As filed with the Securities and Exchange Commission on April 29, 1998
Registration No. 33-63246
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 5 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 6 [X]
(Check appropriate box or boxes)
WRL SERIES ANNUITY ACCOUNT B
(Exact Name of Registrant)
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
(Name of Depositor)
201 Highland Avenue
Largo, Florida 33770
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code:
(813) 585-6565
--------------
Thomas E. Pierpan, Esq.
Vice President, Assistant Secretary and Associate General Counsel
Western Reserve Life Assurance Co. of Ohio
201 Highland Avenue
Largo, Florida 33770
(Name and Address of Agent for Service)
Copy to:
Stephen E. Roth, Esq.
Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
--------------------------------
It is proposed that this filing will become effective (check appropriate space):
______ immediately upon filing pursuant to paragraph (b) of Rule 486
__X___ on May 1, 1998 pursuant to paragraph (b) of Rule 486
______ 60 days after filing pursuant to paragraph (a) of Rule 485
______ on DATE , pursuant to paragraph (a) of Rule 486
<PAGE>
WRL SERIES ANNUITY ACCOUNT B
POST-EFFECTIVE AMENDMENT NO. 5 TO
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 ON FORM N-4
Cross Reference Sheet
Showing Location in Prospectus
and Statement of Additional Information
As Required by Form N-4
<TABLE>
<CAPTION>
FORM N-4 ITEM PROSPECTUS CAPTION
<S> <C>
1. Cover Page.................................Cover Page
2. Definitions................................Definitions of Special Terms
3. Synopsis or Highlights.....................Summary
4. Condensed Financial
Information................................Condensed Financial Information
5. General Description of
Registrant, Depositor,
and Portfolio Companies....................Western Reserve, the Series Account B, and
the Trust; Voting Right
6. Deductions.................................Charges and Deductions; Distribution of
the Contracts
7. General Description of
Variable Annuity Contracts.................Western Reserve, the Series Account B, and
the Trust; The Contract; Statement of
Additional Information
8. Annuity Period.............................The Contract - Annuity Provisions
9. Death Benefit..............................The Contract - Accumulation Provisions -
Death Benefits during the Accumulation
Period; The Contract - Annuity Provisions
- Death Benefits after the Maturity Date
10. Purchases and Contract
Value......................................The Contract - Accumulation Provisions -
Purchase Payments, Net Purchase Payments,
Accumulation Unit Value; Distribution of
the Contracts
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
FORM N-4 ITEM PROSPECTUS CAPTION
<S> <C>
11. Redemptions................................The Contract - Accumulation Provisions -
Partial Withdrawals and Surrenders; Other
Matters Relating to the Contract - Right
to Examine Contract
12. Taxes......................................Federal Tax Matters
13. Legal Proceedings..........................Legal Proceedings
14. Table of Contents of the
Statement of Additional
Information................................Statement of Additional Information
STATEMENT OF ADDITIONAL
FORM N-4 ITEM INFORMATION CAPTION
15. Cover Page.................................Cover Page
16. Table of Contents..........................Table of Contents
17. General Information and
History....................................Not Applicable
18. Services...................................Custodian; Independent Accountants
19. Purchase of Securities Being
Offered....................................Addition, Deletion and Substitution of
Investments
20. Underwriters...............................Distribution of Contracts
21. Calculation of Performance
Data.......................................Calculation of Performance Related
Information
22. Annuity Payments...........................Not Applicable
23. Financial Statements.......................Financial Statements
</TABLE>
(ii)
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE>
JANUS RETIREMENT ADVANTAGE(R)
Flexible Payment Variable Accumulation Deferred Annuity Contract
Prospectus
MAY 1, 1998
ISSUED BY: DISTRIBUTED BY:
Western Reserve Life Assurance Co. InterSecurities, Inc.
of Ohio 201 Highland Avenue
201 Highland Avenue Largo, Florida 33770-2597
Largo, Florida 33770-2597
Please direct all telephone inquiries to 1-800-504-4440.
This Prospectus describes the Janus Retirement Advantage(R) (the "Contract"), a
tax deferred variable annuity contract issued by Western Reserve Life Assurance
Co. of Ohio ("Western Reserve").
The Contract provides for accumulation of Contract values on a variable basis, a
fixed basis, or a combination of both. The Contract also provides for the
payment of periodic annuity payments on a variable basis or a fixed basis. If
the variable basis is chosen, Contract values will be held in the WRL Series
Annuity Account B (the "Series Account") and will vary according to the
investment performance of the underlying investment portfolios of the Janus
Aspen Series (the "Trust"). If the fixed basis is chosen, Contract values will
be allocated to the Fixed Account and earn interest at no less than the minimum
guaranteed rate.
There are currently twelve Sub-Accounts of the Series Account (in addition to
the Fixed Account) available during the Accumulation Period and after the
Maturity Date. Each Sub-Account invests in one investment portfolio of the Trust
and Net Purchase Payments will be allocated to one or more of these Sub-Accounts
or the Fixed Account as directed by the Owner. The twelve investment portfolios
of the Trust are: the Growth Portfolio, the Aggressive Growth Portfolio, the
Capital Appreciation Portfolio, the International Growth Portfolio, the
Worldwide Growth Portfolio, the Balanced Portfolio, the Equity Income Portfolio,
the Growth and Income Portfolio, the Flexible Income Portfolio, the High-Yield
Portfolio, the Short-Term Bond Portfolio and the Money Market Portfolio. Janus
Capital Corporation ("Janus Capital") serves as Investment Adviser to the Trust.
(Effective May 1, 1998, the Short-Term Bond Portfolio will not be available to
new investors and it is anticipated that this Portfolio will be liquidated once
required regulatory approvals are obtained.)
This Prospectus sets forth information about the Contract that a prospective
investor should know before investing. Additional information about the Series
Account has been filed with the Securities and Exchange Commission in a
Statement of Additional Information, dated May 1, 1998, which is incorporated
herein by reference. The Statement of Additional Information is available upon
request and without charge by writing to Western Reserve, P.O. Box 9052,
Clearwater, FL 33758-9052; or by calling (800) 504-4440. The table of contents
for the Statement of Additional Information appears on page 44 of this
Prospectus.
THIS PROSPECTUS MUST BE ACCOMPANIED OR PRECEDED BY CURRENT PROSPECTUSES FOR THE
JANUS ASPEN SERIES. CERTAIN PORTFOLIOS MAY NOT BE AVAILABLE IN ALL STATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
THE CONTRACT IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, A
BANK OR DEPOSITORY INSTITUTION, AND THE CONTRACT IS NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY AND INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESPERSON OR OTHER PERSON
IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998
<PAGE>
This page intentionally left blank.
JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998
<PAGE>
CONTENTS
DEFINITIONS OF SPECIAL TERMS................. 3
SUMMARY...................................... 5
CALCULATION OF YIELDS AND TOTAL RETURNS...... 12
OTHER PERFORMANCE DATA....................... 15
PUBLISHED RATINGS............................ 16
WESTERN RESERVE, THE SERIES ACCOUNT, AND THE
TRUST...................................... 16
Western Reserve Life Assurance Co. of Ohio... 16
WRL Series Annuity Account B................. 17
Janus Aspen Series........................... 17
CHARGES AND DEDUCTIONS....................... 18
No Sales Charge.............................. 19
Transfer Charge.............................. 19
Mortality and Expense Risk Charge............ 19
Annual Contract Charge....................... 19
Administrative Charge........................ 20
Premium Taxes................................ 20
Deductions for Other Taxes................... 20
Expenses of the Trust........................ 20
THE CONTRACT -- ACCUMULATION PROVISIONS...... 21
Purchase Payments............................ 21
Net Purchase Payments........................ 22
Accumulation Unit Value...................... 23
Computing Sub-Account Value.................. 23
Portfolio Share Net Asset Value.............. 24
Transfers to and from, and among Allocation
Options.................................... 24
Systematic Exchanges......................... 25
Partial Withdrawals and Surrenders........... 25
Death Benefits during the Accumulation
Period..................................... 27
JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998 1
<PAGE>
THE CONTRACT -- ANNUITY PROVISIONS........... 29
Maturity Date and Selection of Annuity
Options.................................... 29
Fixed Account Annuity Options................ 31
Series Account Annuity Options............... 31
Death Benefits after the Maturity Date....... 32
Improved Annuity Rates....................... 32
Proof of Age, Sex, and Survival.............. 32
OTHER MATTERS RELATING TO THE CONTRACT....... 32
Changes in Purchase Payments................. 32
Right to Examine Contract.................... 32
Contract Payments............................ 33
Ownership.................................... 33
Annuitant.................................... 33
Beneficiary.................................. 34
Modification or Waiver....................... 34
FEDERAL TAX MATTERS.......................... 34
Introduction................................. 34
Company Tax Status........................... 35
Taxation of Annuities........................ 35
Individual Retirement Annuities.............. 37
Roth Individual Retirement Annuities ("Roth
IRA")...................................... 38
Additional Considerations.................... 38
THE FIXED ACCOUNT............................ 40
Minimum Guaranteed and Current Interest
Rates...................................... 40
Fixed Account Value.......................... 41
Allocations, Transfers and Partial
Withdrawals................................ 41
DISTRIBUTION OF THE CONTRACTS................ 42
VOTING RIGHTS................................ 42
YEAR 2000 MATTERS............................ 43
LEGAL PROCEEDINGS............................ 44
STATEMENT OF ADDITIONAL INFORMATION.......... 44
2 JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998
<PAGE>
DEFINITIONS OF
SPECIAL TERMS
ACCUMULATION PERIOD - The period between the Contract Date and the Maturity Date
while the Contract is in force.
ACCUMULATION UNIT VALUE - An accounting unit of measure used to calculate Sub-
Account values during the Accumulation Period.
ADMINISTRATIVE OFFICE - Western Reserve's administrative office for variable
insurance products, the address of which is P.O. Box 9052, Clearwater, Florida
33758-9052.
ALLOCATION OPTIONS - The Fixed Account and the Sub-Accounts of the Series
Account.
ANNUITANT - The person named in the application, or as subsequently changed, to
receive annuity payments. The Annuitant may be changed as provided in the
Contract's death benefit provisions and annuity provisions.
ANNUITY PROCEEDS - The amount applied to purchase periodic annuity payments.
Such amount is the Annuity Value on the Maturity Date, less any applicable
premium tax.
ANNUITY VALUE - The sum of the Series Account Value and the Fixed Account Value.
ANNUITY UNIT VALUE - An accounting unit of measure used to calculate annuity
payments from certain Sub-Accounts after the Maturity Date.
ANNIVERSARY - The same day and month as the Contract Date for each succeeding
year the Contract remains in force.
ATTAINED AGE - The Issue Age plus the number of completed Contract Years. Issue
Age refers to the age on the birthday nearest the Contract Date.
BENEFICIARY - The person(s) entitled to receive the death benefit proceeds under
the Contract.
CASH VALUE - The Annuity Value less any applicable premium taxes.
CODE - The Internal Revenue Code of 1986, as amended.
CONTINGENT BENEFICIARY - The person named in the application to become the new
Beneficiary upon the current Beneficiary's death.
CONTRACT DATE - The later of the date on which the initial Purchase Payment is
received and the date that the properly completed application is received at
Western Reserve's Administrative Office.
CONTRACT YEAR - A period of twelve consecutive months beginning on the Contract
Date and any Anniversary thereafter.
FIXED ACCOUNT - An Allocation Option under the Contract that provides for
accumulation of Net Purchase Payments and options for annuity payments on a
fixed basis. For Contracts issued in the State of Washington, the Fixed Account
is not available for allocation of Net Purchase Payments or transfers of Annuity
Value from the Sub-Accounts.
JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998 3
<PAGE>
FIXED ACCOUNT VALUE - During the Accumulation Period, the value in the Fixed
Account allocable to a Contract.
IN FORCE - Condition under which the Contract is active and the Owner is
entitled to exercise all rights under the Contract.
ISSUE AGE - Refers to the age on the birthday nearest the Contract Date.
MATURITY DATE - The date on which the Accumulation Period ends and annuity
payments are to commence.
NET PURCHASE PAYMENT - The Purchase Payment less any applicable premium taxes.
(See "Premium Taxes" on page 20.)
NON-QUALIFIED CONTRACTS - Contracts issued other than in connection with
retirement plans that qualify for special Federal income tax treatment under the
Code.
OWNER - The person(s) entitled to exercise all rights under the Contract. The
Annuitant is the Owner unless the application states otherwise, or unless a
change of ownership is made at a later time.
PORTFOLIO - A separate investment portfolio of the Trust.
PURCHASE PAYMENTS - Amounts paid by an Owner or on the Owner's behalf to Western
Reserve as consideration for the benefits provided by the Contract.
QUALIFIED CONTRACTS - Contracts issued in connection with retirement plans that
qualify for special Federal income tax treatment under Sections 408 or 408A of
the Code.
SERIES ACCOUNT OR SEPARATE ACCOUNT - WRL Series Annuity Account B, a separate
investment account composed of several Sub-Accounts established to receive and
invest Net Purchase Payments not allocated to the Fixed Account.
SERIES ACCOUNT VALUE - During the Accumulation Period, the value in the Series
Account allocable to a Contract, which value is equal to the total of the values
allocable to a Contract in each of the Sub-Accounts during the Accumulation
Period.
SUB-ACCOUNT - A sub-division of the Series Account that invests exclusively in
the shares of a specified Portfolio and supports the Contracts. Sub-Accounts
corresponding to each applicable Portfolio hold assets under the Contract during
the Accumulation Period. Sub-Accounts corresponding to each applicable Portfolio
will hold assets after the Maturity Date if a Series Account annuity option is
selected.
SURRENDER - The termination of a Contract at the option of the Owner.
TRUST - Janus Aspen Series.
VALUATION DATE - Each day on which the New York Stock Exchange is open for
business.
VALUATION PERIOD - The period commencing at the end of one Valuation Date and
continuing to the end of the next succeeding Valuation Date.
4 JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998
<PAGE>
SUMMARY
This summary provides you with an overview of the tax deferred variable annuity
contract offered by Western Reserve and funded by the WRL Series Annuity Account
B and the Fixed Account.
THE CONTRACT
The Janus Retirement Advantage(R) (the "Contract") is a tax deferred variable
annuity contract that may be purchased by submitting a completed application to
Western Reserve for its approval. The Contract provides for accumulation of
Annuity Values on a variable basis, a fixed basis, or a combination of both. The
Contract also provides for the payment of periodic annuity payments on a
variable basis or a fixed basis. (See "THE CONTRACT - Accumulation Provisions"
on page 21 and "THE CONTRACT - Annuity Provisions" on page 29.) (For information
about tax status, see "FEDERAL TAX MATTERS" on pages 34-38.)
RIGHT TO EXAMINE CONTRACT
If an Owner is not satisfied with the Contract, it may be cancelled by returning
it within ten days after receipt (the "Free-Look Period") together with a
written request for cancellation. In such event, Western Reserve will pay the
Owner an amount equal to the sum of: (i) the Purchase Payments received; plus
(or minus) (ii) the accumulated gains (or losses), if any, in the Series Account
for the Contract as of the date Western Reserve receives the returned Contract.
Certain states require a Free-Look Period longer than ten days, either for all
Contract Owners or for certain classes of Contract Owners. (In certain states,
Western Reserve will refund the Purchase Payment.) (See "OTHER MATTERS RELATING
TO THE CONTRACT - Right to Examine Contract" on page 32.)
THE TRUST
The underlying variable investments for the Contract are shares of the twelve
Portfolios of the Trust: the Growth Portfolio, the Aggressive Growth Portfolio,
the Capital Appreciation Portfolio, the International Growth Portfolio, the
Worldwide Growth Portfolio, the Balanced Portfolio, the Equity Income Portfolio,
the Growth and Income Portfolio, the Flexible Income Portfolio, the High-Yield
Portfolio, the Short-Term Bond Portfolio (effective May 1, 1998, this Portfolio
will not be available to new investors*) and the Money Market Portfolio. Janus
Capital serves as Investment Adviser to the Portfolios. Western Reserve reserves
the right to offer additional investment portfolios or mutual funds with
differing investment objectives. (See "WESTERN RESERVE, THE SERIES ACCOUNT, AND
THE TRUST - Janus Aspen Series" on page 17.)
- ---------------
* Investors who purchased their Contracts prior to May 1, 1998, may allocate new
purchase payments and transfer amounts into and out of the Short-Term Bond
Portfolio until further notice. It is anticipated that this Portfolio will be
liquidated once required regulatory approvals are obtained.
JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998 5
<PAGE>
PURCHASE PAYMENTS
The Owner may make Purchase Payments at such frequency as the Owner elects. The
initial Purchase Payment generally must accompany the application, and must be
at least $2,500 unless Western Reserve consents to a smaller amount. Subsequent
Purchase Payments must be at least $100, unless Western Reserve consents to a
smaller amount. The maximum amount of Purchase Payments that may be made in any
Contract Year is $1,000,000, unless Western Reserve consents to a larger amount.
Western Reserve reserves the right to reject any Purchase Payment for any reason
permitted by law. (See "THE CONTRACT - ACCUMULATION PROVISIONS - Purchase
Payments" on page 21.)
PARTIAL WITHDRAWAL AND SURRENDER PRIVILEGE
A Contract may be surrendered or portions of the Cash Value may be partially
withdrawn at any time prior to the Maturity Date. The Cash Value may not,
however, be reduced by any partial withdrawal to less than $2,500. (See "THE
CONTRACT - ACCUMULATION PROVISIONS - Partial Withdrawals and Surrenders" on page
25.) Moreover, a partial withdrawal or Surrender may have Federal income tax
consequences. (See "FEDERAL TAX MATTERS - Individual Retirement Annuities" on
page 37.)
NO SALES CHARGE
No deductions for sales expenses are made from Purchase Payments or from
withdrawals or Surrenders. However, a penalty tax is currently imposed on
withdrawals or Surrenders if such withdrawals or Surrenders are made prior to
age 59 1/2 and other exceptions do not apply. (See "FEDERAL TAX MATTERS" on
pages 34-38.)
MORTALITY AND EXPENSE RISK CHARGE
For assuming mortality and expense risks under the Contract, Western Reserve
imposes a 0.50% per annum charge against the Annuity Value held in the Series
Account. (See "CHARGES AND DEDUCTIONS - Mortality and Expense Risk Charge" on
page 19.) This charge is deducted from the Series Account both during the
Accumulation Period and after the Maturity Date.
ANNUAL CONTRACT CHARGE
An Annual Contract Charge of $30 will be deducted annually on the Anniversary
and upon any surrender or payment of a death benefit during the Accumulation
Period on other than an Anniversary. (See "CHARGES AND DEDUCTIONS - Annual
Contract Charge" on page 19.)
ADMINISTRATIVE CHARGE
Western Reserve imposes a daily Administrative Charge equal to an annual rate of
0.15% against all Annuity Value held in the Series Account. (See "CHARGES AND
DEDUCTIONS - Administrative Charge" on page 20.)
PREMIUM TAXES
No deduction is made for premium taxes unless Western Reserve incurs a premium
tax under state law. Certain states impose premium taxes ranging up to 3.5% of
Purchase Payments. (See "CHARGES AND DEDUCTIONS - Premium Taxes" on page 20.)
6 JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998
<PAGE>
CHARGES BY THE TRUST
The Trust is subject to certain fees, charges and expenses. (See "WESTERN
RESERVE, THE SERIES ACCOUNT, AND THE TRUST - Janus Aspen Series" on page 17 and
the Prospectuses for the Trust.)
SUMMARY OF CHARGES AND EXPENSES
The following illustrates the charges and deductions under the Contract during
the Accumulation Period, as well as the fees and expenses of the Trust.
OWNER TRANSACTION EXPENSES
Sales Load Imposed on Purchases None
Maximum Contingent Deferred Sales
Charge None
Transfer Charge
On first 12 transfers each year None
On each transfer thereafter $10.00
Annual Contract Charge* $30.00 Per Contract
* Deduction of the Annual Contract Charge is currently waived when the Annuity
Value on the Anniversary is equal to or greater than $25,000.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average Series Account Value)
Mortality and Expense Risk Charge 0.50%
Other Account Fees and Expenses (See
"Administrative Charge" on page 20) 0.15%
Total Separate Account Annual Expenses 0.65%
TRUST ANNUAL EXPENSES (after fee waivers and reductions)**
(as a % of average net assets for the period ended December 31, 1997)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
AGGRESSIVE CAPITAL INTERNATIONAL WORLDWIDE
GROWTH GROWTH APPRECIATION GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO*** PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Management Fees 0.65% 0.73% 0.23% 0.67% 0.66%
Other Expenses (after
any fee waivers) 0.05% 0.03% 1.03% 0.29% 0.08%
Total Operating
Expenses 0.70% 0.76% 1.26% 0.96% 0.74%
- --------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
EQUITY GROWTH AND FLEXIBLE
BALANCED INCOME INCOME INCOME
PORTFOLIO PORTFOLIO*** PORTFOLIO*** PORTFOLIO
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees 0.76% 0.00% 0.67% 0.65%
Other Expenses (after any fee
waivers) 0.07% 1.25% 0.30% 0.10%
Total Operating Expenses 0.83% 1.25% 0.97% 0.75%
- --------------------------------------------------------------------------------------------
</TABLE>
JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998 7
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
HIGH- SHORT-TERM MONEY
YIELD BOND MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees 0.00% 0.39% 0.22%
Other Expenses (after any fee waivers) 1.00% 0.26% 0.28%
Total Operating Expenses 1.00% 0.65% 0.50%
- ---------------------------------------------------------------------------------------------
<FN>
- ----------------
** Management fees for Growth, Aggressive Growth, Capital Appreciation,
International Growth, Worldwide Growth, Balanced and Equity Income
Portfolios were reduced on July 1, 1997. The reduced management fee for
each of these Portfolios is reflected in the fee table. Other expenses for
each Portfolio other than the Flexible Income Portfolio is net of fee
waivers or reductions from Janus Capital. Fee reductions for the Growth,
Aggressive Growth, Capital Appreciation, International Growth, Worldwide
Growth, Balanced, Equity Income and Growth and Income Portfolios reduce the
management fee to the level of the corresponding Janus retail fund. Other
waivers, if applicable, are first applied against the management fee and
then against other expenses. Without such waivers or reductions, the
Management Fee, Other Expenses and Total Operating Expenses for the
Portfolios would have been 0.74%, 0.04%, and 0.78% for Growth Portfolio;
0.74%, 0.04%, and 0.78% for Aggressive Growth Portfolio; 1.14%, 1.05%, and
2.19% for Capital Appreciation Portfolio; 0.79%, 0.29%, and 1.08% for
International Growth Portfolio; 0.72%, 0.09% and 0.81% for Worldwide Growth
Portfolio; 0.77%, 0.06% and 0.83% for Balanced Portfolio; 0.76%, 4.99%, and
5.75% for Equity Income Portfolio; estimated to be 0.75%, 0.30% and 1.05%
for Growth and Income Portfolio; 0.75%, 2.52% and 3.27% for High-Yield
Portfolio; 0.65%, 0.26% and 0.91% for Short-Term Bond Portfolio; and 0.25%,
0.30% and 0.55% for Money Market Portfolio, respectively. Janus Capital may
modify or terminate the waivers or reductions at any time upon at least 90
days' notice to the Trustees of the Trust.
*** Because the Capital Appreciation and Equity Income Portfolios commenced
operations on May 1, 1997, the "Management Fees," "Other Expenses," and
"Total Operating Expenses" for these Portfolios are annualized. Because the
Growth and Income Portfolio will commence operations on May 1, 1998, the
"Management Fees," "Other Expenses," and "Total Operating Expenses" for
this Portfolio are based on estimates of expenses for its initial operating
year.
</FN>
</TABLE>
The purpose of the preceding Table is to assist the Owner in understanding the
various costs and expenses that an Owner will bear directly and indirectly. The
Table reflects charges and expenses of the Separate Account for the fiscal year
ended December 31, 1997 and charges for the Portfolios of the Trust for the
periods described in the footnotes above. Actual expenses of the Trust may be
higher or lower in the future. Certain states and other governmental entities
may impose a premium tax; the Table does not include any premium tax. For more
information on the charges described in this Table see "CHARGES AND DEDUCTIONS"
on page 18 and the Trust Prospectuses which accompany this Prospectus.
8 JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998
<PAGE>
EXAMPLES
Regardless of whether you surrender or annuitize your Contract at the end of the
applicable time period or if you hold your Contract until the end of the
applicable time period, you would pay the following expenses on a $1,000
investment, assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth Sub-Account $15 $45 $ 78 $171
Aggressive Growth Sub-Account $15 $47 $ 81 $177
Capital Appreciation Sub-Account $20 $62 $107 $231
International Growth Sub-Account $17 $53 $ 92 $199
Worldwide Growth Sub-Account $15 $46 $ 80 $175
Balanced Sub-Account $16 $49 $ 85 $185
Equity Income Sub-Account $20 $62 $107 $230
Growth and Income Sub-Account $17 $53 $ 92 $200
Flexible Income Sub-Account $15 $47 $ 81 $176
High-Yield Sub-Account $18 $54 $ 94 $204
Short-Term Bond Sub-Account $14 $44 $ 75 $165
Money Market Sub-Account $12 $39 $ 67 $148
- --------------------------------------------------------------------------------
</TABLE>
The above examples assume that no transfer charges have been assessed. In
addition, the examples factor in the $30 annual contract charge based on an
estimated average Series Account value per Contract of $39,217 which translates
that charge into an assumed charge at an annual rate of 0.08% of the Series
Account value.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND THE ACTUAL EXPENSES PAID MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS, WHICH MAY BE GREATER OR LESS
THAN THE ASSUMED AMOUNT.
DEATH BENEFIT
If the Annuitant is also the Owner or if the Owner is not a natural person, and
the Annuitant dies at any time before the Maturity Date, a death benefit will be
provided, unless certain elections have been made that would keep the Contract
in force. After the Maturity Date, death benefits will be paid in accordance
with the annuity option then in effect. (See "THE CONTRACT - ACCUMULATION
PROVISIONS - Death Benefits during the Accumulation Period" on page 27 and "THE
CONTRACT - ANNUITY PROVISIONS - Death Benefits after the Maturity Date" on page
32.)
ANNUITY PAYMENT OPTIONS
Annuity payment options are available under the Contract for distribution of the
Annuity Proceeds after the Maturity Date. The Maturity Date may not be earlier
than the end of the fifth Contract Year and cannot be deferred beyond the
Annuitant reaching Attained Age 90. Subject to these limitations, the default
Maturity Date may be changed by the Owner, at any time prior to that date, by
delivering a written request to Western Reserve. (See "THE CONTRACT - ANNUITY
PROVISIONS - Maturity Date and Selection of Annuity Options" on page 29.)
JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998 9
<PAGE>
TRANSFERS
Prior to the Maturity Date, the Owner may transfer any or all of the Annuity
Value from any Sub-Account to the Fixed Account, from the Fixed Account to any
Sub-Account, or among the Sub-Accounts. (For Contracts issued in the State of
Washington, the Fixed Account is not available for transfers of Annuity Value
from the Sub-Accounts.) (See "THE CONTRACT - ACCUMULATION PROVISIONS - Transfers
to and from, and among Allocation Options" on page 24.) Western Reserve will
impose a charge of $10 for each transfer following the first twelve transfers
made during any Contract Year. This charge will not be increased. Certain
restrictions apply to transfers from the Fixed Account. Western Reserve may at
any time revoke or modify the transfer privilege. (See "THE
CONTRACT - ACCUMULATION PROVISIONS - Transfers to and from, and among Allocation
Options" on page 24 and "THE FIXED ACCOUNT - Allocations, Transfers and Partial
Withdrawals" on page 41.)
FIXED ACCOUNT
Annuity Values allocated to the Fixed Account will be held in the general
account of Western Reserve and earn interest at no less than the minimum
guaranteed rate. Matters pertaining to the Fixed Account are discussed in the
section entitled "THE FIXED ACCOUNT" beginning on page 40.
CONDENSED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
PERIOD FROM 9/14/93* TO 12/31/93
-----------------------------------------------------------
NUMBER OF
ACCUMULATION UNIT ACCUMULATION UNIT ACCUMULATION UNITS
VALUE AT BEGINNING VALUE AT END OUTSTANDING AT END
SUB-ACCOUNT OF PERIOD OF PERIOD OF PERIOD
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
International Growth 9.665 11.801 135,202.435
Worldwide Growth 11.991 15.144 732,914.024
Balanced 10.720 13.264 247,488.141
Flexible Income 9.895 12.152 200,443.851
Short-Term Bond 10.038 10.902 111,209.654
- ----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
PERIOD FROM 5/1/95* TO 12/31/95
-----------------------------------------------------------
NUMBER OF
ACCUMULATION UNIT ACCUMULATION UNIT ACCUMULATION UNITS
VALUE AT BEGINNING VALUE AT END OUTSTANDING AT END
SUB-ACCOUNT OF PERIOD OF PERIOD OF PERIOD
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market $10.000 $10.303 167,435.066
- ----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------------------
NUMBER OF
ACCUMULATION UNIT ACCUMULATION UNIT ACCUMULATION UNITS
VALUE AT BEGINNING VALUE AT END OUTSTANDING AT END
SUB-ACCOUNT OF PERIOD OF PERIOD OF PERIOD
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth $13.613 $16.010 1,042,859.684
Aggressive Growth 17.213 18.449 1,020,107.090
International Growth 11.801 15.785 390,010.601
Worldwide Growth 15.144 19.402 1,211,235.201
Balanced 13.264 15.301 348,749.461
Flexible Income 12.152 13.175 166,841.253
Short-Term Bond 10.902 11.255 89,662.336
Money Market 10.303 10.744 567,317.336
- ----------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations of the Sub-Account.
JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998 11
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
PERIOD FROM 5/1/96* TO 12/31/96
-----------------------------------------------------------
NUMBER OF
ACCUMULATION UNIT ACCUMULATION UNIT ACCUMULATION UNITS
VALUE AT BEGINNING VALUE AT END OUTSTANDING AT END
SUB-ACCOUNT OF PERIOD OF PERIOD OF PERIOD
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
High-Yield $10.000 $11.191 58,905.138
- ----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997
-----------------------------------------------------------
NUMBER OF
ACCUMULATION UNIT ACCUMULATION UNIT ACCUMULATION UNITS
VALUE AT BEGINNING VALUE AT END OUTSTANDING AT END
SUB-ACCOUNT OF PERIOD OF PERIOD OF PERIOD
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth $16.010 $19.524 1,514,530.379
Aggressive Growth 18.449 20.651 984,381.141
International Growth 15.785 18.585 821,409.199
Worldwide Growth 19.402 23.547 1,875,176.146
Balanced 15.301 18.562 608,080.467
Flexible Income 13.175 14.629 250,305.069
Short-Term Bond 11.255 11.934 127,534.600
Money Market 10.744 11.226 656,381.666
High-Yield 11.191 12.895 225,866.419
- ----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
PERIOD FROM 5/1/97* TO 12/31/97
-----------------------------------------------------------
NUMBER OF
ACCUMULATION UNIT ACCUMULATION UNIT ACCUMULATION UNITS
VALUE AT BEGINNING VALUE AT END OUTSTANDING AT END
SUB-ACCOUNT OF PERIOD OF PERIOD OF PERIOD
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital Appreciation $10.000 $12.605 209,216.685
Equity Income 10.000 13.412 227,237.196
- ----------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations of the Sub-Account.
Because the Growth and Income Sub-Account did not commence operations until May
1, 1998, there is no condensed financial information for this Sub-Account for
the year ended December 31, 1997.
CALCULATION OF YIELDS
AND TOTAL RETURNS
From time to time, Western Reserve may disclose in advertisements and sales
literature yields and total returns for the Sub-Accounts representing the
Accumulation Period under a Contract. In addition, Western Reserve may, on the
same basis, advertise the effective yield of the Money Market Sub-Account under
a contract. THESE YIELDS AND TOTAL RETURNS ARE BASED ON THE SUB-ACCOUNTS'
HISTORICAL PERFORMANCE ONLY AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE.
For more detailed information about the performance data calculations described
below, see the Statement of Additional Information.
12 JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998
<PAGE>
YIELD
The yield of the Money Market Sub-Account refers to the annualized income
produced by a hypothetical Series Account Value in the Money Market Sub-Account
under a Contract over a specified seven day period. The yield calculation
assumes that the same amount of income produced for that seven day period is
also produced for each seven day period over a fifty-two week period and is
shown as a percentage of the hypothetical Series Account Value. The effective
yield is calculated similarly but, when annualized, the income earned by the
Series Account Value in the Money Market Sub-Account is assumed to be
reinvested. The effective yield will be slightly higher than the yield because
of the compounding effect of this assumed reinvestment of income. Based on the
method of calculation described in the Statement of Additional Information, for
the seven-day period ended December 31, 1997, the current yield and effective
yield for the Money Market Sub-Account were as follows:
Current Yield = 4.63%
Effective Yield = 4.74%
The yield of a Sub-Account other than the Money Market Sub-Account refers to the
income produced by a hypothetical Series Account Value in the other Sub-Account
under a Contract over a specified thirty day period, expressed as a percentage
rate of return for that period. The yield is calculated by assuming that the
income produced by the investment during that thirty day period is produced each
thirty day period over a twelve month period and is shown as a percentage of the
Series Account Value. Based on the method of calculation described in the
Statement of Additional Information, for the thirty-day period ended December
31, 1997, the yield for the following Sub-Account was as follows:
Short-Term Bond Sub-Account = 5.48%
JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998 13
<PAGE>
TOTAL RETURN
The total return of a Sub-Account for a Contract refers to return quotations
assuming a hypothetical Series Account Value in the Sub-Account under a Contract
has been held for various periods of time including, but not limited to, a
period measured from the date the Sub-Account commenced operations. When a
Sub-Account has been in operation for one, five, and ten years, respectively,
the total return for these periods will be provided. The total return quotations
for a hypothetical Series Account Value will represent the average annual
compounded rates of return that would equate an initial Series Account Value of
$1,000 under a Contract to the redemption value of that Series Account Value as
of the last day of each of the periods for which total return quotations are
provided. FOR PURPOSES OF THE TOTAL RETURN QUOTATIONS, THE CALCULATIONS WILL
TAKE INTO ACCOUNT ALL FEES AND CHARGES THAT ARE CHARGED TO ALL CONTRACTS DURING
THE ACCUMULATION PERIOD. (The $30 Annual Contract Charge is not included in
these calculations.) THE CALCULATIONS WILL ALSO ASSUME A COMPLETE REDEMPTION AS
OF THE END OF THE PARTICULAR PERIOD. THE CALCULATIONS WILL NOT REFLECT THE
EFFECT OF ANY PREMIUM TAXES THAT MAY BE APPLICABLE TO A PARTICULAR CONTRACT.
Based on the method of calculation described above and in more detail in the
Statement of Additional Information, the average annual total returns for the
period beginning with the commencement of each Sub-Account to December 31, 1997,
were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
PERIOD FROM INCEPTION ONE YEAR PERIOD THREE YEAR PERIOD
SUB-ACCOUNT TO 12/31/97 ENDED 12/31/97 ENDED 12/31/97
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth 16.83% 21.95% 22.79%
Aggressive Growth 18.36% 11.93% 14.89%
Capital Appreciation 26.05% N/A N/A
International Growth 18.40% 17.74% 24.35%
Worldwide Growth 22.03% 21.36% 25.22%
Balanced 15.46% 21.31% 20.08%
Equity Income 34.12% N/A N/A
Flexible Income 9.25% 11.04% 13.92%
High-Yield 16.46% 15.22% N/A
Short-Term Bond 4.20% 6.03% 5.94%
Money Market 4.43% 4.49% N/A
- ---------------------------------------------------------------------------------------
</TABLE>
The Growth, Aggressive Growth, Worldwide Growth, Balanced, Flexible Income and
Short-Term Bond Sub-Accounts commenced operations on September 14, 1993. The
International Growth Sub-Account commenced operations on May 2, 1994. The Money
Market Sub-Account commenced operations on May 1, 1995. The High-Yield Sub-
Account commenced operations on May 1, 1996. The Capital Appreciation and Equity
Income Sub-Accounts commenced operations on May 1, 1997. Because the Growth and
Income Sub-Account commenced operations on May 1, 1998, there is no performance
information for this Sub-Account.
14 JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998
<PAGE>
OTHER PERFORMANCE DATA
Western Reserve may from time to time disclose average annual total return in
non-standard formats and cumulative total return for the Contracts.
Western Reserve may from time to time also disclose in advertising and sales
literature non-standard yields, standard total returns, and non-standard total
returns for the Trust's Portfolios, which do not include Contract and Series
Account fees and charges. ACTUAL PERFORMANCE OF THE SUB-ACCOUNTS WILL BE LOWER,
HOWEVER, BECAUSE CONTRACT AND SERIES ACCOUNT FEES AND CHARGES MUST BE DEDUCTED.
NON-STANDARD PERFORMANCE DATA WILL ONLY BE DISCLOSED IF THE STANDARD PERFORMANCE
DATA FOR THE REQUIRED PERIODS IS ALSO DISCLOSED.
Western Reserve may compare the performance of each Sub-Account in advertising
and sales literature to the performance of other variable annuity issuers in
general or to the performance of particular types of variable annuities
investing in mutual funds, or investment series of mutual funds with investment
objectives similar to each of the Sub-Accounts whose performance is reported by
Lipper Analytical Services, Inc. ("Lipper"), Variable Annuity Research & Data
service ("VARDS") and Morningstar, Inc. ("Morningstar") or reported by other
services, companies, individuals or other industry or financial publications of
general interest, such as Forbes, Money, The Wall Street Journal, Business Week,
Barron's, Kiplinger's Personal Finance and Fortune. Lipper, VARDS and
Morningstar are independent services which monitor and rank the performance of
variable annuity issuers in each of the major categories of investment
objectives on an industry-wide basis.
Western Reserve is a member of the Insurance Marketplace Standards Association
("IMSA"), and as such may include the IMSA logo and information about IMSA
membership in its advertisements. Companies that belong to IMSA subscribe to a
set of ethical standards covering the various aspects of sales and service for
individually sold life insurance and annuities.
Lipper's and Morningstar's rankings include variable life insurance policies as
well as variable annuity contracts. VARDS rankings compare only variable annuity
contracts. The performance analysis prepared by Lipper, VARDS and Morningstar
each rank such policies and contracts on the basis of total return, assuming
reinvestment of distributions, but do not take sales charges, redemption fees or
certain expense deductions at the separate account level into consideration. In
addition, VARDS prepares risk adjusted rankings, which consider the effects of
market risk on total return performance. This type of ranking provides data as
to which funds provide the highest total return within various categories of
funds defined by the degree of risk inherent in their investment objectives.
Western Reserve may also compare the performance of each Sub-Account in
advertising and sales literature to the Standard & Poor's Index of 500 Common
Stocks, a widely used measure of stock market performance or other widely used
indices. Unmanaged indices may assume the reinvestment of dividends, but usually
do not reflect any "deduction" for the expense of operating or managing an
investment portfolio.
JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998 15
<PAGE>
In addition, Western Reserve may, as appropriate, compare each Sub-Account's
performance to that of other types of investments such as certificates of
deposit, savings accounts and U.S. Treasuries, or to certain interest rate and
inflation indices, such as the Consumer Price Index, which is published by the
U.S. Department of Labor and measures the average change in prices over time of
a fixed "market basket" of certain specified goods and services. Similar
comparisons of Sub-Account performance may also be made with appropriate indices
measuring the performance of a defined group of securities widely recognized by
investors as representing a particular segment of the securities markets. For
example, Sub-Account performance may be compared with Donoghue Money Market
Institutional Averages (money market rates), Lehman Brothers Corporate Bond
Index (corporate bond interest rates) or Lehman Brothers Government Bond Index
(long-term U.S. Government obligation interest rates).
PUBLISHED RATINGS
Western Reserve may from time to time publish in advertisements, sales
literature and reports to Owners, the ratings and other information assigned to
it by one or more independent rating organizations such as A.M. Best Company
("A.M. Best"), Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Insurance Rating Services ("Standard & Poor's"), and Duff & Phelps Credit Rating
Co. ("Duff & Phelps"). A.M. Best's and Moody's ratings reflect their current
opinion of the relative financial strength and operating performance of an
insurance company in comparison to the norms of the life/health insurance
industry. Standard & Poor's and Duff & Phelps provide ratings which measure the
claims-paying ability of insurance companies. These ratings are opinions of an
operating insurance company's financial capacity to meet the obligations of its
insurance policies in accordance with their terms. Claims-paying ability ratings
do not refer to an insurer's ability to meet non-policy obligations (i.e.,
debt/commercial paper).
WESTERN RESERVE, THE SERIES
ACCOUNT, AND THE TRUST
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
Western Reserve was originally incorporated under the laws of Ohio on October 1,
1957. Western Reserve is engaged in the business of writing life insurance
policies and annuity contracts. Western Reserve is admitted to do business in 49
states and the District of Columbia. The Administrative Office of Western
Reserve is located in Largo, Florida; however, the mailing address is P.O. Box
9052, Clearwater, FL 33758-9052. Western Reserve is wholly-owned by First AUSA
Life Insurance Company ("First AUSA"), a stock life insurance company which is
wholly-owned by AEGON USA, Inc. ("AEGON USA"). AEGON USA is a financial services
holding company whose primary emphasis is on life and health insurance and
annuity and investment products. AEGON USA is a wholly-owned indirect subsidiary
of AEGON nv, a Netherlands corporation, which is a publicly traded international
insurance group.
16 JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998
<PAGE>
WRL SERIES ANNUITY ACCOUNT B
The Series Account was established by Western Reserve as a separate account and
a unit investment trust on May 24, 1993. The Series Account meets the definition
of a "separate account" under the Federal securities laws. The Series Account
will receive and invest Net Purchase Payments paid under the Contracts. In
addition, the Series Account may be used for other variable annuity contracts
issued by Western Reserve.
Although the assets of the Series Account belong to Western Reserve, Ohio
insurance law provides that the assets in the Series Account attributable to
variable annuity contracts are not chargeable with liabilities arising out of
any other business of Western Reserve. However, the assets of the Series Account
are available to cover the liabilities of the general asset account of Western
Reserve to the extent that the Series Account's assets exceed the liabilities
arising under variable annuity contracts supported by it.
The Series Account is currently divided into various Sub-Accounts. Each
Sub-Account invests exclusively in shares of a single Portfolio of the Trust.
Income and both realized and unrealized gains or losses from the assets of each
Sub-Account are credited to or charged against that Sub-Account without regard
to income, gains or losses from any other Sub-Account or arising out of any
other business of Western Reserve. Western Reserve may add, delete or substitute
investments held by the Sub-Accounts, and Western Reserve reserves the right to
add or remove Sub-Accounts. Western Reserve further reserves the right to change
the investment objective of any Sub-Account, subject to applicable law as
described in the Statement of Additional Information.
JANUS ASPEN SERIES
The Series Account currently invests only in shares of the Trust, a series
mutual fund that is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940, as amended (the "1940 Act"),
as an open-end management investment company.
The Trust currently has twelve Portfolios: the Growth Portfolio, the Aggressive
Growth Portfolio, the Capital Appreciation Portfolio, the International Growth
Portfolio, the Worldwide Growth Portfolio, the Balanced Portfolio, the Equity
Income Portfolio, the Growth and Income Portfolio, the Flexible Income
Portfolio, the High-Yield Portfolio, the Short-Term Bond Portfolio and the Money
Market Portfolio. (Effective May 1, 1998, the Short-Term Bond Portfolio will not
be available to new investors and it is anticipated that this Portfolio will be
liquidated once required regulatory approvals are obtained.) The assets of each
Portfolio are held separate from the assets of the other Portfolios, and each
Portfolio has different investment objectives and policies. Thus, each Portfolio
operates as a separate investment vehicle, and the income or losses of one
Portfolio are unrelated to that of any other Portfolio. Except for the
Aggressive Growth Portfolio, each Portfolio is a diversified fund.
Janus Capital serves as Investment Adviser to each Portfolio. There is no
assurance that any Portfolio will achieve its investment objective. More
detailed information, including a description of risks, can be found in the
Prospectuses for the Trust, which should be read carefully.
JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998 17
<PAGE>
The investment objectives and policies of certain Portfolios are similar to the
investment objectives and policies of other portfolios that may be managed by
the same investment adviser or manager. The investment results of the
Portfolios, however, may be higher or lower than the results of such other
portfolios. There can be no assurance, and no representation is made, that the
investment results of any of the Portfolios will be comparable to the investment
results of any other portfolio, even if the other portfolio has the same
investment adviser or manager.
Janus Capital manages the Trust's assets in accordance with policies, programs
and guidelines established by the Trustees of the Trust. Janus Capital, located
at 100 Fillmore Street, Denver, Colorado 80206, has been engaged in the
management of investment funds for over 27 years.
Shares of the Trust may in the future be sold to separate accounts of other
insurance companies to fund benefits under variable life insurance policies or
variable annuity contracts. Shares of the Trust may also be sold to retirement
plans qualifying under Section 401 of the Internal Revenue Code. It is possible
that, in the future, it may become disadvantageous to one or more classes of
investors for variable life insurance separate accounts, variable annuity
separate accounts of various insurance companies and/or retirement plans to
invest in the Trust simultaneously. Neither Western Reserve nor the Trust
currently foresees any such disadvantages or conflicts. After being notified by
Western Reserve or another insurance company of a potential or existing
conflict, the Trustees will determine if a material conflict exists and what
action, if any, it will take. If the Trustees determine that a conflict exists,
the Trustees may require one or more insurance company separate accounts or
retirement plans to withdraw its investments in one or more portfolios and to
substitute shares of another portfolio. As a result, a portfolio may be forced
to sell securities at disadvantageous prices. In addition, the Trustees may
refuse to permit the Trust to sell shares of any portfolio to any separate
account or may suspend or terminate the offering of any portfolio if such action
is required by law or regulatory authority or the Trustees determine such action
is in the best interest of the portfolio. If the Trustees were to conclude that
separate mutual funds should be established for variable life and variable
annuity separate accounts, Western Reserve may bear a portion of the attendant
expenses, but variable life insurance policyowners, variable annuity contract
owners and plan participants would no longer have the economies of scale
resulting from a larger combined fund.
CHARGES AND DEDUCTIONS
Certain charges will be deducted in connection with the Contracts to compensate
Western Reserve for (1) administering the Contracts; (2) assuming certain risks
in connection with the Contracts; and (3) incurring expenses in distributing the
Contracts. The nature and amount of these charges are described more fully
below. Western Reserve also reserves the right to charge a fee for providing
extraordinary services to individual Contract Owners. For example, a $25 charge
will be imposed to provide a duplicate Contract.
18 JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998
<PAGE>
NO SALES CHARGE
No deductions for sales expenses are made from Purchase Payments or from
withdrawals or Surrenders. However, any Surrender or partial withdrawal may be
subject to taxation, and the Owner should, therefore, consult with his or her
tax adviser before requesting any Surrender or partial withdrawal. (See "FEDERAL
TAX MATTERS - Taxation of Annuities" on pages 35-37 and "- Individual Retirement
Annuities" on page 37.)
Western Reserve will cover certain expenses it advances, such as the cost of
printing prospectuses and sales literature and any advertising costs, from its
general account assets.
TRANSFER CHARGE
After twelve free transfers of Annuity Value among the Sub-Accounts during any
one Contract Year, each additional transfer will be subject to a Transfer Charge
of $10, which will be deducted from the amount transferred to compensate Western
Reserve for the costs of the transfer. All transfers made on any one day will be
considered a single transfer, with any transfer charge allocated equally.
Western Reserve may, at any time, revoke or modify this transfer privilege. The
Transfer Charge may not be increased.
MORTALITY AND EXPENSE RISK CHARGE
Western Reserve will deduct a daily Mortality and Expense Risk Charge from the
Series Account at an annual rate of 0.50% of the average daily net assets of the
Series Account. Western Reserve assumes two mortality risks: (1) that the
annuity rates under the Contracts cannot be changed to the detriment of Owners
even if Annuitants live longer than projected; and (2) Western Reserve may be
obligated to pay a death benefit claim in excess of a Contract's Cash Value.
(See "THE CONTRACT - ANNUITY PROVISIONS - Improved Annuity Rates" on page 32 and
"THE CONTRACT - ACCUMULATION PROVISIONS - Death Benefits during the Accumulation
Period" on page 27.) Western Reserve also assumes an expense risk through its
guarantee not to increase the charges for issuing and administering the
Contracts and the Series Account, regardless of its actual expenses.
This charge is deducted from the Series Account both during the Accumulation
Period and after the Maturity Date. The Mortality and Expense Risk Charge will
not be assessed against the Fixed Account Value or to monies that have been
applied to purchase an annuity option under the Fixed Account Annuity Payments
provisions.
ANNUAL CONTRACT CHARGE
On each Anniversary through the Maturity Date, Western Reserve will deduct an
Annual Contract Charge of $30 as partial compensation for the cost of providing
administrative services under the Contracts. The Annual Contract Charge is
deducted from each Sub-Account and the Fixed Account in proportion to the value
each bears to the Annuity Value. If the Annuity Value is surrendered other than
on an Anniversary, a full $30 fee will be deducted.
JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998 19
<PAGE>
Even if administrative expenses of the Series Account increase, Western Reserve
guarantees that it will not increase the amount of the Annual Contract Charge.
Deduction of the Annual Contract Charge is currently waived when the Annuity
Value on the Anniversary is equal to or greater than $25,000. Western Reserve
reserves the right to modify this waiver upon 30 days written notice to Owners.
ADMINISTRATIVE CHARGE
Western Reserve deducts a daily Administrative Charge from values remaining in
the Series Account at an annual rate of 0.15% of the average daily net assets of
the Series Account for the cost of providing administrative services under the
Contracts and the Account. This charge is deducted from the Series Account both
during the Accumulation Period and after the Maturity Date.
Even if administrative expenses of the Contract and the Series Account increase,
Western Reserve guarantees that it will not increase the amount of the
Administrative Charge.
PREMIUM TAXES
Certain states and other governmental entities may impose a premium tax, ranging
up to 3.5% of Purchase Payments. If applicable, and if Western Reserve has
incurred or reasonably expects to incur expenses in respect of premium taxes,
the tax will be deducted, either from the Purchase Payment when received, from
amounts partially withdrawn or surrendered, from death benefit proceeds, or from
the amount applied to an annuity at the time annuity payments commence. Western
Reserve will deduct any applicable premium taxes when it incurs them, but
reserves the right to defer deduction to a later date as long as such deferral
is equitable to Owners.
Premium tax rates are subject to change by the respective state legislatures,
administrative interpretations, or judicial acts. The amount of any such tax
will depend on, among other things, the Owner's state of residence, the status
of Western Reserve in that state, and the insurance tax laws of such state.
DEDUCTIONS FOR OTHER TAXES
Currently no charge is made to the Series Account for Federal income taxes
attributable to the Series Account. Western Reserve may, however, make such a
charge in the future subject to obtaining any necessary regulatory approvals.
Charges for any other applicable taxes including any tax or other economic
burden resulting from the application of tax laws that Western Reserve
determines to be properly attributable to the Series Account may also be made.
(See "FEDERAL TAX MATTERS - Company Tax Status" on page 35.)
EXPENSES OF THE TRUST
Because the Series Account purchases shares of the Trust, the net assets of the
Series Account will reflect the investment advisory fee and other expenses
incurred by the Trust, as described in the Trust's Prospectus.
20 JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998
<PAGE>
THE CONTRACT -
ACCUMULATION PROVISIONS
PURCHASE PAYMENTS
Owners may make Purchase Payments as frequently as they elect. Purchase Payments
after the initial Purchase Payment are payable at Western Reserve's
Administrative Office. The initial Purchase Payment generally must accompany the
application, and must be at least $2,500 unless Western Reserve consents to a
smaller amount. Subsequent Purchase Payments are not required but may be made at
any time and in any amount provided that each payment is for a minimum of $100,
unless Western Reserve consents to a smaller amount and further provided that
total Purchase Payments in any Contract Year do not exceed $1,000,000, unless
Western Reserve consents to a larger amount. If elected in the application or by
subsequent written request from the Owner, Western Reserve will bill Owners for
additional periodic Purchase Payments on a monthly bank draft basis. Western
Reserve may reject any application or Purchase Payment for any reason permitted
by law.
As an accommodation to Owners, Western Reserve will accept transmittal of both
initial Purchase Payments of at least $2,500 and subsequent Purchase Payments of
at least $1,000 by wire transfer. For initial Purchase Payments, the wire
transfer must be accompanied by a simultaneous telephone facsimile transmission
of an application ("FAXED Application"). Initial Purchase Payments accepted via
wire transfer with FAXED Application will be invested at the value next
determined following receipt. Initial Purchase Payments made by wire transfer
not accompanied by simultaneous FAXED Application, or accompanied by an
incomplete FAXED Application, will be retained for a period up to five business
days while Western Reserve attempts to obtain the FAXED Application or complete
the essential information required to establish the Contract and allocate the
initial Purchase Payment at the Accumulation Unit Value which will be determined
after receipt of the FAXED Application or information necessary to complete the
application. If Western Reserve cannot obtain the FAXED Application or essential
information within five business days, Western Reserve will return the initial
Purchase Payment to the applicant, unless the applicant consents to allow
Western Reserve to retain the initial Purchase Payment until the required FAXED
Application or essential information is received. When the FAXED Application
contains all information necessary to issue the Contract and allocate the Net
Purchase Payment, but the FAXED Application has not been signed by the Owner,
Western Reserve will issue the Contract and allocate the Net Purchase Payment as
indicated in the FAXED Application. At the same time, Western Reserve will also
electronically prepare a new application form, containing the same information
received on the FAXED Application, for delivery with the Contract to the Owner.
Upon delivery, the Owner will sign the electronically prepared application,
which will be retained by Western Reserve.
In the event the original application with original signature is later received
and the allocation instructions in that application are, for any reason,
inconsistent with those previously designated on the FAXED Application, the
initial Purchase Payment will be reallocated in accordance with the allocation
instructions in the application with original
JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998 21
<PAGE>
signature at the Accumulation Unit Value next determined after receipt of such
application.
Owners wishing to make payments via bank wire should instruct their banks to
wire Federal Funds as follows to:
Barnett Bank of Pinellas County
ABA # 063000047
For credit to: Western Reserve Life
Account #: 1263627596
Owner's Name:
Contract Number:
Attention: Annuity Accounting
Fax Number: (813) 588-1620
Western Reserve may reject any application or Purchase Payment for any reason
permitted by law.
NET PURCHASE PAYMENTS
The Net Purchase Payment is equal to the Purchase Payment less any premium
taxes. (See "CHARGES AND DEDUCTIONS - Premium Taxes" on page 20.) Initial and
subsequent Net Purchase Payments are allocated according to the Owner's
direction among the Sub-Accounts of the Series Account, to the Fixed Account, or
to a combination of both. Western Reserve does not currently require that
allocation of Net Purchase Payments to an Account meet a minimum percentage.
Western Reserve does reserve the right to limit allocation of Net Purchase
Payments to any Account to no less than 10% of each Net Purchase Payment. No
fractional percentages are permitted. (For Contracts issued in the State of
Washington, the Fixed Account is not available for allocation of Net Purchase
Payments.) The Owner may change the allocation of subsequent Purchase Payments
at any time upon written request to Western Reserve, or by calling
1-800-504-4440. Western Reserve reserves the right to limit such change to once
each Contract Year. Upon allocation to the Series Account, Net Purchase Payments
are converted into units of the appropriate Sub-Account based upon the
Accumulation Unit Value in that Sub-Account on or following the Valuation Date
on which the Purchase Payment is received at Western Reserve's Administrative
Office. (See "Accumulation Unit Value," below.) If the Contract application and
other information necessary for processing the request to apply the Purchase
Payment (collectively "application") are complete upon receipt, Western Reserve
will accept the application and apply the initial Net Purchase Payment within
two business days of receipt. If it is incomplete, Western Reserve will attempt
to have it properly completed within five business days of receipt, and if
unable to do so, Western Reserve will inform the prospective purchaser of the
reasons that the application is incomplete and request that the prospective
purchaser consent to Western Reserve retaining the Purchase Payment until the
application is properly completed. If such consent is not obtained, Western
Reserve will immediately return the entire Purchase Payment. Once the
application is complete, Western Reserve will accept it and apply the initial
Net Purchase Payment within two business days.
22 JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998
<PAGE>
ACCUMULATION UNIT VALUE
The Accumulation Unit Value will vary from one Valuation Period to the next
depending on the investment results experienced by each Sub-Account. When the
Sub-Accounts were first established, the initial Accumulation Unit Value for
each Sub-Account was arbitrarily set at $10. The Accumulation Unit Value for
each Sub-Account at the end of a Valuation Period is the result of:
1. The total value of the assets held in the Sub-Account. This value is
determined by multiplying the number of shares of the designated Fund Portfolio
owned by the Sub-Account times the Portfolio's net asset value per share; minus
2. The accrued daily percentage for the Administrative Charge and Mortality and
Expense Risk Charge multiplied by the net assets of the Sub-Account; minus
3. The accrued amount of reserve for any taxes that are determined by Western
Reserve to have resulted from the investment operations of the Sub-Account;
divided by
4. The number of outstanding units in the Sub-Account.
The Mortality and Expense Risk Charge is deducted at an annual rate of 0.50% of
net assets for each day in the Valuation Period and compensates Western Reserve
for certain mortality and expense risks. The Administrative Charge is deducted
at an annual rate of 0.15% of net assets for each day in the Valuation Period
and compensates Western Reserve for certain administrative expenses. (See
"CHARGES AND DEDUCTIONS - Mortality and Expense Risk Charge" on page 19 and
" - Administrative Charge" on page 20.) The Accumulation Unit Value may
increase, decrease, or remain the same from Valuation Period to Valuation
Period.
COMPUTING SUB-ACCOUNT VALUE
At the end of any Valuation Period, a Sub-Account's value is equal to the number
of units that the Contract has in the Sub-Account, multiplied by the
Accumulation Unit Value of that Sub-Account.
The number of units that a Contract has in each Sub-Account is equal to:
1. The initial units purchased on the Contract Date; plus
2. Units purchased at the time additional Net Purchase Payments are allocated to
the Sub-Account; plus
3. Units purchased through transfers from another Sub-Account or the Fixed
Account; minus
4. Any units that are redeemed to pay for partial withdrawals; minus
5. Any units that are redeemed as part of a transfer to another Sub-Account or
the Fixed Account; minus
6. Any units that are redeemed to pay the Annual Contract Charge, any premium
taxes and any Transfer Charge.
JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998 23
<PAGE>
PORTFOLIO SHARE NET ASSET VALUE
The net asset value per share of each Portfolio of the Trust is determined, once
daily, as of the close of the regular session of business on the New York Stock
Exchange (usually 4:00 p.m., Eastern time), on each day the New York Stock
Exchange is open.
TRANSFERS TO AND FROM, AND AMONG ALLOCATION OPTIONS
Before the Maturity Date, the Owner may, at any time, transfer amounts among
Sub-Accounts or from Sub-Accounts to the Fixed Account. (For Contracts issued in
the State of Washington, the Fixed Account is not available to receive Annuity
Value transferred from the Sub-Accounts.) Transfers may also be made from the
Fixed Account to the Sub-Accounts, subject to certain restrictions. (See "THE
FIXED ACCOUNT - Allocations, Transfers and Partial Withdrawals" on page 41.)
Transfers are not available if the Owner has elected Systematic Exchanges.
The amount of Annuity Value available for transfer from any Sub-Account or the
Fixed Account, is determined at the end of the Valuation Period during which the
transfer request is received at Western Reserve's Administrative Office. As
explained in the previous paragraph, the net asset value for each share of the
corresponding Portfolio of any Sub-Account is determined, once daily, as of the
close of the regular business session of the New York Stock Exchange (usually
4:00 p.m., Eastern time), which coincides with the end of each Valuation Period.
Therefore, any transfer request received after the close of the regular session,
on any day the New York Stock Exchange is open for business will be processed
utilizing the net asset value for each share of the applicable Portfolio
determined as of the close of the regular business session, on the next day the
New York Stock Exchange is open for business.
The amount available for transfer from the Fixed Account will be determined in
the same manner. Owners may make transfer requests in writing, or by telephone.
Written requests must be in a form acceptable to Western Reserve. Western
Reserve automatically provides Owners with the ability to make transfers by
telephone. All telephone transfers should be made by calling the toll-free
number: 1-800-504-4440.
Western Reserve will not be liable for complying with telephone instructions it
reasonably believes to be authentic, nor for any loss, damage, cost or expense
in acting on such telephone instructions, and Owners will bear the risk of any
such loss. Western Reserve will employ reasonable procedures to confirm that
telephone instructions are genuine. If Western Reserve does not employ such
procedures, it may be liable for losses due to unauthorized or fraudulent
instructions. Such procedures may include, among others, requiring forms of
personal identification prior to acting upon telephone instructions, providing
written confirmation of such transactions to Owners, and/or tape recording of
telephone transfer request instructions received from Owners.
Excessive trading activity can disrupt portfolio management strategy and
increase portfolio expenses, which are borne by all Owners participating in the
portfolio, regardless of their transfer activity. Therefore, Western Reserve
may, at any time, limit the number of transfers permitted, revoke or otherwise
modify the transfer privilege. Western Reserve ordinarily will effect transfers
and determine all values in connection with transfers at the end of the
Valuation Period during which the transfer request is received at Western
Reserve's Administrative Office. Western Reserve will impose a
24 JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998
<PAGE>
$10 charge for each transfer after the first twelve transfers during any one
Contract Year. (See "CHARGES AND DEDUCTIONS - Transfer Charge" on page 19.)
SYSTEMATIC EXCHANGES
The Owner may direct Western Reserve to automatically transfer specified amounts
from the Money Market Sub-Account, the Flexible Income Sub-Account, the
Short-Term Bond Sub-Account, the High-Yield Sub-Account, the Fixed Account or
any combination of these Accounts on a monthly basis to any other Sub-Account(s)
within the Series Account. This service is intended to allow the Owner to
utilize "Systematic Exchanges," also known as "Dollar Cost Averaging," a
long-term investment method which provides for regular, level investments over
time. Western Reserve makes no guarantees that Systematic Exchanges will result
in a profit or protect against loss.
To qualify for Systematic Exchanges, a minimum of $2,500 must be allocated to
each Sub-Account from which transfers will be made and at least $100, in the
aggregate, must be transferred each month. These $2,500 allocations can be made
by an initial or subsequent investment or by transferring amounts into the Money
Market, Flexible Income, Short-Term Bond and/or High-Yield Sub-Account from the
other Sub-Accounts or the Fixed Account within the Contract. Transfers from the
Fixed Account may be subject to certain restrictions. (See "THE FIXED
ACCOUNT - Allocations, Transfers and Partial Withdrawals" on page 41.)
A written election of this service, on a form provided by Western Reserve, must
be completed by the Owner in order to begin transfers. Once elected, transfers
from the Money Market, Flexible Income, Short-Term Bond and/or High-Yield
Sub-Account will be processed monthly until the entire value of each Sub-Account
from which transfers are made is completely depleted or the Owner instructs
Western Reserve in writing to cancel the monthly transfers. For example, if
$15,000 is allocated to the Flexible Income Sub-Account and $10,000 is allocated
to the Short-Term Bond Sub-Account and transfers of $500 are made each month
from each of these Sub-Accounts to the Growth Sub-Account, transfers of $500 per
month will continue to be made from the Flexible Income Sub-Account even though
transfers from the Short-Term Bond Sub-Account cease as a result of depletion of
value. There is no charge for Systematic Exchanges. However, each transfer which
occurs under Systematic Exchanges will be counted towards the twelve free
transfers allowed during each Contract Year. (See "CHARGES AND
DEDUCTIONS - Transfer Charge" on page 19.) Western Reserve reserves the right to
discontinue offering Systematic Exchanges upon 30 days' written notice to
Owners. Systematic Exchanges are not available if the Owner has elected
Systematic Partial Withdrawals.
PARTIAL WITHDRAWALS AND SURRENDERS
1. PARTIAL WITHDRAWALS. Prior to the earlier of the Maturity Date or the death
of the Annuitant (when no Contingent Annuitant has been named), the Owner may
partially withdraw a portion of the Series Account Value upon written request,
complete with all necessary information, to Western Reserve's Administrative
Office. Unless Western Reserve consents, no partial withdrawal is permitted if
the Cash Value would be reduced below $2,500. No partial withdrawals from the
Fixed Account may be made without the consent of Western Reserve. (See "THE
FIXED ACCOUNT - Allocations, Transfers and
JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998 25
<PAGE>
Partial Withdrawals" on page 41.) All requests for partial withdrawals are
processed at the Accumulation Unit Value for each Sub-Account next computed
after receipt and acceptance of the request by Western Reserve at its
Administrative Office. Western Reserve will cancel units equal to the amount
requested from each Sub-Account and will pay the partial withdrawal amount
requested less any applicable premium taxes. (See "CHARGES AND
DEDUCTIONS - Premium Taxes" on page 20.) The Sub-Accounts for a partial
withdrawal may be specified and the amount requested to be withdrawn from each
specified Sub-Account may not exceed the value of that Sub-Account. If not
specified, partial withdrawals will be based on the Owner's current allocation
election.
2. SYSTEMATIC PARTIAL WITHDRAWALS. The Owner may elect in writing on a form
provided by Western Reserve to partially withdraw from the Series Account in
equal monthly payments ("Systematic Partial Withdrawals") of at least $200 per
month. The first withdrawal will occur during the month which follows receipt of
the form, providing the form is received by the 25th day of the month. If
Systematic Partial Withdrawals are elected at the time of application for a
Contract, a minimum initial Purchase Payment of at least $25,000 must accompany
the application, unless Western Reserve consents to a smaller amount. A
subsequent election is subject to the Contract then having a minimum of $25,000
of Cash Value. Western Reserve will pay the Systematic Partial Withdrawal amount
requested and cancel units equal to the amount withdrawn from the Sub-Accounts
in the same manner as the current Net Purchase Payment allocation instructions,
except no Systematic Partial Withdrawals are permitted from the Fixed Account.
The amount to be partially withdrawn from each Sub-Account may not exceed the
Cash Value of the Sub-Account. Western Reserve will not process a Systematic
Partial Withdrawal if the Cash Value for the entire Contract would be reduced
below $5,000.
Systematic Partial Withdrawals may be discontinued by the Owner at any time by
notifying Western Reserve in writing. Western Reserve reserves the right to
discontinue offering Systematic Partial Withdrawals upon 30 days' written notice
to Owners. Generally, under a Non-Qualified Contract, Systematic Partial
Withdrawals, like other distributions prior to the Maturity Date, are first
treated as taxable income to the extent that the Annuity Value immediately
before a withdrawal exceeds the "investment in the contract" at that time. Any
additional amount withdrawn is not taxable. Further, under a Non-Qualified
Contract, a 10% Federal income tax penalty may be imposed on the taxable portion
of a Systematic Partial Withdrawal made prior to the Owner's age 59 1/2, unless
certain exceptions apply. Other penalties may apply to Qualified Contracts. The
Owner should, therefore, consult with his or her tax adviser before requesting
any Systematic Partial Withdrawals. (See "FEDERAL TAX MATTERS - Taxation of
Annuities" on pages 35-37.)
3. SURRENDERS. The Owner may completely surrender the Contract at any time prior
to the Maturity Date. All requests for Surrender are processed at the
Accumulation Unit Value for each Sub-Account next computed after receipt and
acceptance of the Surrender request by Western Reserve at its Administrative
Office. Western Reserve will deduct the $30 Annual Contract Charge and any
applicable premium taxes from the Surrender proceeds.
26 JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998
<PAGE>
4. PARTIAL WITHDRAWALS AND SURRENDERS. The amount of any partial withdrawal or
Surrender will be paid promptly, and in any event within seven days of receipt
of the request, complete with all necessary information at Western Reserve's
Administrative Office, except that Western Reserve reserves the right to defer
the right of partial withdrawal or Surrender under certain circumstances. (See
"OTHER MATTERS RELATING TO THE CONTRACT - Contract Payments" on page 33.) Under
Non-Qualified Contracts, Western Reserve will withhold from each partial
withdrawal, systematic partial withdrawal or surrender 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.
When Western Reserve incurs extraordinary charges, such as wire transfers or
overnight mail expenses, for expediting delivery of a partial withdrawal or
Surrender payment to a Contract Owner, Western Reserve will deduct such charges
from the payment. The current charge for a wire transfer is $15. The current
charge for overnight delivery is $20. For the protection of Owners, all requests
for partial withdrawals or surrenders of more than $100,000, or where the
partial withdrawal or surrender proceeds are to be sent to an address other than
the address of record will require a signature guarantee. All required
guarantees of signatures must be made by a national or state bank, a member firm
of a national stock exchange or any other institution which is an eligible
guarantor institution as defined by rules and regulations of the SEC. If the
Owner is a corporation, partnership, trust or fiduciary, evidence of the
authority of the person seeking redemption is required before the request for
withdrawal is accepted, including withdrawals under $100,000. For information,
Owners may call (800) 504-4440. Partial withdrawals and Surrenders may be
subject to tax including a 10% Federal income tax penalty. (See "FEDERAL TAX
MATTERS - Taxation of Annuities" on pages 35-37.) For certain Qualified
Contracts, a partial withdrawal may require the consent of the Owner's spouse
under the Code and the regulations promulgated thereunder by the Treasury
Department (the "Treasury Regulations"). (See "FEDERAL TAX MATTERS - Individual
Retirement Annuities" on page 37.)
DEATH BENEFITS DURING THE ACCUMULATION PERIOD
1. GENERAL. In general, if the Annuitant dies during the Accumulation Period and
the Owner is a natural person other than the Annuitant, the Owner will
automatically become the new Annuitant and the Contract will continue in force
and no death benefit will be payable to the Beneficiary. If the Annuitant dies
during the Accumulation Period and an Owner is either the same individual as the
Annuitant or other than a natural person, Western Reserve will pay the death
benefit proceeds to the Beneficiary in a lump sum upon receipt of due proof of
death unless a written Alternative Election, as described below, is made.
2. AMOUNT OF DEATH BENEFIT PROCEEDS. If the Annuitant dies during the
Accumulation Period and an Owner is either the same person as the Annuitant or
other than a natural person, the death benefit proceeds, if payable, will be the
greater of: (i) the Annuity Value as of the date Western Reserve receives due
proof of death and a written election as to the method of payment, as described
above; or (ii) the excess of (a) the amount of Purchase Payments paid less (b)
any amounts partially withdrawn from the Contract to pay for partial
withdrawals.
JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998 27
<PAGE>
3. ALTERNATIVE ELECTIONS. If the Beneficiary is entitled to receive the death
benefit proceeds as in 2. above and is the spouse of the deceased Annuitant,
then the spousal Beneficiary may elect to become the new Owner and Annuitant and
keep the Contract in force in lieu of receiving the death benefit proceeds.
If the Beneficiary is not the spouse of the deceased Annuitant and is entitled
to receive the death benefit proceeds, the Beneficiary may elect, in lieu of a
lump sum payment, one of the following options that provide for complete
distribution of the death benefit proceeds and termination of the Contract: (i)
within five years of the date of such Annuitant's death; (ii) over the lifetime
of the Beneficiary; or (iii) over a period that does not exceed the life
expectancy of such Beneficiary, as defined by the Code and the Treasury
Regulations. Options (ii) and (iii) may be elected only if the Beneficiary is a
natural person and payments start within one year of the date of the Annuitant's
death. (For a more detailed explanation of these requirements, see "FEDERAL TAX
MATTERS - Additional Considerations" on page 38.) Multiple Beneficiaries may
choose individually among any of the three options.
Under options (i) and (iii) above, the Annuity Value as of the date Western
Reserve receives due proof of death and a written election as to the method of
payment, if any, will be adjusted to equal the death benefit proceeds, as
described below, and the Contract will remain in force as a deferred annuity
until the end of the elected distribution period.
Under option (i) above, Western Reserve will:
- - Allow the Beneficiary, at the time of electing (i), to make a partial
withdrawal. Further partial withdrawals during the duration of the five-year
period are not permitted;
- - Allow the Beneficiary, at the time of electing (i), to make "one-time"
transfer of Contract values among Sub-Accounts and to the Fixed Account, and
transfers from the Fixed Account to the Sub-Accounts;
- - Deduct the Annual Contract Charge during the duration of the five-year period;
- - Not allow annuitization during or at the end of the five-year period.
Distribution of all Contract values will be made in a lump sum;
- - In the event of the death of the Beneficiary prior to the end of the five-year
period, pay remaining Contract value, according to its value at the time of
payment, to the Beneficiary's estate, unless a Contingent Beneficiary has been
named by the Owner, in which event payment will be made to the Contingent
Beneficiary. The Beneficiary is not entitled to name his or her own
beneficiary of the Contract's value.
Under option (ii), the Maturity Date will be changed to the date Western Reserve
receives due proof of death and a written election as to the method of payment,
if any, and the death benefit proceeds will be used to purchase annuity payments
under the annuity provisions of the Contract. (See "THE CONTRACT - ANNUITY
PROVISIONS" on page 29.)
28 JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998
<PAGE>
4. DEATH OF AN OWNER WHO IS NOT AN ANNUITANT. If an Owner is not the same
individual as the Annuitant and dies before the Annuitant:
(a)If no Successor Owner has been named or, if named, is no longer alive, the
Owner's estate will become the new Owner. The Cash Value must be distributed
within five years of the former Owner's death; or
(b)If a Successor Owner has been named, is alive and is the Owner's spouse, the
Contract will continue with the spouse as the new Owner; or
(c)If a Successor Owner has been named, is alive and is not the Owner's spouse,
the Successor Owner will become the new Owner. The Cash Value must be
distributed either:
(1) within five years of the former Owner's death; or
(2) over the lifetime of the new Owner, if a natural person, with payments
beginning within one year of the former Owner's death; or
(3) over a period that does not exceed the life expectancy (as defined by
the Code and Regulations adopted under the Code) of the new Owner, if a
natural person, with payments beginning within one year of the former
Owner's death.
5. QUALIFIED CONTRACTS. If a Qualified Contract is issued to a retirement plan,
similar provisions will apply upon the death of the plan participant. However,
the required distribution rules are more complex in the case of a Qualified
Contract held by a plan. Plan participants should consult a qualified pension or
tax adviser concerning the operation of these rules.
THE CONTRACT -
ANNUITY PROVISIONS
MATURITY DATE AND SELECTION OF ANNUITY OPTIONS
Provided the Contract is still in force, annuity payments will begin on the
Maturity Date, which is, for Non-Qualified Contracts the Anniversary nearest the
Annuitant's Attained Age 90. For Qualified Contracts, distributions must begin
no later than April 1 of the calendar year following the calendar year in which
the Owner reaches age 70 1/2. Roth IRAs under Section 408A do not require
distributions at any time prior to the Owner's death. However, the Owner may
change the Maturity Date at any time prior to the Maturity Date by written
request. Any new Maturity Date must be at least five years after the Contract
Date, and the Attained Age of the Annuitant as of the new Maturity Date cannot
be greater than 90. After the Maturity Date, no additional Purchase Payments,
partial withdrawals, transfers, full Surrenders, or change of Annuitants or
annuity options may be made under the Contract. The Qualified Contract is
designed for use with retirement plans that qualify for special Federal income
tax treatment under Section 408 of the Code. A tax adviser should be consulted
about the use of a Qualified Contract with qualified plans, including the
specified minimum distribution rules applicable to such plans.
Annuity Payments will be paid under Option D (described on page 31), with 120
payments guaranteed, unless the Owner elects otherwise. The Owner may change
JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998 29
<PAGE>
the annuity option by written request at any time prior to the Maturity Date.
Thirty days prior to the Maturity Date, Western Reserve will mail to the Owner a
notice and a form upon which the Owner can select Allocation Options for the
annuity proceeds as of the Maturity Date, which cannot be changed thereafter and
will remain in effect until the Contract terminates. If a Series Account annuity
option is chosen, the Owner must include in the written notice the Sub-Account
allocation of the Annuity Proceeds as of the Maturity Date. If Western Reserve
does not receive that form or other written notice acceptable to Western Reserve
prior to the Maturity Date, the Contract's existing Allocation Options will
remain in effect until the Contract terminates. The Owner may also, prior to the
Maturity Date, select or change the frequency of annuity payments, which may be
monthly, quarterly, semi-annually or annually, provided that the annuity option
and payment frequency provides for payments of at least $100 per period. If none
of these is possible, a lump sum payment will be made.
The Owner may select one of the Fixed Account annuity options or Series Account
annuity options described below or any alternate form of settlement acceptable
to Western Reserve. Treasury Regulations may preclude the availability of
certain annuity options in connection with Qualified Contracts.
Fixed Account annuity options provide equal monthly payments of a specified
amount that Western Reserve guarantees will not change. The amount of the
periodic annuity payment will be based on the Annuity Proceeds on the Maturity
Date, the annuity option selected (i.e., the form and duration of payments), the
age of the Annuitant or Beneficiary (or ages of Co-Annuitants), the sex of the
Annuitant (except for certain Qualified Contracts), and the applicable annuity
rate shown in the Contract (or a more favorable current rate available under the
Contracts on the Maturity Date). The annuity rates shown in the Contract are
based on the Society of Actuaries 1983 Table A with projection and an assumed
investment rate of 3%. Western Reserve may in its sole discretion, increase the
amount of a payment or payments once payments begin.
Series Account annuity options (i.e., variable annuity options) are similar to
fixed annuity options except that the amount of each periodic payment after the
first will vary to reflect the net investment experience of the Sub-Accounts
selected by the Owner. The amount of the first annuity payment is determined in
the manner described in the Statement of Additional Information for a Series
Account annuity option. Under a Series Account annuity option, the Owner applies
the Annuity Proceeds to one or more of the nine Sub-Accounts designated to
support annuity payments by purchasing units issued in connection with one or
more of these Sub-Accounts. The number of units purchased is equal to the amount
of the first annuity payment allocated to a particular Sub-Account divided by
the Annuity Unit Value for that Sub-Account on the Maturity Date. The number of
units of a particular Sub-Account supporting payments to an Annuitant never
changes, but the second and subsequent payments will vary with the Annuity Unit
Value because each payment will equal the number of units in each selected
Sub-Account multiplied by the Annuity Unit Value of that Sub-Account on the date
the payment is processed. Annuity Proceeds allocated to Series Account annuity
options are subject to a daily Mortality and Expense Risk Charge of 0.50% per
annum and a daily Administrative Charge of 0.15% per annum.
30 JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998
<PAGE>
The Annuity Unit Value for a Sub-Account, designated to support annuity
payments, is first calculated in the same manner as the Accumulation Unit Value
corresponding to the same Trust Portfolio would be calculated (see "THE
CONTRACT - ACCUMULATION PROVISIONS" on page 21) and then is adjusted to reflect
a 5% assumed investment return. The adjustment results in the Annuity Unit Value
increasing to the extent that the net investment factor increases at greater
than an annual rate of 5.65%. It results in the Annuity Unit Value decreasing to
the extent that the net investment factor decreases or increases at less than an
annual rate of 5.65%. Consequently, if, for a monthly periodic payment, the net
investment experience of a Sub-Account for a given month exceeds an annual rate
of 5.65%, the monthly payment from that Sub-Account will be greater than the
previous payment. Likewise, if the net investment experience for that month is
less than an annual rate of 5.65%, the payment will be less than the previous
payment.
FIXED ACCOUNT ANNUITY OPTIONS
The following options are available for payment of fixed account monthly annuity
payments.
OPTION A - FIXED INSTALLMENTS. The Annuity Proceeds will be paid in equal
installments over a fixed period of 5, 10, 15, or 20 years or any other fixed
period acceptable to Western Reserve.
OPTION B - LIFE INCOME. The Annuity Proceeds will be paid in equal installments:
(1) during the lifetime of the Annuitant only ("Life Annuity"); (2) during a
10-year fixed period certain and for the remaining lifetime of the Annuitant
("Certain Period"); or (3) until the sum of installments paid equals the Annuity
Proceeds applied and for the remaining life of the Annuitant ("Installment
Refund").
OPTION C - JOINT AND SURVIVOR LIFE INCOME. The Annuity Proceeds will be paid
during the joint lifetimes of the Annuitant and a designated Co-Annuitant and
will continue upon the death of the first payee for the remaining lifetime of
the survivor.
SERIES ACCOUNT ANNUITY OPTIONS
Under the Series Account annuity options, the Contract's Annuity Proceeds will
be used to purchase annuity units of the Sub-Accounts selected by the Owner. The
following Series Account annuity options are available:
OPTION D - VARIABLE LIFE INCOME. The Annuity Proceeds will be paid in
installments determined in accordance with the table set forth in the Contract.
Such installments are payable (1) during the payee's lifetime only ("Variable
Life Annuity"); or (2) during a 10-year fixed period certain and for the payee's
remaining lifetime ("Variable Certain Period").
OPTION E - VARIABLE JOINT AND SURVIVOR LIFE INCOME. The Annuity Proceeds will be
paid in installments during the joint lifetime of two payees and continuing upon
the death of the first payee for the remaining lifetime of the survivor.
JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998 31
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DEATH BENEFITS AFTER THE MATURITY DATE
The death benefit, if any, payable after the Maturity Date and after the
commencement of annuity payments depends upon the annuity option selected. If a
payee dies on or after the commencement of annuity payments, the remaining
portion of any interest in the Contract will be distributed at least as rapidly
as under the method of distribution being used as of the date of the payee's
death. (For additional information about death benefit payments under the
Contract, see "THE CONTRACT - ACCUMULATION PROVISIONS - Death Benefits during
the Accumulation Period" on page 27.)
IMPROVED ANNUITY RATES
Western Reserve may offer improved annuity rates to Owners if, at the Maturity
Date, it is offering annuity contracts of the same type and class as the
Contract with more favorable rates than those contained in the Contract's income
tables.
PROOF OF AGE, SEX, AND SURVIVAL
Western Reserve may require proper proof of age and sex of any Annuitant or
Co-Annuitant prior to making the first annuity payment. Prior to making any
payment, Western Reserve may require proper proof that the Annuitant or
Co-Annuitant is alive and legally qualified to receive such payment. If required
by law to ignore differences in sex of any payee, annuity payments will be
determined using unisex rates.
OTHER MATTERS RELATING
TO THE CONTRACT
CHANGES IN PURCHASE PAYMENTS
The Owner may change the amount and the mode of the anticipated Purchase Payment
pattern specified in the Contract if agreed to by Western Reserve.
RIGHT TO EXAMINE CONTRACT
An Owner may, within ten days of receipt of the Contract (the "Free-Look
Period"), return it to Western Reserve at its Administrative Office, and obtain
a refund equal to the sum of: (1) the Purchase Payments received; plus (or
minus) (2) the accumulated gains (or losses), if any, in the Series Account for
the Contract as of the date Western Reserve receives the returned Contract.
Certain states require a Free-Look Period longer than ten days, either for all
Contract Owners or for certain classes of Contract Owners. The Owner bears the
investment risk during the Free-Look Period. (Certain states require Western
Reserve to refund the Purchase Payment, which may be greater or less than the
amount computed above. In these states, Western Reserve bears the investment
risk during the Free-Look Period.) The specific terms applicable to a particular
Contract will be set forth in the "Right to Examine Contract" provision of that
Contract.
32 JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998
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CONTRACT PAYMENTS
All payments under the Contract will be paid in one sum unless the Owner elects
otherwise. Western Reserve reserves the right to suspend or postpone the right
of partial withdrawal and Surrender or postpone the date of payment for any
period: (1) the New York Stock Exchange is closed, other than customary weekend
and holiday closing, or trading on the New York Stock Exchange is restricted as
determined by the SEC; (2) the SEC by order permits postponement for the
protection of Owners; or (3) an emergency exists, as determined by the SEC, as a
result of which valuation or disposal of securities is not reasonably
practicable. Transfers may also be postponed under these circumstances.
Payments of any amounts derived from Purchase Payments paid by check or bank
draft may be delayed until the check or bank draft has cleared the payor's bank.
OWNERSHIP
The Owner is the person entitled to exercise all rights under the Contract.
Prior to the Maturity Date, the Owner is the person designated on the Contract
Schedule page or as subsequently named. These rights may be subject to the
consent of any assignee or irrevocable Beneficiary.
A Successor Owner can be named in the application for the Contract or by
notifying Western Reserve in writing. If the Owner is not the Annuitant, the
Successor Owner will become the new Owner of the Contract upon the death of the
Owner prior to the death of the Annuitant. (See "THE CONTRACT - ACCUMULATION
PROVISIONS - Death Benefits during the Accumulation Period - 4. Death of an
Owner Who is Not an Annuitant," on page 29.)
With regard to Non-Qualified Contracts, ownership of the Contract may be changed
or the Contract collaterally assigned at any time during the lifetime of the
Annuitant and prior to the Maturity Date, subject to the rights of any
irrevocable Beneficiary. The assignment of a Contract will be treated as a
distribution of the Annuity Value for Federal tax purposes. (See "FEDERAL TAX
MATTERS - Taxation of Annuities" on pages 35-37.) Any change of ownership or
assignment must be made in writing and accepted by Western Reserve, and, if
accepted, will be effective as of the date accepted by Western Reserve. Western
Reserve assumes no liability for any payments made or actions taken before a
change is accepted and shall not be responsible for the validity or effect of
any change of ownership or assignment.
Changing the Owner or naming a new Successor Owner cancels any prior designation
of Successor Owner, but it does not change the Beneficiary or Annuitant.
With regard to Qualified Contracts, ownership of the Contract generally may be
assigned, but any assignment may be subject to restrictions, penalties, or even
prohibition under the Code, and must also be permitted under the terms of the
underlying retirement plan.
ANNUITANT
The Annuitant is the person named in the application to receive annuity
payments. If no person is so named, the Owner will be the Annuitant. Prior to
the Maturity Date, if
JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998 33
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the Owner is a natural person and upon agreement with Western Reserve, the Owner
may elect a different Annuitant. As of the Maturity Date, and upon agreement
with Western Reserve, the Owner may elect a different Annuitant or, if either
annuity Option C or Option E has been selected, add a joint Annuitant. On the
Maturity Date, the Annuitant(s) will become the payee(s) and receive the annuity
payments.
BENEFICIARY
The Beneficiary is the person or persons named in the application or as
subsequently changed. The Beneficiary may be changed during the lifetime of the
Annuitant, subject to the rights of any irrevocable Beneficiary. Any change must
be made in writing and received at Western Reserve's Administrative Office and,
if accepted, will be effective as of the date on which signed by the Owner.
Western Reserve assumes no liability for any payments made or actions taken
before the change is received and shall not be responsible for the validity or
effect of the change. Prior to the Maturity Date, if no Beneficiary survives the
Annuitant, the Owner, if living, or the Owner's estate will be the Beneficiary.
The interest of any Beneficiary is subject to that of any assignee. In the case
of certain Qualified Contracts, the Treasury Regulations may prescribe certain
limitations on the designation of a Beneficiary.
Unless Western Reserve receives written notice from the Owner to the contrary,
no Beneficiary may assign any payments under the Contract before such payments
are due. To the extent permitted by law, no payments under the Contract will be
subject to the claims of any Beneficiary's creditors.
MODIFICATION OR WAIVER
The contract and the application constitute the entire Contract. Only statements
in the application can be used to void the Contract or defend a claim. The
statements are considered representations and not warranties. No Contract
provision can be waived or changed except by endorsement. Only the President or
Secretary of Western Reserve can agree to change or waive any provision of the
Contract.
The Contract may not be modified by Western Reserve without the consent of the
Owner, except as may be required to make it conform to any law or regulation or
ruling issued by a governmental agency or to improve the rights and/or benefits
under the Contract.
FEDERAL TAX MATTERS
INTRODUCTION
The Contracts are designed for use by individuals to accumulate Annuity Value
and may be used by retirement plans that qualify for special Federal income tax
treatment under Section 408 of the Code, generally known as "Individual
Retirement Annuities". The ultimate effect of Federal income taxes on the
amounts held under a Contract, on annuity payments, and on the economic benefits
to the Owner, Annuitant or Beneficiary depends on Western Reserve's tax status,
on the type of retirement plan for which the
34 JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998
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Contract is purchased, and upon the tax and employment status of the individual
concerned.
The following discussion is general in nature and is not intended as tax advice.
Each person concerned should consult a competent tax adviser. No attempt is made
to consider any applicable state or other tax laws. Moreover, the discussion is
based upon Western Reserve's understanding of the Federal income tax laws as
they are currently interpreted. Western Reserve makes no representations
regarding the likelihood of continuation of the Federal income tax laws, the
Treasury Regulations, or the current interpretations by the Internal Revenue
Service (the "Service"). For a discussion of Federal income taxes as they relate
to the Trust, please see the accompanying Prospectus for the Portfolios of the
Trust.
COMPANY TAX STATUS
Western Reserve is taxed as a life insurance company under Part I of Subchapter
L of the Code. Because the Series Account is not a separate entity from Western
Reserve and its operations form a part of Western Reserve, it will not be taxed
separately as a "regulated investment company" under Subchapter M of the Code.
Investment income and realized capital gains on the assets of the Series Account
are reinvested and taken into account in determining the Annuity Value. Western
Reserve believes that under existing Federal income tax law, the Series
Account's investment income, including realized net capital gains, will not be
taxed to Western Reserve. Based upon this belief, it is anticipated that no
charges will be made against the Series Account for Federal income tax. If any
such charge is made, a Contract's Annuity Value will reflect a deduction for the
charge. Western Reserve reserves the right to make a deduction from the assets
of the Series Account should any tax or other economic burden resulting from the
application of tax laws that Western Reserve determines to be properly
attributable to the Account be imposed with respect to such items in the future.
TAXATION OF ANNUITIES
The following discussion assumes the Contract will qualify as an annuity
contract for Federal income tax purposes.
1. IN GENERAL. Code Section 72 governs taxation of annuities. In general, an
Owner is not taxed on increases in value under a Contract until some form of
distribution is made under the Contract. The exception to this rule is that
generally, an Owner of any deferred annuity contract who is not a natural person
must include in income any increase in the excess of the Contract's Annuity
Value over the Owner's investment in the Contract during the taxable year.
However, there are some exceptions to this exception and you may wish to discuss
these with your tax counsel. The taxable portion of a distribution (in the form
of an annuity or lump sum payment) is generally taxed as ordinary income. For
this purpose, the assignment, pledge, or agreement to assign or pledge any
portion of the Annuity Value generally will be treated as a distribution.
2. PARTIAL WITHDRAWALS AND SURRENDERS. In the case of a partial withdrawal,
Systematic Partial Withdrawal, or Surrender distributed to a participant or
Beneficiary under a Qualified Contract, a ratable portion of the amount received
is taxable, generally based on the ratio of the investment in the Contract to
the total Annuity
JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998 35
<PAGE>
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.
Generally, in the case of a partial withdrawal, Systematic Partial Withdrawal,
or Surrender under a Non-Qualified Contract before the Maturity Date, amounts
received are first treated as taxable income to the extent that the Annuity
Value immediately before the partial withdrawal, Systematic Partial Withdrawal,
or Surrender exceeds the "investment in the Contract" at that time. Any
additional amount partially withdrawn, applied to a Systematic Partial
Withdrawal or Surrender, is not taxable. In the event of a partial withdrawal or
Systematic Partial Withdrawal from, or Surrender of, a Non-Qualified Contract,
Western Reserve 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.
3. ANNUITY PAYMENTS. Although the tax consequences may vary depending on the
Annuity Payment elected under the Contract, in general, only the portion of the
Annuity Payment that represents the amount by which the Annuity Value exceeds
the investment in the Contract will be taxed; after the investment in the
Contract is recovered, the full amount of any additional Annuity Payments is
taxable. For variable annuity payments, the taxable portion is generally
determined by an equation that establishes a specific dollar amount of each
payment that is not taxed. The dollar amount is determined by dividing the
"investment in the Contract" by the total number of expected periodic payments.
However, the entire distribution will be taxable once the recipient has
recovered the dollar amount of his or her "investment in the Contract." For
Fixed Annuity Payments, in general, there is no tax on the portion of each
payment which represents the same ratio that the "investment in the Contract"
bears to the total expected value of the Annuity Payments for the term of the
payments; however, the remainder of each Annuity Payment is taxable until the
recovery of the investment in the Contract, and thereafter the full amount or
each Annuity Payment is taxable. If death occurs before full recovery of the
investment in the Contract, the unrecovered amount may be deducted on the
Annuitant's final tax return.
4. PENALTY TAX ON CERTAIN DISTRIBUTIONS. In the case of a distribution pursuant
to a Non-Qualified Contract, a Federal income tax penalty may be imposed equal
to 10% of the amount treated as taxable income. The penalty tax is not imposed
in certain circumstances, including, generally, distributions: (1) made on or
after the date on which the Owner attains age 59 1/2, (2) made as a result of
death of the Owner or disability of the taxpayer, or (3) received in
substantially equal installments as a life annuity. Other tax penalties may
apply to certain distributions pursuant to a Qualified Contract.
5. TAXATION OF DEATH BENEFIT PROCEEDS. Amounts may be distributed from a
Contract because of the death of an Owner or an Annuitant. Generally, such
amounts are includable in the income of the recipient as follows: (1) if
distributed in a lump sum, they are taxed in the same manner as a full surrender
of the Contract, as described above, or (2) if distributed under an annuity
option, they are taxed in the same manner as annuity payments, as described
above. For these purposes, the
36 JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998
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investment in the Contract is not affected by the Owner's or Annuitant's death.
That is, the investment in the Contract remains the amount of any purchase
payments paid which were not excluded from gross income.
6. MULTIPLE CONTRACTS. All non-qualified, deferred annuity contracts entered
into after October 21, 1988 that are issued by Western Reserve (or its
affiliates) 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. Accordingly, an Owner should consult a
competent tax adviser before purchasing more than one Contract or other annuity
contracts.
7. TRANSFERS, ASSIGNMENTS OR EXCHANGES OF CONTRACTS. A transfer of ownership or
assignment of a Contract, the designation of an Annuitant or other Beneficiary
who is not also the Owner, the selection of certain maturity dates, or a change
of Annuitant, may result in certain income or gift tax consequences to the Owner
that are beyond the scope of this discussion. An Owner contemplating any such
transfer, assignment, selection or change should contact a competent tax adviser
in respect to the potential tax effects of such a transaction.
8. POSSIBLE CHANGES IN TAXATION. Although the likelihood of legislative change
is uncertain, there is always the possibility that the tax treatment of the
Contracts could change by legislation or other means. For instance, the
President's 1999 Budget Proposal recommended legislation that, if enacted, would
adversely modify the Federal taxation of the Contracts. It is also possible that
any change could be retroactive (that is, effective prior to the date of the
change). A tax advisor should be consulted with respect to legislative
developments and their effect on the Contract.
INDIVIDUAL RETIREMENT ANNUITIES
The Qualified Contract is designed for use with retirement plans that qualify
for special Federal income tax treatment under Sections 219 and 408 of the Code,
generally known as Traditional "Individual Retirement Annuities" ("IRAs").
Special favorable tax treatment may be available for certain types of
contributions and distributions. Adverse tax consequences may result from
contributions in excess of specified limits, distributions prior to age 59 1/2
(subject to certain exceptions), distributions that do not conform to specified
minimum distribution rules, aggregate distributions in excess of a specified
annual amount, and in certain other circumstances. Traditional IRAs are subject
to limitations on the amount which may be contributed and deducted and the time
when distributions may commence. In addition, distributions from certain other
types of qualified plans may be placed into a Traditional IRA on a tax-deferred
basis.
Under the tax qualification rules for Section 408 plans, distributions generally
must commence no later than April 1 of the calendar year following the calendar
year in which the Owner reaches age 70 1/2, and must be made in a specified form
and manner. Special rules and other restrictions may apply depending on the type
of plan and the particular circumstances. Each Owner is responsible for making
contributions and requesting distributions under the Contract that satisfy
applicable tax rules, and should consult a qualified tax adviser.
JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998 37
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The above description of Federal income tax consequences pertaining to the
Traditional IRA is only a brief summary and is not intended as tax advice. The
rules governing the provisions of Traditional IRAs are complex and often
difficult to comprehend. In addition, the Tax Reform Act of 1986 significantly
changed a great many rules for Traditional IRAs. Anything less than full
compliance with the applicable rules, all of which are subject to change, may
have significant adverse tax consequences. Owners of Traditional IRAs are
responsible for requesting distributions in accordance with, and for determining
that contributions and other transactions comply with, applicable law. A
prospective purchaser considering the purchase of a Contract in connection with
a Traditional IRA should first consult a qualified and competent tax adviser
with regard to the suitability of the Contract as a Traditional IRA.
ROTH INDIVIDUAL RETIREMENT ANNUITIES ("ROTH IRA")
The Roth IRA, under Section 408A of the Code, contains many of the same
provisions as a Traditional IRA. However, there are some differences. First, the
contributions are not deductible. The Roth IRA is available to individuals
depending on their level of income. The amount per individual that may be
contributed to all IRAs (Roth and Traditional) is $2,000. In addition, the Roth
IRA offers tax-free distributions when made from assets which have been held in
the account for 5 tax years and are made after attaining age 59 1/2, to pay for
qualified first time homebuyer expenses (lifetime maximum of $10,000) or due to
death or disability. All other distributions are subject to income tax when made
from earnings and may be subject to a premature withdrawal penalty tax unless an
exception applies. Unlike the Traditional IRA, there are no minimum required
distributions during the Owner's lifetime; however, required distributions at
death are generally the same.
ADDITIONAL CONSIDERATIONS
1. DIVERSIFICATION. Section 817(h) of the Code requires that the investments of
the Series Account must be "adequately diversified" in accordance with Treasury
regulations in order for the Contracts to qualify as annuity contracts under
Section 72 of the Code. The Series Account, through the Trust, intends to comply
with the diversification requirements prescribed by the Treasury in Reg. Sec.
1.817-5, which affect how the Trust's assets may be invested. Western Reserve
believes the Series Account will, thus, meet the diversification requirements of
Section 817(h). If the Series Account does not meet those diversification
requirements, Owners would be taxed currently on any investment income under the
Contract.
In certain circumstances, owners of variable annuity contracts may be considered
the owners, for federal income tax purposes, of the assets of the separate
account used to support their contracts. In those circumstances, income and
gains from the separate account assets would be includable in the variable
annuity contract owner's gross income. The Treasury Department has stated in
published rulings that a variable contract owner will be considered the owner of
separate account assets if the contract owner possesses incidents of ownership
in those assets, such as the ability to exercise investment control over the
assets. The Treasury Department has also announced, in connection with the
issuance of regulations concerning investment diversification, that those
regulations "do not provide guidance concerning the circumstances in which
38 JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998
<PAGE>
investor control of the investments of a segregated asset account may cause the
investor (i.e., the contract owner), rather than the insurance company, to be
treated as the owner of the assets in the account." This announcement further
states that guidance would be issued by way of regulations or rulings on the
"extent to which policyholders may direct their investments to particular
subaccounts without being treated as owners of the underlying assets."
The ownership rights under the Contract are similar to, but different in certain
respects from, those described by the IRS in rulings in which it was determined
that contract owners were not owners of separate account assets. For example,
the owner of a Contract has the choice of more Sub-Accounts in which to allocate
net purchase payments and Contract Values, and may be able to transfer among
Sub-Accounts more frequently than in such rulings. These differences could
result in an Owner being treated as the owner of a pro rata share of the assets
of the Series Account. In addition, Western Reserve does not know what standards
will be set forth, if any, in the regulations or rulings which the Treasury
Department has stated it expects to issue. Western Reserve therefore reserves
the right to modify the Contract as necessary to attempt to prevent an Owner
from being considered the owner of a pro rata share of the assets of the Series
Account.
2. DISTRIBUTION-AT-DEATH RULES. The Code also requires Non-Qualified Annuity
Contracts to contain specific provisions for distribution of the Contract
proceeds upon the death of an Owner. In order to be treated as an Annuity
Contract for Federal income tax purposes, the Code requires that such Contract
provide that (a) if any Owner dies on or after the Maturity Date and before the
entire interest in the Contract has been distributed, the remaining portion must
be distributed at least as rapidly as under the method in effect on the Owner's
death; and (b) if any Owner dies before the Maturity Date, the entire interest
in the Contract must generally be distributed within 5 years after the Owner's
date of death. These requirements will be considered satisfied if the entire
interest of the Contract is used to purchase an immediate annuity under which
payments will begin within one year of the Owner's death and will be made for
the life of the Beneficiary or for a period not extending beyond the life
expectancy of the Beneficiary. The Owner's Beneficiary is the person to whom
ownership of the Contract passes because of death and must be a natural person.
(In the Contract, the successor owner is the Owner's Beneficiary.) If the
Beneficiary is the Owner's surviving spouse, the Contract may be continued with
the surviving spouse as the new Owner. Non-Qualified Contracts will be reviewed
and modified if necessary to attempt to assure that they comply with the Code
requirements when clarified by regulation or otherwise. Other rules may apply to
Qualified Contracts.
3. WITHHOLDING. Withholding of Federal income taxes on the taxable portion of
all distributions may be required unless the recipient elects not to have any
such amounts withheld and properly notifies Western Reserve of that election.
Different rules may apply to United States citizens or expatriates living
abroad. In addition, some states have enacted legislation requiring withholding.
4. SECTION 1035 EXCHANGES. Code Section 1035 generally provides that no gain or
loss shall be recognized on the exchange of one Annuity Contract for another. If
the surrendered Contract was issued prior to August 14, 1982, the tax rules that
formerly
JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998 39
<PAGE>
provided that the Surrender was taxable only to the extent the amount received
exceeds the Owner's investment in the Contract will continue to apply to amounts
allocable to investment in the Contract before August 14, 1982. In contrast,
Contracts issued on or after January 19, 1985 in a Code Section 1035 exchange
are treated as new Contracts for purposes of the penalty and
distribution-at-death rules. Special rules and procedures apply to Code Section
1035 transactions. Prospective purchasers wishing to take advantage of Code
Section 1035 should consult their tax advisers.
5. DIVERSIFICATION AND QUALIFIED PLANS. Code Section 817(h) applies to variable
annuity contracts other than pension plan contracts. The regulations reiterate
that the diversification requirements do not apply to pension plan contracts.
All of the Qualified Plans (described above) are defined as pension plan
contracts for these purposes. Notwithstanding the exception of Qualified
Contracts from application of the diversification rules, the investment vehicle
for Western Reserve's Qualified Contracts (i.e., the Trust) will be structured
to comply with the diversification standards because it serves as the investment
vehicle for Non-Qualified Contracts as well as Qualified Contracts.
THE FIXED ACCOUNT
An Owner may allocate Net Purchase Payments and transfer Annuity Value to the
Fixed Account, which is part of Western Reserve's general account. The Insurance
Department of the State of Washington has disapproved, for Contracts issued in
Washington, the ability both to allocate Net Purchase Payments to the Fixed
Account and to transfer Annuity Value from Sub-Accounts of the Series Account to
the Fixed Account. Because of exemptive and exclusionary provisions, interests
in the Fixed Account have not been registered under the Securities Act of 1933
and neither the Fixed Account nor the general account has been registered as an
investment company under the 1940 Act. Accordingly, neither the Fixed Account,
the general account nor any interests therein are generally subject to the
provisions of these Acts, and Western Reserve has been advised that the staff of
the SEC has not reviewed the disclosures in this Prospectus relating to the
Fixed Account. Disclosures regarding the Fixed Account may, however, be subject
to certain generally applicable provisions of the Federal securities laws
relating to the accuracy and completeness of statements made in prospectuses.
The portion of the Annuity Value allocated to the Fixed Account (the "Fixed
Account Value") will be credited with rates of interest, as described below.
Because the Fixed Account Value becomes part of Western Reserve's general
account, Western Reserve assumes the risk of investment gain or loss on this
amount. All assets in the general account are subject to Western Reserve's
general liabilities from business operations.
MINIMUM GUARANTEED AND CURRENT INTEREST RATES
The Fixed Account Value is guaranteed to accumulate at a minimum effective
annual interest rate of 4%. Western Reserve presently credits the Fixed Account
Value with current rates in excess of the minimum guarantee, but it is not
obligated to do so. Western Reserve has no specific formula for determining
current interest rates. Some of
40 JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998
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the factors that Western Reserve may consider, in its sole discretion, in
determining whether to credit interest in excess of the 4% guaranteed rate are:
general economic trends, rates of return currently available and anticipated on
the company's investments, regulatory and tax requirements, and competitive
factors. The Fixed Account Value will not share in the investment performance of
the company's general account or any portion thereof. Because Western Reserve,
at its sole discretion, anticipates changing the current interest rate from time
to time, different allocations to and from the Fixed Account Value will be
credited with different current interest rates.
Western Reserve further guarantees that when a higher or lower current interest
rate is declared on an allocation to the Fixed Account Value, that new interest
rate will be guaranteed on such allocation for at least a one year period
measured from the date of each Purchase Payment or transfer (the "Guarantee
Period"). At the end of the Guarantee Period, Western Reserve reserves the right
to declare a new current interest rate on such allocation and accrued interest
thereon (which may be a different current interest rate than the current
interest rate on new allocations to the Fixed Account Value on that date). The
rate declared on such allocation and accrued interest thereon at the end of each
Guarantee Period will be guaranteed again for another Guarantee Period. At the
end of any Guarantee Period, any interest credited on the Fixed Account Value in
excess of the minimum guaranteed rate of 4% per year will be determined in the
sole discretion of Western Reserve. The Owner assumes the risk that interest
credited may not exceed the guaranteed minimum rate.
Allocations from the Fixed Account Value to provide: a) partial withdrawal
amounts, b) transfers to the Series Account, or c) the Annual Contract Charge
are currently, for the purpose of crediting interest, accounted for on a last
in, first out ("LIFO") method.
Western Reserve reserves the right to change the method of crediting interest
from time to time, provided that such changes will not have the effect of
reducing the guaranteed rate of interest below 4% per annum.
FIXED ACCOUNT VALUE
At the end of any Valuation Period, the Fixed Account Value is equal to:
1. The sum of all Net Purchase Payments allocated to the Fixed Account; plus
2. Any amounts transferred from a Sub-Account to the Fixed Account; plus
3. Total interest credited to the Fixed Account; minus
4. Any amounts withdrawn from the Fixed Account to pay for partial withdrawals;
minus
5. Any amounts transferred to a Sub-Account from the Fixed Account; minus
6. Any amounts charged to pay the Annual Contract Charge, premium tax, and
transfer charges, if any.
ALLOCATIONS, TRANSFERS AND PARTIAL WITHDRAWALS
Net Purchase Payments and transfers to the Fixed Account will be allocated to
the Fixed Account on the first Valuation Date on or following the date Western
Reserve receives
JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998 41
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the payment or transfer request at its Administrative Office, except that any
allocation of an initial Net Purchase Payment will take place on the Contract
Date.
Transfers may be made from the Fixed Account to a Sub-Account once each Contract
Year. The amount that may be transferred is currently the entire amount
available in the Fixed Account; however, Western Reserve reserves the right to
limit the amount available to be transferred to the greater of (a) 25% of the
amount in the Fixed Account, or (b) the amount transferred in the prior Contract
Year from the Fixed Account, unless Western Reserve consents otherwise. No
transfer charge will apply to transfers from the Fixed Account to a Sub-Account.
Amounts may be withdrawn from the Fixed Account for partial withdrawals and
Surrenders only upon written request and (other than for Surrenders) only with
Western Reserve's consent. Western Reserve further reserves the right to defer
payment of transfers, partial withdrawals, or Surrenders from the Fixed Account
for up to six months. In addition, Contract provisions relating to transfers,
partial withdrawals or Surrenders from the Series Account will also apply to the
Fixed Account. Systematic Exchanges may be done from the Fixed Account. (See
"THE CONTRACT - ACCUMULATION PROVISIONS - Systematic Exchanges," on page 25.)
DISTRIBUTION OF
THE CONTRACTS
InterSecurities, Inc. ("ISI") located at 201 Highland Avenue, Largo, Florida
33770, an affiliate of Western Reserve, serves as the distributor and principal
underwriter of the Contracts. ISI is registered with the SEC under the
Securities Exchange Act of 1934 and is a member of the National Association of
Securities Dealers, Inc. No amounts have been retained by ISI for acting as
distributor or principal underwriter for the Contracts. There are no sales
commissions payable upon the sale of Contracts. The offering of Contracts will
be made on a continuous basis.
VOTING RIGHTS
To the extent required by law, Western Reserve will vote the Trust shares held
in the Series Account at shareholder meetings of the Trust in accordance with
instructions received from persons having voting interests in the corresponding
Sub-Accounts of the Series Account. Except as required by the 1940 Act, the
Trust does not hold regular or special shareholder meetings. If the 1940 Act or
any regulation thereunder should be amended or if the present interpretation
thereof should change, and as a result Western Reserve determines that it is
permitted to vote the Trust shares in its own right, it may elect to do so.
The number of votes that an Owner has the right to instruct will be calculated
separately for each Sub-Account, and will be determined during the Accumulation
Period by dividing the portion of the Annuity Value in that Sub-Account by $100.
Fractional shares will be counted. After the Maturity Date, the number of votes
that an Annuitant has the right to instruct will be calculated based on the
liability for future
42 JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998
<PAGE>
variable annuity payments. This liability will be calculated on the basis of the
mortality assumptions used in determining the number of units purchased by the
Annuitant. Because this liability generally declines as any Annuitant ages, the
number of votes attributable to that Annuitant will decrease over time.
The number of votes of the Portfolio that the Owner or Annuitant has the right
to instruct will be determined as of the date established by that Portfolio for
determining shareholders eligible to vote at the meeting of the Trust. Voting
instructions will be solicited by written communications prior to such meeting
in accordance with procedures established by the Trust.
Western Reserve will vote Trust shares as to which no timely instructions are
received and Trust shares that are not attributable to Owners in proportion to
the voting instructions that are received with respect to all Contracts
participating in that Portfolio. Voting instructions to abstain on any item to
be voted upon will reduce the votes eligible to be cast by Western Reserve.
Each person having a voting interest in a Sub-Account will receive proxy
materials, reports and other materials relating to the appropriate Portfolio.
YEAR 2000 MATTERS
In October 1996, Western Reserve adopted and presently has in place a Year 2000
Assessment and Planning Project (the "Plan") to review and analyze existing
hardware and software systems, as well as voice and data communications systems,
to determine if they are Year 2000 compatible. Western Reserve has also engaged
the services of a third-party provider that is specialized in Year 2000 issues
to work on the Plan.
As of the date of this Prospectus, Western Reserve has identified and made
available what it believes are the appropriate resources of hardware, people,
and dollars, including the engagement of outside third parties, to ensure that
the Plan will be completed.
The Year 2000 computer problem, and its resolution, is complex and multifaceted,
and success of a response plan cannot be conclusively known until the Year 2000
is reached (or an earlier date to the extent that the systems or equipment
addresses Year 2000 data prior to the Year 2000). Even with the appropriate and
diligent pursuit of a well-conceived response plan, including testing
procedures, there is no certainty that any company will achieve complete
success. Further, notwithstanding its efforts or results, Western Reserve's
ability to function unaffected to and through the Year 2000 may be adversely
affected by actions (or failure to act) of third parties beyond our knowledge or
control. See the Trust's prospectus for information on the Trust's preparation
for Year 2000.
JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998 43
<PAGE>
LEGAL PROCEEDINGS
Western Reserve, like other life insurance companies, is involved in lawsuits.
Western Reserve is not aware of any class action lawsuits naming it as a
Defendant or involving the Series 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, Western Reserve believes that at the present time
there are no pending or threatened lawsuits that are reasonably likely to have a
material adverse impact on the Series Account or Western Reserve.
STATEMENT OF
ADDITIONAL INFORMATION
The Statement of Additional Information contains information and financial
statements relating to the Series Account and Western Reserve. The Table of
Contents of the Statement of Additional Information is set forth below:
1. Custodian
2. Independent Accountants
3. Legal Matters
4. Calculation of Performance Related Information
5. Addition, Deletion, and Substitution of Investments
6. Calculation of Variable Annuity Payments
7. Financial Statements
8. Index to Financial Statements
Inquiries and requests for a Statement of Additional Information should be
directed to Western Reserve Life Assurance Co. of Ohio, P.O. Box 9052,
Clearwater, Florida 33758-9052; telephone number 1-800-504-4440.
44 JANUS RETIREMENT ADVANTAGE(R) PROSPECTUS MAY 1, 1998
<PAGE>
JANUS RETIREMENT ADVANTAGE (R)
PROSPECTUS
A Variable Annuity Issued by
Western Reserve Life Assurance Co. of Ohio
[JANUS LOGO]
Please direct all mail and inquiries to:
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
Please complete and return Application to:
IF MAILED:
Janus Retirement Advantage
c/o Western Reserve Life Assurance Co. of Ohio
Attn: Annuity Dept.
P.O. Box 9052
Clearwater, FL 33758-9052
IF OVERNIGHT DELIVERY:
Janus Retirement Advantage
c/o Western Reserve Life Assurance Co. of Ohio
Attn: Annuity Dept.
201 Highland Avenue
Largo, FL 33770
[JANUS LOGO]
Janus Retirement Advantage (R) o 1-800-504-4440
(5/98)
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF
ADDITIONAL INFORMATION
<PAGE>
JANUS RETIREMENT ADVANTAGE(R)
FLEXIBLE PAYMENT VARIABLE ACCUMULATION DEFERRED ANNUITY CONTRACT
STATEMENT OF ADDITIONAL INFORMATION
WRL SERIES ANNUITY ACCOUNT B
MAY 1, 1998
ISSUED BY
Western Reserve Life Assurance Co. of Ohio
201 Highland Avenue
Largo, Florida 33770-2597
Please direct all telephone inquiries to 1-800-504-4440.
This Statement of Additional Information is not a Prospectus and should be read
in conjunction with the Janus Retirement Advantage(R) Prospectus, dated May 1,
1998, which is available without charge by contacting Western Reserve Life
Assurance Co. of Ohio ("Western Reserve") at P.O. Box 9052, Clearwater, Florida
33758-9052 or at the above telephone number.
LOGO
<PAGE>
TABLE OF CONTENTS
Custodian..................................................................... 3
Independent Accountants....................................................... 3
Legal Matters................................................................. 3
Calculation of Performance Related Information................................ 3
Advertising and Sales Literature.............................................. 5
Addition, Deletion, and Substitution of Investments........................... 5
Calculation of Variable Annuity Payments...................................... 5
Financial Statements.......................................................... 6
Index to Financial Statements................................................. 7
- --------------------------------------------------------------------------------
2
<PAGE>
CUSTODIAN
The assets of WRL Series Annuity Account B (the "Series Account") are held
by Western Reserve. The assets of the Series Account are kept physically
segregated and held apart from the general account and any other separate
accounts of Western Reserve. Western Reserve maintains records of all purchases
and redemptions of shares of the Janus Aspen Series (the "Trust"). Additional
protection for the assets of the Series Account is provided by a blanket bond
issued to AEGON U.S. Holding Corporation ("AEGON U.S.") in the amount of $5
million (subject to a $1 million deductible), covering all of the employees of
AEGON U.S. and its affiliates, including Western Reserve. A Stockbrokers Blanket
Bond, issued to AEGON U.S.A. Securities, Inc. provides additional fidelity
coverage, to a limit of $12,000,000.
INDEPENDENT ACCOUNTANTS
The accounting firm of Price Waterhouse LLP, independent accountants,
provided audit services to the Series Account for the year ended December 31,
1997. The principal business address of Price Waterhouse LLP is 1055 Broadway,
Kansas City, Missouri 64105. The accounting firm of Ernst & Young LLP,
independent auditors, provided audit services to Western Reserve for the year
ended December 31, 1997. The principal business address of Ernst & Young LLP is
801 Grand Avenue, Suite 3400, Des Moines, Iowa 50309-2764.
LEGAL MATTERS
Sutherland, Asbill & Brennan LLP, Washington, D.C., has provided advice on
certain legal matters concerning Federal securities laws in connection with the
Contracts. All matters of Ohio law pertaining to the Contracts, including the
validity of the Contracts and Western Reserve's right to issue the Contracts
under Ohio insurance law, have been passed upon by Thomas E. Pierpan, Esq., Vice
President, Associate General Counsel and Assistant Secretary of Western Reserve.
CALCULATION OF PERFORMANCE
RELATED INFORMATION
A. YIELD AND EFFECTIVE YIELD QUOTATIONS FOR THE MONEY MARKET SUB-ACCOUNT
YIELD. The yield quotation set forth in the Prospectus for the Money Market
Sub-Account is for the seven days ended on the date of the most recent balance
sheet of the Series Account included in the registration statement, and is
computed by determining the net change, exclusive of capital changes and income
other than investment income, in the value of a hypothetical pre-existing
account having a balance of one unit in the Money Market Sub-Account at the
beginning of the period, subtracting a hypothetical charge reflecting deductions
from Owner accounts, and dividing the difference by the value of the account at
the beginning of the base period to obtain the base period return, and
multiplying the base period return by (365/7) with the resulting figure carried
to at least the nearest hundredth of one percent.
EFFECTIVE YIELD. The effective yield quotation for the Money Market
Sub-Account set forth in the Prospectus is for the seven days ended on the date
of the most recent balance sheet of the Series Account included in the
registration statement. The effective yield is computed by determining the net
change, exclusive of capital changes and income other than investment income, in
the value of a hypothetical pre-existing Sub-Account having a balance of one
Unit in the Money Market Sub-Account at the beginning of the period. A
hypothetical charge, reflecting deductions from Owner accounts, is subtracted
from the balance. The difference is divided by the value of the Sub-Account at
the beginning of the base period to obtain the base period return, which is then
compounded by adding 1. Next the sum is raised to a power equal to 365 divided
by 7, and 1 is subtracted from the result. The following formula describes the
computation:
EFFECTIVE YIELD = ([BASE PERIOD RETURN + 1](365/7)) - 1
The effective yield is shown at least to the nearest hundredth of one
percent.
HYPOTHETICAL CHARGE. For purposes of the yield and effective yield
computations, the hypothetical charge reflects all fees and charges that are
charged to all Owner accounts in proportion to the length of the base period.
Such fees and charges include the $30 Annual Contract Charge, calculated on the
basis of an average Series Account Value per Contract of $39,217, which converts
that charge to an annual rate of 0.08% of the Series Account Value. The yield
and effective yield quotations do not reflect any deduction for premium taxes or
transfer charges that may be applicable to a particular Contract. No fees or
sales charges are assessed upon annuitization under the Contracts, except
premium taxes. Realized gains and losses from the sale of securities, and
3
<PAGE>
unrealized appreciation and depreciation of assets held by the Money Market
Sub-Account and the Fund are excluded from the calculation of yield.
B. TOTAL RETURN AND YIELD QUOTATIONS FOR THE GROWTH, AGGRESSIVE GROWTH, CAPITAL
APPRECIATION, INTERNATIONAL GROWTH, WORLDWIDE GROWTH, BALANCED, EQUITY
INCOME, GROWTH AND INCOME, FLEXIBLE INCOME, HIGH-YIELD, AND SHORT-TERM BOND
SUB-ACCOUNTS
The total return description set forth in the Prospectuses for all of the
Sub-Accounts except the Money Market Sub-Account holding assets for the
Contracts during the Accumulation Period will be average annual total return
quotations for the one, three, five, and ten-year periods (or, while a
Sub-Account has been in existence for a period of less than one, three, five or
ten years, for such lesser period) ended on the date of the most recent balance
sheet of the Series Account and for the period from the date monies were first
placed into the Sub-Accounts until the aforesaid date. The quotations are
computed by determining the average annual compounded rates of return over the
relevant periods that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
P(1 + T)(n) = ERV
where P = a hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at the end of the particular period
of a hypothetical $1,000 payment made at the beginning of
the particular period or at the end of the particular
period.
For purposes of the total return quotations for all of the Sub-Accounts
except the Money Market Sub-Account, the calculations will take into account all
fees that are charged to all Owner accounts during the Accumulation Period. Such
fees do not include the $30 Annual Contract Charge, calculated on the basis of
an estimated Series Account Value per Contract of $39,217 which converts that
charge to an annual rate of 0.08% of the Series Account Value. The calculations
will also assume a complete redemption as of the end of the particular period.
The calculations will not reflect any deduction for premium taxes or any
transfer charges that may be applicable to a particular Contract.
The yield quotations for all of the Sub-Accounts except the Money Market
Sub-Account representing the accumulation period set forth in the Prospectuses
will be based on the thirty-day period ended on the date of the most recent
balance sheet of the Series Account and will be computed by dividing the net
investment income per unit earned during the period by the maximum offering
price per unit on the last date of the period, according to the following
formula:
a-b (6)
YIELD = 2 [( --- + 1 )] - 1
cd
Where: a = net investment income earned during the period by the
corresponding portfolio of the Trust attributable to shares
owned by the Sub-Account
b = expenses accrued for the period (net of reimbursement)
c = the average daily number of units outstanding during the
period
d = the maximum offering price per unit on the last day of the
period
For purposes of the yield quotations for all of the Sub-Accounts except the
Money Market Sub-Account, the calculations will take into account all fees that
are charged to all Owner accounts during the Accumulation Period. Such fees do
not include the $30 Annual Contract Charge. The calculations do not take into
account any premium taxes or any transfer charges.
Premium taxes currently range from 0% to 3.5% of Purchase Payments
depending upon the jurisdiction in which the Contract is delivered. There is a
transfer charge of $10.00 per transfer after twelve transfers in each Contract
Year. (See "Charges and Deductions -- Transfer Charge" on page 19 of the
Prospectus.)
C. OTHER PERFORMANCE DATA
Western Reserve may from time to time disclose average annual total return
in non-standard formats and cumulative total return for Contracts funded by
these Sub-Accounts.
Western Reserve may from time to time also disclose yield, standard total
returns, and non-standard total returns for the Trust's Portfolios. Non-standard
performance data will only be disclosed if the standard performance data for the
required periods is also disclosed.
4
<PAGE>
ADVERTISING AND
SALES LITERATURE
As described in the Prospectus under "Federal Tax Matters - Taxation of
Annuities," in general, a Contract Owner is not taxed on increases in value
under a Contract until a distribution is made under the Contract. As a result,
the Annuity Value may grow more rapidly than under a comparable investment where
certain increases in value are taxed on a current basis. From time to time,
Western Reserve may use narrative, numerical, or graphic examples to show
hypothetical benefits of tax deferral in advertising and sales literature.
ADDITION, DELETION, AND
SUBSTITUTION OF INVESTMENTS
Western Reserve reserves the right, subject to compliance with applicable
law, to make additions to, deletions from or substitutions for the shares that
are held by the Series Account or that the Series Account may purchase. Western
Reserve reserves the right to eliminate the shares of any of the Portfolios of
the Trust and to substitute shares of another Portfolio of the Trust or of
another open-end registered investment company, if the shares of a Portfolio are
no longer available for investment, or if in Western Reserve's judgment further
investment in any Portfolio should become inappropriate in view of the purposes
of the Series Account. Western Reserve will not, however, substitute any shares
attributable to an Owner's interest in a Sub-Account without notice to and prior
approval of the Securities and Exchange Commission, to the extent required by
the Investment Company Act of 1940, as amended (the "1940 Act"), or other
applicable law.
Western Reserve also reserves the right to establish additional
Sub-Accounts, each of which would invest in a new Portfolio of the Trust, or in
shares of another investment company, with a specified investment objective. New
Sub-Accounts may be established when, in the sole discretion of Western Reserve,
marketing, tax or investment conditions warrant, and any new Sub-Accounts will
be made available to existing Owners on a basis to be determined by Western
Reserve. Western Reserve may also eliminate one or more Sub-Accounts if, in its
sole discretion, marketing, tax or investment conditions warrant.
In the event of any such substitution or change, Western Reserve may make
such changes in the Contracts and other annuity contracts as may be necessary or
appropriate to reflect such substitution or change. If deemed by Western Reserve
to be in the best interests of persons having voting rights under the Contracts,
the Series Account may be operated as a management company under the 1940 Act,
or, subject to any required approval, it may be deregistered under that Act in
the event such registration is no longer required.
Western Reserve reserves the right to change the investment objective of
any Sub-Account. Additionally, if required by law or regulation, Western Reserve
will not materially change an investment objective of the Series Account or of a
Portfolio designated for a Sub-Account unless a statement of the change is filed
with and approved by the appropriate insurance official of the state of Western
Reserve's domicile or deemed approved in accordance with such law or regulation.
CALCULATION OF
VARIABLE ANNUITY PAYMENTS
Under a Series Account annuity option, the Owner applies his or her Annuity
Proceeds (or a portion thereof) on the Maturity Date to one or more of the
twelve Sub-Accounts designated to support annuity payments by purchasing units
issued in connection with each Sub-Account selected by the Owner. The Annuity
Unit Value of any Sub-Account will increase or decrease in accordance with the
investment experience of that Sub-Account. The Annuity Unit Value of any
Sub-Account at the end of a Valuation Period is equal to the product of (a) the
Annuity Unit Value for that Sub-Account at the end of the immediately preceding
Valuation Period, multiplied by (b) the net investment factor for that
Sub-Account for the Valuation Period, multiplied by (c) the "assumed investment
return adjustment factor" for the Valuation Period.
The "assumed investment return adjustment factor" for a Valuation Period is
the product of discount factors of .99986634 per day, and is designed to
recognize the 5% effective annual assumed investment return.
The net investment factor used to calculate the Annuity Unit Value in each
Sub-Account for the Valuation Period is equal to (a) the net result of (1) the
net asset value of a Trust share held in that Sub-Account determined as of the
end of the current Valuation Period; plus (2) the per share amount of any
dividend or capital gain distributions made by the Trust for shares held in that
Sub-Account if the ex-dividend date occurs during the Valuation Period; plus or
minus (3) a per share charge or credit for any taxes reserved for, which Western
Reserve determines to have resulted from the investment operations of the
Sub-Account; divided by (b) the net asset value of a Trust share held in the
Sub-Account determined as of the end of the immediately preceding Valuation
5
<PAGE>
Period; minus (c) a factor representing the mortality and expense risk charge
and administrative charge. This factor is equal, on an annual basis, to 0.65% of
the daily net asset value of a Trust share held in the Series Account for the
Sub-Account.
DETERMINATION OF THE FIRST VARIABLE PAYMENT. The amount of the first
variable payment is determined by multiplying the Annuity Proceeds times the
appropriate rate for the variable option selected. The rates are based on the
Society of Actuaries 1983 Individual Mortality Table A with projection and a 5%
effective annual assumed investment return and assuming a Maturity Date in the
year 2000. Gender based mortality tables will be used unless prohibited by law.
The amount of the first payment depends upon the adjusted age of the
Annuitant. The adjusted age is the Annuitant's actual age nearest birthday at
the Maturity Date, adjusted as follows:
MATURITY DATE ADJUSTED AGE
- --------------------------------------------------------------------------------
Before 2001 Actual Age
2001 -- 2010 Actual Age minus 1
2011 -- 2020 Actual Age minus 2
2021 -- 2030 Actual Age minus 3
2031 -- 2040 Actual Age minus 4
- --------------------------------------------------------------------------------
After the year 2040 as determined by Western Reserve.
DETERMINATION OF SUBSEQUENT VARIABLE PAYMENTS
The amount of variable annuity payments after the first will increase or
decrease according to the Annuity Unit Value which reflects the investment
experience of the selected Sub-Account(s). Each variable annuity payment after
the first will be equal to the number of units attributable to the Contract in
each selected Sub-Account multiplied by the Annuity Unit Value of that
Sub-Account on the date the payment is processed. The number of such units is
determined by dividing the first payment allocated to that Sub-Account by the
Annuity Unit Value of that Sub-Account on the date the first annuity payment is
processed.
FINANCIAL STATEMENTS
The financial statements of Western Reserve which are included in this
Statement of Additional Information should be considered only as bearing on the
ability of Western Reserve to meet its obligations under the Contracts. They
should not be considered as bearing on the investment performance of the assets
held in the Series Account.
Financial Statements for Western Reserve for the years ended December 31,
1997, 1996 and 1995 have been prepared on the basis of statutory accounting
principles, rather than generally accepted accounting principles ("GAAP").
6
<PAGE>
INDEX TO
FINANCIAL STATEMENTS
WRL SERIES ANNUITY ACCOUNT B
Statements of Assets, Liabilities and Equity Accounts as of December 31,
1997 and Statements of Operations for the year or period ended December 31,
1997
Statements of Changes in Equity Accounts for the years or periods ended
December 31, 1997 and 1996
Selected Per Unit Data and Ratios for the years or periods ended December
31, 1997, 1996, 1995, 1994 and 1993
Notes to Financial Statements
Report of Independent Accountants dated January 30, 1998
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
Report of Independent Auditors dated February 27, 1998
Statutory-basis balance sheets at December 31, 1997 and 1996
Statutory-basis statements of operations for the years ended December 31,
1997, 1996 and 1995
Statutory-basis statements of changes in capital and surplus for the years
ended December 31, 1997, 1996 and 1995
Statutory-basis statements of cash flows for the years ended December 31,
1997, 1996 and 1995
Notes to Statutory-basis financial statements
Statutory-basis financial statement schedules
7
<PAGE>
JANUS RETIREMENT ADVANTAGE WRL SERIES ANNUITY ACCOUNT B
STATEMENTS OF ASSETS, LIABILITIES, AND EQUITY ACCOUNTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
AGGRESSIVE CAPITAL INTERNATIONAL
GROWTH GROWTH APPRECIATION GROWTH
AS OF DECEMBER 31, 1997 SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Shares 1,584,351.353 981,961.758 205,865.421 845,897.297
------------------------------------------------------------------------------------------------------------------------------
Investments at cost $24,784,325 $18,028,820 $2,609,570 $15,755,685
------------------------------------------------------------------------------------------------------------------------------
Investments at net asset value $29,278,813 $20,179,315 $2,598,022 $15,632,182
Accrued transfers from/(to)
depositor -- net 291,189 149,057 39,194 (366,624)
------------------------------------------------------------------------------------------------------------------------------
Total assets 29,570,002 20,328,372 2,637,216 15,265,558
------------------------------------------------------------------------------------------------------------------------------
LIABILITIES: -- -- -- --
------------------------------------------------------------------------------------------------------------------------------
Net assets $29,570,002 $20,328,372 $2,637,216 $15,265,558
------------------------------------------------------------------------------------------------------------------------------
EQUITY ACCOUNTS:
Contract owners' equity:
Units 1,514,530.3792 984,381.1411 206,716.6848 821,409.1991
------------------------------------------------------------------------------------------------------------------------------
Unit value $19.524205 $20.650916 $12.605192 $18.584596
------------------------------------------------------------------------------------------------------------------------------
Value $29,570,002 $20,328,372 $2,605,703 $15,265,558
------------------------------------------------------------------------------------------------------------------------------
Depositor's equity:
Units -- -- 2,500.0000 --
------------------------------------------------------------------------------------------------------------------------------
Unit value -- -- 12.605192 --
------------------------------------------------------------------------------------------------------------------------------
Value -- -- 31,513 --
------------------------------------------------------------------------------------------------------------------------------
Total equity $29,570,002 $20,328,372 $2,637,216 $15,265,558
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
JANUS RETIREMENT ADVANTAGE WRL SERIES ANNUITY ACCOUNT B
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
AGGRESSIVE CAPITAL INTERNATIONAL
FOR THE YEAR OR PERIOD ENDED GROWTH GROWTH APPRECIATION GROWTH
DECEMBER 31, 1997 SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT(1) SUB-ACCOUNT
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $365,450 -- $8,192 $95,784
Capital gains 329,756 -- -- 19,913
------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Mortality and expense risk charges 152,763 $108,167 5,340 82,855
------------------------------------------------------------------------------------------------------------------------------
Net investment income/(loss) 542,443 (108,167) 2,852 32,842
------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS:
Net realized gain/(loss) from securities
transactions 1,479,545 813,080 41,020 2,550,511
Change in unrealized
appreciation/(depreciation) 2,320,741 1,447,684 (11,548) (742,560)
------------------------------------------------------------------------------------------------------------------------------
NET GAIN/(LOSS) ON INVESTMENTS 3,800,286 2,260,764 29,472 1,807,951
------------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets
resulting from operations $4,342,729 $2,152,597 $32,324 $1,840,793
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Period May 1, 1997 (inception) to December 31, 1997.
See Notes to Financial Statements.
8
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
WORLDWIDE FLEXIBLE SHORT-TERM
GROWTH BALANCED EQUITY INCOME INCOME HIGH-YIELD BOND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1,904,285.342 643,777.043 222,118.876 305,303.905 303,312.102 171,389.076
- -----------------------------------------------------------------------------------------------------------------------
$42,899,820 $9,809,254 $2,968,707 $3,540,092 $3,538,617 $1,729,617
- -----------------------------------------------------------------------------------------------------------------------
$44,541,234 $11,246,785 $2,989,720 $3,596,480 $3,573,017 $1,521,935
(387,161) 40,120 57,896 65,190 (660,469) --
- -----------------------------------------------------------------------------------------------------------------------
44,154,073 11,286,905 3,047,616 3,661,670 2,912,548 1,521,935
- -----------------------------------------------------------------------------------------------------------------------
-- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
$44,154,073 $11,286,905 $3,047,616 $3,661,670 $2,912,548 $1,521,935
- -----------------------------------------------------------------------------------------------------------------------
1,875,176.1461 608,080.4668 224,737.1962 250,305.0692 225,866.4190 127,534.6001
- -----------------------------------------------------------------------------------------------------------------------
$23.546627 $18.561532 $13.411608 $14.628828 $12.895002 $11.933507
- -----------------------------------------------------------------------------------------------------------------------
$44,154,073 $11,286,905 $3,014,087 $3,661,670 $2,912,548 $1,521,935
- -----------------------------------------------------------------------------------------------------------------------
-- -- 2,500.0000 -- -- --
- -----------------------------------------------------------------------------------------------------------------------
-- -- 13.411608 -- -- --
- -----------------------------------------------------------------------------------------------------------------------
-- -- 33,529 -- -- --
- -----------------------------------------------------------------------------------------------------------------------
$44,154,073 $11,286,905 $3,047,616 $3,661,670 $2,912,548 $1,521,935
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------- -----------------------
WORLDWIDE MONEY
GROWTH MARKET
SUB-ACCOUNT SUB-ACCOUNT
- ------------------- -----------------------
<S> <C>
1,904,285.342 6,242,688.860
- -----------------------------------------------
$42,899,820 $6,242,689
- -----------------------------------------------
$44,541,234 $6,242,689
(387,161) 1,126,132
- -----------------------------------------------
44,154,073 7,368,821
- -----------------------------------------------
-- --
- -----------------------------------------------
$44,154,073 $7,368,821
- -----------------------------------------------
1,875,176.1461 656,381.6656
- -----------------------------------------------
$23.546627 $11.226427
- -----------------------------------------------
$44,154,073 $7,368,821
- -----------------------------------------------
-- --
- -----------------------------------------------
-- --
- -----------------------------------------------
-- --
- -----------------------------------------------
$44,154,073 $7,368,821
- -----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
WORLDWIDE FLEXIBLE SHORT-TERM
GROWTH BALANCED EQUITY INCOME INCOME HIGH-YIELD BOND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT(1) SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$427,145 $273,098 $2,212 $188,887 $116,829 $249,557
203,012 11,585 -- 1,300 -- 107
- -----------------------------------------------------------------------------------------------------------------------
246,214 52,909 4,384 17,695 9,454 8,194
- -----------------------------------------------------------------------------------------------------------------------
383,943 231,774 (2,172) 172,492 107,375 241,470
- -----------------------------------------------------------------------------------------------------------------------
6,632,556 594,287 97,518 84,370 49,208 36,895
(108,118) 708,799 21,013 38,257 43,362 (205,104)
- -----------------------------------------------------------------------------------------------------------------------
6,524,438 1,303,086 118,531 122,627 92,570 (168,209)
- -----------------------------------------------------------------------------------------------------------------------
$6,908,381 $1,534,860 $116,359 $295,119 $199,945 $73,261
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------- -----------------------
WORLDWIDE MONEY
GROWTH MARKET
SUB-ACCOUNT SUB-ACCOUNT
- ------------------- -----------------------
<S> <C>
$427,145 $403,764
203,012 --
- --------------------------------------------
246,214 52,003
- --------------------------------------------
383,943 351,761
- --------------------------------------------
6,632,556 --
(108,118) --
- --------------------------------------------
6,524,438 --
- --------------------------------------------
$6,908,381 $351,761
- --------------------------------------------
</TABLE>
9
<PAGE>
JANUS RETIREMENT ADVANTAGE WRL SERIES ANNUITY ACCOUNT B
STATEMENTS OF CHANGES IN EQUITY ACCOUNTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
CAPITAL
FOR THE YEAR OR PERIOD ENDED GROWTH AGGRESSIVE GROWTH APPRECIATION
DECEMBER 31, 1997 AND DECEMBER 31, 1996 SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
- ----------------------------------------------------------------------------------------------------------
1997 1996 1997 1996 1997(1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income/(loss) $542,443 $286,185 $(108,167) $63,822 $2,852
Net gain/(loss) on investments 3,800,286 1,799,612 2,260,764 875,020 29,472
---------------------------------------------------------------------------------------------------------
Net increase/(decrease) in equity
accounts resulting from operations 4,342,729 2,085,797 2,152,597 938,842 32,324
---------------------------------------------------------------------------------------------------------
EQUITY TRANSACTIONS:
Proceeds from units sold/(redeemed) 9,792,532 4,799,761 262,291 6,702,926 2,585,924
Less cost of units redeemed:
Administrative charges 10,747 8,882 12,220 11,557 75
Surrender benefits 1,239,711 304,288 894,332 488,330 5,957
Death benefits 10,820 235 -- 1,357 --
---------------------------------------------------------------------------------------------------------
Increase/(decrease) from equity
transactions 8,531,254 4,486,356 (644,261) 6,201,682 2,579,892
---------------------------------------------------------------------------------------------------------
Net increase/(decrease) in equity
accounts 12,873,983 6,572,153 1,508,336 7,140,524 2,612,216
Depositor's equity
contribution/(redemption) -- (1,452) -- (1,849) 25,000
EQUITY ACCOUNTS:
Beginning of period 16,696,019 10,125,318 18,820,036 11,681,361 --
---------------------------------------------------------------------------------------------------------
End of period $29,570,002 $16,696,019 $20,328,372 $18,820,036 $2,637,216
---------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------- -----------------------------
FOR THE YEAR OR PERIOD ENDED INTERNATIONAL GROWTH
DECEMBER 31, 1997 AND DECEMBER 31, 1996 SUB-ACCOUNT
- --------------------------------------- -----------------------------
1997 1996
- --------------------------------------- -----------------------------
<S> <C> <C>
OPERATIONS:
Net investment income/(loss) $32,842 $60,618
Net gain/(loss) on investments 1,807,951 896,343
---------------------------------------------------------------------
Net increase/(decrease) in equity
accounts resulting from operations 1,840,793 956,961
---------------------------------------------------------------------
EQUITY TRANSACTIONS:
Proceeds from units sold/(redeemed) 7,761,214 3,703,610
Less cost of units redeemed:
Administrative charges 3,888 2,040
Surrender benefits 484,107 63,430
Death benefits 4,726 1,633
---------------------------------------------------------------------
Increase/(decrease) from equity
transactions 7,268,493 3,636,507
---------------------------------------------------------------------
Net increase/(decrease) in equity
accounts 9,109,286 4,593,468
Depositor's equity
contribution/(redemption) -- (32,804)
EQUITY ACCOUNTS:
Beginning of period 6,156,272 1,595,608
---------------------------------------------------------------------
End of period $15,265,558 $6,156,272
---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
FOR THE YEAR OR PERIOD ENDED WORLDWIDE GROWTH BALANCED EQUITY INCOME
DECEMBER 31, 1997 AND DECEMBER 31, 1996 SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
- ----------------------------------------------------------------------------------------------------------
1997 1996 1997 1996 1997(1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income/(loss) $383,943 $190,327 $231,774 $84,055 $(2,172)
Net gain/(loss) on investments 6,524,438 3,754,842 1,303,086 534,086 118,531
---------------------------------------------------------------------------------------------------------
Net increase/(decrease) in equity
accounts resulting from operations 6,908,381 3,945,169 1,534,860 618,141 116,359
---------------------------------------------------------------------------------------------------------
EQUITY TRANSACTIONS:
Proceeds from units sold/(redeemed) 14,687,402 8,933,782 4,796,830 1,501,584 2,945,035
Less cost of units redeemed:
Administrative charges 12,511 9,466 3,640 3,148 63
Surrender benefits 927,554 465,167 377,340 61,517 38,715
Death benefits 2,161 1,333 -- 229 --
---------------------------------------------------------------------------------------------------------
Increase/(decrease) from equity
transactions 13,745,176 8,457,816 4,415,850 1,436,690 2,906,257
---------------------------------------------------------------------------------------------------------
Net increase/(decrease) in equity
accounts 20,653,557 12,402,985 5,950,710 2,054,831 3,022,616
Depositor's equity
contribution/(redemption) -- (1,666) -- (1,362) 25,000
EQUITY ACCOUNTS:
Beginning of period 23,500,516 11,099,197 5,336,195 3,282,726 --
---------------------------------------------------------------------------------------------------------
End of period $44,154,073 $23,500,516 $11,286,905 $5,336,195 $3,047,616
---------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------- -----------------------------
FOR THE YEAR OR PERIOD ENDED FLEXIBLE INCOME
DECEMBER 31, 1997 AND DECEMBER 31, 1996 SUB-ACCOUNT
- --------------------------------------- -----------------------------
1997 1996
- --------------------------------------- -----------------------------
<S> <C> <C>
OPERATIONS:
Net investment income/(loss) $172,492 $136,562
Net gain/(loss) on investments 122,627 28,685
---------------------------------------------------------------------
Net increase/(decrease) in equity
accounts resulting from operations 295,119 165,247
---------------------------------------------------------------------
EQUITY TRANSACTIONS:
Proceeds from units sold/(redeemed) 1,357,618 (326,493)
Less cost of units redeemed:
Administrative charges 1,137 1,223
Surrender benefits 188,030 73,878
Death benefits -- 224
---------------------------------------------------------------------
Increase/(decrease) from equity
transactions 1,168,451 (401,818)
---------------------------------------------------------------------
Net increase/(decrease) in equity
accounts 1,463,570 (236,571)
Depositor's equity
contribution/(redemption) -- (1,197)
EQUITY ACCOUNTS:
Beginning of period 2,198,100 2,435,868
---------------------------------------------------------------------
End of period $3,661,670 $2,198,100
---------------------------------------------------------------------
</TABLE>
(1) Period May 1, 1997 (inception) to December 31, 1997.
See Notes to Financial Statements.
10
<PAGE>
JANUS RETIREMENT ADVANTAGE WRL SERIES ANNUITY ACCOUNT B
STATEMENTS OF CHANGES IN EQUITY ACCOUNTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR OR PERIOD ENDED HIGH-YIELD SHORT-TERM BOND MONEY MARKET
DECEMBER 31, 1997 AND DECEMBER 31, 1996 SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
1997 1996(1) 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income/(loss) $107,375 $18,226 $241,470 $39,719 $351,761 $157,414
Net gain/(loss) on investments 92,570 24,534 (168,209) (9,894) -- --
--------------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in equity accounts
resulting from operations 199,945 42,760 73,261 29,825 351,761 157,414
--------------------------------------------------------------------------------------------------------------------------------
EQUITY TRANSACTIONS:
Proceeds from units sold/(redeemed) 2,180,160 591,467 506,376 (173,543) 1,679,951 4,791,643
Less cost of units redeemed:
Administrative charges 192 6 777 883 907 626
Surrender benefits 97,892 -- 61,280 57,578 757,261 552,314
Death benefits -- -- 4,797 -- -- --
--------------------------------------------------------------------------------------------------------------------------------
Increase/(decrease) from equity transactions 2,082,076 591,461 439,522 (232,004) 921,783 4,238,703
--------------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in equity accounts 2,282,021 634,221 512,783 (202,179) 1,273,544 4,396,117
Depositor's equity contribution/(redemption) (28,694) 25,000 -- (1,082) -- (26,062)
EQUITY ACCOUNTS:
Beginning of period 659,221 -- 1,009,152 1,212,413 6,095,277 1,725,222
--------------------------------------------------------------------------------------------------------------------------------
End of period $2,912,548 $659,221 $1,521,935 $1,009,152 $7,368,821 $6,095,277
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Period May 1, 1996 (inception) to December 31, 1996.
See Notes to Financial Statements.
11
<PAGE>
JANUS RETIREMENT ADVANTAGE WRL SERIES ANNUITY ACCOUNT B
SELECTED PER UNIT DATA AND RATIOS*
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
FOR EACH YEAR OR PERIOD ENDED GROWTH AGGRESSIVE GROWTH
DECEMBER 31 SUB-ACCOUNT SUB-ACCOUNT
- ------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993(1) 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ACCUMULATION UNIT VALUE, BEGINNING
OF PERIOD $16.01 $13.61 $10.55 $10.35 $10.00 $18.45 $17.21 $13.62
-----------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income/(loss) .42 .32 .26 (.04) .03 (.12) .07 .15
Net realized and unrealized
gain/(loss) on investments 3.09 2.08 2.80 .24 .32 2.32 1.17 3.44
-----------------------------------------------------------------------------------------------------------------
Total income/(loss) from
operations 3.51 2.40 3.06 .20 .35 2.20 1.24 3.59
-----------------------------------------------------------------------------------------------------------------
ACCUMULATION UNIT VALUE, END OF
PERIOD $19.52 $16.01 $13.61 $10.55 $10.35 $20.65 $18.45 $17.21
-----------------------------------------------------------------------------------------------------------------
Total return** 21.95% 17.61% 29.07% 1.90% 3.50% 11.93% 7.18% 26.41%
-----------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (in
thousands) $29,570 $16,696 $10,125 $4,758 $1 $20,328 $18,820 $11,681
Ratio of net investment
income/(loss) to average net
assets*** 2.30% 2.10% 2.08% (.35)% .97% (.65)% .42% 1.00%
-----------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------- -----------------------
FOR EACH YEAR OR PERIOD ENDED AGGRESSIVE GROWTH
DECEMBER 31 SUB-ACCOUNT
- ---------------------------------- -----------------------
1994 1993(1)
- ---------------------------------- -----------------------
<S> <C> <C> <C>
ACCUMULATION UNIT VALUE, BEGINNING
OF PERIOD $11.81 $10.00
-----------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income/(loss) .08 .01
Net realized and unrealized
gain/(loss) on investments 1.73 1.80
-----------------------------------------------------------------------------------------------------------------
Total income/(loss) from
operations 1.81 1.81
-----------------------------------------------------------------------------------------------------------------
ACCUMULATION UNIT VALUE, END OF
PERIOD $13.62 $11.81
-----------------------------------------------------------------------------------------------------------------
Total return** 15.35% 18.05%
-----------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (in
thousands) $4,828 $1
Ratio of net investment
income/(loss) to average net
assets*** .63% .15%
-----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
CAPITAL
FOR EACH YEAR OR PERIOD ENDED APPRECIATION INTERNATIONAL GROWTH WORLDWIDE GROWTH
DECEMBER 31 SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
- ------------------------------------------------------------------------------------------------------------------
1997(3) 1997 1996 1995 1994(2) 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ACCUMULATION UNIT VALUE,
BEGINNING OF PERIOD $10.00 $15.78 $11.80 $9.66 $10.00 $19.40 $15.14 $11.99
-----------------------------------------------------------------------------------------------------------------
Income from operations:
Net investment income/(loss) .03 .05 .24 (.06) (.05) .23 .19 (.04)
Net realized and unrealized
gain/(loss) on investments 2.58 2.75 3.74 2.20 (.29) 3.92 4.07 3.19
-----------------------------------------------------------------------------------------------------------------
Total income/(loss) from
operations 2.61 2.80 3.98 2.14 (.34) 4.15 4.26 3.15
-----------------------------------------------------------------------------------------------------------------
ACCUMULATION UNIT VALUE, END OF
PERIOD $12.61 $18.58 $15.78 $11.80 $9.66 $23.55 $19.40 $15.14
-----------------------------------------------------------------------------------------------------------------
Total return** 26.05% 17.74% 33.75% 22.11% (3.35)% 21.36% 28.12% 26.29%
-----------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period
(in thousands) $2,637 $15,266 $6,156 $1,596 $904 $44,154 $23,501 $11,099
Ratio of net investment
income/(loss) to average
net assets*** .35% .26% 1.72% (.66)% (.89)% 1.01% 1.12% (.32)%
-----------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------- -----------------------
FOR EACH YEAR OR PERIOD ENDED WORLDWIDE GROWTH
DECEMBER 31 SUB-ACCOUNT
- ------------------------------- -----------------------
1994 1993(1)
- ------------------------------- -----------------------
<S> <C> <C>
ACCUMULATION UNIT VALUE,
BEGINNING OF PERIOD $11.91 $10.00
-------------------------------------------------------
Income from operations:
Net investment income/(loss) (.10) .02
Net realized and unrealized
gain/(loss) on investments .18 1.89
-------------------------------------------------------
Total income/(loss) from
operations .08 1.91
-------------------------------------------------------
ACCUMULATION UNIT VALUE, END OF
PERIOD $11.99 $11.91
-------------------------------------------------------
Total return** .68% 19.10%
-------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period
(in thousands) $6,738 $1
Ratio of net investment
income/(loss) to average
net assets*** (.86)% .63%
-------------------------------------------------------
<FN>
- ------------------
* The above tables calculate the change for a unit outstanding by using the
average units outstanding throughout each period.
** Not annualized for periods of less than 1 full year.
*** Annualized for periods of less than 1 full year.
(1) Period September 13, 1993 (inception) to December 31, 1993.
(2) Period May 2, 1994 (inception) to December 31, 1994.
(3) Period May 1, 1997 (inception) to December 31, 1997.
</FN>
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
JANUS RETIREMENT ADVANTAGE WRL SERIES ANNUITY ACCOUNT B
SELECTED PER UNIT DATA AND RATIOS*
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
FOR EACH YEAR OR PERIOD ENDED BALANCED EQUITY INCOME
DECEMBER 31 SUB-ACCOUNT SUB-ACCOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993(1) 1997(3)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ACCUMULATION UNIT VALUE, BEGINNING OF PERIOD $15.30 $13.26 $10.72 $10.72 $10.00 $10.00
--------------------------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income/(loss) .49 .28 .13 .05 .08 (.03)
Net realized and unrealized gain/(loss) on
investments 2.77 1.76 2.41 (.05) .64 3.44
--------------------------------------------------------------------------------------------------------------------------------
Total income/(loss) from operations 3.26 2.04 2.54 -- .72 3.41
--------------------------------------------------------------------------------------------------------------------------------
ACCUMULATION UNIT VALUE, END OF PERIOD $18.56 $15.30 $13.26 $10.72 $10.72 $13.41
--------------------------------------------------------------------------------------------------------------------------------
Total return** 21.31% 15.36% 23.73% 0.00% 7.20% 34.12%
--------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $11,287 $5,336 $3,283 $2,162 $1 $3,048
Ratio of net investment income/(loss) to
average net assets*** 2.84% 1.98% 1.08% .51% 2.61% (.32)%
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
FLEXIBLE INCOME HIGH-YIELD
FOR EACH YEAR OR PERIOD ENDED DECEMBER 31 SUB-ACCOUNT SUB-ACCOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993(1) 1997 1996(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ACCUMULATION UNIT VALUE, BEGINNING OF
PERIOD $13.17 $12.15 $9.90 $10.07 $10.00 $11.19 $10.00
--------------------------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income/(loss) .88 .83 .57 .41 .10 .90 .55
Net realized and unrealized gain/(loss)
on investments .58 .19 1.68 (.58) (.03) .81 .64
--------------------------------------------------------------------------------------------------------------------------------
Total income/(loss) from operations 1.46 1.02 2.25 (.17) .07 1.71 1.19
--------------------------------------------------------------------------------------------------------------------------------
ACCUMULATION UNIT VALUE, END OF PERIOD $14.63 $13.17 $12.15 $9.90 $10.07 $12.90 $11.19
--------------------------------------------------------------------------------------------------------------------------------
Total return** 11.04% 8.41% 22.81% (1.74)% .70% 15.22% 11.91%
--------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (in
thousands) $3,662 $2,198 $2,436 $893 $1 $2,913 $659
Ratio of net investment income/(loss)
to average net assets*** 6.33% 6.75% 5.53% 4.69% 3.43% 7.37% 7.88%
--------------------------------------------------------------------------------------------------------------------------------
<FN>
- ------------------
* The above tables calculate the change for a unit outstanding by using the
average units outstanding throughout each period.
** Not annualized for periods of less than 1 full year.
*** Annualized for periods of less than 1 full year.
(1) Period September 13, 1993 (inception) to December 31, 1993.
(2) Period May 1, 1995 (inception) to December 31, 1995.
(3) Period May 1, 1996 (inception) to December 31, 1996.
</FN>
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
JANUS RETIREMENT ADVANTAGE WRL SERIES ANNUITY ACCOUNT B
SELECTED PER UNIT DATA AND RATIOS*
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
SHORT-TERM BOND MONEY MARKET
FOR EACH YEAR OR PERIOD ENDED DECEMBER 31 SUB-ACCOUNT SUB-ACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993(1) 1997 1996(1) 1995(2)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ACCUMULATION UNIT VALUE, BEGINNING OF PERIOD $11.26 $10.90 $10.04 $10.03 $10.00 $10.74 $10.30 $10.00
--------------------------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income/(loss) 2.23 .38 .40 .50 .10 .49 .44 .30
Net realized and unrealized gain/(loss) on
investments (1.56) (.02) .46 (.49) (.07) -- -- --
--------------------------------------------------------------------------------------------------------------------------------
Total income/(loss) from operations .67 .36 .86 .01 .03 .49 .44 .30
--------------------------------------------------------------------------------------------------------------------------------
ACCUMULATION UNIT VALUE, END OF PERIOD $11.93 $11.26 $10.90 $10.04 $10.03 $11.23 $10.74 $10.30
--------------------------------------------------------------------------------------------------------------------------------
Total return** 6.03% 3.24% 8.61% .08% .30% 4.49% 4.28% 3.03%
--------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $1,522 $1,009 $1,212 $2,437 $1 $7,369 $6,095 $1,725
Ratio of net investment income/(loss) to
average net assets*** 19.19% 3.51% 4.11% 5.35% 3.45% 4.43% 4.19% 4.42%
--------------------------------------------------------------------------------------------------------------------------------
<FN>
- -----------------------
* The above tables calculate the change for a unit outstanding by using the
average units outstanding throughout each period.
** Not annualized for periods of less than 1 full year.
*** Annualized for periods of less than 1 full year.
(1) Period September 13, 1993 (inception) to December 31, 1993.
(2) Period May 1, 1995 (inception) to December 31, 1995.
(3) Period May 1, 1996 (inception) to December 31, 1996.
</FN>
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
JANUS RETIREMENT ADVANTAGE WRL SERIES ANNUITY ACCOUNT B
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The WRL Series Annuity Account B (the "Account") was established as a
variable accumulation deferred annuity separate account of Western Reserve Life
Assurance Co. of Ohio ("WRL") and is registered as a unit investment trust
("Trust") under the Investment Company Act of 1940, as amended. The Account
encompasses the Janus Retirement Advantage, a tax-deferred variable annuity
contract (the "Contracts") issued by WRL. The Account contains eleven investment
options referred to as Sub-Accounts. Each Sub-Account invests in the
corresponding Portfolio of the Janus Aspen Series Trust (collectively referred
to as the "Fund" and individually as a "Portfolio"), which is registered as an
open-end management investment company under the Investment Company Act of 1940,
as amended. On May 1, 1997, WRL made an initial contribution of $50,000 to the
Account. The amount of the contribution and units received were as follows:
SUB-ACCOUNT CONTRIBUTION UNITS
- -----------------------------------------------------------
Capital Appreciation $25,000 2,500.000000
Equity Income $25,000 2,500.000000
- -----------------------------------------------------------
The Account's equity transactions are accounted for using the appropriate
effective date at the corresponding accumulation unit value.
The following significant accounting policies, which are in conformity with
generally accepted accounting principles for unit investment trusts, have been
consistently used in preparation of the Trust's financial statements.
A. VALUATION OF INVESTMENTS AND SECURITIES TRANSACTIONS
The investments in the Trust's shares are stated at the closing net asset
value ("NAV") per share as determined by the Fund on December 31, 1997.
Investment transactions are accounted for on the trade date, using the Fund NAV
per share next determined after receipt of sale or redemption orders without
sales charges. Dividend income and capital gains distributions are recorded on
the ex-dividend date. The cost of investments sold is determined on a first-in,
first-out basis.
B. FEDERAL INCOME TAXES
The operations of the Account are a part of and are taxed with the total
operations of WRL, which is taxed as a life insurance company under the Internal
Revenue Code of 1986, as amended. Under current law, the investment income of
the Account, including realized and unrealized capital gains, is not taxable to
WRL. Accordingly, no provision for federal income taxes has been made.
C. ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
NOTE 2. CHARGES AND DEDUCTIONS
Charges are assessed by WRL in connection with the issuance and
administration of the Contracts.
A. CONTRACT CHARGES
On each anniversary through the maturity date, WRL will deduct an annual
contract charge as partial compensation for providing administrative services
under the Contracts. Deduction of the annual contract charge is currently waived
when the account value on the anniversary is equal to or greater than $25,000.
B. ANNUITY SUB-ACCOUNT CHARGE
A daily charge equal to an annual rate of .65% of average daily net assets
of each Sub-Account is assessed to compensate WRL for assumption of mortality
and expense risks and administrative services in connection with issuance and
administration of the Contracts. This charge (not assessed at the individual
contract level) effectively reduces the value of a unit outstanding during the
year.
15
<PAGE>
JANUS RETIREMENT ADVANTAGE WRL SERIES ANNUITY ACCOUNT B
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. DIVIDENDS AND DISTRIBUTIONS
Dividends of the Fund's Money Market Portfolio are declared daily and
reinvested monthly. Dividends of the remaining Fund Portfolios are typically
declared and reinvested semiannually, while capital gains distributions are
typically declared and reinvested annually. Dividends and distributions of the
Fund are generally paid to and reinvested by the Account on the next business
day after the ex-date. Dividends are not declared by the Account because the
increase in value of the underlying investment in the Fund is reflected daily in
the unit price used to calculate the equity value within the Account.
Consequently, a dividend distribution by the underlying fund does not change
either the unit price or equity values within the Account.
NOTE 4. SECURITIES TRANSACTIONS
Securities transactions are summarized as follows:
<TABLE>
<CAPTION>
FOR THE YEAR OR PERIOD ENDED DECEMBER 31, 1997
PURCHASES OF PROCEEDS FROM SALES
SUB-ACCOUNT LONG-TERM SECURITIES OF LONG-TERM SECURITIES
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Growth $12,981,344 $ 4,189,222
Aggressive Growth 17,916,638 18,842,261
Capital Appreciation(1) 2,940,090 371,540
International Growth 27,371,441 19,701,421
Worldwide Growth 50,469,846 35,901,302
Balanced 6,513,802 1,887,763
Equity Income(1) 3,727,836 856,647
Flexible Income 3,336,990 2,047,223
High-Yield 4,097,726 1,271,419
Short-Term Bond 3,046,098 2,362,208
Money Market 67,285,406 67,112,623
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Period May 1, 1997 (inception) to December 31, 1997.
NOTE 5. EQUITY TRANSACTIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
UNITS UNITS
BALANCE UNITS UNITS BALANCE
SUB-ACCOUNT BEGINNING OF YEAR ISSUED REDEEMED END OF YEAR
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth 1,042,859.6844 993,522.4840 521,851.7892 1,514,530.3792
Aggressive Growth 1,020,107.0897 1,242,294.4941 1,278,020.4427 984,381.1411
Capital Appreciation(1) -- 285,252.3760 76,035.6912 209,216.6848
International Growth 390,010.6011 2,044,356.3123 1,612,957.7143 821,409.1991
Worldwide Growth 1,211,235.2007 3,135,720.1340 2,471,779.1886 1,875,176.1461
Balanced 348,749.4610 500,188.3158 240,857.3100 608,080.4668
Equity Income(1) -- 338,534.2546 111,297.0584 227,237.1962
Flexible Income 166,841.2528 282,109.4873 198,645.6709 250,305.0692
High-Yield 58,905.1379 383,919.4188 216,958.1377 225,866.4190
Short-Term Bond 89,662.3361 287,846.7071 249,974.4431 127,534.6001
Money Market 567,317.3363 9,554,325.3890 9,465,261.0597 656,381.6656
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Period May 1, 1997 (inception) to December 31, 1997.
16
<PAGE>
JANUS RETIREMENT ADVANTAGE WRL SERIES ANNUITY ACCOUNT B
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. OTHER MATTERS
As of December 31, 1997, the equity accounts include net unrealized
appreciation (depreciation) on investments as follows:
SUB-ACCOUNT
Growth $4,494,488
Aggressive Growth 2,150,495
Capital Appreciation (11,548)
International Growth (123,503)
Worldwide Growth 1,641,414
Balanced 1,437,531
Equity Income 21,013
Flexible Income 56,388
High-Yield 34,400
Short-Term Bond (207,682)
Money Market N/A
- ------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF WESTERN RESERVE
LIFE ASSURANCE CO. OF OHIO AND CONTRACT OWNERS
OF THE JANUS RETIREMENT ADVANTAGE WRL SERIES
ANNUITY ACCOUNT B
In our opinion, the accompanying statement of assets, liabilities and
equity accounts and the related statements of operations and of changes in
equity accounts and the selected per unit data and ratios present fairly, in all
material respects, the financial position of each of the Sub-Accounts
constituting the Janus Retirement Advantage WRL Series Annuity Account B (a
separate account of Western Reserve Life Assurance Co. of Ohio, hereafter
referred to as the "Account") at December 31, 1997, the results of each of their
operations, the changes in each of their equity accounts and the selected per
unit data and ratios for each of the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
selected per unit data and ratios (hereafter referred to as "financial
statements") are the responsibility of the Account's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
/s/ PRICE WATERHOUSE
Kansas City, Missouri
January 30, 1998
17
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
We have audited the accompanying statutory-basis balance sheets of Western
Reserve Life Assurance Co. of Ohio as of December 31, 1997 and 1996, and the
related statutory-basis statements of operations, changes in capital and
surplus, and cash flows for each of the three years in the period ended December
31, 1997. Our audits also included the statutory-basis financial statement
schedules required by Regulation S-X, Article 7. These financial statements and
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our audits. We
did not audit the "Separate Account Assets" and "Separate Account Liabilities"
in the balance sheets of the Company. The Separate Account financial statements
were audited by other auditors whose reports have been furnished to us, and our
opinion, insofar as it relates to the data included for the Separate Account, is
based solely upon the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of other auditors provide a
reasonable basis for our opinion.
As described in Note 1 to the financial statements, the Company presents
its financial statements in conformity with accounting practices prescribed or
permitted by the Insurance Department of the State of Ohio, which practices
differ from generally accepted accounting principles. The variances between such
practices and generally accepted accounting principles are also described in
Note 1. The effects on the financial statements of these variances are not
reasonably determinable but are presumed to be material.
In our opinion, because of the effects of the matters described in the
preceding paragraph, the financial statements referred to above do not present
fairly, in conformity with generally accepted accounting principles, the
financial position of Western Reserve Life Assurance Co. of Ohio at December 31,
1997 and 1996, or the results of its operations or its cash flows for each of
the three years in the period ended December 31, 1997.
Also, in our opinion, based on our audits and the reports of other
auditors, the financial statements referred to above present fairly, in all
material respects, the financial position of Western Reserve Life Assurance Co.
of Ohio at December 31, 1997 and 1996, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1997 in
conformity with accounting practices prescribed or permitted by the Insurance
Department of the State of Ohio. Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic statutory-basis
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
ERNST & YOUNG LLP
Des Moines, Iowa
February 27, 1998
18
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
BALANCE SHEETS - STATUTORY BASIS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
DECEMBER 31
- -----------------------------------------------------------------------------------------------------
1997 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
ADMITTED ASSETS
Cash and invested assets:
Cash and short-term investments $ 13,896 $ 2,480
Bonds 255,919 359,579
Common stocks:
Affiliated entities (cost: 1997 - $150) 319 --
Other (cost: 1997 and 1996 - $302) 428 597
Mortgage loans on real estate 4,824 6,049
Home office properties 19,964 7,962
Policy loans 76,741 52,604
- -----------------------------------------------------------------------------------------------------
Total cash and invested assets 372,091 429,271
Premiums deferred and uncollected 1,928 1,943
Accrued investment income 4,088 5,940
Receivable from affiliates -- 1,165
Transfers from separate accounts 279,958 204,181
Other assets 5,221 3,962
Separate account assets 4,814,594 3,527,145
- -----------------------------------------------------------------------------------------------------
Total admitted assets $5,477,880 $4,173,607
- -----------------------------------------------------------------------------------------------------
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Aggregate reserves for policies and contracts:
Life $ 186,523 $ 155,166
Annuity 296,290 332,230
Policy and contract claim reserves 10,929 8,584
Other policyholders' funds 3,877 3,104
Remittances and items not allocated 9,184 9,107
Federal income taxes payable 2,283 1,266
Asset valuation reserve 2,436 5,710
Interest maintenance reserve 9,134 7,451
Short-term note payable to affiliate 8,200 --
Payable to affiliate 1,925 20,463
Other liabilities 19,257 13,082
Separate account liabilities 4,812,979 3,521,888
- -----------------------------------------------------------------------------------------------------
Total liabilities 5,363,017 4,078,051
Commitments and contingencies
Capital and surplus:
Common stock, $1.00 par value, 1,500 shares authorized,
issued and outstanding 1,500 1,500
Paid-in surplus 88,015 68,015
Unassigned surplus 25,348 26,041
- -----------------------------------------------------------------------------------------------------
Total capital and surplus 114,863 95,556
- -----------------------------------------------------------------------------------------------------
Total liabilities and capital and surplus $5,477,880 $4,173,607
- -----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
19
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
STATEMENTS OF OPERATIONS - STATUTORY BASIS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
- ---------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Premiums and other considerations, net of reinsurance:
Life $ 394,370 $ 293,590 $191,508
Annuity 822,149 740,125 378,390
Net investment income 40,013 36,067 40,891
Amortization of interest maintenance reserve 1,576 1,335 882
Commissions and expense allowances on reinsurance
ceded 11 11 11
Other income 3,016 13,398 8,237
- ---------------------------------------------------------------------------------------------------------------------
1,261,135 1,084,526 619,919
Benefits and expenses:
Benefits paid or provided for:
Life 28,060 21,256 17,844
Surrender benefits 431,939 286,406 206,250
Other benefits 28,112 23,270 19,530
Increase (decrease) in aggregate reserves for
policies and contracts:
Life 29,485 80,139 (15,132)
Annuity (35,940) 12,877 5,229
Other 794 422 109
- ---------------------------------------------------------------------------------------------------------------------
482,450 424,370 233,830
Insurance expenses:
Commissions 179,106 140,261 82,903
General insurance expenses 70,546 47,406 37,246
Taxes, licenses and fees 13,101 10,848 8,919
Transfer to separate accounts 519,214 452,471 242,427
Other expenses 21 60 34
- ---------------------------------------------------------------------------------------------------------------------
781,988 651,046 371,529
- ---------------------------------------------------------------------------------------------------------------------
1,264,438 1,075,416 605,359
- ---------------------------------------------------------------------------------------------------------------------
Gain (loss) from operations before federal income taxes
and realized capital gains (losses) on investments (3,303) 9,110 14,560
Federal income tax expense 469 9,297 8,917
- ---------------------------------------------------------------------------------------------------------------------
Gain (loss) from operations before realized capital
gains (losses) on investments (3,772) (187) 5,643
Net realized capital gains (losses) on investments (net
of related federal income taxes and amounts
transferred to interest maintenance reserve) 747 (811) (1,678)
- ---------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (3,025) $ (998) $ 3,965
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
20
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS - STATUTORY BASIS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
COMMON PAID-IN UNASSIGNED TOTAL CAPITAL
STOCK SURPLUS SURPLUS AND SURPLUS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at January 1, 1995 $1,500 $68,015 $25,505 $ 95,020
Net income for 1995 -- -- 3,965 3,965
Net unrealized capital losses -- -- (500) (500)
Decrease in non-admitted assets -- -- 903 903
Decrease in asset valuation reserve -- -- 2,901 2,901
Increase in surplus in separate accounts -- -- 541 541
Change in reserve valuation -- -- (3,496) (3,496)
Other adjustments -- -- (1,395) (1,395)
- ---------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 1,500 68,015 28,424 97,939
Net loss for 1996 -- -- (998) (998)
Net unrealized capital gains -- -- 1,294 1,294
Decrease in non-admitted assets -- -- 199 199
Increase in asset valuation reserve -- -- (120) (120)
Increase in surplus in separate accounts -- -- 237 237
Change in reserve valuation -- -- (2,995) (2,995)
- ---------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 1,500 68,015 26,041 95,556
Net loss for 1997 -- -- (3,025) (3,025)
Increase in non-admitted assets -- -- (702) (702)
Decrease in asset valuation reserve -- -- 3,274 3,274
Decrease in surplus in separate accounts -- -- (2,115) (2,115)
Change in reserve valuation -- -- (1,872) (1,872)
Capital contribution -- 20,000 -- 20,000
Tax effect of capital loss carry-forward
utilized by affiliates -- -- 3,747 3,747
- ---------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 $1,500 $88,015 $25,348 $114,863
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
21
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
STATEMENTS OF CASH FLOWS - STATUTORY BASIS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
- ---------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Premiums and other considerations, net of reinsurance $1,224,228 $1,046,548 $ 577,986
Net investment income 43,802 38,666 42,359
Life and accident and health claims (26,005) (20,655) (16,759)
Surrender benefits and other fund withdrawals (431,939) (286,406) (206,250)
Other benefits to policyholders (28,147) (22,129) (19,041)
Commissions, other expenses and other taxes (261,352) (196,373) (128,341)
Net transfers to separate accounts (596,347) (658,326) (242,427)
Federal income taxes paid (5,006) (9,449) (7,531)
Interest paid (731) -- --
Other, net (6,768) 28,325 (4,284)
- ---------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (88,265) (79,799) (4,288)
INVESTING ACTIVITIES
Proceeds from investments sold, matured or repaid:
Bonds and preferred stocks 146,963 122,820 108,554
Common stocks -- -- 2,108
Mortgage loans on real estate 2,116 132 1,954
Real estate -- 4,304 --
Other -- 175 --
- ---------------------------------------------------------------------------------------------------------------------
149,079 127,431 112,616
Cost of investments acquired
Bonds and preferred stocks (40,418) (26,826) (139,402)
Common stocks (150) (4) (589)
Mortgage loans on real estate (891) -- (6)
Real estate (12,002) (7,837) (449)
Policy loans (24,137) (15,479) (9,605)
Other -- (5) --
- ---------------------------------------------------------------------------------------------------------------------
(77,598) (50,151) (150,051)
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 71,481 77,280 (37,435)
FINANCING ACTIVITIES
Issuance of short-term note payable to affiliate 8,200 -- --
Capital contribution 20,000 -- --
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 28,200 -- --
- ---------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and short-term investments 11,416 (2,519) (41,723)
Cash and short-term investments at beginning of year 2,480 4,999 46,722
- ---------------------------------------------------------------------------------------------------------------------
Cash and short-term investments at end of year $ 13,896 $ 2,480 $ 4,999
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
22
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS - STATUTORY-BASIS
DECEMBER 31, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Western Reserve Life Assurance Co. of Ohio ("the Company") is a stock life
insurance company and is a wholly-owned subsidiary of First AUSA Life Insurance
Company which, in turn, is a wholly-owned subsidiary of AEGON USA, Inc.
("AEGON"). AEGON is a wholly-owned subsidiary of AEGON nv, a holding company
organized under the laws of the Netherlands.
NATURE OF BUSINESS
The Company operates predominantly in the variable universal life and
variable annuity areas of the life insurance business. The Company is licensed
in 49 states and the District of Columbia. Sales of the Company's products are
through financial planners, independent representatives, financial institutions
and stockbrokers. The majority of the Company's new life insurance written and a
substantial portion of new annuities written is done through one marketing
organization; the Company expects to maintain this relationship for the
foreseeable future.
BASIS OF PRESENTATION
The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported in the
financial statements and accompanying notes. Such estimates and assumptions
could change in the future as more information becomes known, which could impact
the amounts reported and disclosed herein.
The accompanying financial statements have been prepared in conformity with
accounting practices prescribed or permitted by the Insurance Department of the
State of Ohio, which practices differ from generally accepted accounting
principles. The more significant of these differences are as follows: (a) bonds
are generally carried at amortized cost rather than segregating the portfolio
into held-to-maturity (reported at amortized cost), available-for-sale (reported
at fair value), and trading (reported at fair value) classifications; (b)
acquisition costs of acquiring new business are expensed as incurred rather than
deferred and amortized over the life of the policies; (c) policy reserves on
traditional life products are based on statutory mortality rates and interest
which may differ from reserves based on reasonable assumptions of expected
mortality, interest, and withdrawals which include a provision for possible
unfavorable deviation from such assumptions; (d) policy reserves on certain
investment products use discounting methodologies utilizing statutory interest
rates rather than full account values; (e) reinsurance amounts are netted
against the corresponding asset or liability rather than shown as gross amounts
on the balance sheet; (f) deferred income taxes are not provided for the
difference between the financial statement amounts and income tax bases of
assets and liabilities; (g) net realized gains or losses attributed to changes
in the level of interest rates in the market are deferred and amortized over the
remaining life of the bond or mortgage loan, rather than recognized as gains or
losses in the statement of operations when the sale is completed; (h) declines
in the estimated realizable value of investments are provided for through the
establishment of a formula-determined statutory investment reserve (reported as
a liability) changes to which are charged directly to surplus, rather than
through recognition in the statement of operations for declines in value, when
such declines are judged to be other than temporary; (i) certain assets
designated as "non-admitted assets" have been charged to surplus rather than
being reported as assets; (j) revenues for universal life and investment
products consist of the entire premiums received rather than policy charges for
the cost of insurance, policy administration charges, amortization of policy
initiation fees and surrender charges assessed; (k) pension expense is recorded
as amounts are paid rather than accrued and expensed during the periods in which
the employers provide service; and (l) the financial statements of wholly-owned
affiliates are not consolidated with those of the Company. The effects of these
variances have not been determined by the Company.
The National Association of Insurance Commissioners (NAIC) currently is in
the process of recodifying statutory accounting practices, the result of which
is expected to constitute the only source of "prescribed" statutory accounting
practices. Accordingly, that project, which is expected to be completed in 1998,
will likely change, to some extent, prescribed statutory accounting practices
and may result in changes to the accounting practices that the Company uses to
prepare its statutory-basis financial statements. The impact of any such changes
on the Company's statutory surplus cannot be determined at this time and could
be material.
23
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS - STATUTORY-BASIS (CONTINUED)
Other significant statutory accounting practices are as follows:
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers all
highly liquid investments with remaining maturities of one year or less when
purchased to be cash equivalents.
INVESTMENTS
Investments in bonds (except those to which the Securities Valuation Office
of the NAIC has ascribed a value), mortgage loans on real estate and short-term
investments are reported at cost adjusted for amortization of premiums and
accrual of discounts. Amortization is computed using methods which result in a
level yield over the expected life of the security. The Company reviews its
prepayment assumptions on mortgage and other asset backed securities at regular
intervals and adjusts amortization rates retrospectively when such assumptions
are changed due to experience and/or expected future patterns. Common stocks of
unaffiliated companies are carried at market and include shares of mutual funds
(money market and other), and the related unrealized capital gains/(losses) are
reported in unassigned surplus without any adjustment for federal income taxes.
Common stocks of the Company's wholly-owned affiliates are recorded at the
equity in net assets. Home office property is reported at cost less allowances
for depreciation. Depreciation is computed principally by the straight-line
method. Policy loans are reported at unpaid principal. Other "admitted assets"
are valued, principally at cost, as required or permitted by Ohio Insurance
Laws.
Realized capital gains and losses are determined on the basis of specific
identification and are recorded net of related federal income taxes. The Asset
Valuation Reserve (AVR) is established by the Company to provide for anticipated
losses in the event of default by issuers of certain invested assets. These
amounts are determined using a formula prescribed by the NAIC and are reported
as a liability. The formula for the AVR provides for a corresponding adjustment
for realized gains and losses. Under a formula prescribed by the NAIC, the
Company defers, in the Interest Maintenance Reserve (IMR), the portion of
realized gains and losses on sales of fixed income investments, principally
bonds and mortgage loans, attributable to changes in the general level of
interest rates and amortizes those deferrals over the remaining period to
maturity of the security.
During 1997, 1996 and 1995, net realized capital gains of $3,259, $2,394
and $554, respectively, were credited to the IMR rather than being immediately
recognized in the statements of operations. Amortization of these net gains
aggregated $1,576, $1,335 and $882 for the years ended December 31, 1997, 1996
and 1995, respectively.
Interest income is recognized on an accrual basis. The Company does not
accrue income on bonds in default, mortgage loans on real estate in default
and/or foreclosure or which are delinquent more than twelve months, or real
estate where rent is in arrears for more than three months. Further, income is
not accrued when collection is uncertain. No investment income due and accrued
has been excluded for the years ended December 31, 1997, 1996 and 1995, with
respect to such practices.
AGGREGATE RESERVES FOR POLICIES
Life and annuity reserves are developed by actuarial methods and are
determined based on published tables using statutorily specified interest rates
and valuation methods that will provide, in the aggregate, reserves that are
greater than or equal to the minimum required by law.
The aggregate policy reserves for life insurance policies are based
principally upon the 1941, 1958 and 1980 Commissioners' Standard Ordinary
Mortality and American Experience Mortality Tables. The reserves are calculated
using interest rates ranging from 2.25 to 5.50 percent and are computed
principally on the Net Level Premium Valuation and the Commissioners' Reserve
Valuation Methods. Reserves for universal life policies are based on account
balances adjusted for the Commissioners' Reserve Valuation Method.
Deferred annuity reserves are calculated according to the Commissioners'
Annuity Reserve Valuation Method including excess interest reserves to cover
situations where the future interest guarantees plus the decrease in surrender
charges are in excess of the maximum valuation rates of interest. Reserves for
immediate annuities and supplementary contracts with life contingencies are
equal to the present value of future payments assuming interest rates ranging
from 5.75 to 8.75 percent and mortality rates, where appropriate, from a variety
of tables.
POLICY AND CONTRACT CLAIM RESERVES
Claim reserves represent the estimated accrued liability for claims
reported to the Company and claims incurred but not yet reported through the
statement date. These reserves are estimated using either individual case-basis
valuations or statistical analysis
24
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS - STATUTORY-BASIS (CONTINUED)
techniques. These estimates are subject to the effects of trends in claim
severity and frequency. The estimates are continually reviewed and adjusted as
necessary as experience develops or new information becomes available.
SEPARATE ACCOUNTS
Assets held in trust for purchases of variable universal life and variable
annuity contracts and the Company's corresponding obligation to the contract
owners are shown separately in the balance sheets. The assets in the separate
accounts are valued at market. Income and gains and losses with respect to the
assets in the separate accounts accrue to the benefit of the policyholders and,
accordingly, the operations of the separate accounts are not included in the
accompanying financial statements. The separate accounts do not have any minimum
guarantees and the investment risks associated with market value changes are
borne entirely by the policyholders. The Company received variable contract
premiums of $1,164,013, $997,513 and $466,822 in 1997, 1996 and 1995,
respectively. All variable account contracts are subject to discretionary
withdrawal by the policyholder at the market value of the underlying assets less
the current surrender charge. Separate account contractholders have no claim
against the assets of the general account.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1996 and 1995 financial
statements to conform to the 1997 presentation.
2. FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, Disclosures about Fair
Value of Financial Instruments, requires disclosure of fair value information
about financial instruments, whether or not recognized in the statutory-basis
balance sheet, for which it is practicable to estimate that value. In cases
where quoted market prices are not available, fair values are based on estimates
using present value or other valuation techniques. Those techniques are
significantly affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard, the derived fair value estimates
cannot be substantiated by comparisons to independent markets and, in many
cases, could not be realized in immediate settlement of the instrument.
Statement of Financial Accounting Standards No. 107 excludes certain financial
instruments and all nonfinancial instruments from its disclosure requirements
and allows companies to forego the disclosures when those estimates can only be
made at excessive cost. Accordingly, the aggregate fair value amounts presented
do not represent the underlying value of the Company.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and Short-Term Investments: The carrying amounts reported in the
statutory-basis balance sheet for these instruments approximate their fair
values.
Investment Securities: Fair values for fixed maturity securities (including
redeemable preferred stocks) are based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair values
are estimated using values obtained from independent pricing services or
(in the case of private placements) are estimated by discounting expected
future cash flows using a current market rate applicable to the yield,
credit quality, and maturity of the investments. The fair values for equity
securities are based on quoted market prices.
Mortgage Loans and Policy Loans: The fair values for mortgage loans are
estimated utilizing discounted cash flow analyses, using interest rates
reflective of current market conditions and the risk characteristics of the
loans. The fair value of policy loans are assumed to equal their carrying
value.
Investment Contracts: Fair values for the Company's liabilities under
investment-type insurance contracts are estimated using discounted cash
flow calculations, based on interest rates currently being offered for
similar contracts with maturities consistent with those remaining for the
contracts being valued.
Fair values for the Company's insurance contracts other than investment
contracts are not required to be disclosed. However, the fair values of
liabilities under all insurance contracts are taken into consideration in the
Company's overall management of interest rate risk, which minimizes exposure to
changing interest rates through the matching of investment maturities with
amounts due under insurance contracts.
25
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS - STATUTORY-BASIS (CONTINUED)
The following sets forth a comparison of the fair values and carrying
values of the Company's financial instruments subject to the provisions of
Statement of Financial Accounting Standards No. 107:
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
- -------------------------------------------------------------------------------------------------------------------
CARRYING VALUE FAIR VALUE CARRYING VALUE FAIR VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ADMITTED ASSETS
Bonds $ 255,919 $ 267,763 $ 359,579 $ 372,319
Common stocks 747 747 597 597
Mortgage loans on real estate 4,824 5,143 6,049 6,134
Policy loans 76,741 76,741 52,604 52,604
Cash and short-term investments 13,896 13,896 2,480 2,480
Separate account assets 4,814,594 4,814,594 3,527,145 3,527,145
LIABILITIES
Investment contract liabilities 280,121 276,113 321,293 314,748
Separate account annuities 3,615,255 3,565,557 2,692,614 2,647,266
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
3. INVESTMENTS
The carrying value and estimated fair value of investments in debt
securities are as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
CARRYING UNREALIZED UNREALIZED FAIR
VALUE GAINS LOSSES VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
Bonds:
United States Government and agencies $ 3,675 $ 9 $ 30 $ 3,654
State, municipal and other government 3,855 360 -- 4,215
Public utilities 15,794 904 403 16,295
Industrial and miscellaneous 121,513 7,700 710 128,503
Mortgage-backed securities 111,082 4,198 184 115,096
- -----------------------------------------------------------------------------------------------------------------
Total bonds $255,919 $13,171 $1,327 $267,763
- -----------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1996
Bonds:
United States Government and agencies $ 11,422 $ 13 $ 292 $ 11,143
State, municipal and other government 5,504 274 -- 5,778
Public utilities 14,808 848 80 15,576
Industrial and miscellaneous 173,097 8,889 910 181,076
Mortgage-backed securities 154,748 4,617 619 158,746
- -----------------------------------------------------------------------------------------------------------------
Total bonds $359,579 $14,641 $1,901 $372,319
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS - STATUTORY-BASIS (CONTINUED)
The carrying value and fair value of bonds at December 31, 1997 by
contractual maturity are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without penalties.
<TABLE>
<CAPTION>
CARRYING ESTIMATED
VALUE FAIR VALUE
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 18,310 $ 18,467
Due one through five years 67,005 70,952
Due five through ten years 29,508 30,621
Due after ten years 30,014 32,627
- ----------------------------------------------------------------------------------------
144,837 152,667
Mortgage and other asset backed securities 111,082 115,096
- ----------------------------------------------------------------------------------------
$255,919 $267,763
- ----------------------------------------------------------------------------------------
</TABLE>
A detail of net investment income is presented below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest on bonds $25,723 $33,969 $38,624
Dividends on equity investments 10,855 -- 30
Interest on mortgage loans 478 559 573
Rental income on real estate 1,371 919 1,014
Interest on policy loans 4,656 3,339 2,353
Other investment income 26 9 328
- -----------------------------------------------------------------------------------------------
Gross investment income 43,109 38,795 42,922
Investment expenses (3,096) (2,728) (2,031)
- -----------------------------------------------------------------------------------------------
Net investment income $40,013 $36,067 $40,891
- -----------------------------------------------------------------------------------------------
</TABLE>
Proceeds from sales and maturities of debt securities and related gross
realized gains and losses were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Proceeds $146,963 $122,820 $108,554
- --------------------------------------------------------------------------------------------------
Gross realized gains $ 3,921 $ 2,984 $ 1,631
Gross realized losses 626 791 1,346
- --------------------------------------------------------------------------------------------------
Net realized gains $ 3,295 $ 2,193 $ 285
- --------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1997, bonds with an aggregate carrying value of $5,474 were
on deposit with certain state regulatory authorities or were restrictively held
in bank custodial accounts for benefit of such state regulatory authorities, as
required by statute.
Realized investment gains (losses) and changes in unrealized gains (losses)
for investments are summarized below:
<TABLE>
<CAPTION>
REALIZED
- ------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
1997 1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Debt securities $ 3,295 $ 2,193 $ 285
Mortgage loans -- -- (1,409)
Real estate -- (606) --
Other invested assets -- (4) --
- ------------------------------------------------------------------------------------------------
3,295 1,583 (1,124)
Tax benefit (711) -- --
Transfer to interest maintenance reserve (3,259) (2,394) (554)
- ------------------------------------------------------------------------------------------------
Net realized gains (losses) $ 747 $ (811) $(1,678)
- ------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS - STATUTORY-BASIS (CONTINUED)
<TABLE>
<CAPTION>
CHANGE IN UNREALIZED
- ------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
1997 1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Debt securities $ (896) $(14,442) $36,399
Common stock -- (66) (236)
- ------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) $ (896) $(14,508) $36,163
- ------------------------------------------------------------------------------------------------
</TABLE>
Gross unrealized gains (losses) on common stocks were as follows:
<TABLE>
<CAPTION>
UNREALIZED
- --------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
1997 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unrealized gains $295 295 $361
Unrealized losses -- -- --
- --------------------------------------------------------------------------------------------
Net unrealized gains $295 295 $361
- --------------------------------------------------------------------------------------------
</TABLE>
During 1997, the Company issued one mortgage loan with an interest rate of
8.07%. The maximum percentage of any one mortgage loan to the value of the
underlying real estate at origination was 69%. The Company requires all
mortgagees to carry fire insurance equal to the value of the underlying
property.
During 1997, 1996 and 1995, no mortgage loans were foreclosed and
transferred to real estate. During 1997 and 1996, the Company held a mortgage
loan loss reserve in the asset valuation reserve of $54 and $138, respectively.
At December 31, 1997, the Company had no investments (excluding U. S.
Government guaranteed or insured issues) which individually represented more
than ten percent of capital and surplus and the asset valuation reserve.
4. REINSURANCE
The Company reinsures portions of certain insurance policies which exceed
its established limits, thereby providing a greater diversification of risk and
minimizing exposure on larger risks. The Company remains contingently liable
with respect to any insurance ceded, and this would become an actual liability
in the event that the assuming insurance company became unable to meet its
obligations under the reinsurance treaty.
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Direct premiums $1,219,271 $1,034,757 $570,413
Reinsurance assumed 2,389 2,063 1,569
Reinsurance ceded (5,141) (3,105) (2,084)
- ------------------------------------------------------------------------------------------------------
Net premiums earned $1,216,519 $1,033,715 $569,898
- ------------------------------------------------------------------------------------------------------
</TABLE>
The Company received reinsurance recoveries in the amount of $2,288, $2,156
and $512 during 1997, 1996 and 1995, respectively. At December 31, 1997 and
1996, estimated amounts recoverable from reinsurers that have been deducted from
policy and contract claim reserves totaled $2,721 and $974, respectively. The
aggregate reserves for policies and contracts were reduced for reserve credits
for reinsurance ceded at December 31, 1997 and 1996 of $1,369 and $1,140,
respectively.
5. INCOME TAXES
For federal income tax purposes, the Company joins in a consolidated tax
return filing with certain affiliated companies. Under the terms of a
tax-sharing agreement between the Company and its affiliates, the Company
computes federal income tax expense as if it were filing a separate income tax
return, except that tax credits and net operating loss carryforwards are
determined on the basis of the consolidated group. Additionally, the alternative
minimum tax is computed for the consolidated group and the resulting tax, if
any, is allocated back to the separate companies on the basis of the separate
companies' alternative minimum taxable income.
28
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS - STATUTORY-BASIS (CONTINUED)
Federal income tax expense differs from the amount computed by applying the
statutory federal income tax rate to gain from operations before taxes and
realized capital gains (losses) for the following reasons:
<TABLE>
<CAPTION>
1997 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed tax at federal statutory rate (35%) $(1,156) $3,189 $5,096
Deferred acquisition costs - tax basis 9,164 7,172 4,241
Tax reserve valuation (194) (696) (34)
Excess tax depreciation (127) (65) (49)
Amortization of IMR (552) (467) (309)
Dividend received deduction (5,326) -- --
Other, net (1,340) 164 (28)
- ---------------------------------------------------------------------------------------------
Federal income tax expense $ 469 $9,297 $8,917
- ---------------------------------------------------------------------------------------------
</TABLE>
For the year ended December 31, 1997, federal income tax benefit differs
from the amount computed by applying the statutory federal income tax rate to
realized gains due to the recognition for tax purposes of a deferred loss
previously incurred on a transfer of bonds from the Company to an affiliate.
Prior to 1984, as provided for under the Life Insurance Company Tax Act of
1959, a portion of statutory income was not subject to current taxation, but was
accumulated for income tax purposes in a memorandum account referred to as the
policyholders' surplus account. No federal income taxes have been provided for
in the financial statements on income deferred in the policyholders' surplus
account ($293 at December 31, 1997). To the extent dividends are paid from the
amount accumulated in the policyholders' surplus account, net earnings would be
reduced by the amount of tax required to be paid. Should the entire amount in
the policyholders' surplus account become taxable, the tax thereon computed at
current rates would amount to approximately $103.
In 1995, the Company reached a final settlement with the Internal Revenue
Service for 1987 through 1993 resulting in taxes of $1,275 and interest of $120
(net of $65 tax effect). The assessment was charged to surplus as a prior period
adjustment. An examination is currently underway for years 1994 through 1995.
At December 31, 1996, the Company had capital loss carryforwards of
approximately $10,705, which were utilized by the Company's affiliates in the
consolidated tax return filing in 1997. This transaction resulted in a receipt
from the Company's affiliate of $3,747, which was credited directly to
unassigned surplus.
6. POLICY AND CONTRACT ATTRIBUTES
Participating life insurance policies are issued by the Company which
entitle policyholders to a share in the earnings of the participating policies,
provided that a dividend distribution, which is determined annually based on
mortality and persistency experience of the participating policies, is
authorized by the Company. Participating insurance constituted approximately
.03% and .04% of life insurance in force at December 31, 1997 and 1996,
respectively.
A portion of the Company's policy reserves and other policyholders' funds
relate to liabilities established on a variety of the Company's products,
primarily separate accounts, that are not subject to significant mortality or
morbidity risk; however, there may
29
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS - STATUTORY-BASIS (CONTINUED)
be certain restrictions placed upon the amount of funds that can be withdrawn
without penalty. The amount of reserves on these products, by withdrawal
characteristics are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
- -----------------------------------------------------------------------------------------------------------------
PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal with market value
adjustment $ 13,812 1% $ 14,881 1%
Subject to discretionary withdrawal at book value less
surrender charge 68,376 2 63,619 2
Subject to discretionary withdrawal at market value 3,615,255 91 2,692,614 89
Subject to discretionary withdrawal at book value (minimal
or no charges or adjustments) 201,457 5 239,204 7
Not subject to discretionary withdrawal provision 16,572 1 17,603 1
- -----------------------------------------------------------------------------------------------------------------
3,915,472 100% 3,027,921 100%
- -----------------------------------------------------------------------------------------------------------------
Less reinsurance ceded -- --
- -----------------------------------------------------------------------------------------------------------------
Total policy reserves on annuities and deposit fund
liabilities $3,915,472 $3,027,921
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
A reconciliation of the amounts transferred to and from the separate
accounts is presented below:
<TABLE>
<CAPTION>
1997 1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Transfers as reported in the summary of operations of the
separate accounts statement:
Transfers to separate accounts $1,164,013 $ 997,513 $466,882
Transfers from separate accounts 646,477 339,523 224,416
- -----------------------------------------------------------------------------------------------------
Net transfers to separate accounts 517,536 657,990 242,466
Reconciling adjustments - change in accruals for investment
management, administration fees and contract guarantees,
and separate account surplus 1,678 (205,519) (39)
- -----------------------------------------------------------------------------------------------------
Transfers as reported in the summary of operations of the
life, accident and health annual statement $ 519,214 $ 452,471 $242,427
- -----------------------------------------------------------------------------------------------------
</TABLE>
Reserves on the Company's traditional life products are computed using mean
reserving methodologies. These methodologies result in the establishment of
assets for the amount of the net valuation premiums that are anticipated to be
received between the policy's paid-through date to the policy's next anniversary
date. At December 31, 1997 and 1996, these assets (which are reported as
premiums deferred and uncollected) and the amounts of the related gross premiums
and loadings, are as follows:
<TABLE>
<CAPTION>
GROSS LOADING NET
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DECEMBER 31, 1997
Ordinary direct first year business $ 2 $ 1 $ 1
Ordinary direct renewal business 1,350 140 1,210
Group life direct business 717 -- 717
- ---------------------------------------------------------------------------------------------
$2,069 $141 $1,928
- ---------------------------------------------------------------------------------------------
DECEMBER 31, 1996
Ordinary direct first year business $ 40 $ 9 $ 31
Ordinary direct renewal business 1,431 225 1,206
Group life direct business 622 -- 622
Annuity renewal business 94 10 84
- ---------------------------------------------------------------------------------------------
$2,187 $244 $1,943
- ---------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1997 and 1996, the Company had insurance in force
aggregating $1,710 and $1,904, respectively, in which the gross premiums are
less than the net premiums required by the standard valuation standards
established by the Insurance Department of the State of Ohio. The Company
established policy reserves of $26 and $27 to cover these deficiencies at
December 31, 1997 and 1996, respectively.
30
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS - STATUTORY-BASIS (CONTINUED)
In 1994, the NAIC enacted a guideline to clarify reserving methodologies
for contracts that require immediate payment of claims upon proof of death of
the insured. Companies were allowed to grade the effects of the change in
reserving methodologies over five years. A direct charge to surplus of $1,872,
$2,995 and $3,496 was made for the years ended December 31, 1997, 1996 and 1995,
respectively, related to the change in reserve methodology.
7. DIVIDEND RESTRICTIONS
Generally, an insurance company's ability to pay dividends is limited to
the amount that their net assets, as determined in accordance with statutory
accounting practices, exceed minimum statutory capital requirements. However,
payment of such amounts as dividends may be subject to approval by regulatory
authorities.
8. RETIREMENT AND COMPENSATION PLANS
The Company's employees participate in a qualified benefit plan sponsored
by AEGON. The Company has no legal obligation for the plan. The Company
recognizes pension expense equal to its allocation from AEGON. The pension
expense is allocated among the participating companies based on the FASB
Statement No. 87 expense as a percent of salaries. The benefits are based on
years of service and the employee's compensation during the highest five
consecutive years of employment. Pension expense aggregated $659, $581 and $505
for the years ended December 31, 1997, 1996 and 1995, respectively. The plan is
subject to the reporting and disclosure requirements of the Employee Retirement
and Income Security Act of 1974.
The Company's employees also participate in a contributory defined
contribution plan sponsored by AEGON which is qualified under Section 401(k) of
the Internal Revenue Service Code. Employees of the Company who customarily work
at least 1,000 hours during each calendar year and meet the other eligibility
requirements are participants of the plan. Participants may elect to contribute
up to fifteen percent of their salary to the plan. The Company will match an
amount up to three percent of the participant's salary. Participants may direct
all of their contributions and plan balances to be invested in a variety of
investment options. The plan is subject to the reporting and disclosure
requirements of the Employee Retirement and Income Security Act of 1974. Pension
expense related to this plan was $448, $184 and $305 for the years ended
December 31, 1997, 1996 and 1995, respectively.
AEGON sponsors supplemental retirement plans to provide the Company's
senior management with benefits in excess of normal pension benefits. The plans
are noncontributory and benefits are based on years of service and the
employee's compensation level. The plans are unfunded and nonqualified under the
Internal Revenue Code. In addition, AEGON has established incentive deferred
compensation plans for certain key employees of the Company. AEGON also sponsors
an employee stock option plan for individuals employed at least three years and
a stock purchase plan for its producers, with the participating affiliated
companies establishing their own eligibility criteria, producer contribution
limits and company matching formula. These plans have been accrued or funded as
deemed appropriate by management of AEGON and the Company.
In addition to pension benefits, the Company participates in plans
sponsored by AEGON that provide postretirement medical, dental and life
insurance benefits to employees meeting certain eligibility requirements.
Portions of the medical and dental plans are contributory. The expenses of the
postretirement plans calculated on the pay-as-you-go basis are charged to
affiliates in accordance with an intercompany cost sharing arrangement. The
Company expensed $99, $98 and $86 for the years ended December 31, 1997, 1996
and 1995, respectively.
9. RELATED PARTY TRANSACTIONS
The Company shares certain officers, employees and general expenses with
affiliated companies.
The Company receives data processing, investment advisory and management,
marketing and administration services from certain affiliates. During 1997, 1996
and 1995, the Company paid $10,040, $10,038 and $8,825, respectively, for such
services, which approximates their costs to the affiliates. The Company provides
office space, marketing and administrative services to certain affiliates.
During 1997, 1996 and 1995, the Company received $4,395, $3,271 and $4,545,
respectively, for such services, which approximates their cost. The Company had
a net payable with affiliates of $1,925 and $19,298 at December 31, 1997 and
1996, respectively.
31
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS - STATUTORY-BASIS (CONTINUED)
Payable to affiliates and intercompany borrowings bear interest at the
thirty-day commercial paper rate of 5.33% at December 31, 1997. During 1997,
1996 and 1995, the Company paid (received) net interest of $364, $138 and
$(294), respectively, to (from) affiliates.
The Company received capital contributions of $20,000 from its parent in
1997.
At December 31, 1997, the Company has a $8,200 short-term note payable to
an affiliate. Interest on this note accrues at 5.60%.
10. COMMITMENTS AND CONTINGENCIES
The Company is a party to legal proceedings incidental to its business.
Although such litigation sometimes includes substantial demands for compensatory
and punitive damages in addition to contract liability, it is management's
opinion, after consultation with counsel and a review of available facts, that
damages arising from such demands will not be material to the Company's
financial position.
The Company is subject to insurance guaranty laws in the states in which it
writes business. These laws provide for assessments against insurance companies
for the benefit of policyholders and claimants in the event of insolvency of
other insurance companies. Assessments are charged to operations when received
by the Company except where right of offset against other taxes paid is allowed
by law; amounts available for future offsets are recorded as an asset on the
Company's balance sheet. The future obligation has been based on the most recent
information available from the National Organization of Life and Health
Insurance Guaranty Association. Potential future obligations for unknown
insolvencies are not determinable by the Company. The Company has established a
reserve of $4,007 and $4,344 and an offsetting premium tax benefit of $1,070 and
$1,218 at December 31, 1997 and 1996, respectively, for its estimated share of
future guaranty fund assessments related to several major insurer insolvencies.
The guaranty fund expense was $0, $212 and $1,950 at December 31, 1997, 1996 and
1995, respectively.
11. YEAR 2000 (UNAUDITED)
AEGON has adopted and has in place a Year 2000 Assessment and Planning
Project (the "Project") to review and analyze its information technology and
systems to determine if they are Year 2000 compatible. The Company has begun to
convert or modify, where necessary, critical data processing systems. It is
contemplated that the plan will be substantially completed by early 1999. The
Company does not expect this project to have a significant effect on operations.
However, to mitigate the effect of outside influences upon the success of the
project, the Company has undertaken communications with its significant
customers, suppliers and other third parties to determine their Year 2000
compatibility and readiness. Management believes that the issues associated with
the Year 2000 will be resolved with no material financial impact on the Company.
Since the Year 2000 computer problem, and its resolution is complex and
multifaceted, the success of a response plan cannot be conclusively known until
the Year 2000 is reached (or an earlier date to the extent that systems or
equipment addresses Year 2000 date data prior to the Year 2000). Even with
appropriate and diligent pursuit of a well-conceived Project, including testing
procedures, there is no certainty that any company will achieve complete
success. Notwithstanding the efforts or results of the Company, its ability to
function unaffected to and through the Year 2000 may be adversely affected by
actions (or failure to act) of third parties beyond its knowledge or control.
32
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
SUMMARY OF INVESTMENTS OTHER THAN
INVESTMENTS IN RELATED PARTIES
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1997
SCHEDULE I
<TABLE>
<CAPTION>
AMOUNT AT WHICH
SHOWN IN THE
TYPE OF INVESTMENT COST(1) VALUE BALANCE SHEET
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIXED MATURITIES
Bonds:
United States Government and government agencies and
authorities $ 65,611 $ 68,452 $ 65,611
States, municipalities and political subdivisions 1,840 1,974 1,840
Foreign governments 2,015 2,241 2,015
Public utilities 15,794 16,295 15,794
All other corporate bonds 170,659 178,801 170,659
- ---------------------------------------------------------------------------------------------------------
Total fixed maturities 255,919 267,763 255,919
EQUITY SECURITIES
Common stocks:
Industrial, miscellaneous and all other 452 747 747
- ---------------------------------------------------------------------------------------------------------
Total equity securities 452 747 747
Mortgage loans on real estate 4,824 4,824
Real estate 19,964 19,964
Policy loans 76,741 76,741
Cash and short-term investments 13,896 13,896
- ---------------------------------------------------------------------------------------------------------
Total investments $371,796 $372,091
- ---------------------------------------------------------------------------------------------------------
<FN>
- ----------------------
(1) Original cost of equity securities and, as to fixed maturities, original
cost reduced by repayments and adjusted for amortization of premiums or
accruals of discounts.
</FN>
</TABLE>
33
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
SUPPLEMENTARY INSURANCE INFORMATION
(DOLLARS IN THOUSANDS)
SCHEDULE III
<TABLE>
<CAPTION>
BENEFITS,
CLAIMS,
LOSSES
FUTURE POLICY POLICY AND NET AND OTHER
BENEFITS AND CONTRACT PREMIUM INVESTMENT SETTLEMENT OPERATING
EXPENSES LIABILITIES REVENUE INCOME* EXPENSES EXPENSES*
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Individual life $177,088 $ 9,533 $ 390,452 $13,742 $ 88,738 $176,303
Group life 9,435 805 3,918 810 3,986 3,292
Annuity 296,290 591 822,149 25,461 389,726 83,179
- ------------------------------------------------------------------------------------------------------------------------
$482,813 $10,929 $1,216,519 $40,013 $482,450 $262,774
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996
Individual life $145,964 $ 7,017 $ 289,375 $ 8,228 $125,861 $124,181
Group life and health 9,202 713 4,215 3,940 3,828 2,818
Annuity 332,230 854 740,125 23,899 294,681 71,576
- ------------------------------------------------------------------------------------------------------------------------
$487,396 $ 8,584 $1,033,715 $36,067 $424,370 $198,575
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995
Individual life $ 64,128 $ 5,811 $ 188,143 $ 9,470 $ 20,048 $ 83,709
Group life 7,904 701 3,365 1,054 2,774 946
Annuity 319,353 100 378,390 30,367 211,008 44,447
- ------------------------------------------------------------------------------------------------------------------------
$391,385 $ 6,612 $ 569,898 $40,891 $233,830 $129,102
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Allocations of net investment income and other operating expenses are based on
a number of assumptions and estimates, and the results would change if
different methods were applied.
34
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
REINSURANCE
(DOLLARS IN THOUSANDS)
SCHEDULE IV
<TABLE>
<CAPTION>
ASSUMED PERCENTAGE
CEDED TO FROM OF AMOUNT
GROSS OTHER OTHER NET ASSUMED
AMOUNT COMPANIES COMPANIES AMOUNT TO NET
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Life insurance in force $40,221,361 $6,776,447 $2,692,822 $36,137,736 7.5%
- -------------------------------------------------------------------------------------------------------------------
Premiums:
Individual life $ 395,361 $ 4,910 $ -- $ 390,452 0.0%
Group life and health 1,761 231 2,389 3,918 61.0
Annuity 822,149 -- -- 822,149 0.0
- -------------------------------------------------------------------------------------------------------------------
$ 1,219,271 $ 5,141 $ 2,389 $ 1,216,519 0.2%
- -------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996
Life insurance in force $28,168,880 $4,463,986 $2,210,601 $25,915,495 8.5%
- -------------------------------------------------------------------------------------------------------------------
Premiums:
Individual life $ 292,239 $ 2,863 $ -- $ 289,376 0.0%
Group life and health 2,393 242 2,063 4,214 49.0
Annuity 740,125 -- -- 740,125 0.0
- -------------------------------------------------------------------------------------------------------------------
$ 1,034,757 $ 3,105 $ 2,063 $ 1,033,715 0.2%
- -------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995
Life insurance in force $19,438,203 $1,365,119 $1,619,378 $19,692,462 8.2%
- -------------------------------------------------------------------------------------------------------------------
Premiums:
Individual life $ 189,870 $ 1,727 $ -- $ 188,143 0.0%
Group life 2,153 357 1,569 3,365 46.6
Annuity 378,390 -- -- 378,390 0.0
- -------------------------------------------------------------------------------------------------------------------
$ 570,413 $ 2,084 $ 1,569 $ 569,898 0.2%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
This page intentionally left blank.
<PAGE>
WRL Series Annuity Account B
PART C
OTHER INFORMATION
<TABLE>
<CAPTION>
<S> <C>
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
The financial statements for the WRL Series Annuity Account B and for
Western Reserve Life Assurance Co. of Ohio ("Western Reserve") are
included in Part B.
(b) Exhibits
(1) Copy of resolution of the Board of Directors of
Western Reserve establishing the Series Account.
(2) Not Applicable.
(3) Distribution of Contracts
(a) Form of Master Agreement. (3)
(b) Form of Participation Agreement. (3)
(c) Form of Principal Underwriting and Distribution
Agreement. (3)
(d) Broker-Dealer Selling Agreement
(4) Form of Specimen Flexible Payment Variable Accumulation
Deferred Annuity Contract. (1)
(5) (a) Application Form for Flexible Payment Variable
Accumulation Deferred Annuity Contract.(3)
(b) Endorsement (Form END00117-04/95). (4)
(6) (a) Copy of Second Amended Articles of Incorporation of
Western Reserve.(1)
(b) Copy of Amended Code of Regulations of Western Reserve.
(1)
(7) Not Applicable.
(8) Not Applicable.
(9) Opinion and Consent of Thomas E. Pierpan, Esq. as to Legality
of Securities Being Registered. (4)
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(10) (a) Written Consent of Sutherland, Asbill &
Brennan LLP
(b) Written Consent of Ernst & Young LLP
(c) Written Consent of Price Waterhouse LLP
(11) Not Applicable.
(12) Not Applicable.
(13) Schedules for Computation of Performance
Quotations. (2)
(14) Not Applicable.
(15) (a) Powers of Attorney (4) (b) Power of Attorney -
James R. Walker (5)
<FN>
- -------------------------------------
(1) This exhibit was previously filed on Form N-4 Registration Statement
dated May 25, 1993 and is incorporated herein by reference.
(2) This exhibit was previously filed on Post-Effective Amendment No. 1 to
Form N-4 Registration Statement dated April 29, 1993 (File No. 33-49550)
and is incorporated herein by reference.
(3) This exhibit was previously filed on Pre-Effective Amendment No. 1 to
Form N-4 Registration Statement dated August 18, 1993 (File No.
33-63246) and is incorporated herein by reference.
(4) This exhibit was previously filed on Post-Effective Amendment No. 2 to
Form N-4 Registration Statement dated April 28, 1995 (File No. 33-63246)
and is incorporated herein by reference.
(5) This exhibit was previously filed on Post-Effective Amendment No. 4 to
Form N-4 Registration Statement dated April 23, 1997 (File No. 33-63246)
and is incorporated herein by reference.
</FN>
</TABLE>
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
PRINCIPAL POSITION AND OFFICES
NAME BUSINESS ADDRESS WITH DEPOSITOR
------ ---------------- ---------------------
John R. Kenney (1) Chairman of the Board,
Chief Executive Officer
and President
Patrick S. Baird 4333 Edgewood Rd. N.E. Director
Cedar Rapids, Iowa 52499
Lyman H. Treadway 30195 Chagrin Blvd. Director
Suite 210N
Cleveland, Ohio 44124
- -------------------------
(1) 201 Highland Avenue, Largo, Florida 33770
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<PAGE>
PRINCIPAL POSITION AND OFFICES
NAME BUSINESS ADDRESS WITH DEPOSITOR
------ ---------------- ---------------------
James R. Walker 3320 Office Park Drive Director
Dayton, Ohio 45439
Jack E. Zimmerman 507 St. Michel Circle Director
Kettering, Ohio 45429
Alan M. Yaeger (1) Executive Vice President
Actuary, and Chief Financial
Officer
G. John Hurley (1) Executive Vice President
and Chief Operating Officer
William H. Geiger (1) Senior Vice President,
Secretary and General
Counsel
Allan J. Hamilton (1) Vice President, Treasurer
and Controller
- -------------------------
(1) 201 Highland Avenue, Largo, Florida 33770
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT.
VERENGING AEGON Netherlands Membership Association
AEGON n.v. Netherlands Corporation (53.63%)
AEGON Netherland N.V. Netherlands Corporation (100%)
AEGON Nevark Holding B.V. Netherlands Corporation (100%)
Groninger Financieringen B.V. Netherlands Corporation (100%)
AEGON International N.V. Netherlands Corporation (100%)
Voting Trust - (Trustees - K.J. Storm, Donald J. Shepard, H.B. Van Wijk,
Dennis Hersch)
AEGON U.S. Holding Corporation (DE) (100%)
Short Hills Management Company (NJ) (100%)
CORPA Reinsurance Company (NY) (100%) AEGON Management Company (IN)
(100%) RCC North America Inc. (DE) (100%)
AEGON USA, Inc. - Holding Co. (IA) (100%)
First AUSA Life Insurance Company - Insurance Holding Co. (MD) (100%)
AUSA Life Insurance Company, Inc. - Insurance (NY) (100%)
Life Investors Insurance Company of America - Insurance (IA)(100%)
Bankers United Life Assurance Company - Insurance (IA) (100%)
PFL Life Insurance Company - Insurance (IA) (100%)
Southwest Equity Life Insurance Company - Insurance (AZ) (100%
Voting Common)
Iowa Fidelity Life Insurance Company - Insurance (AZ) (100% Voting
Common)
Western Reserve Life Assurance Co. of Ohio - Insurance (OH) (100%)
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<PAGE>
WRL Series Fund, Inc. - Mutual fund (MD)
Monumental Life Insurance Company - Insurance (MD) (100%)
Monumental General Casualty Company - Insurance (MD)
(100%) United Financial Services, Inc. - General Agency
(MD) (100%) Bankers Financial Life Insurance Company -
Insurance (AZ) The Whitestone Corporation - Insurance
agency (MD) (100%)
Cadet Holding Corp. - Holding company (IA) (100%)
AUSA Holding Company - Holding company (MD) (100%)
Monumental General Insurance Group, Inc. - Holding company
(MD)(100%)
Monumental General Administrators, Inc. - Provides management
services to unaffiliated third party administrator (MD)(100%)
Executive Management and Consultant Services, Inc. - Provides
actuarial consulting services (MD) (100%)
Monumental General Mass Marketing, Inc. - Marketing arm for sale of
mass marketed insurance coverages (MD) (100%)
AUSA Financial Markets, Inc. - Marketing (IA) (100%)
Universal Benefits Corporation - Third party administrator
(IA)(100%)
Investors Warranty of America, Inc. - Provider of automobile
extended maintenance contracts (IA) (100%)
Massachusetts Fidelity Trust Company - Trust company (IA) (100%)
Money Services, Inc. - Provides financial counseling for employees
and agents of affiliated companies (DE) (100%)
Zahorik Company, Inc. - Broker-dealer (CA) (100%)
ZCI, Inc. (AL) (100%)
InterSecurities, Inc. - Broker-dealer (DE) (100%)
ISI Insurance Agency Inc. & its Subsidiaries - Insurance agency
(CA) (100%)
Associated Mariner Financial Group, Inc. - Holding company
management services (MI) (100%)
Mariner Financial Services, Inc. - Broker/Dealer (MI) (100%)
Mariner/ISI Planning Corporation - Financial planning
(MI)(100%)
Associated Mariner Agency, Inc. and its Subsidiaries- Insurance
agency (MI)(100%)
Mariner Mortgage Corporation - Mortgage origination (MI) (100%)
Idex Investor Services, Inc. - Shareholder services (FL) (100%)
IDEX Management, Inc. - Investment adviser (DE) (50%)
IDEX Series Fund - Mutual fund (MA) Transunion Casualty Company
- Insurance (IA) (100%)
AUSA Institutional Marketing Group, Inc. - Insurance agency
(MN)(100%)
Colorado Annuity Agency, Inc. - Insurance agency (MN) (100%)
Diversified Investment Advisors, Inc. - Registered investment
advisor (DE)(100%)
Diversified Investors Securities Corporation - Broker-dealer (DE)
(100%)
AEGON USA Securities, Inc. - Broker-dealer (IA) (100%)
AEGON USA Managed Portfolios, Inc. - Mutual fund (MD)
American Forum for Fiscal Fitness, Inc. - Marketing (IA) (100%)
Supplemental Insurance Division, Inc. - Insurance (TN) (100%)
Creditor Resources, Inc. - Credit insurance (MI) (100%)
CRC Creditor Resources Canadian Dealer Network Inc. - Insurance
agency (Canada)
AEGON USA Investment Management, Inc. - Investment advisor
(IA)(100%)
AEGON USA Realty Advisors, Inc.- Provides real estate
administrative and real estate investment services
(IA)(100%)
QUANTRA Corporation - (DE) (100%)
QUANTRA Software Corporation - (DE) (100%)
Landauer Realty Advisors, Inc. - Real estate counseling
(IA)(100%)
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<PAGE>
Landauer Associates, Inc. - Real estate counseling (DE) (100%)
AEGON USA Realty Management, Inc. - Real estate management
(IA) (100%)
Realty Information Systems, Inc. - Information systems for real
estate investment management (IA) (100%)
USP Real Estate Investment Trust - Real estate investment trust
(IA)
Cedar Income Fund Ltd. - Real estate investment trust (IA)
Item 27. NUMBER OF CONTRACTOWNERS.
As of March 31, 1998, 4,059 non-qualified contracts and 134 qualified
contracts were In Force.
Item 28. INDEMNIFICATION
Provisions exist under the Ohio General Corporation Law, the Second
Amended Articles of Incorporation of Western Reserve and the Amended
Code of Regulations of Western Reserve whereby Western Reserve may
indemnify certain persons against certain payments incurred by such
persons. The following excerpts contain the substance of these
provisions.
OHIO GENERAL CORPORATION LAW
SECTION 1701.13 AUTHORITY OF CORPORATION.
(E)(1) A corporation may indemnify or agree to indemnify any person who
was or is a party or is threatened to be made a party, to any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, other than an action by or in the right of the
corporation, by reason of the fact that he is or was a director, officer,
employee, or agent of the corporation, or is or was serving at the request of
the corporation as a director, trustee, officer, employee, or agent of another
corporation (including a subsidiary of this corporation), domestic or foreign,
nonprofit or for profit, partnership, joint venture, trust, or other enterprise,
against expenses, including attorneys' fees, judgments, fines, and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendre or its equivalent, shall not, of itself create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
(2) A corporation may indemnify or agree to indemnify any person who
was or is a party, or is threatened to be made a party to any threatened,
pending, or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee, or agent of the corporation, or is or was serving
at the request of the corporation as a director, trustee, officer, employee, or
agent of another corporation, domestic or foreign, nonprofit or for profit,
partnership, joint venture, trust, or other enterprise, against expenses,
including attorneys' fees, actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any of the following:
(a) Any claim, issue, or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the corporation unless, and only to the extent that the court of common
pleas, or the court in which such action or suit was brought determines upon
application that, despite the adjudication of liability, but in view of all the
circumstances
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<PAGE>
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses as the court of common pleas or such other court shall deem proper;
(b) Any action or suit in which the only liability asserted
against a director is pursuant to section 1701.95 of the Revised Code.
(3) To the extent that a director, trustee, officer, employee, or agent
has been successful on the merits or otherwise in defense of any action,
suit, or proceeding referred to in divisions (E)(1) and (2) of this section,
or in defense of any claim, issue, or matter therein, he shall be indemnified
against expenses, including attorneys' fees, actually and reasonably incurred
by him in connection therewith.
(4) Any indemnification under divisions (E)(1) and (2) of this section,
unless ordered by a court, shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
trustee, officer, employee, or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in divisions (E)(1) and (2)
of this section. Such determination shall be made as follows:
(a) By a majority vote of a quorum consisting of directors of the
indemnifying corporation who were not and are not parties to or threatened with
any such action, suit, or proceeding;
(b) If the quorum described in division (E)(4)(a) of this section
is not obtainable or if a majority vote of a quorum of disinterested directors
so directs, in a written opinion by independent legal counsel other than an
attorney, or a firm having associated with it an attorney, who has been retained
by or who has performed services for the corporation, or any person to be
indemnified within the past five years;
(c) By the shareholders;
(d) By the court of common pleas or the court in which such
action, suit, or proceeding was brought.
Any determination made by the disinterested directors under division
(E)(4)(a) or by independent legal counsel under division (E)(4)(b) of this
section shall be promptly communicated to the person who threatened or brought
the action or suit by or in the right of the corporation under division (E)(2)
of this section, and within ten days after receipt of such notification, such
person shall have the right to petition the court of common pleas or the court
in which such action or suit was brought to review the reasonableness of such
determination.
(5)(a) Unless at the time of a director's act or omission that is the
subject of an action, suit or proceeding referred to in divisions (E)(1) and (2)
of this section, the articles or the regulations of a corporation state by
specific reference to this division that the provisions of this division do not
apply to the corporation and unless the only liability asserted against a
director in an action, suit, or proceeding referred to in divisions (E)(1) and
(2) of this section is pursuant to section 1701.95 of the Revised Code,
expenses, including attorney's fees, incurred by a director in defending the
action, suit, or proceeding shall be paid by the corporation as they are
incurred, in advance of the final disposition of the action, suit, or proceeding
upon receipt of an undertaking by or on behalf of the director in which he
agrees to do both of the following:
(i) Repay such amount if it is proved by clear and convincing
evidence in a court of competent jurisdiction that his action or failure to act
involved an act or omission undertaken with deliberate intent to cause injury to
the corporation or undertaken with reckless disregard for the best interests of
the corporation;
(ii) Reasonably cooperate with the corporation concerning the
action, suit, or proceeding.
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<PAGE>
(b) Expenses, including attorneys' fees incurred by a director,
trustee, officer, employee, or agent in defending any action, suit, or
proceeding referred to in divisions (E)(1) and (2) of this section, may be paid
by the corporation as they are incurred, in advance of the final disposition of
the action, suit, or proceeding as authorized by the directors in the specific
case upon receipt of an undertaking by or on behalf of the director, trustee,
officer, employee, or agent to repay such amount, if it ultimately is determined
that he is entitled to be indemnified by the corporation.
(6) The indemnification authorized by this section shall not be
exclusive of, and shall be in addition to, any other rights granted to those
seeking indemnification under the articles or the regulations or any agreement,
vote of shareholders or disinterested directors, or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
trustee, officer, employee, or agent and shall inure to the benefit of the
heirs, executors, and administrators of such a person.
(7) A corporation may purchase and maintain insurance or furnish
similar protection, including but not limited to trust funds, letters of credit,
or self-insurance on behalf of or for any person who is or was a director,
officer, employee, or agent of the corporation, or is or was serving at the
request of the corporation as a director, trustee, officer, employee, or agent
of another corporation, domestic or foreign, nonprofit or for profit,
partnership, joint venture, trust, or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liability under this section. Insurance may be
purchased from or maintained with a person in which the corporation has a
financial interest.
(8) The authority of a corporation to indemnify persons pursuant to
divisions (E)(1) and (2) of this section does not limit the payment of expenses
as they are incurred, indemnification, insurance, or other protection that may
be provided pursuant to divisions (E)(5), (6), and (7) of this section.
Divisions (E)(1) and (2) of this section do not create any obligation to repay
or return payments made by the corporation pursuant to divisions (E)(5), (6), or
(7).
(9) As used in this division, references to "corporation" include all
constituent corporations in a consolidation or merger and the new or surviving
corporation, so that any person who is or was a director, officer, employee, or
agent of such a constituent corporation, or is or was serving at the request of
such constituent corporation as a director, trustee, officer, employee or agent
of another corporation, domestic or foreign, nonprofit or for profit,
partnership, joint venture, trust, or other enterprise, shall stand in the same
position under this section with respect to the new or surviving corporation as
he would if he had served the new or surviving corporation in the same capacity.
SECOND AMENDED ARTICLES OF INCORPORATION OF WESTERN RESERVE
ARTICLE EIGHTH
EIGHTH: (1) The corporation may indemnify or agree to indemnify any
person who was or is a party or is threatened to be made a party, to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative, other than an action by or in the
right of the corporation, by reason of the fact that he is or was a director,
officer, employee, or agent of the corporation, or is or was serving at the
request of the corporation as a director, trustee, officer, employee, or agent
of another corporation (including a subsidiary of this corporation), domestic or
foreign, nonprofit or for profit, partnership, joint venture, trust, or other
enterprise, against expenses, including attorneys' fees, judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit, or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement, conviction, or
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<PAGE>
upon a plea of nolo contendre or its equivalent, shall not, of itself create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
(2) The corporation may indemnify or agree to indemnify any person who
was or is a party, or is threatened to be made a party to any threatened,
pending, or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee, or agent of the corporation, or is or was serving
at the request of the corporation as a director, trustee, officer, employee, or
agent of another corporation (including a subsidiary of this corporation),
domestic or foreign, nonprofit or for profit, partnership, joint venture, trust,
or other enterprise against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, except that no
indemnification shall be made in respect of any claim, issue, or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation unless, and only to
the extent that the court of common pleas, or the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability, but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses as the court of
common pleas or such other court shall deem proper.
(3) To the extent that a director, trustee, officer, employee, or agent
has been successful on the merits or otherwise in defense of any action, suit,
or proceeding referred to in sections (1) and (2) of this article, or in defense
of any claim, issue, or matter therein, he shall be indemnified against
expenses, including attorneys' fees, actually and reasonably incurred by him in
connection therewith.
(4) Any indemnification under sections (1) and (2) of this article,
unless ordered by a court, shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
trustee, officer, employee, or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in sections (1) and (2) of
this article. Such determination shall be made (a) by a majority vote of a
quorum consisting of directors of the indemnifying corporation who were not and
are not parties to or threatened with any such action, suit, or proceeding, or
(b) if such a quorum is not obtainable or if a majority vote of a quorum of
disinterested directors so directs, in a written opinion by independent legal
counsel other than an attorney, or a firm having associated with it an attorney,
who has been retained by or who has performed services for the corporation, or
any person to be indemnified within the past five years, or (c) by the
shareholders, or (d) by the court of common pleas or the court in which such
action, suit, or proceeding was brought. Any determination made by the
disinterested directors under section (4)(a) or by independent legal counsel
under section (4)(b) of this article shall be promptly communicated to the
person who threatened or brought the action or suit by or in the right of the
corporation under section (2) of this article, and within ten days after receipt
of such notification, such person shall have the right to petition the court of
common pleas or the court in which such action or suit was brought to review the
reasonableness of such determination.
(5) Expenses, including attorneys' fees incurred in defending any
action, suit, or proceeding referred to in sections (1) and (2) of this article,
may be paid by the corporation in advance of the final disposition of such
action, suit, or proceeding as authorized by the directors in the specific case
upon receipt of a written undertaking by or on behalf of the director, trustee,
officer, employee, or agent to repay such amount, unless it shall ultimately be
determined that he is entitled to be indemnified by the corporation as
authorized in this article. If a majority vote of a quorum of disinterested
directors so directs by resolution, said written undertaking need not be
submitted to the corporation. Such a determination that a written undertaking
need not be submitted to the corporation shall in no way affect the entitlement
of indemnification as authorized by this article.
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<PAGE>
(6) The indemnification provided by this article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under the articles or the regulations or any agreement, vote of
shareholders or disinterested directors, or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
trustee, officer, employee, or agent and shall inure to the benefit of the
heirs, executors, and administrators of such a person.
(7) The Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, trustee, officer, employee, or agent of another corporation (including
a subsidiary of this corporation), domestic or foreign, nonprofit or for profit,
partnership, joint venture, trust, or other enterprise against any liability
asserted against him and incurred by him in any such capacity or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liability under this section.
(8) As used in this section, references to "the corporation" include
all constituent corporations in a consolidation or merger and the new or
surviving corporation, so that any person who is or was a director, officer,
employee, or agent of such a constituent corporation, or is or was serving at
the request of such constituent corporation as a director, trustee, officer,
employee or agent of another corporation (including a subsidiary of this
corporation), domestic or foreign, nonprofit or for profit, partnership, joint
venture, trust, or other enterprise shall stand in the same position under this
article with respect to the new or surviving corporation as he would if he had
served the new or surviving corporation in the same capacity.
(9) The foregoing provisions of this article do not apply to any
proceeding against any trustee, investment manager or other fiduciary of an
employee benefit plan in such person's capacity as such, even though such person
may also be an agent of this corporation. The corporation may indemnify such
named fiduciaries of its employee benefit plans against all costs and expenses,
judgments, fines, settlements or other amounts actually and reasonably incurred
by or imposed upon said named fiduciary in connection with or arising out of any
claim, demand, action, suit or proceeding in which the named fiduciary may be
made a party by reason of being or having been a named fiduciary, to the same
extent it indemnifies an agent of the corporation. To the extent that the
corporation does not have the direct legal power to indemnify, the corporation
may contract with the named fiduciaries of its employee benefit plans to
indemnify them to the same extent as noted above. The corporation may purchase
and maintain insurance on behalf of such named fiduciary covering any liability
to the same extent that it contracts to indemnify.
AMENDED CODE OF REGULATIONS OF WESTERN RESERVE
ARTICLE V
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Each Director, officer and member of a committee of this Corporation,
and any person who may have served at the request of this Corporation as a
Director, officer or member of a committee of any other corporation in which
this Corporation owns shares of capital stock or of which this Corporation is
a creditor (and his heirs, executors and administrators) shall be indemnified
by the Corporation against all expenses, costs, judgments, decrees, fines or
penalties as provided by, and to the extent allowed by, Article Eighth of the
Corporation's Articles of Incorporation, as amended.
RULE 484 UNDERTAKING
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons
of Western Reserve pursuant to the foregoing provisions
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<PAGE>
or otherwise, Western Reserve has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by Western Reserve of expenses incurred or paid by a director,
officer or controlling person of Western Reserve in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
Western Reserve will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. PRINCIPAL UNDERWRITER
(a) InterSecurities, Inc. ("ISI"), formerly known as IDEX
Distributors, Inc. and before that, as Pioneer Western
Distributors, Inc., currently distributes securities of
WRL Series Life Account and the IDEX Series Fund managed
by IDEX Management, Inc., an affiliate of ISI.
(b) Directors and Officers of ISI
PRINCIPAL POSITION AND OFFICES
NAME BUSINESS ADDRESS WITH UNDERWRITER
---- ---------------- --------------------
John R. Kenney (1) Chairman of the
Board
G. John Hurley (1) Director, President
and Chief Executive
Officer
Thomas R. Moriarty (1) Senior Vice President
William H. Geiger (1) Director and Secretary
William G. Cummings (1) Vice President and
Treasurer
-------------------------
(1) 201 Highland Avenue, Largo, Florida 33770
(c) Compensation to Principal Underwriter
Not Applicable
Item 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books, or other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules promulgated thereunder are
maintained by the Registrant through Western Reserve, 201 Highland
Avenue, Largo, Florida 33770.
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<PAGE>
Item 31. MANAGEMENT SERVICES
Not Applicable
Item 32. UNDERTAKINGS
Western Reserve Life Assurance Co. of Ohio ("Western Reserve") hereby
represents that the fees and charges deducted under the Contracts, in
the aggregate, are reasonable in relation to the services rendered, the
expenses expected to be incurred, and the risks assumed by Western
Reserve.
Item 33. NOT APPLICABLE.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Post-Effective Amendment No. 5 to its Registration Statement to be signed
on its behalf by the undersigned, thereunder duly authorized, in the City of
Largo, State of Florida, on this 18th day of April, 1998.
WRL SERIES ANNUITY ACCOUNT B
(Registrant)
By: /s/ JOHN R. KENNEY
-----------------------------
John R. Kenney, Chairman of the Board, Chief
Executive Officer and President of Western
Reserve Life Assurance Co. of Ohio
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
(Depositor)
By: /s/ JOHN R. KENNEY
-----------------------------
John R. Kenney, Chairman of the Board, Chief
Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 5 to this Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ JOHN R. KENNEY Chairman of the Board, April 18, 1998
- ------------------------ Chief Executive Officer
John R. Kenney and President
(Principal Executive
Officer)
/s/ALLAN J. HAMILTON Vice President, Treasurer April 18, 1998
- --------------------- and Controller
Allan J. Hamilton
<PAGE>
/s/ ALAN M. YAEGER Executive Vice President, April 18, 1998
- --------------------- Actuary and Chief Financial
Alan M. Yaeger */ Officer
/s/ PATRICK S. BAIRD Director April 18, 1998
- ----------------------
Patrick S. Baird */
/s/ JAMES R. WALKER Director April 18, 1998
- ----------------------
James R. Walker */
/s/ LYMAN H. TREADWAY Director April 18, 1998
- ----------------------
Lyman H. Treadway */
/s/JACK E. ZIMMERMAN Director April 18, 1998
- ----------------------
Jack E. Zimmerman */
*/ /s/ THOMAS E. PIERPAN
- -- ---------------------
Signed by Thomas E. Pierpan
As Attorney-in-fact
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS FILED WITH
POST-EFFECTIVE AMENDMENT NO. 5 TO THE
REGISTRATION STATEMENT
ON FORM N-4
WRL SERIES ANNUITY ACCOUNT B
REGISTRATION NO. 33-63246
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
NO. OF EXHIBIT
- ------- -----------
(b)(1) Copy of Resolution of the Board of Directors of Western
Reserve Life Assurance Co. of Ohio establishing the Series
Account
(10)(a) Consent of Sutherland, Asbill & Brennan LLP
(10)(b) Consent of Ernst & Young LLP
(10)(c) Consent of Price Waterhouse LLP
EXHIBIT 99.A6
EXHIBIT (b)(1)
Copy of Resolution of the Board of Directors of Western Reserve
Life Assurance Co. of Ohio establishing the Series Account
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
I, William H. Geiger, Secretary of Western Reserve Life Assurance Co. of
Ohio ("Western Reserve" or the "Company"), hereby certify that the following is
a true and correct copy of resolutions duly adopted by the Board of Directors of
Western Reserve on May 21, 1993, which resolutions have not been amended,
rescinded or annulled and remain in full force and effect:
RESOLVED, that the Company, pursuant to the applicable provisions of
the Ohio Insurance Code, hereby establishes a separate account
designated "WRL Series Annuity Account B" (hereinafter the "Account")
for the following use and purposes, and subject to such conditions as
hereafter set forth, said use, purposes and conditions to be in full
compliance with the Ohio Insurance Code and all rules and regulations
of the Ohio Insurance Department;
FURTHER RESOLVED, that the Account shall be established for the purpose
of providing for the issuance by the Company of such variable annuity
contracts ("Contracts") as the President may designate for such purpose
and shall constitute a separate account into which are allocated
amounts paid to the Company which are to be applied under the terms of
such Contracts; and
FURTHER RESOLVED, that the income, gains and losses, whether or not
realized, from assets allocated to the Account shall, in accordance
with the Contracts, be credited to or charged against such Account
without regard to either income, gains or losses of the Company; and
FURTHER RESOLVED, that the fundamental investment policy of the Account
shall be to invest or reinvest the assets of the Account securities
issued by investment companies registered under the Investment Company
Act of 1940, as amended (the "1940 Act") as may be specified in the
respective Contracts; and
FURTHER RESOLVED, that six separate investment divisions be, and hereby
are, established within the Account to which payments under the
Contracts will be allocated in accordance with instructions received
from Contract Owners, and that the President be, and hereby is,
authorized to increase or decrease the number of investment divisions
in the Account as he deems necessary or appropriate; and
FURTHER RESOLVED, that each such investment division shall invest only
in the shares of a single mutual fund or a single mutual fund portfolio
of an investment company organized as s series fund pursuant to the
1940 Act; and
FURTHER RESOLVED, that the President, or each Vice President, be, and
hereby is, authorized to deposit such amount in the Account or in each
investment division thereof as may be necessary or appropriate to
facilitate the commencement of the Account's operations; and
FURTHER RESOLVED, that the President, or each Vice President, be, and
hereby is, authorized to transfer funds from time to time between the
Company's general account and the Account in order to establish the
Account or to support the operation of the Contracts with respect to
the Account as deemed necessary or appropriate and consistent with the
terms of the Contracts; and
FURTHER RESOLVED, that the appropriate officers of the Company, with
such assistance from the Company's auditors, legal counsel and
independent consultant or others as they may require, be, and they
hereby are, authorized and directed to take all action necessary to:
(a) register the Account as a unit investment trust under the 1940 Act;
(b) register the Contracts in such
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amounts, which maybe be an indefinite amount, as the officers of the
Company shall from time to time deem appropriate under the Securities
Act of 1933; and (c) take all other actions which are necessary in
connection with the offering of said Contracts for sale and the
operation of the Account in order to comply with the 1940 Act, the
Securities Exchange Act of 1934, the Securities Act of 1933, and other
applicable Federal laws, including the filing of any registration
statements, any amendments to registration statements, any
undertakings, and any applications, and any amendments to such
applications, for exemptions from the 1940 Act or other applicable
Federal laws, as the officers of the Company shall deem necessary or
appropriate; and
FURTHER RESOLVED, that the President, the Vice Presidents and
Secretary, and each of them with full power to act without the others,
hereby are severally authorized and empowered to prepare, execute and
cause to be filed with the Securities and Exchange Commission on behalf
of the Account, and by the Company as sponsor and depositor, a Form of
Notification of Registration on Form N-8A, a Registration Statement
registering the Account as an investment company under the 1940 Act, a
Registration Statement under the Securities Act of 1933 registering the
Contracts, any applications for exemptions from the 1940 Act or other
applicable Federal laws, and any and all amendments to the foregoing on
behalf of the Account and the Company and on behalf of and as attorneys
for the principal executive officers and/or the principal financial
officer and/or the principal accounting officer and/or any other
officer of the Company; and
FURTHER RESOLVED, that William H. Geiger, Esq., 201 Highland Avenue,
Largo, Florida 34640, is hereby appointed as agent for service of
process under such registration statements and is duly authorized to
receive communications and notices from the Securities and Exchange
Commission with respect thereto; and
FURTHER RESOLVED, that the Company be authorized and directed to obtain
any required approvals with respect to the establishment of the Account
and marketing of the Contracts, from the Commissioner of Insurance of
Ohio, and any other statutory or regulatory approvals required by the
Company as an Ohio corporation; and
FURTHER RESOLVED, that the appropriate officers of the Company be, and
they hereby are, authorized on behalf of the Account and on behalf of
the Company to take any and all action they may deem necessary or
advisable in order to sell the Contracts, including any registrations,
filings, and qualifications of the Company, its officers, agents and
employees, and the Contracts under the insurance and securities laws of
any of the states of the United States of America or other
jurisdictions, and in connection therewith to prepare, execute,
deliver, and file all such applications, reports, covenants,
resolutions, application for exemptions, consent to service of process,
and other papers and instruments as may be required under such laws,
and to take any and all further action which said officers or counsel
of the Company may deem necessary or desirable (including entering into
whatever agreements may be necessary) in order to maintain such
registrations or qualifications for as long as the said officers or
counsel deem it to be in the best interests of the Account and the
Company; and
FURTHER RESOLVED, that the President, the Vice President and the
Secretary of the Company be, and they hereby are, each authorized in
the name and on behalf of the Account and the Company to execute and
file irrevocable written consent on the part of the Account and of the
Company to be used in such states wherein such consents to service of
process may be required under the insurance or securities laws therein
in connection with said registration or qualification of Contracts and
to appoint the appropriate state official or such other person as may
be allowed by said insurance or securities laws, agent of the Account
and of the Company for the purpose of receiving and accepting process;
and
FURTHER RESOLVED, that the President of the Company be, and hereby is,
authorized to cause the Company to institute procedures for providing
voting rights for owners of such Contracts with respect to securities
owned by the Account; and
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FURTHER RESOLVED, that the President of the Company is hereby
authorized to execute such agreement or agreements as deemed necessary
and appropriate with underwriters and distributors for the Contracts to
provide distribution services, with one or more registered investment
advisors to provide investment advisory services, and with one or more
qualified banks or other qualified entities to provide administrative
and/or custodial services, all in connection with the establishment,
operation and maintenance of the Account and the design, issuance, and
administration of the Contracts; and
FURTHER RESOLVED, that the appropriate officers of the Company are
hereby authorized to execute whatever agreement or agreements may be
necessary or appropriate to enable the Account to invest in securities
issued by one or more investment companies registered under the 1940
Act as may be specified in the respective Contracts; and
FURTHER RESOLVED, that the appropriate officers of the Company, and
each of them, are hereby authorized to execute and deliver all such
documents and papers and to do or cause to be done all such acts and
things as they may deem necessary or desirable to carry out the
foregoing resolutions and the intent and purposes thereof; and
FURTHER RESOLVED, that the term "appropriate officers", as used herein,
shall include all of the elected and appointed officers of the Company,
either severally or individually, subject to any applicable resolutions
of the Board of Directors dealing with signing authority for the
Company.
IN WITNESS WHEREOF, I have executed and delivered this Certificate
this 24th day of May, 1993.
(Corporate Seal) /s/ WILLIAM H. GEIGER
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William H. Geiger, Secretary
EXHIBIT 99.C6-1
EXHIBIT (10)(A)
WRITTEN CONSENT OF SUTHERLAND, ASBILL & BRENNAN LLP
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S.A.B. letterhead
April 28, 1998
Board of Directors
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account B
201 Highland Avenue
Largo, Florida 34640
RE: WRL Series Annuity Account B
File No. 33-63246
Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Statement of Additional Information filed as part of the
Post-Effective Amendment No. 5 to the Registration Statement on Form N-4 (File
No. 33-63246) of WRL Series Annuity Account B filed by Western Reserve Life
Assurance Co. of Ohio with the Securities and Exchange Commission. In giving
this consent, we do not admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN LLP
By: /s/ STEPHEN E. ROTH
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Stephen E. Roth
EXHIBIT 99.C6-2
EXHIBIT (10)(b)
WRITTEN CONSENT OF ERNST & YOUNG LLP
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Consent of Independent Auditors
We consent to the reference to our firm under the caption "Independent
Accountants" and to the use of our report dated February 27, 1998, with respect
to the statutory-basis financial statements and schedules of Western Reserve
Life Assurance Co. of Ohio included in Post-Effective Amendment No. 5 to the
Registration Statement (Form N-4 No. 33-63246) and related Prospectus of WRL
Series Annuity Account B.
ERNST & YOUNG LLP
Des Moines, Iowa
April 28, 1998
EXHIBIT 99.C6-3
EXHIBIT (10)(c)
WRITTEN CONSENT OF PRICE WATERHOUSE LLP
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Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional Information
constituting part of the Janus Retirement Advantage Post-Effective Amendment No.
5 to the Registration Statement on Form N-4 of our report dated January 30,
1998, relating to the financial statements and selected per unit data and ratios
of the sub-accounts comprising the Janus Retirement Advantage WRL Series Annuity
Account B, which appears in such Statement of Additional Information. We also
consent to the reference to us under the heading "Independent Accountants" in
such Statement of Additional Information.
Price Waterhouse LLP
Kansas City, Missouri
April 28, 1998
