL J.P. MORGAN MONEY MARKET SUBACCOUNT. The yield of the WRL J. P. Morgan
Money Market subaccount is the annualized income generated by an investment in
the subaccount over a specified seven-day period. The yield is calculated by
assuming that the income generated for that seven-day period, not including
capital changes or income other than investment income, is generated each
seven-day period over a 52-week period and is shown as a percentage of the
investment. The effective yield is calculated similarly but we assume that the
income earned is reinvested. The effective yield will be slightly higher than
the yield because of the compounding effect of this assumed reinvestment. For
the seven days ended December 31, 1999, the yield of the WRL J.P. Morgan Money
Market subaccount was 3.88%, and the effective yield was 3.95%.
OTHER SUBACCOUNTS. The YIELD of a subaccount, other than the WRL J.P.
Morgan Money Market subaccount, refers to the annualized income generated by an
investment in the subaccount over a specified 30-day period. The yield is
calculated by assuming that the income generated by the investment during that
30-day period is generated each 30-day period over a 12-month period and is
shown as a percentage of the investment.
The TOTAL RETURN of a subaccount assumes that an investment has been held
in a subaccount for various periods of time including a period measured from
the date the first subaccount investing in the underlying portfolios began
operations. When the first subaccount investing in the underlying portfolios
has been in operation for 1, 5, and 10 years, the total return for these
periods will be provided, adjusted to reflect current subaccount charges. The
total return quotations will represent the average annual compounded rates of
return of investment of $1,000 in the subaccount as of the last day of each
period.
The yield and total return calculations for a subaccount are not reduced
by any premium taxes. For additional information regarding yields and total
returns, please refer to the SAI.
Based on the method of calculation described in the SAI, the 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 Table 1 below. Total returns shown in Table 1 reflect deductions of 1.10%
for the mortality and expense risk charge, 0.15% for the administrative charge
and $30 for the annual Contract charge. (Based on an average Contract size of
$62,770, the annual Contract charge translates into a charge of 0.05%.)
54
<PAGE>
Total returns also assume a complete surrender of the Contract at the end of
the period; therefore, the withdrawal charge is deducted.
<TABLE>
<CAPTION>
TABLE 1
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS OF THE SUBACCOUNTS
(ASSUMES SURRENDER)
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* -2.50% 3.54% 3.46% 3.73% 02/24/1989
WRL AEGON Bond -10.19% 5.70% 6.00% 6.69% 02/24/1989
WRL Janus Growth 51.62% 38.03% 22.09% 23.48% 02/24/1989
WRL Janus Global 62.90% 31.15% N/A 26.31% 12/03/1992
WRL LKCM Strategic Total Return 4.63% 14.82% N/A 12.43% 03/01/1993
WRL VKAM Emerging Growth 96.52% 41.07% N/A 31.01% 03/01/1993
WRL Alger Aggressive Growth 60.84% 34.79% N/A 28.76% 03/01/1994
WRL AEGON Balanced -4.30% 9.67% N/A 7.21% 03/01/1994
WRL Federated Growth & Income -11.69% 9.74% N/A 7.49% 03/01/1994
WRL Dean Asset Allocation -12.86% N/A N/A 8.72% 01/03/1995
WRL C.A.S.E. Growth 26.12% N/A N/A 17.08% 05/01/1995
WRL NWQ Value Equity 0.56% N/A N/A 8.72% 05/01/1996
WRL GE International Equity 17.34% N/A N/A 12.43% 01/02/1997
WRL GE U.S. Equity 10.88% N/A N/A 20.33% 01/02/1997
WRL Third Avenue Value 8.22% N/A N/A -0.46% 01/02/1998
WRL J.P. Morgan Real Estate Securities -11.01% N/A N/A -16.41% 05/01/1998
WRL Goldman Sachs Growth N/A N/A N/A 10.48% 05/03/1999
WRL Goldman Sachs Small Cap N/A N/A N/A 10.39% 05/03/1999
WRL T. Rowe Price Dividend Growth N/A N/A N/A -14.20% 05/03/1999
WRL T. Rowe Price Small Cap N/A N/A N/A 31.29% 05/03/1999
WRL Salomon All Cap N/A N/A N/A 8.57% 05/03/1999
WRL Pilgrim Baxter Mid Cap Growth N/A N/A N/A 70.46% 05/03/1999
WRL Dreyfus Mid Cap N/A N/A N/A 0.27% 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 -- N/A N/A N/A N/A 05/01/2000
Service Class 2
Fidelity VIP II Contrafund/registered trademark/ Portfolio -- N/A N/A N/A N/A 05/01/2000
Service Class 2
Fidelity VIP III Growth Opportunities Portfolio -- N/A N/A N/A N/A 05/01/2000
Service Class 2
</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.
55
<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 disclose average annual total return or
other performance data in non-standardized formats for the subaccounts. The
non-standardized performance data may make different assumptions regarding the
amount invested, the time periods shown, or the effect of partial withdrawals
or annuity payments.
All non-standardized performance data will be advertised only if the
standardized performance data as shown in Table 1 is also disclosed. For
additional information regarding the calculation of other performance data,
please refer to the SAI.
Based on the method of calculation described in the SAI, the
non-standardized average annual total returns for periods from inception of the
subaccounts to December 31, 1999, and for the one, five and ten-year periods
ended December 31, 1999 are shown in Table 2 below. Total returns shown in
Table 2 reflect deductions of 1.10% for the mortality and expense risk charge,
0.15% for the administrative charge and $30 for the annual Contract charge.
(Based on an average Contract size of $62,770, the annual Contract charge
translates into a charge of 0.05%.) Total returns assume that the Contract is
not surrendered and therefore the withdrawal charge is not deducted.
56
<PAGE>
<TABLE>
<CAPTION>
TABLE 2
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS OF THE SUBACCOUNTS
(ASSUMES NO SURRENDER)
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* 3.50% 3.88% 3.46% 3.73% 02/24/1989
WRL AEGON Bond -4.19% 6.02% 6.00% 6.69% 02/24/1989
WRL Janus Growth 57.62% 38.14% 22.09% 23.48% 02/24/1989
WRL Janus Global 68.90% 31.28% N/A 26.31% 12/03/1992
WRL LKCM Strategic Total Return 10.63% 15.05% N/A 12.43% 03/01/1993
WRL VKAM Emerging Growth 102.52% 41.17% N/A 31.01% 03/01/1993
WRL Alger Aggressive Growth 66.84% 34.91% N/A 28.76% 03/01/1994
WRL AEGON Balanced 1.70% 9.95% N/A 7.21% 03/01/1994
WRL Federated Growth & Income -5.69% 10.01% N/A 7.49% 03/01/1994
WRL Dean Asset Allocation -6.86% N/A N/A 9.01% 01/03/1995
WRL C.A.S.E. Growth 32.12% N/A N/A 17.32% 05/01/1995
WRL NWQ Value Equity 6.56% N/A N/A 9.37% 05/01/1996
WRL GE International Equity 23.34% N/A N/A 13.48% 01/02/1997
WRL GE U.S. Equity 16.88% N/A N/A 21.25% 01/02/1997
WRL Third Avenue Value 14.22% N/A N/A 2.53% 01/02/1998
WRL J.P. Morgan Real Estate Securities -5.01% N/A N/A -12.43% 05/01/1998
WRL Goldman Sachs Growth N/A N/A N/A 16.48% 05/03/1999
WRL Goldman Sachs Small Cap N/A N/A N/A 16.39% 05/03/1999
WRL T. Rowe Price Dividend Growth N/A N/A N/A -8.20% 05/03/1999
WRL T. Rowe Price Small Cap N/A N/A N/A 37.29% 05/03/1999
WRL Salomon All Cap N/A N/A N/A 14.57% 05/03/1999
WRL Pilgrim Baxter Mid Cap Growth N/A N/A N/A 76.46% 05/03/1999
WRL Dreyfus Mid Cap N/A N/A N/A 6.27% 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 -- N/A N/A N/A N/A 05/01/2000
Service Class 2
Fidelity VIP II Contrafund/registered trademark/ Portfolio -- N/A N/A N/A N/A 05/01/2000
Service Class 2
Fidelity VIP III Growth Opportunities Portfolio -- N/A N/A N/A N/A 05/01/2000
Service Class 2
</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.
57
<PAGE>
ADJUSTED HISTORICAL PERFORMANCE DATA. We may disclose historic performance
data for the portfolios since their inception reduced by some or all of the
fees and charges under the Contract. Such adjusted historic performance would
include data that precedes the inception dates of the subaccounts investing in
the underlying portfolios. This data is designed to show the performance that
would have resulted if the Contract had been in existence during that time,
based on the portfolio's performance. This data assumes that the subaccounts
available under the Contract were in existence for the same period as the
portfolio with a level of charges equal to those currently assessed under the
Contract. This data is not intended to indicate future performance.
Because the separate account has been invested in portfolio shares since
the inception of the class of portfolio shares held by the separate account,
the adjusted historic portfolio data for the Contract corresponds to the
performance data displayed in Tables 1 and 2 of Appendix B.
58
