As filed with the Securities and Exchange Commission on April 26, 1999
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. 7 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 8 [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)
570 Carillon Parkway
St. Petersburg, Florida 33716
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code:
(727) 299-1800
--------------------
Thomas E. Pierpan, Esq.
Vice President, Assistant Secretary and Associate General Counsel
Western Reserve Life Assurance Co. of Ohio
570 Carillon Parkway
St. Petersburg, Florida 33716
(Name and Address of Agent for Service)
Copy to:
Stephen E. Roth, Esq.
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
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, 1999 pursuant to paragraph (b) of Rule 486
______
______ 60 days after filing pursuant to paragraph (a) of Rule 485
______ on , pursuant to paragraph (a) of Rule 486
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PART A
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE>
[Janus Logo]
Janus Retirement Advantage(R)
Variable Annuity
Issued Through
WRL SERIES ANNUITY ACCOUNT B
By
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
PROSPECTUS
MAY 1, 1999
This prospectus gives you important information
about the Janus Retirement Advantage, a flexible
payment variable accumulation deferred annuity.
Please read this prospectus and the prospectus for
the Janus Aspen Series before you invest and keep
them for future reference. This Contract is
available to individuals and can be used with
individual retirement plans.
You can put your money into 12 investment choices: a
fixed account and 11 subaccounts of the WRL Series
Annuity Account B. Money you put in a subaccount is
invested exclusively in a single mutual fund
portfolio of the Janus Aspen Series. Your
investments in the Janus portfolios are not
guaranteed. You could lose your money. Money you
direct into the fixed account earns interest at a
rate guaranteed by Western Reserve.
The 11 portfolios we currently offer through the
subaccounts under this Contract are:
JANUS ASPEN SERIES
<TABLE>
<S> <C>
Growth Portfolio Equity Income Portfolio
Aggressive Growth Growth and Income
Portfolio Portfolio
Capital Appreciation Flexible Income Portfolio
Portfolio High-Yield Portfolio
International Growth Money Market Portfolio
Portfolio
Worldwide Growth Portfolio
Balanced Portfolio
</TABLE>
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED
OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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[JANUS LOGO]
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Table - of contents
<TABLE>
<S> <C>
DEFINITIONS OF SPECIAL TERMS.................... 3
SUMMARY......................................... 6
ANNUITY CONTRACT FEE TABLE...................... 12
EXAMPLE......................................... 13
1. THE ANNUITY CONTRACT........................ 14
2. ANNUITY PAYMENTS (THE INCOME PHASE)......... 15
Annuity Payment Options.................... 15
Fixed Annuity Options...................... 17
Variable Annuity Options................... 18
3. PURCHASE.................................... 20
Contract Issue Requirements................ 20
Purchase Payments.......................... 20
Initial Purchase Requirements.............. 20
Additional Purchase Payments............... 21
Maximum Annual Purchase Payments........... 21
Allocation of Purchase Payments............ 22
Annuity Value.............................. 22
Accumulation Units......................... 22
4. INVESTMENT CHOICES.......................... 24
The Separate Account....................... 24
Janus Aspen Series......................... 24
The Fixed Account.......................... 24
Transfers.................................. 25
Systematic Exchanges....................... 27
Asset Rebalancing Program.................. 27
Telephone Transactions..................... 28
5. EXPENSES.................................... 29
Surrenders and Partial Withdrawals......... 29
Mortality and Expense Risk Charge.......... 29
Administrative Charge...................... 29
Annual Contract Charge..................... 29
Premium Taxes.............................. 30
Federal, State and Local Taxes............. 30
Transfer Charge............................ 30
Portfolio Management Fees.................. 31
</TABLE>
Table of contents 1
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<TABLE>
<S> <C>
6. TAXES....................................... 32
Annuity Contracts in General............... 32
Qualified and Non-Qualified Contracts...... 32
Withdrawals - Non-Qualified Contracts...... 33
Withdrawals - Qualified Contracts.......... 34
Diversification and Distribution
Requirements............................. 34
Multiple Contracts......................... 34
Partial Withdrawals and Surrenders
- Qualified Contracts ................... 35
Taxation of Death Benefit Proceeds......... 35
Annuity Payments........................... 36
Transfers, Assignments or Exchanges of
Contracts................................ 37
Possible Tax Law Changes................... 37
7. ACCESS TO YOUR MONEY........................ 38
Surrenders and Withdrawals................. 38
Delay of Payment and Transfers............. 39
Systematic Partial Withdrawals............. 40
8. PERFORMANCE................................. 41
9. DEATH BENEFIT............................... 42
When We Pay A Death Benefit................ 42
When We Do Not Pay A Death Benefit......... 43
Amount of Death Benefit.................... 43
Alternate Payment Elections................ 44
10. OTHER INFORMATION........................... 45
Ownership.................................. 45
Assignment................................. 45
Western Reserve Life Assurance Co. of
Ohio..................................... 45
The Separate Account....................... 45
Voting Rights.............................. 46
Distributor of the Contracts............... 47
Non-participating Contract................. 47
Variations in Contract Provisions.......... 47
Year 2000 Readiness Disclosure............. 48
IMSA....................................... 48
Legal Proceedings.......................... 49
Financial Statements....................... 49
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL
INFORMATION................................... 50
APPENDIX A
Condensed Financial Information............ 51
APPENDIX B
Historical Performance Data................ 55
</TABLE>
2 Janus Retirement Advantage Variable Annuity
<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
subaccount values during the accumulation
period.
age The issue age, which is annuitant's age on the
birthday nearest the Contract date, plus the
number of completed Contract years. When we use
the term "age" in this prospectus, it has the
same meaning as "attained age" in the Contract.
annuitant The person named in the application, or as
subsequently changed, to receive annuity
payments. The annuitant may be changed as
provided in the Contract's death benefit
provisions and annuity provision.
annuity value The sum of the separate account value and the
fixed account value.
annuity unit value An accounting unit of measure used to calculate
annuity payments from certain subaccounts after
the maturity date.
beneficiary(ies) The person(s) entitled to receive the death
benefit proceeds under the Contract.
Cash Value The annuity value less any applicable premium
taxes.
Code The Internal Revenue Code of 1986, as amended.
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.
fixed account An allocation option under the Contract, other
than the separate account, that provides for
accumulation of purchase payments, and options
for annuity payments on a fixed basis. For
Definitions of special terms 3
<PAGE>
Contracts issued in the State of Washington,
the fixed account is not available for
allocation of purchase payments or transfers.
fixed account value During the accumulation period, a Contract's
value allocated to the fixed account.
in force Condition under which the Contract is active
and the owner is entitled to exercise all
rights under the Contract.
maturity date The date on which the accumulation period ends
and annuity payments begin.
Non-Qualified Contracts Contracts issued other than in connection with
retirement plans. Non-Qualified Contracts do
not qualify for special Federal income tax
treatment under the Code.
owner, you, your The person(s) entitled to exercise all rights
under the Contract. The annuitant is the owner
unless the application states otherwise, or
unless a change of ownership is made at a later
time.
portfolio A separate investment portfolio of the 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. When we
use the term "purchase payment" in this
prospectus, it has the same meaning as "net
purchase payment" in the Contract, which means
the purchase payment less any applicable
premium taxes.
Qualified Contracts Contracts issued in connection with retirement
plans that qualify for special Federal income
tax treatment under the Code.
separate account WRL Series Annuity Account B, a separate
account composed of subaccounts established to
4 Janus Retirement Advantage Variable Annuity
<PAGE>
receive and invest purchase payments not
allocated to the fixed account.
separate account value During the accumulation period, a Contract's
value in the separate account, which equals the
total value in each subaccount during the
accumulation period.
subaccount A sub-division of the separate account that
invests exclusively in the shares of a
specified portfolio and supports the Contracts.
Subaccounts corresponding to each applicable
portfolio hold assets under the Contract during
the accumulation period. Other subaccounts
corresponding to each applicable portfolio will
hold assets after the maturity date if a
variable annuity option is selected.
surrender The termination of a Contract at the option of
the owner.
Trust Janus Aspen Series, an investment company
registered with the U.S. Securities and
Exchange Commission.
Valuation Date Each day on which the New York Stock
Exchange is open for trading, except when a
subaccount's corresponding portfolio does not
value its shares.
Valuation Period The period beginning at the end of one
Valuation Date and continuing to the end of the
next succeeding Valuation Date.
Definitions of special terms 5
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Summary -
THE SECTIONS IN THIS SUMMARY CORRESPOND TO SECTIONS IN THIS
PROSPECTUS, WHICH DISCUSS THE TOPICS IN MORE DETAIL. PLEASE READ
THE PROSPECTUS CAREFULLY BEFORE INVESTING.
1. THE ANNUITY CONTRACT
The Janus Retirement Advantage(R) is a flexible payment variable
deferred annuity contract (the "Contract") offered by Western
Reserve Life Assurance Co. of Ohio (Western Reserve, we, us). It
is a contract between you, as the owner, and Western Reserve, a
life insurance company. The Contract provides a way for you to
invest on a tax-deferred basis in the subaccounts of the separate
account and the fixed account. We intend the Contract to be used
to accumulate money for retirement or other long-term investment
purposes.
The Contract allows you to direct your money into any of the 11
subaccounts. Each subaccount invests exclusively in a single
portfolio of the Janus Aspen Series (the "Trust") listed in
Section 4. The money you invest in the subaccounts will fluctuate
daily based on the portfolio's investment results. The value of
your investment in the subaccounts is not guaranteed and may
increase or decrease. You bear the investment risk for amounts
you invest in the subaccounts.
You can also direct money to the fixed account. Amounts in the
fixed account earn interest annually at a fixed rate that is
guaranteed by us never to be less than 4%, and may be more. We
guarantee the interest, as well as principal, on money placed in
the fixed account.
You can transfer money between any of the investment choices.
The Contract, like all deferred annuity contracts, has two
phases: the "accumulation period" and the "income phase." During
the accumulation period, earnings accumulate on a tax-deferred
basis and are taxed as income when you take them out of the
Contract. The income phase starts on the maturity date when you
begin receiving regular payments from your Contract. The money
you can accumulate during the accumulation period, as well as the
6 Janus Retirement Advantage Variable Annuity
<PAGE>
annuity payment option you choose, will determine the amount of
any income payments you receive during the income phase.
2. ANNUITY PAYMENTS (THE INCOME PHASE)
The Contract allows you to receive income under one of five
annuity payment options. You may choose from fixed payment
options or variable payment options. If you select a variable
payment option, the dollar amount of the payments you receive may
go up or down depending on the investment results of the
portfolios you invest in at that time.
3. PURCHASE
You can buy this Contract with $2,500 or more under most
circumstances. You can add as little as $100 at any time during
the accumulation period.
4. INVESTMENT CHOICES
You can invest your money in any of the 11 portfolios of the
Trust by directing it to the corresponding subaccount. The
portfolios are described in the prospectuses for the Trust. The
portfolios now available to you under the Contract are:
11 PORTFOLIOS OF THE JANUS ASPEN SERIES
Growth Portfolio
Aggressive Growth Portfolio
Capital Appreciation Portfolio
International Growth Portfolio
Worldwide Growth Portfolio
Balanced Portfolio
Equity Income Portfolio
Growth and Income Portfolio
Flexible Income Portfolio
High-Yield Portfolio
Money Market Portfolio
Summary 7
<PAGE>
Depending upon market conditions, you can make or lose money in
any of these subaccounts. We reserve the right to offer other
investment choices in the future.
You can also allocate your purchase payments to the fixed
account.
5. EXPENSES
We do not take any deductions from purchase payments at the time
you buy the Contract. You invest the full amount of each purchase
payment in one or more of the investment choices.
We deduct from the daily net assets a mortality and expense risk
charge of 0.50% and an administrative charge of 0.15% each year
from the money you have invested in the subaccounts.
During the accumulation period, we deduct an Annual Contract
Charge of $30 from the annuity value on each Contract anniversary
and at the time of surrender. Deduction of the Annual Contract
Charge is currently waived when the annuity value on the
anniversary is equal to or greater than $25,000.
We impose a $10 charge per transfer if you make more than 12
transfers among the subaccounts per Contract year.
We will deduct state premium taxes, which currently range from 0%
to 3.50%, if:
- you surrender the Contract; or
- partially withdraw its value; or
- we pay out death benefit proceeds; or
- you begin to receive regular annuity payments.
We only charge you premium taxes in those states that require us
to pay premium taxes.
The portfolios deduct investment charges from amounts you have
invested in the portfolios. These charges range from 0.25% to
0.75% annually, depending on the portfolio. See the prospectuses
for the Trust and the Fee Table in this prospectus.
8 Janus Retirement Advantage Variable Annuity
<PAGE>
6. TAXES
The Contract's earnings are generally not taxed until you take
them out. For Federal tax purposes, if you take money out during
the accumulation period, earnings come out first and are taxed as
ordinary income. If you are younger than 59 1/2 when you take
money out, you may be charged a 10% Federal penalty tax on the
earnings. The annuity payments you receive during the income
phase are considered partly a return of your original investment
so that part of each payment is not taxable as income. Different
tax consequences may apply for a Contract used in connection with
a qualified plan.
7. ACCESS TO YOUR MONEY
You can take some or all of your money out anytime during the
accumulation period. However, you may not take a partial
withdrawal if it reduces the Cash Value below $2,500. No
withdrawals may be made from the fixed account without prior
consent from us. You may also have to pay Federal income tax and
a penalty tax on any money you take out. No surrender charges
apply.
8. PERFORMANCE
The value of your Contract will vary up or down depending upon
the investment performance of the subaccounts you choose and will
be reduced by Contract fees and charges. We provide performance
information in Appendix B and in the SAI. Past performance does
not guarantee future results.
9. DEATH BENEFIT
If you are both the owner and the annuitant and you die before
the income phase begins, your beneficiary will receive a death
benefit.
If you name different persons as owner and annuitant, you can
affect whether the death benefit is payable and who would receive
it. Use care when naming owners, annuitants and beneficiaries.
Summary 9
<PAGE>
The death benefit will be the greater of:
- the value of your Contract on the date we receive proof of
death and your beneficiary's election regarding payment; and
- the total purchase payments you make to the Contract, less
partial withdrawals.
10. OTHER INFORMATION
RIGHT TO CANCEL PERIOD. You may return your Contract for a refund
within 10 days after you receive it. The amount of the refund
will generally be the total purchase payments we have received,
plus (or minus) any gains (or losses) in the amounts you invested
in the subaccounts. We determine the value of the refund as of
the date we receive the returned Contract. We will pay the refund
within 7 days after we receive your written notice of
cancellation and the returned Contract. The Contract will then be
deemed void. In some states you may have more than 10 days, or
receive a different refund amount.
WHO SHOULD PURCHASE THE CONTRACT? We have designed this Contract
for people seeking long-term tax deferred accumulation of assets,
generally for retirement. This includes persons who have
maximized their use of other retirement savings methods, such as
401(k) plans and individual retirement accounts. The tax-deferred
feature is most attractive to people in high Federal and state
tax brackets. You should not buy this Contract if you are looking
for a short-term investment or if you cannot take the risk of
getting back less money than you put in.
ADDITIONAL FEATURES. This Contract has additional features that
might interest you. These include the following:
- SYSTEMATIC PARTIAL WITHDRAWALS: You can arrange to have money
automatically sent to you monthly, quarterly, semi-annually, or
annually while your Contract is in the accumulation period.
Amounts you receive may be included in your gross income, and,
in certain circumstances, may be subject to penalty taxes.
10 Janus Retirement Advantage Variable Annuity
<PAGE>
- SYSTEMATIC EXCHANGES: You can arrange to have a certain amount
of money automatically transferred monthly from one or any
combination of the Money Market, Flexible Income, High-Yield
subaccounts or the fixed account into your choice of
subaccounts. This is also known as dollar cost averaging, a
long-term investment method which provides for regular, level
investments over time. Systematic Exchanges do not guarantee a
profit or protect against a loss if market prices decline.
- ASSET REBALANCING: We will automatically transfer amounts among
the subaccounts on a regular basis to maintain a desired
allocation of the annuity value among the various subaccounts.
- TELEPHONE TRANSACTIONS: You may make transfers, change the
allocation of additional purchase payments and/or make
additional purchase payments by telephone.
These features are not available in all states and may not be
suitable for your particular situation.
Certain states place restrictions on access to the fixed account,
on the death benefit calculation and on other features of the
Contract. Consult your Contract form for details.
11. INQUIRIES
If you need additional information, please contact us at:
Western Reserve Life
Annuity Department
P.O. Box 9052
Clearwater, FL 33758-9052
1-800-504-4440
Summary 11
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Annuity contract - fee table
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<CAPTION>
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SEPARATE ACCOUNT ANNUAL EXPENSES
Owner Transaction Expenses (as a percentage of average account value)
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<S> <C> <C>
Sales Load On Purchase Payments..None Mortality and Expense Risk Charge.. 0.50%
Maximum Withdrawal Charge........None Administrative Charge.............. 0.15%
Transfer Charge.............$10 after -----
12 per Contract year TOTAL SEPARATE ACCOUNT ANNUAL
EXPENSES........................... 0.65%
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OTHER EXPENSES
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Annual Contract Charge*.......$30 per
Contract Year
* We waive the Annual Contract Charge
when the annuity value on the
anniversary is equal to or greater
than $25,000.
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</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO ANNUAL EXPENSES(1)
(as a percentage of average net assets)
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Total Annual
Total Annual Portfolio
Portfolio Total Operating
Operating Expenses Waivers Expenses with
Janus Aspen Series Management Other Without Waivers or And Waivers or
Portfolios Fee Expenses Reductions Reductions Reductions(2)
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<S> <C> <C> <C> <C> <C>
Growth 0.72% 0.03% 0.75% 0.07% 0.68%
Aggressive Growth 0.72% 0.03% 0.75% N/A 0.75%
Capital Appreciation 0.75% 0.22% 0.97% 0.05% 0.92%
International Growth 0.75% 0.20% 0.95% 0.09% 0.86%
Worldwide Growth 0.67% 0.07% 0.74% 0.02% 0.72%
Balanced 0.72% 0.02% 0.74% N/A 0.74%
Equity Income 0.75% 1.11% 1.86% 0.61% 1.25%
Growth and Income(3) 0.75% 2.31% 3.06% 1.81% 1.25%
Flexible Income 0.65% 0.08% 0.73% N/A 0.73%
High-Yield 0.75% 1.36% 2.11% 1.11% 1.00%
Money Market 0.25% 0.09% 0.34% N/A 0.34%
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</TABLE>
(1) The fee table information relating to the Janus portfolios is for 1998 and
was provided to Western Reserve by the Trust. Western Reserve has not
independently verified such information.
R(2) All portfolio expenses are stated both with and without contractual waivers
and fee reductions by Janus Capital. Janus Capital has agreed to continue
the waivers and fee reductions until at least the next annual renewal of the
advisory agreements.
(3) Because Growth and Income commenced operations on May 1, 1998, the
percentages set forth as "Other Expenses" and "Total Portfolio Annual
Expenses" are annualized.
12 Janus Retirement Advantage Variable Annuity
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- Example
You would pay the following expenses on a $1,000 investment,
assuming a hypothetical 5% annual return on assets, and assuming
the entire $1,000 is invested in the subaccount listed.
<TABLE>
<CAPTION>
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If the Contract is surrendered or annuitized
at the end of the applicable time period
Subaccounts 1 Year 3 Years 5 Years 10 Years
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<S> <C> <C> <C> <C>
Growth $14 $43 $ 74 $164
Aggressive Growth $15 $46 $ 80 $175
Capital Appreciation $16 $51 $ 88 $192
International Growth $16 $50 $ 86 $187
Worldwide Growth $15 $45 $ 78 $171
Balanced $15 $46 $ 79 $174
Equity Income $20 $62 $106 $229
Growth and Income $20 $62 $106 $229
Flexible Income $15 $46 $ 79 $172
High-Yield $17 $54 $ 93 $202
Money Market $11 $33 $ 58 $128
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</TABLE>
The table above will help you understand the costs of investing
in the subaccounts. The table reflects the 1998 expenses of the
portfolios of the Trust and the subaccount fees and charges
without waivers or reductions. The table does not reflect premium
taxes which may range up to 3.5%, depending on the jurisdiction.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND
DOES NOT REPRESENT PAST OR FUTURE ANNUAL RETURNS. ACTUAL RETURNS
MAY BE GREATER OR LESS THAN THE ASSUMED RATE.
In this example, the $30 Annual Contract Charge is reflected as a
charge of 0.06% based on an average Contract value of $50,087.
There is a financial history of each subaccount in Appendix A to
this prospectus. See Appendix A - Condensed Financial
Information.
Example 13
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1. The annuity - contract
This prospectus describes the Janus Retirement Advantage Variable
Annuity Contract offered by Western Reserve.
An annuity is a contract between you, the owner, and an insurance
company (in this case Western Reserve), where the insurance
company promises to pay you an income in the form of annuity
payments. These payments begin after the maturity date. (See
Section 2.) Until the maturity date, your annuity is in the
accumulation period and the earnings are tax deferred. Tax
deferral means you generally are not taxed on your annuity until
you take money out of your annuity. After the maturity date, your
annuity switches to the income phase.
The Contract is a flexible purchase variable annuity. You can use
the Contract to accumulate funds for retirement or other long-
term financial planning purposes.
It is a "flexible purchase" Contract because after you purchase
it, you can generally make additional investments of $100 or
more, until the maturity date. But you are not required to make
any additional investments.
The Contract is a "variable" annuity because the value of your
Contract can go up or down based on the performance of your
investment choices. If you select the variable annuity portion of
the Contract, the amount of money you are able to accumulate in
your Contract during the accumulation period depends upon the
performance of your investment choices. The amount of annuity
payments you receive during the income phase from the variable
annuity portion of your Contract also depends upon the investment
performance of your investment choices for the income phase.
The Contract also contains a fixed account. The fixed account
offers an interest rate that is guaranteed by Western Reserve to
equal at least 4% per year. There may be different interest rates
for each payment or transfer you direct to the fixed account. The
interest rates we set will be credited for periods of at least
one year measured from each payment or transfer date.
14 Janus Retirement Advantage Variable Annuity
<PAGE>
2. Annuity - payments
(the income phase)
You choose the date when annuity payments under the Contract
start. This is the maturity date. You can change this date by
giving us 30 days written notice. The maturity date cannot be
earlier than the end of the fifth Contract year. The latest
annuity maturity date is the Contract month following the month
in which the annuitant reaches age 90.
ELECTION OF ANNUITY PAYMENT OPTION. Before the maturity date, if
the annuitant is alive, you may choose an annuity payment option
or change your option. If you do not choose an annuity option by
the maturity date, we will make payments under Option D (see
below) as a Variable Life Income with 10 years of guaranteed
payments. You cannot change the annuity payment option after the
maturity date.
If you choose a variable payment option, you must specify how you
want the annuity proceeds divided among the subaccounts as of the
maturity date. If you do not specify, we will allocate the
annuity proceeds in the same proportion as the annuity value is
allocated among the investment options on the maturity date.
Unless you specify otherwise, the annuitant named on the
application will receive the annuity payments. As of the maturity
date, you can change the annuitant or add a joint annuitant, so
long as we agree. If you do not choose an annuitant, we will
consider you to be the annuitant.
SUPPLEMENTAL CONTRACT. Once you annuitize and you have selected a
fixed payment option, the Contract will end and we will issue a
supplemental Contract to describe the terms of the option you
selected. The supplemental Contract will name who will receive
the annuity payments and describe when the annuity payments will
be made.
ANNUITY PAYMENT OPTIONS
The Contract provides five annuity payment options that are
described below. You can choose to receive payments monthly,
quarterly, semi-annually, or annually.
2. Annuity payments (the income phase) 15
<PAGE>
We will use your "annuity proceeds" to provide these payments.
The "annuity proceeds" is your annuity value on the maturity
date, less any premium tax that may apply. If your annuity
payment would be less than $100, then we will pay you the annuity
proceeds in one lump sum.
FIXED ANNUITY INCOME PAYMENTS. If you choose annuity payment
Option A, B or C, the dollar amount of each annuity payment will
be fixed on the maturity date and guaranteed by us. The payment
amount will depend on five things:
- The amount of the annuity proceeds on the maturity date;
- The gender of the annuitant;
- The age of the annuitant or beneficiary;
- The interest rate we credit on those amounts (we guarantee a
minimum annual interest rate of 3%); and
- The specific payment option you choose.
We may, in our discretion, increase the amount of a payment once
payments begin.
VARIABLE ANNUITY INCOME PAYMENTS. If you choose variable annuity
payment Option D or E, the dollar amount of the first variable
payment will be determined in accordance with the annuity payment
rates set forth in the applicable table contained in the
Contract. The dollar amount of each additional variable payment
will vary based on the investment performance of the
subaccount(s) you invest in and the Contract's assumed investment
return of 5%. The dollar amount of each variable payment after
the first may increase, decrease or remain constant. If, after
all charges are deducted, the actual investment performance
exactly matches the Contract's assumed investment return of 5% at
all times, then the amount of the next variable annuity payment
will remain equal. If actual investment performance, after all
charges are deducted, exceeds the assumed investment return, then
the amount of the variable annuity payments would increase. But,
if actual investment performance, less charges, is lower than
16 Janus Retirement Advantage Variable Annuity
<PAGE>
the 5% assumed investment return, then the amount of the variable
annuity payments would decrease. The portfolio in which you are
invested must grow at a rate at least equal to the 5% assumed
investment return (plus the mortality and expense risk charge and
the administrative charge) in order to avoid a decrease in the
dollar amount of variable annuity payments. For more information
or how variable annuity income payments are determined, see the
SAI.
The annuity payment options are explained below. Options A, B,
and C are fixed only. Options D and E are variable only.
FIXED ANNUITY OPTIONS
PAYMENT OPTION A - FIXED INSTALLMENTS: We will pay the annuity in
equal payments over a fixed period of 5, 10, 15 or 20 years or
any other fixed period acceptable to Western Reserve.
PAYMENT OPTION B - LIFE INCOME - FIXED PAYMENTS:
- No Period Certain - We will make level payments only during the
annuitant's lifetime; or
- 10 Years Certain - We will make level payments for the longer
of the annuitant's lifetime or ten years; or
- Guaranteed Return of Annuity Proceeds - We will make level
payments for the longer of the annuitant's lifetime or until
the total dollar amount of payments we made to you equals the
annuity proceeds.
PAYMENT OPTION C - JOINT AND SURVIVOR LIFE INCOME - FIXED
PAYMENTS:
- We will make level payments during the joint lifetime of the
annuitant and a co-annuitant of your choice. Payments will be
made as long as either person is living.
2. Annuity payments (the income phase) 17
<PAGE>
VARIABLE ANNUITY OPTIONS
PAYMENT OPTION D - VARIABLE LIFE INCOME: The annuity proceeds are
used to purchase annuity units of the subaccounts you select. You
may choose between:
- No Period Certain - We will make variable payments only during
the annuitant's lifetime; or
- 10 Years Certain - We will make variable payments for the
longer of the annuitant's lifetime or ten years.
PAYMENT OPTION E - VARIABLE JOINT AND SURVIVOR LIFE INCOME:
- We will make variable payments during the joint lifetime of the
annuitant and a co-annuitant of your choice. Payments will be
made as long as either person is living.
NOTE CAREFULLY:
IF:
- you choose Life Income with No Period Certain or a Joint and
Survivor Life Income (fixed or variable); and
- the annuitant(s) dies before the due date of the second annuity
payment;
THEN:
- we may make only one annuity payment.
IF:
- you choose Fixed Installments, Life Income with 10 years
Certain or Guaranteed Return of Annuity Proceeds; and
- the person receiving payments dies prior to the end of the
guaranteed period;
THEN:
- the remaining guaranteed payments will be continued to that
person's beneficiary, or their value (determined at the date of
death) may be paid in a single sum.
18 Janus Retirement Advantage Variable Annuity
<PAGE>
We will not pay interest on amounts represented by uncashed
annuity payment checks if the postal or other delivery service is
unable to deliver checks to the payee's address of record. The
payee is responsible to keep Western Reserve informed of the
payee's current address of record.
2. Annuity payments (the income phase) 19
<PAGE>
3. - Purchase
CONTRACT ISSUE REQUIREMENTS
Western Reserve will issue a Contract
IF:
- we receive the information we need to issue the Contract;
- we receive a minimum initial purchase payment; and
- you are age 85 or younger.
PURCHASE PAYMENTS
You should make checks or drafts for purchase payments payable
only to "Western Reserve" and send them to the administrative
office. Your check or draft must be honored in order for Western
Reserve to pay any associated payments and benefits due under the
Contract.
INITIAL PURCHASE REQUIREMENTS
The initial purchase payment for most Contracts must be at least
$2,500. We will credit your initial purchase payment to your
Contract within two business days after the day we receive it and
your complete Contract information. If we are unable to credit
your initial purchase payment, we will contact you within five
business days and explain why. We will also return your initial
purchase payment at that time unless you tell us to keep it. We
will credit it as soon as we receive all necessary application
information.
The date on which we credit your initial purchase payment to your
Contract is the Contract Date. The Contract Date is used to
determine Contract years, Contract months and Contract
anniversaries.
You may wire your initial purchase payment to us. You must send
an application by facsimile ("faxed application") at the same
time that you send the wire transfer. The faxed application
should be faxed to 1-727-299-1620.
20 Janus Retirement Advantage Variable Annuity
<PAGE>
We will follow the same procedures for completing your
application and crediting your initial purchase payment as are
discussed above. When the faxed application contains all the
information we need to issue your Contract and credit your
payment, but you did not sign the faxed application, we will
issue your Contract and credit your payment according to the
allocation instructions you specified in the faxed application.
We will also send you a new application for your signature that
will contain all the information on the faxed application. You
must sign the new application and return it to us.
If the allocation instructions on the signed application you
returned to us do not match the instructions on the faxed
application, we will reallocate your annuity value to fit the
allocation instructions on the signed application. We will effect
the reallocation at the accumulation unit value next determined
after we receive the signed application.
If you wish to make payments by bank wire, you should instruct
your bank to wire Federal Funds to us. Please contact us at
1-800-504-4440 for complete wire instructions.
We may reject any application or purchase payments for any reason
permitted by law.
ADDITIONAL PURCHASE PAYMENTS
You are not required to make any additional purchase payments.
However, you can make additional purchase payments as often as
you like during the lifetime of the annuitant and prior to the
maturity date. Additional purchase payments must be at least $100
($1,000 if by wire). We will credit additional purchase payments
to your Contract as of the business day we receive your purchase
payment and required information.
MAXIMUM ANNUAL PURCHASE PAYMENTS
We allow purchase payments up to a total of $1,000,000 per
Contract year without prior approval.
3. Purchase 21
<PAGE>
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a Contract, we will allocate your purchase
payment to the investment choices you select. Your allocation
must be in whole percentages and must total 100%. We may in the
future require that you allocate at least 10% of each payment to
any particular investment choice. No fractional percentages are
permitted. We will allocate additional purchase payments the same
way, unless you request a different allocation.
You may change allocations for future additional purchase
payments by sending written instructions or by telephone, subject
to the limitations described below under "Telephone
Transactions." The allocation change will apply to purchase
payments received after the date we receive the change request.
You should review periodically how your payments are divided
among the subaccounts because market conditions and your overall
financial objective may change.
ANNUITY VALUE
You should expect your annuity value to change from Valuation
Period to Valuation Period to reflect the investment performance
of the portfolios, the interest credited to your value in the
fixed account, and the fees and charges we deduct. A Valuation
Period begins at the close of business on each business day and
ends at the close of business on the next succeeding business
day. A business day is any day the New York Stock Exchange is
open. Our business day closes when the New York Stock Exchange
closes, usually 4:00 P.M. Eastern time. We observe the same
holidays as the New York Stock Exchange.
ACCUMULATION UNITS
We measure the value of your Contract during the accumulation
period by using a unit called an accumulation unit. During the
income phase, we call the unit an annuity unit. When you direct
money into a subaccount, we credit your Contract with
accumulation units for that subaccount. We determine how many
22 Janus Retirement Advantage Variable Annuity
<PAGE>
accumulation units to credit by dividing the dollar amount you
direct to the subaccount by the subaccount's accumulation unit
value as of the end of that business day. If you withdraw or
transfer out of a subaccount, or if we assess a transfer or
Annual Contract Charge, we subtract accumulation units from the
subaccounts using the same method.
Each subaccount's accumulation unit value was set at $10 when the
subaccount started. We recalculate the accumulation unit value
for each subaccount at the close of each business day. The new
value reflects the investment performance of the underlying
portfolio and the daily deduction of the mortality and expense
risk charge and the administrative charge. For a detailed
discussion of how we determine accumulation unit values, see the
SAI.
3. Purchase 23
<PAGE>
4. Investment - choices
THE SEPARATE ACCOUNT
The separate account currently consists of eleven subaccounts.
JANUS ASPEN SERIES
Each subaccount invests exclusively in one portfolio of the
Trust. Janus Capital serves as the investment adviser to each
portfolio. The portfolios are listed below.
Growth Portfolio
Aggressive Growth Portfolio
Capital Appreciation Portfolio
International Growth Portfolio
Worldwide Growth Portfolio
Balanced Portfolio
Equity Income Portfolio
Growth and Income Portfolio
Flexible Income Portfolio
High-Yield Portfolio
Money Market Portfolio
The general public may not purchase these portfolios. Their
investment objective and policies may be similar to other
portfolios and mutual funds managed by the same investment
adviser that are sold directly to the public. You should not
expect that the investment results of the other portfolios and
mutual funds would be similar to those of the portfolios offered
by this prospectus.
THERE IS NO ASSURANCE THAT A PORTFOLIO WILL ACHIEVE ITS STATED
OBJECTIVE. MORE DETAILED INFORMATION, INCLUDING AN EXPLANATION OF
EACH PORTFOLIO'S INVESTMENT OBJECTIVE, MAY BE FOUND IN THE
TRUST'S CURRENT PROSPECTUS, WHICH IS ATTACHED TO THIS PROSPECTUS.
YOU SHOULD READ THE PROSPECTUS FOR THE TRUST CAREFULLY BEFORE YOU
INVEST.
THE FIXED ACCOUNT
Purchase payments allocated and amounts transferred to the fixed
account become part of the general account of Western Reserve.
24 Janus Retirement Advantage Variable Annuity
<PAGE>
Interests in the general account have not been registered under
the Securities Act of 1933 (the "1933 Act"), nor is the general
account registered as an investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"). Accordingly,
neither the general account nor any interests therein are
generally subject to the provisions of the 1933 or 1940 Acts.
Western Reserve has been advised that the staff of the SEC has
not reviewed the disclosures in this prospectus which relate to
the fixed account.
We guarantee that the interest credited to the fixed account will
not be less than 4% per year. We have no formula for determining
fixed account interest rates. We established the interest rate,
at our sole discretion, for each purchase payment or transfer
into the fixed account. Rates are guaranteed for at least one
year.
If you select the fixed account, your money will be placed with
the other general assets of Western Reserve. All assets in our
general account are subject to the general liabilities of our
business operations. The amount of money you are able to
accumulate in the fixed account during the accumulation period
depends upon the total interest credited. The amount of annuity
payments you receive during the income phase under a fixed
annuity option will remain level for the entire income phase.
When you request a transfer or partial withdrawal from the fixed
account, we will account for it on a last-in, first-out ("LIFO")
basis, for purposes of crediting your interest. This means that
we will take the deduction from the most recent money you have
put in the fixed account.
Washington State residents: The fixed account is NOT available to
you. You may not direct any money to the fixed account or
transfer any of your Contract's value into the fixed account.
TRANSFERS
During the accumulation period, you may make transfers from any
subaccount as often as you wish. However, we will not permit
4. Investment choices 25
<PAGE>
you to make transfers if you have elected Systematic Exchanges,
asset rebalancing or systematic withdrawals.
Transfers from the fixed account are allowed once each Contract
year. You may transfer the entire dollar amount in the fixed
account. We may, in the future, limit the amount you can transfer
out of the fixed account to the greater of: (1) 25% of the dollar
amount in the fixed account, or (2) the amount you transferred
out of the fixed account in the previous Contract year.
Washington State residents: You may NOT transfer any of your
Contract's value into the fixed account.
Transfers may be made by telephone, subject to limitations
described below under "Telephone Transactions."
If you make more than 12 transfers from the subaccounts in any
Contract year, we will charge you $10 for each additional
transfer you make during that year. Currently, there is no charge
for transfers from the fixed account.
The Contract's transfer privilege is not intended to afford
Contract owners a way to speculate on short-term movements in the
market. Excessive use of the transfer privilege can disrupt the
management of the portfolios and increase transaction costs.
Accordingly, we have established a policy of limiting excessive
transfer activity. We will limit transfer activity to two
substantive transfers (at lease 30 days apart) from each
portfolio, except from the Money Market portfolio. We interpret
"substantive" to mean either a dollar amount large enough to have
a negative impact on a portfolio's operations or a series of
movements between portfolios. We will not limit non-substantive
transfers.
We may, at any time, no longer permit transfers, modify our
procedures, or limit the number of transfers we permit. We will
ordinarily execute transfers and determine all values in
connection with transfers at the end of the business day during
which we receive the transfer request.
26 Janus Retirement Advantage Variable Annuity
<PAGE>
SYSTEMATIC EXCHANGES
Systematic Exchanges allows you to systematically transfer a
specific amount each month from the Money Market subaccount, the
Flexible Income subaccount, the High-Yield subaccount, the fixed
account, or any combination of these accounts to a different
subaccount. You may specify the dollar amount to be transferred
monthly; however, each transfer must be at least $100. To
qualify, a minimum of $2,500 must be in each subaccount from
which we make the transfer. There is no charge for this program.
These transfers do count towards the twelve free transfers
allowed during each Contract year.
By transferring a set amount on a regular schedule instead of
transferring the total amount at one particular time, you may
reduce the risk of investing in the portfolios only when the
price is high. It does not guarantee a profit and it does not
protect you from loss if market prices decline.
We reserve the right to discontinue offering Systematic Exchanges
30 days after we send notice to you. Systematic Exchanges is not
available if you have elected systematic partial withdrawals.
ASSET REBALANCING PROGRAM
During the accumulation period you can instruct us to rebalance
automatically the amounts in your subaccounts to maintain your
desired asset allocation. This feature is called asset
rebalancing and can be started and stopped at any time free of
charge. However, we will not rebalance if you are in Systematic
Exchanges, systematic partial withdrawals or if any other
transfer is requested. Asset rebalancing ignores amounts in the
fixed account. You can choose to rebalance monthly, quarterly,
semi-annually, or annually.
To qualify for asset rebalancing, a minimum annuity value of
$2,500 for an existing Contract, or a minimum initial purchase
payment of $2,500 for a new Contract is required. Asset
rebalancing does not guarantee gains, nor does it assure that any
subaccount will not have losses.
4. Investment choices 27
<PAGE>
Each reallocation which occurs under asset rebalancing will be
counted towards the 12 free transfers allowed during each
Contract year.
We reserve the right to discontinue, modify or suspend the asset
rebalancing program at any time.
TELEPHONE TRANSACTIONS
You may make additional purchase payments, transfers and change
the allocation of additional purchase payments by telephone
IF:
- you complete the appropriate form; or
- you later request telephone transfers in writing.
When you make an additional purchase by telephone, we will
automatically debit your predesignated bank account for the
requested amount. Call 1-800-504-4440 to request the proper form
to be completed.
To make telephone transfers, call 1-800-504-4440. You will be
required to provide certain information for identification
purposes when you request a transaction by telephone. We may also
require written confirmation of your request. We will not be
liable for following telephone requests that we believe are
genuine.
Telephone requests must be received before 4:00 P.M. Eastern time
to assure same-day pricing of the transaction. We may discontinue
this option at any time.
28 Janus Retirement Advantage Variable Annuity
<PAGE>
5. - Expenses
There are charges and expenses associated with your Contract that
reduce the return on your investment in the Contract.
SURRENDERS AND PARTIAL WITHDRAWALS
During the accumulation period, you can withdraw part or all of
the Cash Value. Cash Value is the annuity value less any premium
taxes. No surrender charges apply.
MORTALITY AND EXPENSE RISK CHARGE
We charge a fee as compensation for bearing certain mortality and
expense risks under the Contract. Examples include a guarantee of
annuity rates, the death benefits, certain expenses of the
Contract, and assuming the risk that the current charges will be
insufficient in the future to cover costs of administering the
Contract. The mortality and expense risk charge is equal, on an
annual basis, to 0.50% of the average daily net assets that you
have invested in each subaccount. This charge is deducted from
the subaccounts during both the accumulation period and the
annuity period (the income phase).
If this charge does not cover our actual costs, we absorb the
loss. Conversely, if the charge covers more than actual costs,
the excess is added to our surplus. We expect to profit from this
charge. We may use any profits to cover distribution costs.
ADMINISTRATIVE CHARGE
We deduct an annual administrative charge to cover the costs of
administering the Contracts. This charge is assessed daily and is
equal to 0.15% per year of the daily net assets that you have
invested in each subaccount. This charge is deducted from the
subaccounts during both the accumulation period and the annuity
period (the income phase). This charge is guaranteed not to be
increased.
ANNUAL CONTRACT CHARGE
We deduct an Annual Contract Charge of $30 from your annuity
value on each Contract anniversary and at surrender. We deduct
5. Expenses 29
<PAGE>
the charge to cover our costs of administering the Contract. This
charge is currently waived when the annuity value on the
anniversary is equal to or greater than $25,000. We reserve the
right to modify this waiver upon 30 days written notice to you.
PREMIUM TAXES
Some states assess premium taxes on the purchase payments you
make. Currently, we do not deduct for these taxes at the time you
make a purchase payment. However, we will deduct the total amount
of premium taxes, if any, from the annuity value when:
- you elect to begin receiving annuity payments;
- you surrender the Contract;
- you request a partial withdrawal; or
- a death benefit is paid.
Generally, premium taxes range from 0% to 3.50%, depending on the
state.
FEDERAL, STATE AND LOCAL TAXES
We may in the future deduct charges from the Contract for any
taxes we incur because of the Contract. However, no deductions
are being made at the present time.
TRANSFER CHARGE
You are allowed to make 12 free transfers per Contract year. If
you make more than 12 transfers per Contract year, we charge $10
for each additional transfer. We deduct the charge from the
amount transferred. Systematic Exchange transfers and asset
rebalancing are considered transfers. All transfer requests made
on the same day are treated as a single request. We deduct the
charge to compensate us for the cost of processing the transfer.
30 Janus Retirement Advantage Variable Annuity
<PAGE>
PORTFOLIO MANAGEMENT FEES
The value of the assets in each subaccount is reduced by the fees
and expenses paid by the portfolios of the Trust. A description
of these expenses is found in the "Fee Table" section of this
prospectus and in the Trust's prospectus.
5. Expenses 31
<PAGE>
6. - Taxes
NOTE: WESTERN RESERVE HAS PREPARED THE FOLLOWING INFORMATION ON
FEDERAL INCOME TAXES AS A GENERAL DISCUSSION OF THE SUBJECT. IT
IS NOT INTENDED AS TAX ADVICE TO ANY INDIVIDUAL. YOU SHOULD
CONSULT YOUR OWN TAX ADVISOR ABOUT YOUR OWN CIRCUMSTANCES. WE
BELIEVE THAT THE CONTRACT QUALIFIES AS AN ANNUITY CONTRACT FOR
FEDERAL INCOME TAX PURPOSES AND THE FOLLOWING DISCUSSIONS ASSUMES
IT SO QUALIFIES. WE HAVE INCLUDED AN ADDITIONAL DISCUSSION
REGARDING TAXES IN THE SAI.
ANNUITY CONTRACTS IN GENERAL
Deferred annuity Contracts are a way of setting aside money for
future needs like retirement. Congress recognized how important
saving for retirement is and provided special rules in the Code
for annuities.
Simply stated, these rules provide that you will not be taxed on
the earnings, if any, on the money held in your annuity Contract
until you take the money out. This is referred to as tax
deferral. There are different rules as to how you will be taxed
depending on how you take the money out and the type of
Contract - Qualified or Non-Qualified (discussed below).
You will not be taxed on increases in the value of your Contract
until a distribution occurs - either as a withdrawal or as
annuity payments.
When a non-natural person (e.g., corporations or certain other
entities other than tax-qualified trusts) owns a Non-Qualified
Contract, the Contract will generally not be treated as an
annuity for tax purposes.
QUALIFIED AND NON-QUALIFIED CONTRACTS
If you purchase the Contract under an individual retirement
annuity, your Contract is referred to as a Qualified Contract.
If you purchase the Contract as an individual and not under a
Qualified Contract, your Contract is referred to as a Non-
Qualified Contract.
32 Janus Retirement Advantage Variable Annuity
<PAGE>
A Qualified Contract may be used in connection with the following
plans:
- INDIVIDUAL RETIREMENT ANNUITY (IRA): A traditional IRA allows
individuals to make contributions, which may be deductible, to
the Contract. A Roth IRA also allows individuals to make
contributions to the Contract, but it does not allow a
deduction for contributions. Roth IRA distributions may be tax-
free if the owner meets certain rules.
There are limits on the amount of annual contributions you can
make to these plans. Other restrictions may apply. The terms of
the plan may limit your rights under a Qualified Contract. You
should consult your legal counsel or tax advisor if you are
considering purchasing a Contract for use with any retirement
plan. We have provided more detailed information on these plans
and the tax consequences associated with them in the SAI.
WITHDRAWALS - NON-QUALIFIED CONTRACTS
If you make a withdrawal from your Contract, the Code treats that
withdrawal as first coming from earnings and then from your
purchase payments. When you make a withdrawal you are taxed on
the amount of the withdrawal that is earnings. Different rules
apply for annuity payments.
The Code also provides that withdrawn earnings may be subject to
a penalty. The amount of the penalty is equal to 10% of the
amount that is includible in income. Some withdrawals will be
exempt from the penalty. They include any amounts:
- paid on or after the taxpayer reaches age 59 1/2;
- paid after the taxpayer dies;
- paid if the taxpayer becomes totally disabled (as that term is
defined in the Code);
- paid in a series of substantially equal payments made annually
(or more frequently) under a lifetime annuity;
- paid under an immediate annuity; or
6. Taxes 33
<PAGE>
- which come from purchase payments made prior to August 14,
1982.
WITHDRAWALS - QUALIFIED CONTRACTS
The above information describing the taxation of Non-Qualified
Contracts does not apply to Qualified Contracts. There are
special rules that govern with respect to Qualified Contracts,
including rules restricting the time when amounts can be paid
from the Contracts and providing that a penalty tax may be
assessed on amounts withdrawn from the Contract prior to the date
you reach age 59 1/2, unless you meet one of the exceptions to
this rule. We have provided more information in the SAI.
DIVERSIFICATION AND DISTRIBUTION REQUIREMENTS
The Code provides that the underlying investments for a Non-
Qualified variable annuity must satisfy certain diversification
requirements in order to be treated as an annuity Contract. A
Non-Qualified Contract must meet certain distribution
requirements upon an owner's death in order to be treated as an
annuity Contract. A Qualified Contract (except a Roth IRA) must
also meet certain distribution requirements during the owner's
life. These diversification and distribution requirements are
discussed in the SAI. Western Reserve may modify the Contract to
attempt to maintain favorable tax treatment.
MULTIPLE CONTRACTS
All Non-Qualified, deferred annuity contracts entered into after
October 21, 1988 that we issue (or our affiliates issue) to the
same owner during any calendar year are to be treated as one
annuity contract for purposes of determining the amount
includible in an individual's gross income. There may be other
situations in which the Treasury may conclude that it would be
appropriate to aggregate two or more annuity contracts purchased
by the same owner. You should consult a competent tax advisor
before purchasing more than one Contract or other annuity
contracts.
34 Janus Retirement Advantage Variable Annuity
<PAGE>
PARTIAL WITHDRAWALS AND SURRENDERS - QUALIFIED CONTRACTS
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 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, we will withhold
for tax purposes the minimum amount required by law, unless the
owner affirmatively elects, before payments begin, to have either
nothing withheld or a different amount withheld.
Assignment of Non-Qualified Contracts are taxed in the same
manner as withdrawals from such Contracts.
TAXATION OF DEATH BENEFIT PROCEEDS
We may distribute amounts from the Contract because of the death
of an owner or the annuitant. Generally, such amounts are
includible in the income of the recipient:
- if distributed in a lump sum, these amounts are taxed in the
same manner as a full surrender; or
6. Taxes 35
<PAGE>
- if distributed under an annuity payment option, these amounts
are taxed in the same manner as annuity payments.
For these purposes, the "investment in the contract" is not
affected by the owner's or annuitant's death. That is, the
"investment in the contract" remains generally the total purchase
payments, less amounts received which were not includible in
gross income.
ANNUITY PAYMENTS
Although the tax consequences may vary depending on the annuity
payment option you select, in general, for Non-Qualified and
certain Qualified Contracts, only a portion of the annuity
payments you receive will be includible in your gross income.
In general, the excludible portion of each annuity payment you
receive will be generally determined as follows:
- Fixed payments - by dividing the "investment in the contract"
on the maturity date by the total expected value of the annuity
payments for the term of the payments. This is the percentage
of each annuity payment that is excludable.
- Variable payments - by dividing the "investment in the
contract" on the maturity date by the total number of expected
periodic payments. This is the amount of each annuity payment
that is excludable.
The remainder of each annuity payment is includible in gross
income. Once the "investment in the contract" has been fully
recovered, the full amount of any additional annuity payments is
includible in gross income.
If you select more than one annuity payment option, special rules
govern the allocation of the Contract's entire "investment in the
contract" to each such option, for purposes of determining the
excludable amount of each payment received under that option. We
advise you to consult a competent tax advisor as to the potential
tax effects of allocating amounts to any particular annuity
payment option.
36 Janus Retirement Advantage Variable Annuity
<PAGE>
If, after the maturity date, annuity payments stop because of an
annuitant's death, the excess (if any) of the "investment in the
contract" as of the maturity date over the aggregate amount of
annuity payments received that was excluded from gross income is
generally allowable as a deduction for your last tax return.
TRANSFERS, ASSIGNMENTS OR EXCHANGES OF CONTRACTS
If you transfer your ownership or assign a Contract, designate an
annuitant or other beneficiary who is not also the owner, select
certain maturity dates, or change annuitants, you may trigger
certain income or gift tax consequences that are beyond the scope
of this discussion. If you contemplate any such transfer,
assignment, selection, or change, you should contact a competent
tax advisor with respect to the potential tax effects of such a
transaction.
POSSIBLE TAX LAW CHANGES
Although the likelihood of legislative changes is uncertain,
there is always the possibility that the tax treatment of the
Contract could change by legislation or otherwise. You should
consult a tax advisor with respect to legislative developments
and their effect on the Contract.
6. Taxes 37
<PAGE>
7. Access - to your money
SURRENDERS AND WITHDRAWALS
You can have access to the money in your Contract in several
ways:
- by making a withdrawal (either a complete surrender or partial
withdrawal); or
- by taking annuity payments.
If you want to completely surrender your Contract, you will
receive your Cash Value, which equals the annuity value of your
Contract minus:
- premium taxes; and
- the Annual Contract Charge.
No partial withdrawal is permitted if the withdrawal would reduce
the Cash Value below $2,500. Unless you tell us otherwise, we
will take the withdrawal from each of the investment choices in
proportion to the Cash Value.
Remember that any withdrawal you take will reduce the annuity
value, and might reduce the amount of the death benefit. See
Section 9, Death Benefit, for more details. Income taxes, Federal
tax penalties and certain restrictions may apply to any
withdrawals you make.
We must receive a properly completed surrender request which must
contain your original signature. We will accept faxed requests
for partial withdrawals as long as the withdrawal proceeds are
being sent to the address of record.
When we incur extraordinary expenses, such as wire transfers or
overnight mail expenses, for expediting delivery of your partial
withdrawal or surrender payment, we will deduct that charge from
the payment. We charge $15 for a wire transfer and $20 for an
overnight delivery.
For your protection, we will require a signature guarantee for:
- all requests for partial withdrawals or surrenders over
$500,000; or
38 Janus Retirement Advantage Variable Annuity
<PAGE>
- where the partial withdrawal or surrender proceeds will be sent
to an address other than the address of record.
All signature guarantees must be made by:
- a national or state bank;
- a member firm of a national stock exchange; or
- any institution that is an eligible guarantor under SEC rules
and regulations.
If the Contract's owner is not an individual, additional
information may be required. If you own a Qualified Contract, the
tax code may require your spouse to consent to any withdrawal.
For more information, call us at 1-800-504-4440.
DELAY OF PAYMENT AND TRANSFERS
Payment of any amount due from the separate account for a
surrender, a death benefit, or the death of the owner of a Non-
Qualified Contract, will generally occur within seven business
days from the date all required information is received by us. We
may be permitted to defer such payment from the separate account
if:
- the New York Stock Exchange is closed for other than usual
weekends or holidays or trading on the Exchange is otherwise
restricted; or
- an emergency exists as defined by the SEC or the SEC requires
that trading be restricted; or
- the SEC permits a delay for the protection of owners.
In addition, transfers of amounts from the subaccounts may be
deferred under these circumstances.
Pursuant to the requirements of certain state laws, we reserve
the right to defer payment of transfers, partial withdrawals and
surrenders from the fixed account for up to six months.
7. Access to your money 39
<PAGE>
SYSTEMATIC PARTIAL WITHDRAWALS
You can elect to receive regular payments from your Contract by
using systematic partial withdrawals. Payments are made monthly,
quarterly, semi-annually or annually, in equal payments of at
least $200. Your Cash Value must equal at least $25,000. No
systematic partial withdrawals are permitted from the fixed
account.
You may stop systematic partial withdrawals at any time. We
reserve the right to discontinue offering systematic partial
withdrawals 30 days after we send you notice. Systematic partial
withdrawals are not available if you have elected Systematic
Exchanges or the asset rebalancing program.
Income taxes, Federal tax penalties and other restrictions may
apply to any systematic withdrawal you receive.
40 Janus Retirement Advantage Variable Annuity
<PAGE>
8. - Performance
Western Reserve periodically advertises performance of the
subaccounts and investment portfolios. We may disclose at least
four different kinds of performance.
First, we may disclose standard total return figures for the
subaccounts that reflect the deduction of all charges under the
Contract, including the mortality and expense charge, the
administrative charge, and the Annual Contract Charge. These
figures are based on the actual historical performance of the
subaccounts since their inception.
Second, we may disclose total return figures on a non-standard
basis. This means that the data may be presented for different
time periods and different dollar amounts. We will only disclose
non-standard performance data if it is accompanied by standard
total return data.
Third, we may present historic performance data for the
portfolios since their inception reduced by some or all fees and
charges under the Contract. Such adjusted historic performance
includes data that precedes the inception dates of the
subaccounts, but is designed to show the performance that would
have resulted if the Contract had been available during that
time.
Fourth, we may include in our advertising and sales materials,
tax deferred compounding charts and other hypothetical
illustrations, which may include comparisons of currently taxable
and tax deferred investment programs, based on selected tax
brackets.
Appendix B contains performance information that you may find
useful. It is divided into various parts, depending upon the type
of performance information shown. Future performance will vary
and future results will not be the same as the results shown.
8. Performance 41
<PAGE>
9. Death - benefit
We will pay a death benefit to your beneficiary, under certain
circumstances, if you are an owner and the annuitant and you die
during the accumulation period. (If you are not the annuitant, a
death benefit may or may not be paid. See below.) The beneficiary
may choose an annuity payment option, or may choose to receive a
lump sum.
WHEN WE PAY A DEATH BENEFIT
BEFORE THE MATURITY DATE
We will pay a death benefit to your beneficiary
IF:
- you are both the annuitant and the owner of the Contract; and
- you die before the maturity date.
If the only beneficiary is your surviving spouse, then he or she
may elect to continue the Contract as the new annuitant and
owner, instead of receiving the death benefit.
Distribution requirements apply to the annuity value upon the
death of any owner or annuitant. These restrictions are detailed
in the SAI.
AFTER THE MATURITY DATE
The death benefit payable, if any, on or after the maturity date
depends on the annuity payment option selected.
IF:
- you are not the annuitant; and
- you die on or after the maturity date; and
- the entire interest in the Contract has not been paid to you;
THEN:
- any remaining value in the Contract will be distributed at
least as rapidly as under the method of distribution being used
as of the date of the owner's death.
42 Janus Retirement Advantage Variable Annuity
<PAGE>
WHEN WE DO NOT PAY A DEATH BENEFIT
NO DEATH BENEFIT IS PAID IN THE FOLLOWING CASES:
IF:
- you are not the annuitant; and
- the annuitant dies prior to the maturity date;
THEN:
- you will become the new annuitant and the Contract will
continue.
IF:
- you are not the annuitant; and
- an owner dies prior to the maturity date;
THEN:
- the new owner must surrender the Contract for the annuity value
within five years of your death.
NOTE CAREFULLY. If the owner does not name a successor owner, the
owner's estate will become the new owner.
AMOUNT OF DEATH BENEFIT
Death benefit provisions may differ from state to state. The
death benefit will be the greater of:
- the value of your Contract on the date we receive proof of
death and your beneficiary's election regarding payment; or
- the total purchase payments you make to the Contract, less
partial withdrawals.
9. Death benefit 43
<PAGE>
ALTERNATE PAYMENT ELECTIONS
The beneficiary may elect to receive the death benefit in a lump
sum payment, or (if not your surviving spouse) to receive
payment:
1. within 5 years of the date of your death;
2. over a specific number of years, not to exceed the
beneficiary's life expectancy, with payments starting within
one year of the annuitant's death; or
3. under a life annuity payout option, with payments starting
within one year of the annuitant's death.
If the beneficiary chooses 1 or 2 above, this Contract remains in
effect and remains in the accumulation period until it terminates
at the end of the elected period. The death benefit becomes the
new annuity value. If the beneficiary chooses 3 above, the
Contract remains in effect, but moves into the annuity phase with
the beneficiary receiving payments under a life annuity payout
option. Special restrictions apply to option 1 above. See the SAI
for more details.
44 Janus Retirement Advantage Variable Annuity
<PAGE>
10. Other - information
OWNERSHIP
You, as owner of the Contract, exercise all rights under the
Contract. You can change the owner at any time by notifying
Western Reserve in writing. An ownership change may be a taxable
event.
ASSIGNMENT
You can also assign the Contract any time during your lifetime.
Western Reserve will not be bound by the assignment until we
receive written notice of the assignment. Western Reserve will
not be liable for any payment or other action we take in
accordance with the Contract before we receive notice of the
assignment. An assignment may be a taxable event. There may be
limitations on your ability to assign a Qualified Contract.
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
Western Reserve was incorporated under the laws of Ohio on
October 1, 1957. It is engaged in the business of writing life
insurance policies and annuity contracts. Western Reserve is
wholly-owned by First AUSA Life Insurance Company, a stock life
insurance company which is wholly-owned by AEGON USA, Inc. (AEGON
USA), which conducts most of its operations through subsidiary
companies engaged in the insurance business or in providing
non-insurance financial services. All of the stock of AEGON USA
is indirectly owned by AEGON n.v. of the Netherlands, the
securities of which are publicly traded. AEGON n.v., a holding
company, conducts its business through subsidiary companies
engaged primarily in the insurance business. Western Reserve is
licensed in the District of Columbia, Guam, Puerto Rico and in
all states except New York.
THE SEPARATE ACCOUNT
Western Reserve established a separate account, called the WRL
Series Annuity Account B, under the laws of the State of Ohio on
May 24, 1993. The separate account is divided into subaccounts,
each of which invests exclusively in shares of a mutual fund
10. Other information 45
<PAGE>
portfolio. Currently, there are 11 subaccounts offered through
this Contract. Western Reserve may add, delete or substitute
subaccounts or investments held by the subaccounts, and we
reserve the right to change the investment objective of any
subaccount, subject to applicable law as described in the SAI. In
addition, the separate account may be used for other variable
annuity contracts issued by Western Reserve.
The separate account is registered with the SEC as a unit
investment trust under the 1940 Act. However, the SEC does not
supervise the management, the investment practices, or the
Contracts of the separate account or Western Reserve.
The assets of the separate account are held in Western Reserve's
name on behalf of the separate account and belong to Western
Reserve. However, the assets underlying the Contracts are not
chargeable with liabilities arising out of any other business
Western Reserve may conduct. The income, gains and losses,
realized and unrealized, from the assets allocated to each
subaccount are credited to and charged against that subaccount
without regard to the income, gains and losses from any other of
our accounts or subaccounts.
Information about the separate account can be reviewed and copied
at the SEC's Public Reference Room in Washington, D.C. You may
obtain information about the operation of the public reference
room by calling the SEC at 1-800-SEC-0330. In addition, the SEC
maintains a web site (http://www.sec.gov) that contains other
information regarding the separate account.
VOTING RIGHTS
2Western Reserve will vote all shares of the portfolios in
accordance with instructions we receive from you and other owners
that have voting interests in the portfolios. We will send you
and other owners written requests for instructions on how to vote
those shares. When we receive those instructions, we will vote
all of the shares in accordance with those instructions. We will
vote shares for which no timely instructions were received in the
same
46 Janus Retirement Advantage Variable Annuity
<PAGE>
proportion as the voting instructions we received. However, if we
determine that we are permitted to vote the shares in our own
right, we may do so. Each person having a voting interest will
receive proxy material, reports, and other materials relating to
the appropriate portfolio. More information on voting rights is
provided in the SAI.
DISTRIBUTOR OF THE CONTRACTS
AFSG Securities Corporation is the principal underwriter of the
Contracts. Like Western Reserve, it is an indirect wholly-owned
subsidiary of AEGON USA. It is located at 4333 Edgewood Road
N.E., Cedar Rapids, IA 52499-0001. AFSG Securities Corporation is
registered as a broker/dealer under the Securities Exchange Act
of 1934. It is a member of the National Association of Securities
Dealers, Inc. ("NASD").
There are no sales commissions payable upon the sale of
Contracts. The offering of Contracts will be made on a continuous
basis.
NON-PARTICIPATING CONTRACT
The Contract does not participate or share in the profits or
surplus earnings of Western Reserve. No dividends are payable on
the Contract.
VARIATIONS IN CONTRACT PROVISIONS
Certain provisions of the Contracts may vary from the
descriptions in this prospectus in order to comply with different
state laws. See your Contract for variations since any such state
variations will be included in your Contract or in riders or
endorsements attached to your Contract.
Washington State residents: The fixed account is NOT available to
you. You may not direct any money to the fixed account or
transfer any money to the fixed account.
10. Other information 47
<PAGE>
YEAR 2000 READINESS DISCLOSURE
In May 1996, Western Reserve adopted and presently has in place a
Year 2000 Project Plan (the "Plan") to review and analyze
existing hardware and software systems, as well as voice and data
communications systems, to determine if they are Year 2000
compliant. As of March 1, 1999, substantially all of Western
Reserve's mission-critical systems are Year 2000 compliant. The
Year 2000 Project Plan remains on track as we continue with the
validation of our mission-critical and non-mission-critical
systems, including revalidation testing in 1999. In addition, we
have undertaken aggressive initiatives to test all systems that
interface with any third parties and other business partners. All
of these steps are aimed at allowing current operations to remain
unaffected by the Year 2000 date change.
As of the date of this Prospectus, Western Reserve has identified
and made available what it believes are the appropriate resources
of hardware, people, and dollars, including the engagement of
outside third parties, to ensure that the Plan will be completed.
The actions taken by management under the Year 2000 Project Plan
are intended to significantly reduce Western Reserve's risk of a
material business interruption based on the Year 2000 issues. It
should be noted that the Year 2000 computer problem, and its
resolution, is complex and multifaceted, and any company's
success cannot be conclusively known until the Year 2000 is
reached. In spite of its efforts or results, our ability to
function unaffected to and through the Year 2000 may be adversely
affected by actions, or failure to act, of third parties beyond
our knowledge or control.
This statement is a Year 2000 Readiness Disclosure pursuant to
Section 3(9) of the Year 2000 Information and Readiness
Disclosure Act, 15 U.S.C. Section 1 (1998).
IMSA
We are a charter member of the Insurance Marketplace Standards
Association ("IMSA"). IMSA is an independent, voluntary
organization of life insurance companies. It promotes high
ethical standards in the sales, advertising and servicing of
individual life insurance and annuity products. Companies must
undergo a rigorous self and independent assessment of their
practices to become a member of IMSA. The IMSA logo in our sales
literature shows our ongoing commitment to these standards.
48 Janus Retirement Advantage Variable Annuity
<PAGE>
LEGAL PROCEEDINGS
Western Reserve, like other life insurance companies, is involved
in lawsuits. We are not aware of any class lawsuits naming us as
a defendant or involving the separate account. In some lawsuits
involving other insurers, substantial damages have been sought
and/or material settlement payments have been made. Although the
outcome of any litigation cannot be predicted with certainty,
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 separate account, AFSG
Securities Corporation, the principal underwriter for the
Contracts, or Western Reserve.
FINANCIAL STATEMENTS
Financial Statements of Western Reserve and the separate account
are included in the SAI.
10. Other information 49
<PAGE>
Table of - contents of the statement
of additional information
Definitions of Special Terms
The Contract - General Provisions
Certain Federal Income Tax Consequences
Investment Experience
Historical Performance Data
Published Ratings
Administration
Records and Reports
Distribution of the Contracts
Other Products
Custody of Assets
Legal Matters
Independent Accountants
Other Information
Financial Statements
Inquiries and requests for a SAI should be directed to:
Western Reserve Life
Attention: Annuity Department
P.O. Box 9052
Clearwater, Florida 33758-9052
1-800-504-4440
50 Janus Retirement Advantage Variable Annuity
<PAGE>
Appendix - A
CONDENSED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
GROWTH SUBACCOUNT
-----------------------------------------------------------------------------------------
Number of
Accumulation
Accumulation Accumulation Units
Unit Value at Unit Value at Outstanding at
Beginning of Period End of Period END OF PERIOD
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
9/13/93(1)-12/31/93 $10.000 $10.350 100.000
12/31/94 $10.350 $10.547 451,117.958
12/31/95 $10.547 $13.613 743,809.909
12/31/96 $13.613 $16.010 1,042,859.684
12/31/97 $16.010 $19.524 1,514,530.379
12/31/98 $19.524 $26.315 1,652,701.845
-----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
AGGRESSIVE GROWTH SUBACCOUNT
-----------------------------------------------------------------------------------------
Number of
Accumulation
Accumulation Accumulation Units
Unit Value at Unit Value at Outstanding at
Beginning of Period End of Period END OF PERIOD
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
9/13/93(1)-12/31/93 $10.000 $11.805 100.000
12/31/94 $11.805 $13.617 354,557.639
12/31/95 $13.617 $17.213 678,636.237
12/31/96 $17.213 $18.449 1,020,107.090
12/31/97 $18.449 $20.651 984,381.141
12/31/98 $20.651 $27.546 883,037.839
-----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
WORLDWIDE GROWTH SUBACCOUNT
-----------------------------------------------------------------------------------------
Number of
Accumulation
Accumulation Accumulation Units
Unit Value at Unit Value at Outstanding at
Beginning of Period End of Period END OF PERIOD
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
9/13/93(1)-12/31/93 $10.000 $11.910 100.000
12/31/94 $11.910 $11.991 561,882.376
12/31/95 $11.991 $15.144 732,914.024
12/31/96 $15.144 $19.402 1,211,235.201
12/31/97 $19.402 $23.547 1,875,176.146
12/31/98 $23.547 $30.160 1,941,625.844
-----------------------------------------------------------------------------------------
</TABLE>
Appendix A 51
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
INTERNATIONAL GROWTH SUBACCOUNT
-----------------------------------------------------------------------------------------
Number of
Accumulation
Accumulation Accumulation Units
Unit Value at Unit Value at Outstanding at
Beginning of Period End of Period END OF PERIOD
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
5/2/94(1)-12/31/94 $10.000 $ 9.665 93,520.075
12/31/95 $ 9.665 $11.801 135,202.435
12/31/96 $11.801 $15.785 390,010.601
12/31/97 $15.785 $18.585 821,409.199
12/31/98 $18.585 $21.647 671,555.731
-----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
BALANCED SUBACCOUNT
-----------------------------------------------------------------------------------------
Number of
Accumulation
Accumulation Accumulation Units
Unit Value at Unit Value at Outstanding at
Beginning of Period End of Period END OF PERIOD
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
9/13/93(1)-12/31/93 $10.000 $10.720 100.000
12/31/94 $10.720 $10.720 201,716.082
12/31/95 $10.720 $13.264 247,488.141
12/31/96 $13.264 $15.301 348,749.461
12/31/97 $15.301 $18.562 608,080.467
12/31/98 $18.562 $24.764 733,116.706
-----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
FLEXIBLE INCOME SUBACCOUNT
-----------------------------------------------------------------------------------------
Number of
Accumulation
Accumulation Accumulation Units
Unit Value at Unit Value at Outstanding at
Beginning of Period End of Period END OF PERIOD
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
9/13/93(1)-12/31/93 $10.000 $10.070 100.000
12/31/94 $10.070 $ 9.895 90,218.877
12/31/95 $ 9.895 $12.152 200,443.851
12/31/96 $12.152 $13.175 166,841.253
12/31/97 $13.175 $14.629 250,305.069
12/31/98 $14.629 $15.858 427,644.390
-----------------------------------------------------------------------------------------
</TABLE>
52 Janus Retirement Advantage Variable Annuity
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
MONEY MARKET SUBACCOUNT
-----------------------------------------------------------------------------------------
Number of
Accumulation
Accumulation Accumulation Units
Unit Value at Unit Value at Outstanding at
Beginning of Period End of Period END OF PERIOD
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
5/1/95(1)-12/31/95 $10.000 $10.303 167,435.066
12/31/96 $10.303 $10.744 567,317.336
12/31/97 $10.744 $11.226 656,381.666
12/31/98 $11.226 $11.752 1,395,441.856
-----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
HIGH-YIELD SUBACCOUNT
-----------------------------------------------------------------------------------------
Number of
Accumulation
Accumulation Accumulation Units
Unit Value at Unit Value at Outstanding at
Beginning of Period End of Period END OF PERIOD
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
5/1/96(1)-12/31/96 $10.000 $11.191 58,905.138
12/31/97 $11.191 $12.895 225,866.419
12/31/98 $12.895 $12.973 229,600.091
-----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
CAPITAL APPRECIATION SUBACCOUNT
-----------------------------------------------------------------------------------------
Number of
Accumulation
Accumulation Accumulation Units
Unit Value at Unit Value at Outstanding at
Beginning of Period End of Period END OF PERIOD
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
5/1/97(1)-12/31/97 $10.000 $12.605 209,216.685
12/31/98 $12.605 $19.801 714,666.508
-----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
EQUITY INCOME SUBACCOUNT
-----------------------------------------------------------------------------------------
Number of
Accumulation
Accumulation Accumulation Units
Unit Value at Unit Value at Outstanding at
Beginning of Period End of Period END OF PERIOD
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
5/1/97(1)-12/31/97 $10.000 $13.412 227,237.196
12/31/98 $13.412 $19.487 462,715.096
-----------------------------------------------------------------------------------------
</TABLE>
Appendix A 53
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
GROWTH AND INCOME SUBACCOUNT
-----------------------------------------------------------------------------------------
Number of
Accumulation
Units
Accumulation Accumulation Outstanding
Unit Value at Unit Value at at
Beginning of Period End of Period END OF PERIOD
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
5/1/98(1)-12/31/98 $10.000 $11.928 359,656.882
-----------------------------------------------------------------------------------------
</TABLE>
(1) Commencement of operations of these subaccounts.
54 Janus Retirement Advantage Variable Annuity
<PAGE>
Appendix - B
HISTORICAL PERFORMANCE DATA
STANDARDIZED PERFORMANCE DATA
Western Reserve may advertise historical yields and total returns
for the subaccounts of the separate account. These figures are
based on historical earnings and will be calculated according to
guidelines from the SEC. They do not indicate future performance.
MONEY MARKET SUBACCOUNT. The yield of the Money Market subaccount
is the annualized income generated by an investment in the
subaccount over a specified seven-day period. The yield is
calculated by assuming that the income generated for that
seven-day period, not including capital changes or income other
than investment income, is generated each seven-day period over a
52-week period and is shown as a percentage of the investment.
The effective yield is calculated similarly but we assume that
the income earned is reinvested. The effective yield will be
slightly higher than the yield because of the compounding effect
of this assumed reinvestment. For the seven days ended December
31, 1998, the yield of the Money Market subaccount was 4.20%, and
the effective yield was 4.29%.
OTHER SUBACCOUNTS. The yield of a subaccount (other than the
Money Market subaccount) refers to the annualized income
generated by an investment in the subaccount over a specified
30-day period. The yield is calculated by assuming that the
income generated by the investment during that 30-day period is
generated each 30-day period over a 12-month period and is shown
as a percentage of the investment.
The total return of a subaccount assumes that an investment has
been held in the subaccount for various periods of time including
a period measured from the date the subaccount began operations.
When a subaccount has been in operation for 1, 3, 5, and 10
years, the total return for these periods will be provided. The
total return quotations will represent the average annual
compounded rates of return of investment of $1,000 in the
subaccount as of the last day of each period.
Appendix B 55
<PAGE>
The yield and total return calculations are not reduced by any
premium taxes. For additional information regarding yields and
total returns, please see the SAI.
Based on the method of calculation described in the SAI, the
standard average annual total returns for periods from inception
of the subaccounts to December 31, 1998, and for the one and
three year periods ended December 31, 1998 are shown in Table 1
below. Total returns shown reflect deductions of 0.50% for the
mortality and expense risk charge, 0.15% for the administrative
charge and the $30 Annual Contract Charge. (Based on an average
Contract size of $50,087, the Annual Contract Charge translates
into a charge of 0.06%.)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
TABLE 1
STANDARD AVERAGE ANNUAL TOTAL RETURNS OF THE SUBACCOUNTS
(Total Subaccount Annual Expenses: 0.65%)
---------------------------------------------------------------------------------------
1 Year 3 Years 5 Years Inception of Subaccount
Ended Ended Ended the Subaccount Inception
Subaccount 12/31/98 12/31/98 12/31/98 to 12/31/98 Date
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Growth 34.70% 24.50% 20.45% 19.95% 9/13/93
Aggressive Growth 33.31% 16.90% 18.40% 20.99% 9/13/93
Worldwide Growth 28.01% 25.73% 20.35% 23.08% 9/13/93
Balanced 33.34% 23.06% 18.16% 18.59% 9/13/93
Flexible Income 8.34% 9.21% 9.44% 9.02% 9/13/93
International Growth 16.41% 22.34% N/A 17.92% 5/2/94
Money Market* 4.62% 4.42% N/A 4.43% 5/1/95
High-Yield 0.55% N/A N/A 10.18% 5/1/96
Capital Appreciation 57.00% N/A N/A 50.51% 5/1/97
Equity Income 45.21% N/A N/A 49.07% 5/1/97
Growth and Income N/A N/A N/A 19.21% 5/1/98
---------------------------------------------------------------------------------------
</TABLE>
* Yield more closely reflects the current earnings of the Money Market
subaccount than its total return.
56 Janus Retirement Advantage Variable Annuity
<PAGE>
NON-STANDARDIZED PERFORMANCE DATA
In addition to the standard data discussed above, similar
performance data for other periods may also be shown.
We may from time to time also disclose average annual total
return or other performance data in non-standard formats for the
subaccounts. The non-standard performance data may make different
assumptions regarding the amount invested, the time periods
shown, or the effect of partial withdrawals or annuity payments.
All non-standard performance data will be advertised only if the
standard performance data is also disclosed. For additional
information regarding the calculation of other performance data,
please see the SAI.
Appendix B 57
<PAGE>
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58 Janus Retirement Advantage Variable Annuity
<PAGE>
[JANUS LOGO]
1-800-504-4440
P.O. Box 173401
Denver, Colorado 80217-3401
janus.com
If you would like more information about the Janus Retirement
Advantage, you can obtain a free copy of the Statement of Additional
Information (SAI) dated May 1, 1999. Please call us at
1-800-504-4440 or write us at: Western Reserve, P.O. Box 9052,
Clearwater, Florida 33758-9052. A registration statement, including
the SAI, has been filed with the Securities and Exchange Commission
(SEC) and is incorporated herein by reference. The SEC maintains a
web site (http://www.sec.gov) that contains the prospectus, the SAI,
material incorporated by reference and other information. The table
of contents of the SAI is included at the end of this prospectus.
PLEASE NOTE THAT THE CONTRACT AND THE JANUS PORTFOLIOS:
- - ARE NOT BANK DEPOSITS
- - ARE NOT FEDERALLY INSURED
- - ARE NOT ENDORSED BY ANY BANK OR GOVERNMENT AGENCY
- - ARE NOT GUARANTEED TO ACHIEVE THEIR GOAL
- - INVOLVE RISKS, INCLUDING POSSIBLE LOSS OF PREMIUM
Investment Company Act File No. 000-0000
0000
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF
ADDITIONAL INFORMATION
<PAGE>
[JANUS LOGO]
Janus Retirement Advantage(R)
Variable Annuity
WRL Series Annuity Account B
Western Reserve Life Assurance Co. of Ohio
570 Carillon Parkway
St. Petersburg, Florida 33716
Statement of Additional Information
May 1, 1999
This Statement of Additional Information expands upon subjects
discussed in the current prospectus for the Janus Retirement
Advantage Variable Annuity offered by Western Reserve Life
Assurance Co. of Ohio. You may obtain a copy of the prospectus
dated May 1, 1999, by calling 1-800-504-4440, or by writing to
the administrative office, Western Reserve Life, P.O. Box 9052,
Clearwater, Florida 33758-9052. The prospectus sets forth
information that a prospective investor should know before
investing in a Contract. Terms used in the current prospectus
for the Contract are incorporated in this Statement of
Additional Information.
This Statement of Additional Information is not a prospectus
and should be read only in conjunction with the prospectus for
the Contract and the WRL Series Annuity Account B.
<PAGE>
[JANUS LOGO]
<PAGE>
Table - of contents
<TABLE>
<S> <C>
Definitions of Special Terms................................ 2
The Contract - General Provisions........................... 4
Owner.................................................... 4
Entire Contract.......................................... 4
Misstatement of Age or Gender............................ 4
Addition, Deletion or Substitution of Investments........ 4
Annuity Payment Options.................................. 5
Death Benefit............................................ 6
Assignment............................................... 7
Proof of Age, Gender, and Survival....................... 7
Non Participating........................................ 7
Certain Federal Income Tax Consequences..................... 8
Tax Status of the Contract............................... 8
Taxation of Western Reserve.............................. 11
Investment Experience....................................... 12
Accumulation Units....................................... 12
Annuity Unit Value and Annuity Payment Rates............. 12
Historical Performance Data................................. 15
Money Market Yields...................................... 15
Other Subaccount Yields.................................. 15
Total Returns............................................ 16
Other Performance Data................................... 17
Advertising and Sales Literature......................... 17
Published Ratings........................................... 19
Administration.............................................. 19
Records and Reports......................................... 19
Distribution of the Contracts............................... 19
Other Products.............................................. 20
Custody of Assets........................................... 20
Legal Matters............................................... 20
Independent Accountants..................................... 20
Other Information........................................... 21
Financial Statements........................................ 21
</TABLE>
1
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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
subaccount values during the accumulation period.
age The issue age, which is annuitant's age on the birthday
nearest the Contract date, plus the number of completed
Contract years. When we use the term "age" in this
prospectus, it has the same meaning as "attained age" in
the Contract.
annuitant The person named in the application, or as subsequently
changed, to receive annuity payments. The annuitant may
be changed as provided in the Contract's death benefit
provisions and annuity provision.
annuity value The sum of the separate account value and the fixed
account value.
annuity unit value An accounting unit of measure used to calculate annuity
payments from certain subaccounts after the maturity
date.
beneficiary(ies) The person(s) entitled to receive the death benefit
proceeds under the Contract.
Cash Value The annuity value less any applicable premium taxes.
Code The Internal Revenue Code of 1986, as amended.
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.
fixed account An allocation option under the Contract, other than the
separate account, that provides for accumulation of
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.
fixed account value During the accumulation period, a Contract's value
allocated to the fixed account.
in force Condition under which the Contract is active and the
owner is entitled to exercise all rights under the
Contract.
maturity date The date on which the accumulation period ends and
annuity payments begin.
Non-Qualified Contracts Contracts issued other than in connection with
retirement plans. Non-Qualified Contracts do not qualify
for special Federal income tax treatment under the Code.
owner, you, your The person(s) entitled to exercise all rights under the
Contract. The annuitant is the owner unless the
application states otherwise, or unless a change of
ownership is made at a later time.
portfolio A separate investment portfolio of the 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. When we use the term "purchase
payment" in this prospectus, it has the same meaning as
"net purchase payment" in the Contract, which means the
purchase payment less any applicable premium taxes.
Qualified Contracts Contracts issued in connection with retirement plans
that qualify for special Federal income tax treatment
under the Code.
2
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separate account WRL Series Annuity Account B, a separate account
composed of subaccounts established to receive and
invest Net Purchase Payments not allocated to the fixed
account.
separate account value During the accumulation period, a Contract's value in
the separate account, which equals the total value in
each subaccount during the accumulation period.
subaccount A sub-division of the separate account that invests
exclusively in the shares of a specified portfolio and
supports the Contracts. Subaccounts corresponding to
each applicable portfolio hold assets under the Contract
during the accumulation period. Other subaccounts
corresponding to each applicable portfolio will hold
assets after the maturity date if a variable annuity
option is selected.
surrender The termination of a Contract at the option of the
owner.
Trust Janus Aspen Series, an investment company registered
with the U.S. Securities and Exchange Commission.
Valuation Date Each day on which the New York Stock Exchange is open
for trading, except when a subaccount's corresponding
portfolio does not value its shares.
Valuation Period The period beginning at the end of one Valuation Date
and continuing to the end of the next succeeding
Valuation Date.
3
<PAGE>
The - contract - general provisions
In order to supplement the description in the prospectus, the
following provides additional information about Western Reserve and
the Contract, which may be of interest to a prospective purchaser.
OWNER
The Contract shall belong to the owner upon issuance of the Contract
after completion of an application and delivery of the initial
purchase payment. While the annuitant is living, the owner may: (1)
assign the Contract; (2) surrender the Contract; (3) amend or modify
the Contract with Western Reserve's consent; (4) receive annuity
payments or name a payee to receive the payments; and (5) exercise,
receive and enjoy every other right and benefit contained in the
Contract. The exercise of these rights may be subject to the consent
of any assignee or irrevocable beneficiary; and of the owner's spouse
in a community or marital property state.
A successor owner can be named in the Contract application or in a
written notice. The successor owner will become the new owner upon the
owner's death, if the owner is not the annuitant and dies before the
annuitant. If no successor owner survives the owner and the owner dies
before the annuitant, the owner's estate will become the owner.
The owner may change the ownership of the Contract in a written
notice. When this change takes effect, all rights of ownership in the
Contract will pass to the new owner. A change of ownership may have
tax consequences.
When there is a change of owner or successor owner, the change will
take effect as of the date Western Reserve accepts the written notice.
We assume no liability for any payments made, or actions taken before
a change is accepted, and shall not be responsible for the validity or
effect of any change of ownership. Changing the owner or naming a new
successor owner cancels any prior choice of successor owner, but does
not change the designation of the beneficiary or the annuitant.
ENTIRE CONTRACT
The Contract and any endorsements thereon and the Contract application
constitute the entire contract between Western Reserve and the owner.
All statements in the application are representations and not
warranties. No statement will cause the Contract to be void or to be
used in defense of a claim unless contained in the application.
MISSTATEMENT OF AGE OR GENDER
If the age or gender of the annuitant has been misstated, Western
Reserve will change the annuity benefit payable to that which the
purchase payments would have purchased for the correct age or gender.
The dollar amount of any underpayment Western Reserve makes shall be
paid in full with the next payment due such person or the beneficiary.
The dollar amount of any overpayment Western Reserve makes due to any
misstatement shall be deducted from payments subsequently accruing to
such person or beneficiary. Any underpayment or overpayment will
include interest at 5% per year, from the date of the wrong payment to
the date of the adjustment. The age of the annuitant may be
established at any time by the submission of proof Western Reserve
finds satisfactory.
ADDITION, DELETION, OR SUBSTITUTION OF INVESTMENTS
We reserve the right, subject to compliance with applicable law, to
make additions to, deletions from, or substitutions for the shares
that are held by the separate account or that the separate account may
purchase. We reserve the right to eliminate the shares of any 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 our judgement further investment in any portfolio should
become inappropriate in view of the purposes of the separate account.
We will not, however, substitute any shares attributable to an owner's
interest in a subaccount without notice to, and
4
<PAGE>
prior approval of, the Securities and Exchange Commission (to the
extent required by the Investment Company Act of 1940, as amended
(1940 Act)) or other applicable law.
We also reserve the right to establish additional subaccounts, each of
which would invest in a new portfolio of the Trust, or in shares of
another investment company, with a specified investment objective. New
subaccounts may be established when, in the sole discretion of Western
Reserve, marketing, tax or investment conditions warrant, and any new
subaccounts will be made available to existing owners on a basis to be
determined by Western Reserve. We may also eliminate one or more
subaccounts if, in our sole discretion, marketing, tax or investment
conditions warrant.
In the event of any such substitution or change, we may make such
changes in the Contracts and other annuity contracts as may be
necessary or appropriate to reflect such substitution or change. If
deemed by Western Reserve to be in the best interest of persons having
voting rights under the Contracts, the separate account may be
operated as a management company under the 1940 Act, or subject to any
required approval, it may be deregistered under that Act in the event
such registration is no longer required.
We reserve the right to change the investment objective of any
subaccount. Additionally, if required by law or regulation, we will
not materially change an investment objective of the separate account
or of a portfolio designated for a subaccount unless a statement of
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.
ANNUITY PAYMENT OPTIONS
During the lifetime of the annuitant and prior to the maturity date,
the owner may choose an annuity payment option or change the election.
If no election is made prior to the maturity date, annuity payments
will be made under payment Option D, with 120 payments guaranteed.
Thirty days prior to the maturity date, we will mail to the owner a
notice and a form upon which the owner can select allocation options
for the annuity proceeds as of the maturity date, which cannot be
changed thereafter and will remain in effect until the Contract
terminates. If a separate account annuity option is chosen, the owner
must include in the written notice the subaccount allocation of the
annuity proceeds as of the maturity date. If we do not receive that
form or other written notice acceptable to us prior to the maturity
date, the Contract's existing allocation options will remain in effect
until the Contract terminates. The owner may also, prior to the
maturity date, select or change the frequency of annuity payments,
which may be monthly, quarterly, semi-annually or annually, provided
that the annuity option and payment frequency provides for payments of
at least $100 per period. If none of these is possible, a lump sum
payment will be made.
DETERMINATION OF THE FIRST VARIABLE PAYMENT. The amount of the first
variable payment is determined by multiplying the annuity proceeds
times the appropriate rate for the variable option selected. The rates
are based on the Society of Actuaries 1983 Individual Mortality Table
A with projection and a 5% effective annual assumed investment return
and assuming a maturity date in the year 2000. Gender based mortality
tables will be used unless prohibited by law. The amount of the first
variable payment depends upon the
5
<PAGE>
gender (if consideration of gender is allowed under state law) and
adjusted age of the annuitant. The adjusted age is the annuitant's
actual age nearest birthday, at the maturity date, adjusted as
follows:
<TABLE>
<CAPTION>
Maturity Date Adjusted Age
--------------------------------------------------------------
<S> <C>
Before 2001 Actual Age
2001 -- 2010 Actual Age minus 1
2011 -- 2020 Actual Age minus 2
2021 -- 2030 Actual Age minus 3
2031 -- 2040 Actual Age minus 4
After 2040 As determined by Western Reserve
</TABLE>
This adjustment assumes an increase in life expectancy, and therefore
it results in lower payments than without such an adjustment.
DETERMINATION OF ADDITIONAL VARIABLE PAYMENTS. The amount of variable
annuity payments after the first will increase or decrease according
to the annuity unit value which reflects the investment experience of
the selected subaccount(s). Each variable annuity payment after the
first will be equal to the number of units attributable to the
Contract in each selected subaccount multiplied by the annuity unit
value of that subaccount on the date the payment is processed. The
number of such units is determined by dividing the first payment
allocated to that subaccount by the annuity unit value of that
subaccount on the date the first annuity payment is processed.
DEATH BENEFIT
DEATH OF OWNER. Federal tax law requires that if any owner (including
any joint owner or any successor owner who has become a current owner)
dies before the maturity date, then the entire value of the Contract
must generally be distributed within five years of the date of death
of such owner. Special rules apply where (1) the spouse of the
deceased owner is the sole beneficiary, (2) the owner is not a natural
person and the primary annuitant dies or is changed, or (3) any owner
dies after the maturity date. See "Certain Federal Income Tax
Consequences" for a detailed description of these rules. Other rules
may apply to Qualified Contracts.
If the annuitant is not an owner, and an owner dies prior to the
maturity date, a successor owner may surrender the Contract at any
time for the amount of the Cash Value. If the successor owner is not
the deceased owner's spouse, however, the Cash Value must be
distributed: (1) within five years after the date of the deceased
owner's death, or (2) as payments that begin no later than one year
after the deceased owner's death and must be made for the successor
owner's lifetime or for a period certain (so long as any period
certain does not exceed the successor owner's life expectancy).
DEATH OF ANNUITANT. Due proof of death of the annuitant is proof that
the annuitant who is an owner died prior to the commencement of
annuity payments. Upon receipt of this proof and an election of a
method of settlement and return of the Contract, the death benefit
generally will be paid within seven days, or as soon thereafter as we
have sufficient information about the beneficiary to make the payment.
The beneficiary may receive the amount payable in a lump sum cash
benefit, or, subject to any limitation under any state or Federal law,
rule, or regulation, under one of the annuity payment options, unless
a settlement agreement is effective at the owner's death preventing
such election.
If the annuitant was an owner, and the beneficiary was not the
deceased annuitant's spouse, (1) the death benefit must be distributed
within five years of the date of the deceased annuitant's / owner's
death, or (2) payments must begin no later than one year after the
deceased annuitant's / owner's death and must be made for the
beneficiary's lifetime or for a period certain (so long as any certain
period does not exceed
6
<PAGE>
the beneficiary's life expectancy). Death Proceeds which are not paid
to or for the benefit of a natural person must be distributed within
five years of the date of the deceased annuitant's / owner's death. If
the sole beneficiary is the deceased annuitant's / owner's surviving
spouse, such spouse may elect to continue the Contract as the new
annuitant and owner instead of receiving the death benefit. (See
"Certain Federal Income Tax Consequences" in this SAI.)
If the beneficiary elects to receive the death benefit proceeds under
option (1), then: (a) we will allow the beneficiary to make only ONE
partial withdrawal during the 5 year period. That withdrawal must be
made at the time option (1) is elected. No withdrawal charges will
apply to this withdrawal; (b) we will allow the beneficiary to make
ONE transfer to and from the subaccounts and the fixed account during
the 5 year period. That transfer must be made at the time option (1)
is elected; (c) we will deduct the Annual Contract Charge each year
during the 5 year period; (d) we will not apply any withdrawal charges
to the total distribution of Contract; (e) we will not permit
annuitization at the end of the 5 year period; and (f) if the
beneficiary dies during the 5 year period, we will pay the remaining
value of the Contract first to the contingent beneficiary named by the
owner. If no contingent beneficiary is named, then we will make
payment to the beneficiary's estate. The beneficiary is not permitted
to name his or her own beneficiary.
BENEFICIARY. The beneficiary designation in the application will
remain in effect until changed. The owner may change the designated
beneficiary during the annuitant's lifetime by sending written notice
to Western Reserve. The beneficiary's consent to such change is not
required unless the beneficiary was irrevocably designated or law
requires consent. (If an irrevocable beneficiary dies, the owner may
then designate a new beneficiary.) The change will take effect as of
the date the owner signs the written notice. We will not be liable for
any payment made before the written notice is received. Unless we
receive written notice from the owner to the contrary, no beneficiary
may assign any payments under the Contract before such payments are
due. To the extent permitted by law, no payments under the Contract
will be subject to the claims of any beneficiary's creditors.
ASSIGNMENT
During the annuitant's lifetime and prior to the maturity date
(subject to any irrevocable beneficiary's rights) the owner may assign
any rights or benefits provided by a Non-Qualified Contract. The
assignment of a Contract will be treated as a distribution of the
annuity value for Federal tax purposes. Any assignment must be made in
writing and accepted by Western Reserve. An assignment will be
effective as of the date accepted by Western Reserve. We assume no
liability for any payments made or actions taken before a change is
accepted and shall not be responsible for the validity or effect of
any assignment.
With regard to Qualified Contracts, ownership of the Contract
generally may be assigned, but any assignment may be subject to
restrictions, penalties, taxation as a distribution, or even
prohibition under the Code, and must also be permitted under the terms
of the underlying retirement plan.
PROOF OF AGE, GENDER, AND SURVIVAL
Western Reserve may require proper proof of age and gender of any
annuitant or co-annuitant prior to making the first annuity payment.
Prior to making any payment, 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
gender of any payee, annuity payments will be determined using unisex
rates.
NON-PARTICIPATING
The Contract will not share in Western Reserve's surplus earnings; no
dividends will be paid.
7
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Certain - federal income tax consequences
THE FOLLOWING SUMMARY DOES NOT CONSTITUTE TAX ADVICE. IT IS A GENERAL
DISCUSSION OF CERTAIN OF THE EXPECTED FEDERAL INCOME TAX CONSEQUENCES
OF INVESTMENT IN AND DISTRIBUTIONS WITH RESPECT TO A CONTRACT, BASED
ON THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, PROPOSED AND FINAL
TREASURY REGULATIONS THEREUNDER, JUDICIAL AUTHORITY, AND CURRENT
ADMINISTRATIVE RULINGS AND PRACTICE. THIS SUMMARY DISCUSSES ONLY
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO "UNITED STATES PERSONS,"
AND DOES NOT DISCUSS STATE, LOCAL, OR FOREIGN TAX CONSEQUENCES. UNITED
STATES PERSONS MEANS CITIZENS OR RESIDENTS OF THE UNITED STATES,
DOMESTIC CORPORATIONS, DOMESTIC PARTNERSHIPS AND TRUSTS OR ESTATES
THAT ARE SUBJECT TO UNITED STATES FEDERAL INCOME TAX REGARDLESS OF THE
SOURCE OF THEIR INCOME.
TAX STATUS OF THE CONTRACT
The following discussion is based on the assumption that the Contract
qualifies as an annuity contract for Federal income tax purposes.
DIVERSIFICATION REQUIREMENTS. Section 817(h) of the Code provides that
in order for a variable contract which is based on a segregated asset
account to qualify as an annuity contract under the Code, the
investments made by such account must be "adequately diversified" in
accordance with Treasury regulations. The Treasury regulations issued
under Section 817(h) (Treas. Reg. (sec.) 1.817-5) apply a
diversification requirement to each of the subaccounts of the separate
account. The separate account, through the Trust and its portfolios,
intends to comply with the diversification requirements of the
Treasury.
Section 817(h) applies to variable annuity contracts other than
pension plan contracts. The regulations reiterate that the
diversification requirements do not apply to pension plan contracts.
All of the qualified retirement plans (described below) are defined as
pension plan contracts for these purposes. Notwithstanding the
exception of Qualified Contracts from application of the
diversification rules, the investment vehicle for Western Reserve's
Qualified Contracts (i.e., the 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.
OWNER CONTROL. In certain circumstances, owners of variable annuity
contracts may be considered the owners, for Federal income tax
purposes, of the assets of the separate account used to support their
contracts. In those circumstances, income and gains from the separate
account assets would be includable in the variable annuity
contractowner's gross income. Several years ago, the IRS stated in
published rulings that a variable contract owner will be considered
the owner of separate account assets if the contractowner possesses
incidents of ownership in those assets, such as the ability to
exercise investment control over the assets. More recently, the
Treasury Department announced, in connection with the issuance of
regulations concerning investment diversification, that those
regulations "do not provide guidance concerning the circumstances in
which investor control of the investments of a segregated asset
account may cause the investor, rather than the insurance company, to
be treated as the owner of the assets in the account." This
announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which Contract owners may
direct their investments to particular subaccounts without being
treated as owners of underlying assets."
The ownership rights under the Contract are similar to, but different
in certain respects from those described by the IRS in rulings in
which it was determined that owners were not owners of separate
account assets. For example, the owner of a Contract has the choice of
one or more subaccounts in which to allocate premiums and Contract
Values, and may be able to transfer among these accounts more
frequently than in such rulings. These differences could result in
owners being treated as the owners of the assets of the separate
account. In addition, 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. We
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therefore reserve the right to modify the Contracts as necessary to
attempt to prevent the owners from being considered the owners of a
pro rata share of the assets of the separate account.
DISTRIBUTION REQUIREMENTS. The Code also requires that Non-Qualified
Contracts contain specific provisions for distribution of Contract
proceeds upon the death of an owner. In order to be treated as an
annuity contract for Federal income tax purposes, the Code requires
that such Contracts provide that if any owner dies on or after the
maturity date and before the entire interest in the Contract has been
distributed, the remaining portion must be distributed at least as
rapidly as under the method in effect on such owner's death. If any
owner dies before the maturity date, the entire interest in the
Contract must generally be distributed within 5 years after such
owner's date of death or be applied to provide an immediate annuity
under which payments will begin within one year of such owner's death
and will be made for the life of the beneficiary or for a period not
extending beyond the life expectancy of the beneficiary. However, if
such owner's death occurs prior to the maturity date, and such owner's
surviving spouse is named beneficiary, then the Contract may be
continued with the surviving spouse as the new owner. If any owner is
not a natural person, then for purposes of these distribution
requirements, the primary annuitant shall be treated as an owner and
any death or change of such primary annuitant shall be treated as the
death of an owner. The Contract contains provisions intended to comply
with these requirements of the Code. No regulations interpreting these
requirements of the Code have yet been issued and thus no assurance
can be given that the provisions contained in the Contracts satisfy
all such Code requirements. The provisions contained in the Contracts
will be reviewed and modified if necessary to maintain their
compliance with the Code requirements when clarified by regulation or
otherwise.
WITHHOLDING. The portion of any distribution under a Contract that is
includable in gross income will be subject to Federal income tax
withholding unless the recipient of such distribution elects not to
have Federal income tax withheld and properly notifies Western
Reserve. For certain Qualified Contracts, certain distributions are
subject to mandatory withholding. The withholding rate varies
according to the type of distribution and the owner's tax status. For
Qualified Contracts, "eligible rollover distributions" from section
401(a) plans and section 403(b) tax-sheltered annuities are subject to
a mandatory Federal income tax withholding of 20%. An eligible
rollover distribution is the taxable portion of any distribution from
such a plan, except certain distributions such as distributions
required by the Code or distributions in a specified annuity form. The
20% withholding does not apply, however, if the owner chooses a
"direct rollover" from the plan to another tax-qualified plan or IRA.
QUALIFIED CONTRACTS. The Qualified Contract is designed for use with
several types of tax-qualified retirement plans. The tax rules
applicable to participants and beneficiaries in tax-qualified
retirement plans vary according to the type of plan and the terms and
conditions of the plan. Special favorable tax treatment may be
available for certain types of contributions and distributions.
Adverse tax consequences may result from contributions in excess of
specified limits; distributions prior to age 59 1/2 (subject to
certain exceptions); distributions that do not conform to specified
commencement and minimum distribution rules; and in other specified
circumstances. Some retirement plans are subject to distribution and
other requirements that are not incorporated into Western Reserve's
Contract administration procedures. Owners, participants and
beneficiaries are responsible for determining that contributions,
distributions and other transactions with respect to the Contracts
comply with applicable law.
For Qualified plans under section 401(a), 403(a), 403(b), and 457, the
Code requires that distributions generally must commence no later than
the later of April 1 of the calendar year following the calendar year
in which the owner (or plan participant) (i) reaches age 70 1/2 or
(ii) retires, and must be made in a specified form or manner. If the
plan participant is a "5 percent owner" (as defined in the Code),
9
<PAGE>
distributions generally must begin no later than April 1 of the
calendar year in which the owner (or plan participant) reaches age
70 1/2. Each owner is responsible for requesting distributions under
the Contract that satisfy applicable tax rules.
Western Reserve makes no attempt to provide more than general
information about use of the Contract with the various types of
retirement plans. Purchasers of Contracts for use with any retirement
plan should consult their legal counsel and tax advisor regarding the
suitability of the Contract.
INDIVIDUAL RETIREMENT ANNUITIES. In order to qualify as a traditional
individual retirement annuity (IRA) under Section 408(b) of the Code,
a Contract must contain certain provisions: (i) the owner must be the
annuitant; (ii) the Contract generally is not transferable by the
owner, e.g., the owner may not designate a new owner, designate a
contingent owner or assign the Contract as collateral security; (iii)
the total purchase payments for any calendar year on behalf of any
individual may not exceed $2,000, except in the case of a rollover
amount or contribution under Sections 402(c), 403(a)(4), 403(b)(8) or
408(d)(3) of the Code; (iv) annuity payments or partial withdrawals
must begin no later than April 1 of the calendar year following the
calendar year in which the annuitant attains age 70 1/2; (v) an
annuity payment option with a period certain that will guarantee
annuity payments beyond the life expectancy of the annuitant and the
beneficiary may not be selected; (vi) certain payments of death
benefits must be made in the event the annuitant dies prior to the
distribution of the annuity value; and (vii) the entire interest of
the owner is non-forfeitable. Contracts intended to qualify as
traditional IRAs under Section 408(b) of the Code contain such
provisions. Amounts in the IRA (other than nondeductible
contributions) are taxed when distributed from the IRA. Distributions
prior to age 59 1/2 (unless certain exceptions apply) are subject to a
10% penalty tax.
Section 408 of the Code also indicates that no part of the funds for
an IRA may be invested in a life insurance contract, but the
regulations thereunder allow such funds to be invested in an annuity
contract that provides a death benefit that equals the greater of the
premiums paid or the Cash Value for the Contract. The Contract
provides an enhanced death benefit that could exceed the amount of
such a permissible death benefit, but it is unclear to what extent
such an enhanced death benefit could disqualify the Contract under
Section 408 of the Code. The IRS has not reviewed the Contract for
qualification as an IRA, and has not addressed in a ruling of general
applicability whether an enhanced death benefit provision, such as the
provision in the Contract, comports with IRA qualification
requirements.
ROTH INDIVIDUAL RETIREMENT ANNUITIES (ROTH IRA). The Roth IRA, under
Section 408A of the Code, contains many of the same provisions as a
traditional IRA. However, there are some differences. First, the
contributions are not deductible and must be made in cash or as a
rollover or transfer from another Roth IRA or other IRA. A rollover
from or conversion of an IRA to a Roth IRA may be subject to tax and
other special rules may apply. You should consult a tax advisor before
combining any converted amounts with any other Roth IRA contributions,
including any other conversion amounts from other tax years. The Roth
IRA is available to individuals with earned income and whose adjusted
gross income is under $110,000 for single filers, $160,000 for married
filing jointly, and $10,000 for married filing separately. The amount
per individual that may be contributed to all IRAs (Roth and
traditional) is $2,000. Secondly, the distributions are taxed
differently. The Roth IRA offers tax-free distributions when made 5
tax years after the first contribution to any Roth IRA and made after
attaining age 59 1/2, or to pay for qualified first time homebuyer
expenses (lifetime maximum of $10,000), or due to death or disability.
All other distributions are subject to income tax when made from
earnings and may be subject to a premature 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 the same.
10
<PAGE>
TAXATION OF WESTERN RESERVE
Western Reserve at present is taxed as a life insurance company under
part I of Subchapter L of the Code. The separate account is treated as
part of Western Reserve and, accordingly, will not be taxed separately
as a "regulated investment company" under Subchapter M of the Code.
Western Reserve does not expect to incur any Federal income tax
liability with respect to investment income and net capital gains
arising from the activities of the separate account retained as part
of the reserves under the Contract. Based on this expectation, it is
anticipated that no charges will be made against the separate account
for Federal income taxes. If, in future years, any Federal income
taxes are incurred by Western Reserve with respect to the separate
account, Western Reserve may make a charge to the separate account.
11
<PAGE>
Investment - experience
ACCUMULATION UNITS
Allocations of a purchase payment directed to a subaccount are
credited in the form of accumulation units. Each subaccount has a
distinct accumulation unit value. The number of units credited is
determined by dividing the purchase payment or amount transferred to
the subaccount by the accumulation unit value of the subaccount as of
the end of the Valuation Period during which the allocation is made.
For each subaccount, the accumulation unit value for a given business
day is based on the net asset value of a share of the corresponding
portfolio of the Trust less any applicable charges or fees.
Upon allocation to the selected subaccount of the separate account,
purchase payments are converted into accumulation units of the
subaccount. At the end of any Valuation Period, a subaccount's value
is equal to the number of units that your Contract has in the
subaccount, multiplied by the accumulation unit value of the
subaccount.
The number of units that your Contract has in each subaccount is equal
to:
1. The initial units purchased on the Contract Date; plus
2. Units purchased at the time additional Net Purchase Payments are
allocated to the subaccount; plus
3. Units purchased through transfers from another subaccount or the
fixed account; minus
4. Any units that are redeemed to pay for partial withdrawals; minus
5. Any units that are redeemed as part of a transfer to another
subaccount or the fixed account; minus
6. Any units that are redeemed to pay the Annual Contract Charge, any
premium taxes and any transfer charge.
The value of an accumulation unit was arbitrarily established at $10
at the inception of each subaccount. Thereafter, the value of an
accumulation unit is determined as of the close of the regular session
of business on the New York Stock Exchange, on each day the Exchange
is open.
The accumulation unit value will vary from one Valuation Period to the
next depending on the investment results experienced by each
subaccount. The accumulation unit value for each subaccount at the end
of a Valuation Period is the result of:
1. The total value of the assets held in the subaccount. This value is
determined by multiplying the number of shares of the designated
Trust portfolio owned by the subaccount 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 subaccount; minus
3. The accrued amount of reserve for any taxes that are determined by
us to have resulted from the investment operations of the
subaccount; divided by
4. The number of outstanding units in the subaccount. 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. The accumulation unit
value may increase, decrease, or remain the same from Valuation
Period to Valuation Period.
ANNUITY UNIT VALUE AND ANNUITY PAYMENT RATES
The amount of variable annuity payments will vary with annuity unit
values. Annuity unit values rise if the net investment performance of
the subaccount (that is, the portfolio performance minus subaccount
fees
12
<PAGE>
and charges) exceeds the assumed interest rate of 5% annually.
Conversely, annuity unit values fall if the net investment performance
of the subaccount is less than the assumed rate. The value of a
variable annuity unit in each subaccount was established at $10.00 on
the date operations began for that subaccount. The value of a variable
annuity unit on any subsequent business day is equal to (a) multiplied
by (b) multiplied by (c), where:
(a) is the variable annuity unit value for that subaccount on the
immediately preceding business day;
(b) is the net investment factor for that subaccount for the Valuation
Period; and
(c) is the investment result adjustment factor for the Valuation
Period.
The investment result adjustment factor for the Valuation Period is
the product of discount factors of .99986634 per day to recognize the
5% effective annual Assumed Investment Return. The Valuation Period is
the period from the close of the immediately preceding business day to
the close of the current business day.
The net investment factor for the Contract used to calculate the value
of a variable annuity unit in each subaccount for the Valuation Period
is determined by dividing (i) by (ii) and subtracting (iii) from the
result, where:
(i) is the result of:
(1) the net asset value of a portfolio share held in that
subaccount determined at the end of the current Valuation Period; plus
(2) the per share amount of any dividend or capital gain
distributions made by the portfolio for shares held in that subaccount
if the ex-dividend date occurs during the Valuation Period; plus or
minus
(3) a per share charge or credit for any taxes reserved for, which
Western Reserve determines to have resulted from the investment
operations of the subaccount.
(ii) is the net asset value of a portfolio share held in that
subaccount determined as of the end of the immediately preceding
Valuation Period.
(iii) is a factor representing the mortality and expense risk charge
and administrative charge. This factor is equal, on an annual basis,
to 0.65% of the daily net asset value of the subaccount.
The dollar amount of subsequent variable annuity payments will depend
upon changes in applicable annuity unit values.
The annuity payment rates vary according to the annuity option elected
and the gender and adjusted age of the annuitant at the annuity
commencement date.
13
<PAGE>
ILLUSTRATION OF CALCULATIONS FOR ANNUITY UNIT VALUE
AND VARIABLE ANNUITY PAYMENTS
FORMULA AND ILLUSTRATION FOR DETERMINING ANNUITY UNIT VALUE
Annuity Unit Value = A B C
Where: A = Annuity unit value for the immediately preceding Valuation
Period.
Assume............................................... = $ X
B = Net Investment Factor for the Valuation Period for which
the annuity unit value is being calculated.
Assume............................................... = Y
C = A factor to neutralize the assumed interest rate of 5%
built into the Annuity Tables used.
Assume............................................... = Z
Then, the annuity unit value is: $X Y Z = $ Q
FORMULA AND ILLUSTRATION FOR DETERMINING AMOUNT OF
FIRST MONTHLY VARIABLE ANNUITY PAYMENT
<TABLE>
<S> <C>
A B
First Monthly Variable Annuity Payment = ------
$1,000
</TABLE>
Where: A = The Contract value as of the maturity date.
Assume............................................... = $ X
B = The annuity purchase rate per $1,000 based upon the option
selected, the gender and adjusted age of the annuitant
according to the tables contained in the Contract.
Assume............................................... = $ Y
<TABLE>
<S> <C>
$X $Y = $Z
Then, the first Monthly Variable Annuity Payment = ----------
1,000
</TABLE>
FORMULA AND ILLUSTRATION FOR DETERMINING THE NUMBER OF ANNUITY UNITS
REPRESENTED BY EACH MONTHLY VARIABLE ANNUITY PAYMENT
<TABLE>
<S> <C>
A
Number of annuity units = -
B
</TABLE>
Where: A = The dollar amount of the first monthly Variable Annuity
Payment.
Assume............................................... = $ X
B = The annuity unit value for the Valuation Date on which the
first monthly payment is due.
Assume............................................... = $ Y
<TABLE>
<S> <C> <C>
$ X
Then, the number of annuity units = --- = Z
$ Y
</TABLE>
14
<PAGE>
Historical - performance data
MONEY MARKET YIELDS
YIELD. The yield quotation set forth in the prospectus for the Money
Market subaccount is for the seven days ended on the date of the most
recent balance sheet of the separate account included in the
registration statement, and is computed by determining the net change,
exclusive of capital changes and income other than investment income,
in the value of a hypothetical pre-existing account having a balance
of one unit in the Money Market subaccount at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from
owner accounts, and dividing the difference by the value of the
account at the beginning of the base period to obtain the base period
return, and multiplying the base period return by (365/7) with the
resulting figure carried to at least the nearest hundredth of one
percent.
EFFECTIVE YIELD. The effective yield quotation for the Money Market
subaccount set forth in the prospectus is for the seven days ended on
the date of the most recent balance sheet of the separate account
included in the registration statement. The effective yield is
computed by determining the net change, exclusive of capital changes
and income other than investment income, in the value of a
hypothetical pre-existing subaccount having a balance of one unit in
the Money Market subaccount at the beginning of the period. A
hypothetical charge, reflecting deductions from owner accounts, is
subtracted from the balance. The difference is divided by the value of
the subaccount at the beginning of the base period to obtain the base
period return, which is then compounded by adding 1. Next, the sum is
raised to a power equal to 365 divided by 7, and 1 is subtracted from
the result. The following formula describes the computation:
EFFECTIVE YIELD = (GBASE PERIOD RETURN + 1H(365/7)) - 1
The effective yield is shown at least to the nearest hundredth of one
percent.
HYPOTHETICAL CHARGE. For purposes of the yield and effective yield
computations, the hypothetical charge reflects all fees and charges
that are charged to all owner accounts in proportion to the length of
the base period. Such fees and charges include the $30 Annual Contract
Charge, calculated on the basis of an average separate account value
per Contract of $50,087, which converts that charge to an annual rate
of 0.06% of the separate account value. The yield and effective yield
quotations do not reflect any deduction for premium taxes or transfer
charges that may be applicable to a particular Contract. No fees or
sales charges are assessed upon annuitization under the Contracts,
except premium taxes. Realized gains and losses from the sale of
securities, and unrealized appreciation and depreciation of assets
held by the Money Market subaccount and the Trust are excluded from
the calculation of yield.
The yield on amounts held in the Money Market subaccount normally will
fluctuate on a daily basis. Therefore, the disclosed yield for any
given past period is not an indication or representation of future
yields or rates of return. The Money Market subaccount actual yield is
affected by changes in interest rates on money market securities,
average portfolio maturity of the Money Market portfolio, the types
and quality of portfolio securities held by the Money Market portfolio
and its operating expenses. For the seven days ended December 31,
1998, the yield of the Money Market subaccount was 4.20%, and the
effective yield was 4.29%.
OTHER SUBACCOUNT YIELDS
The yield quotations for all of the subaccounts except the Money
Market subaccount representing the accumulation period set forth in
the prospectus is based on the thirty-day period ended on the date of
the most recent balance sheet of the separate account and are computed
by dividing the net investment
15
<PAGE>
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:
<TABLE>
<S> <C> <C> <C> <C>
[( a-b )(6) ]
YIELD = 2 [( --- + 1 ) - 1 ]
[( cd ) ]
</TABLE>
<TABLE>
<S> <C> <C>
Where: a = net investment income earned during the period by the
corresponding portfolio of the Trust attributable to shares
owned by the subaccount.
b = expenses accrued for the period (net of reimbursement).
c = the average daily number of units outstanding during the
period.
d = the maximum offering price per unit on the last day of the
period.
</TABLE>
For purposes of the yield quotations for all of the subaccounts,
except the Money Market subaccount, the calculations take into account
all fees that are charged to all owner accounts during the
accumulation period. Such fees include the $30 Annual Contract Charge,
calculated on the basis of an average separate account value per
Contract of $50,087, which converts that charge to an annual rate of
0.06% of the separate account value. 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.
The yield on amounts held in the subaccounts of the separate account
normally will fluctuate over time. Therefore, the disclosed yield for
any given past period is not an indication or representation of future
yields or rates of return. A subaccount's actual yield is affected by
the types and quality of its investments and its operating expenses.
TOTAL RETURNS
The total return quotations set forth in the prospectus for all of
these subaccounts, except the Money Market subaccount, holding assets
for the Contracts during the accumulation period are average annual
total return quotations for the one, three, five, and ten-year
periods, (or, while a subaccount has been in existence for a period of
less than one, three, five or ten years, for such lesser period) ended
on the date of the most recent balance sheet of the separate account,
and for the period from the date the subaccounts commenced operations
until the aforesaid date. The quotations are computed by determining
the average annual compounded rates of return over the relevant
periods that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
P(1 + T)(n) = ERV
<TABLE>
<S> <C> <C>
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.
</TABLE>
For purposes of the total return quotations for all of these
subaccounts, except the Money Market subaccount, the calculations take
into account all fees that are charged to all owner accounts during
the accumulation period. Such fees include the $30 Annual Contract
Charge, calculated on the basis of an average separate account value
per Contract of $50,087, which converts that charge to an annual rate
of 0.06% of the separate account value. The calculations also assume a
complete surrender as of the end of the particular period. The
calculations do not reflect any deduction for premium taxes or any
transfer charges that may be applicable to a particular Contract.
16
<PAGE>
OTHER PERFORMANCE DATA
We may present the total return data stated in the prospectus on a
non-standard basis. This means that the data will not be reduced by
all the fees and charges under the Contract and that the data may be
presented for different time periods and for different purchase
payment amounts. NON-STANDARD PERFORMANCE DATA WILL ONLY BE DISCLOSED
IF STANDARD PERFORMANCE DATA FOR THE REQUIRED PERIODS IS ALSO
DISCLOSED.
We may also disclose cumulative total returns and yields for the
subaccounts based on the inception date of the subaccounts. These
calculations will be determined according to the formulas presented in
this SAI.
In addition, we may present historic performance data for the
portfolios since their inception reduced by some or all of the fees
and charges under the Contract. Such adjusted historic performance
includes data that precedes the inception dates of the subaccounts.
This data is designed to show the performance that would have resulted
if the Contract had been in existence during that time.
For instance, Western Reserve may disclose average annual total
returns for the portfolios reduced by all fees and charges under the
Contract, as if the Contract had been in existence. Such fees and
charges include the mortality and expense risk charge of 0.50%, the
administrative charge of 0.15% and the $30 Annual Contract Charge
(based on average separate account value of $50,087, the Annual
Contract Charge is translated into an annual charge of 0.06%). Such
data assumes a complete surrender of the Contract at the end of the
period.
ADVERTISING AND SALES LITERATURE
From time to time we may refer to the diversifying process of asset
allocation based on the Modern Portfolio Theory developed by Nobel
Prize winning economist Harry Markowitz. The basic assumptions of
Modern Portfolio Theory are: (1) the selection of individual
investments has little impact on portfolio performance, (2) market
timing strategies seldom work, (3) markets are efficient, and (4)
portfolio selection should be made among asset classes. Modern
Portfolio Theory allows an investor to determine an efficient
portfolio selection that may provide a higher return with the same
risk or the same return with lower risk.
When presenting the asset allocation process we may outline the
process of personal and investment risk analysis including determining
individual risk tolerances and a discussion of the different types of
investment risk. We may classify investors into four categories based
on their risk tolerance and will quote various industry experts on
which types of investments are best suited to each of the four risk
categories. The industry experts quoted may include Ibbotson
Associates, CDA Investment Technologies, Lipper Analytical Services
and any other expert which has been deemed by us to be appropriate. We
may also provide an historical overview of the performance of a
variety of investment market indices, the performance of these indices
over time, and the performance of different asset classes, such as
stocks, bonds, cash equivalents, etc. We may also discuss investment
volatility including the range of returns for different asset classes
and over different time horizons, and the correlation between the
returns of different asset classes. We may also discuss the basis of
portfolio optimization including the required inputs and the
construction of efficient portfolios using sophisticated
computer-based techniques. Finally, we may describe various investment
strategies and methods of implementation, the periodic rebalancing of
diversified portfolios, the use of dollar cost averaging techniques, a
comparison of the tax impact of purchase payments made on a "before
tax" basis through a tax-qualified plan with those made on an "after
tax" basis outside of a tax-qualified plan, and a comparison of
tax-deferred versus non tax-deferred accumulation of purchase
payments.
17
<PAGE>
As described in the prospectus, in general, an owner is not taxed on
increases in value under a Contract until a distribution is made under
the Contract. As a result, the Contract will benefit from tax deferral
during the accumulation period, as the annuity value may grow more
rapidly than under a comparable investment where certain increases in
value are taxed on a current basis. From time to time, we may use
narrative, numerical or graphic examples to show hypothetical benefits
of tax deferral in advertising and sales literature.
18
<PAGE>
Published - ratings
We may from time to time publish in advertisements, sales literature
and reports to owners, the ratings and other information assigned to
it by one or more independent rating organizations such as A.M. Best
Company, Standard & Poor's Insurance Rating Services, Moody's
Investors Service, Inc. and Duff & Phelps Credit Rating Co. A.M.
Best's and Moody's ratings reflect their current opinion of the
relative financial strength and operating performance of an insurance
company in comparison to the norms of the life/health insurance
industry. Standard & Poor's and Duff & Phelps provide ratings which
measure the claims-paying ability of insurance companies. These
ratings are opinions of an operating insurance company's financial
capacity to meet the obligations of its insurance contracts in
accordance with their terms. Claims-paying ability ratings do not
refer to an insurer's ability to meet non-contract obligations such as
debt or commercial paper obligations. These ratings do not apply to
the separate account, its subaccounts, the Trust or its portfolios, or
to their performance.
Administration -
Western Reserve performs administrative services for the Contracts.
These services include issuance of the Contracts, maintenance of
records concerning the Contracts, and certain valuation services.
Records - and reports
All records and accounts relating to the series account will be
maintained by WRL Investment Services, Inc. As presently required by
the 1940 Act and regulations promulgated thereunder, Western Reserve
will mail to all Contract owners at their last known address of
record, at least annually, reports containing such information as may
be required under the 1940 Act or by any other applicable law or
regulation. Contract owners will also receive confirmation of each
financial transaction and any other reports required by law or
regulation.
Distribution - of the contracts
Prior to May 1, 1999, InterSecurities, Inc. ("ISI"), an affiliate of
Western Reserve, was the principal underwriter of the Contracts. ISI
has the same address as Western Reserve. Effective May 1, 1999, AFSG
Securities Corporation ("AFSG") became the principal underwriter of
the Contracts. AFSG is located at 4333 Edgewood Rd., N.E., Cedar
Rapids, Iowa 52499. Both ISI and AFSG are registered with the SEC
under the Securities Exchange Act of 1934 and are members of the
National Association of Securities Dealers, Inc. No amounts have been
retained by ISI for acting as principal underwriter for the Contracts
and AFSG will not be compensated for its services as principal
underwriter of the Contracts.
19
<PAGE>
There are no sales commissions payable upon the sale of Contracts. The
offering of the Contracts is continuous and Western Reserve does not
anticipate discontinuing the offering of the Contracts. However,
Western Reserve reserves the right to do so.
Other - products
Western Reserve makes other variable annuity contracts available that
are funded through other separate accounts. These variable annuity
contracts may have different features, such as different investment
choices or charges.
Custody - of assets
The assets of WRL Series Annuity Account B are held by Western
Reserve. The assets of the separate account are kept physically
segregated and held apart from our general account and any of our
other separate accounts. WRL Investment Services, Inc. maintains
records of all purchases and redemptions of shares of the Trust.
Additional protection for the assets of the separate account is
provided by a blanket bond issued to AEGON U.S. Holding Corporation
("AEGON U.S.") in the amount of $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 million.
Legal - matters
Sutherland Asbill & Brennan LLP has provided advice on certain legal
matters concerning Federal securities laws applicable to the issue and
sale of the Contracts. All matters of Ohio law pertaining to the
Contracts, including the validity of the Contracts and Western
Reserve's right to issue the Contracts under Ohio insurance law, have
been passed upon by Thomas E. Pierpan, Esq., Vice President, Associate
General Counsel and Assistant Secretary of Western Reserve.
Independent - accountants
The accounting firm of PricewaterhouseCoopers LLP, independent
accountants, provided audit services to the separate account for the
year ended December 31, 1998. The principal business address of
PricewaterhouseCoopers LLP is 160 Federal Street, Boston,
Massachusetts 02110. The accounting firm of Ernst & Young LLP,
independent auditors, provided audit services to Western Reserve for
the year ended December 31, 1998. The principal business address of
Ernst & Young LLP is 801 Grand Avenue, Suite 3400, Des Moines, Iowa
50309-2764.
20
<PAGE>
Other - information
A Registration Statement has been filed with the Securities and
Exchange Commission, under the Securities Act of 1933 as amended, with
respect to the Contracts discussed in this SAI. Not all of the
information set forth in the Registration Statement, amendments, and
exhibits thereto has been included in the prospectus or this SAI.
Statements contained in the prospectus and this SAI concerning the
content of the Contracts and other legal instruments are intended to
be summaries. For a complete statement of the terms of these
documents, reference should be made to the instruments filed with the
Securities Exchange Commission.
Financial - statements
The values of an owner's interest in the separate account will be
affected solely by the investment results of the selected
subaccount(s). Western Reserve's Financial Statements which are
included in this SAI, should be considered only as bearing on Western
Reserve's ability to meet its obligations under the Contracts. They
should not be considered as bearing on the investment performance of
the assets held in the separate account.
Financial Statements for Western Reserve for the years ended December
31, 1998, 1997 and 1996 have been prepared on the basis of statutory
accounting principles, rather than generally accepted accounting
principles.
21
<PAGE>
Index - to financial statements
WRL SERIES ANNUITY ACCOUNT B
Statement of Assets and Liabilities as of December 31, 1998 and
Statement of Operations for the year or period ended December 31,
1998.
Statement of Changes in Net Assets for the years or periods ended
December 31, 1998 and 1997
Financial Highlights for the years or periods ended December 31, 1998,
1997, 1996, 1995 and 1994
Notes to Financial Statements
Report of Independent Accountants dated January 29, 1999
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
Report of Independent Auditors dated February 19, 1999
Statutory-basis balance sheets at December 31, 1998 and 1997
Statutory-basis statements of operations for the years ended December
31, 1998, 1997 and 1996
Statutory-basis statements of changes in capital and surplus for the
years ended December 31, 1998, 1997 and 1996
Statutory-basis statements of cash flows for the years ended December
31, 1998, 1997 and 1996
Notes to statutory-basis financial statements
Statutory-basis financial statement schedules
22
<PAGE>
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23
<PAGE>
Statements - of operations
JANUS RETIREMENT ADVANTAGE WRL SERIES ANNUITY ACCOUNT B
(ALL NUMBERS IN THOUSANDS)
<TABLE>
<CAPTION>
Aggressive Capital
For the year or period ended December 31, 1998 Growth Growth Appreciation
(all numbers in thousands) Sub-Account Sub-Account Sub-Account
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income:
Dividends $ 1,249 -- $ 8
Capital gains 1,007 -- --
------- ------ ------
Total Investment Income 2,256 -- 8
Expenses:
Mortality and expense risk charges 222 $ 126 42
------- ------ ------
Net Investment Income/(Loss) 2,034 (126) (34)
Net Realized and Unrealized Gain/(Loss) on Investments:
Net realized gain/(loss) from securities transactions 2,264 2,528 388
Change in net unrealized appreciation/(depreciation) of
investments 6,381 3,552 3,061
------- ------ ------
Net Gain/(Loss) on Investments 8,645 6,080 3,449
------- ------ ------
Net Increase/(Decrease) in Net Assets Resulting from
Operations $10,679 $5,954 $3,415
======= ====== ======
</TABLE>
- ---------------
(1) Period May 1, 1998, (inception) to December 31, 1998.
See notes to financial statements.
24
<PAGE>
<TABLE>
<CAPTION>
International Worldwide Equity Growth and Flexible
Growth Growth Balanced Income Income Income High-Yield Money Market
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account(1) Sub-Account Sub-Account Sub-Account
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 274 $ 1,459 $ 520 $ 83 $ 7 $ 338 $ 323 $767
41 590 87 -- -- 16 -- --
------ ------- ------ ------ ---- ----- ----- ----
315 2,049 607 83 7 354 323 767
102 348 86 38 10 32 22 96
------ ------- ------ ------ ---- ----- ----- ----
213 1,701 521 45 (3) 322 301 671
1,001 6,358 1,041 307 (1) 142 43 --
926 4,605 2,630 1,975 616 (101) (299) --
------ ------- ------ ------ ---- ----- ----- ----
1,927 10,963 3,671 2,282 615 41 (256) --
------ ------- ------ ------ ---- ----- ----- ----
$2,140 $12,664 $4,192 $2,327 $612 $ 363 $ 45 $671
====== ======= ====== ====== ==== ===== ===== ====
</TABLE>
25
<PAGE>
Statements - of assets and liabilities
JANUS RETIREMENT ADVANTAGE WRL SERIES ANNUITY ACCOUNT B
(ALL NUMBERS IN THOUSANDS, EXCEPT UNIT VALUE)
<TABLE>
<CAPTION>
Aggressive Capital
As of December 31, 1998 Growth Growth Appreciation
(all numbers in thousands, except unit value) Sub-Account Sub-Account Sub-Account
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Shares 1,846 881 698
Cost $32,580 $18,605 $10,863
Investments at net asset value $43,456 $24,307 $13,912
Transfers receivable from depositor 34 17 239
------- ------- -------
Total Assets 43,490 24,324 14,151
Liabilities:
Transfers payable to depositor -- -- --
------- ------- -------
Total Liabilities -- -- --
------- ------- -------
Net Assets $43,490 $24,324 $14,151
======= ======= =======
Equity Accounts:
Contract owner's equity $43,490 $24,324 $14,151
Units 1,653 883 715
Accumulation unit value $ 26.31 $ 27.55 $ 19.80
Depositor's equity -- -- --
Units -- -- --
Accumulation unit value -- -- --
------- ------- -------
Total Equity $43,490 $24,324 $14,151
======= ======= =======
</TABLE>
See notes to financial statements.
26
<PAGE>
<TABLE>
<CAPTION>
International Worldwide Equity Growth and Flexible
Growth Growth Balanced Income Income Income High-Yield Money Market
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
681 2,011 805 456 358 560 273 16,880
$13,687 $52,256 $14,055 $6,857 $3,667 $6,804 $3,234 $16,880
$14,489 $58,502 18,123 $8,853 $4,283 $6,759 $2,969 $16,880
48 58 32 164 43 22 10 82
------- ------- ------- ------ ------ ------ ------ -------
14,537 58,560 18,155 9,017 4,326 6,781 2,979 16,962
-- -- -- -- -- -- -- (563)
------- ------- ------- ------ ------ ------ ------ -------
-- -- -- -- -- -- -- (563)
------- ------- ------- ------ ------ ------ ------ -------
$14,537 $58,560 $18,155 $9,017 $4,326 $6,781 $2,979 $16,399
======= ======= ======= ====== ====== ====== ====== =======
$14,537 $58,560 $18,155 $9,017 $4,290 $6,781 $2,979 $16,399
672 1,942 733 463 360 428 230 1,395
$ 21.65 $ 30.16 $ 24.76 $19.49 $11.93 $15.86 $12.97 $ 11.75
-- -- -- -- $ 36 -- -- --
-- -- -- -- 3 -- -- --
-- -- -- -- $11.93 -- -- --
------- ------- ------- ------ ------ ------ ------ -------
$14,537 $58,560 $18,155 $9,017 $4,326 $6,781 $2,979 $16,399
======= ======= ======= ====== ====== ====== ====== =======
</TABLE>
27
<PAGE>
Statements - of Changes in Net Assets
JANUS RETIREMENT ADVANTAGE WRL SERIES ANNUITY ACCOUNT B
<TABLE>
<CAPTION>
Growth Aggressive Growth
For the year or period ended December 31 Sub-Account Sub-Account
(all numbers in thousands) 1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income/(loss) $ 2,034 $ 543 $ (126) $ (108)
Net gain/(loss) on investment 8,645 3,800 6,080 2,261
------- ------- ------- -------
Net Increase/(Decrease) in Net Assets Resulting from
Operations 10,679 4,343 5,954 2,153
Capital Unit Transactions:
Proceeds from units sold/(redeemed) 4,633 9,793 (1,046) 262
Less cost of units redeemed:
Administrative charges 12 11 11 12
Surrender benefits 1,342 1,240 821 895
Death benefits 38 11 80 --
------- ------- ------- -------
1,392 1,262 912 907
------- ------- ------- -------
Increase/(Decrease) in Net Assets from Capital Unit
Transactions 3,241 8,531 (1,958) (645)
Net Increase/(Decrease) in Net Assets 13,920 12,874 3,996 1,508
Depositor's Equity Contribution/(Redemption) -- -- -- --
Net Assets:
Beginning of period 29,570 16,696 20,328 18,820
End of period $43,490 $29,570 $24,324 $20,328
Unit Activity:
Units outstanding -- beginning of period 1,515 1,043 984 1,020
Units issued 731 994 636 1,242
Units redeemed (593) (522) (737) (1,278)
Units Outstanding -- End of Period 1,653 1,515 883 984
</TABLE>
<TABLE>
<CAPTION>
Capital Appreciation International Growth
For the year or period ended December 31 Sub-Account Sub-Account
(all numbers in thousands) 1998 1997 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income/(loss) $ (34) $ 3 $ 213 $ 33
Net gain/(loss) on investment 3,449 29 1,927 1,808
------- ------ ------- -------
Net Increase/(Decrease) in Net Assets Resulting from
Operations 3,415 32 2,140 1,841
Capital Unit Transactions:
Proceeds from units sold/(redeemed) 8,256 2,586 (2,277) 7,762
Less cost of units redeemed:
Administrative charges 1 -- 6 4
Surrender benefits 115 6 567 484
Death benefits -- -- 19 5
------- ------ ------- -------
116 6 592 493
------- ------ ------- -------
Increase/(Decrease) in Net Assets from Capital Unit
Transactions 8,140 2,580 (2,869) 7,269
Net Increase/(Decrease) in Net Assets 11,555 2,612 (729) 9,110
Depositor's Equity Contribution/(Redemption) (41) 25 -- --
Net Assets:
Beginning of period 2,637 -- 15,266 6,156
End of period $14,151 $2,637 $14,537 $15,266
Unit Activity:
Units outstanding -- beginning of period 209 -- 821 390
Units issued 847 285 855 2,044
Units redeemed (341) (76) (1,004) (1,613)
Units Outstanding -- End of Period 715 209 672 821
</TABLE>
- ---------------
(1) Period May 1, 1997, (inception) to December 31, 1997.
See Notes to Financial Statements.
28
<PAGE>
<TABLE>
<CAPTION>
Worldwide Growth Balanced
For the year or period ended December 31 Sub-Account Sub-Account
(all numbers in thousands) 1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income/(loss) $ 1,701 $ 384 $ 521 $ 232
Net gain/(loss) on investment 10,963 6,524 3,671 1,303
------- ------- ------- -------
Net Increase/(Decrease) in Net Assets Resulting from
Operations 12,664 6,908 4,192 1,535
Capital Unit Transactions:
Proceeds from units sold/(redeemed) 3,557 14,687 3,051 4,797
Less cost of units redeemed:
Administrative charges 17 13 4 4
Surrender benefits 1,716 927 371 377
Death benefits 82 2 -- --
------- ------- ------- -------
1,815 942 375 381
------- ------- ------- -------
Increase/(Decrease) in Net Assets from Capital Unit
Transactions 1,742 13,745 2,676 4,416
Net Increase/(Decrease) in Net Assets 14,406 20,653 6,868 5,951
Depositor's Equity Contribution/(Redemption) -- -- -- --
Net Assets:
Beginning of period 44,154 23,501 11,287 5,336
End of period $58,560 $44,154 $18,155 $11,287
Unit Activity:
Units outstanding -- beginning of period 1,875 1,211 608 349
Units issued 2,522 3,136 407 500
Units redeemed (2,455) (2,472) (282) (241)
Units Outstanding -- End of Period 1,942 1,875 733 608
</TABLE>
<TABLE>
<CAPTION>
Equity Income Growth and Income
For the year or period ended December 31 Sub-Account Sub-Account
(all numbers in thousands) 1998 1997(1) 1998(2)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income/(loss) $ 45 $ (2) $ (3)
Net gain/(loss) on investment 2,282 119 615
------ ------ ------
Net Increase/(Decrease) in Net Assets Resulting from
Operations 2,327 117 612
Capital Unit Transactions:
Proceeds from units sold/(redeemed) 3,792 2,945 3,700
Less cost of units redeemed:
Administrative charges 1 -- --
Surrender benefits 109 39 16
Death benefits -- -- --
------ ------ ------
110 39 16
------ ------ ------
Increase/(Decrease) in Net Assets from Capital Unit
Transactions 3,682 2,906 3,684
Net Increase/(Decrease) in Net Assets 6,009 3,023 4,296
Depositor's Equity Contribution/(Redemption) (40) 25 30
Net Assets:
Beginning of period 3,048 -- --
End of period $9,017 $3,048 $4,326
Unit Activity:
Units outstanding -- beginning of period 227 -- --
Units issued 525 338 517
Units redeemed (289) (111) (154)
Units Outstanding -- End of Period 463 227 363
</TABLE>
- ---------------
(1) Period May 1, 1997, (inception) to December 31, 1997.
(2) Period May 1, 1998, (inception) to December 31, 1998.
See Notes to Financial Statements.
29
<PAGE>
<TABLE>
<CAPTION>
Flexible Income High-Yield
For the year or period ended December 31 Sub-Account Sub-Account
(all numbers in thousands) 1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income/(loss) $ 322 $ 172 $ 301 $ 107
Net gain/(loss) on investment 41 123 (256) 93
------ ------ ------ ------
Net Increase/(Decrease) in Net Assets Resulting from
Operations 363 295 45 200
Capital Unit Transactions:
Proceeds from units sold/(redeemed) 3,049 1,358 123 2,180
Less cost of units redeemed:
Administrative charges 2 1 -- --
Surrender benefits 291 188 102 98
Death benefits -- -- -- --
------ ------ ------ ------
293 189 102 98
------ ------ ------ ------
Increase/(Decrease) in Net Assets from Capital Unit
Transactions 2,756 1,169 21 2,082
Net Increase/(Decrease) in Net Assets 3,119 1,464 66 2,282
Depositor's Equity Contribution/(Redemption) -- -- -- (28)
Net Assets:
Beginning of period 3,662 2,198 2,913 659
End of period $6,781 $3,662 $2,979 $2,913
Unit Activity:
Units outstanding -- beginning of period 250 167 226 59
Units issued 541 282 412 384
Units redeemed (363) (199) (408) (217)
Units Outstanding -- End of Period 428 250 230 226
</TABLE>
<TABLE>
<CAPTION>
Money Market
For the year or period ended December 31 Sub-Account
(all numbers in thousands) 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income/(loss) $ 671 $ 352
Net gain/(loss) on investment -- --
------- -------
Net Increase/(Decrease) in Net Assets Resulting from
Operations 671 352
Capital Unit Transactions:
Proceeds from units sold/(redeemed) 16,471 1,680
Less cost of units redeemed:
Administrative charges 1 1
Surrender benefits 8,111 757
Death benefits -- --
------- -------
8,112 758
------- -------
Increase/(Decrease) in Net Assets from Capital Unit
Transactions 8,359 922
Net Increase/(Decrease) in Net Assets 9,030 1,274
Depositor's Equity Contribution/(Redemption) -- --
Net Assets:
Beginning of period 7,369 6,095
End of period $16,399 $ 7,369
Unit Activity:
Units outstanding -- beginning of period 656 567
Units issued 9,807 9,554
Units redeemed (9,068) (9,465)
Units Outstanding -- End of Period 1,395 656
</TABLE>
See Notes to Financial Statements.
30
<PAGE>
Financial - Highlights*
JANUS RETIREMENT ADVANTAGE WRL SERIES ANNUITY ACCOUNT B
<TABLE>
<CAPTION>
Growth
Sub-Account
For the year or period ended December 31 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value, Beginning of Period $ 19.52 $ 16.01 $ 13.61 $ 10.55 $10.35
Income from Operations:
Net investment income/(loss) 1.30 .42 .32 .26 (.04)
Net realized and unrealized gain/(loss) on investment 5.49 3.09 2.08 2.80 .24
------- ------- ------- ------- ------
Total Income/(Loss) from Operations 6.79 3.51 2.40 3.06 .20
======= ======= ======= ======= ======
Accumulation Unit Value, End of Period $ 26.31 $ 19.52 $ 16.01 $ 13.61 $10.55
Total Return** 34.78% 21.95% 17.61% 29.07% 1.90%
Ratios and Supplemental Data:
Net Assets at End of Period (in thousands) $43,490 $29,570 $16,696 $10,125 $4,758
Ratio of Net Investment Income/(Loss) to Average Net
Assets*** 5.92% 2.30% 2.10% 2.08% (.35)%
</TABLE>
<TABLE>
<CAPTION>
Aggressive Growth
Sub-Account
For the year or period ended December 31 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value, Beginning of Period $ 20.65 $ 18.45 $ 17.21 $ 13.62 $11.81
Income from Operations:
Net investment income/(loss) (.14) (.12) .07 .15 .08
Net realized and unrealized gain/(loss) on
investment 7.04 2.32 1.17 3.44 1.73
------- ------- ------- ------- ------
Total Income/(Loss) from Operations 6.90 2.20 1.24 3.59 1.81
======= ======= ======= ======= ======
Accumulation Unit Value, End of Period $ 27.55 $ 20.65 $ 18.45 $ 17.21 $13.62
Total Return** 33.39% 11.93% 7.18% 26.41% 15.35%
Ratios and Supplemental Data:
Net Assets at End of Period (in thousands) $24,324 $20,328 $18,820 $11,681 $4,828
Ratio of Net Investment Income/(Loss) to Average Net
Assets*** (.65)% (.65)% .42% 1.00% .63%
</TABLE>
<TABLE>
<CAPTION>
Capital Appreciation
Sub-Account
For the year or period ended December 31 1998 1997(1)
- -----------------------------------------------------------------------------------
<S> <C> <C>
Accumulation Unit Value, Beginning of Period $ 12.61 $10.00
Income from Operations:
Net investment income/(loss) (.08) .03
Net realized and unrealized gain/(loss) on investment 7.27 2.58
------- ------
Total Income/(Loss) from Operations 7.19 2.61
======= ======
Accumulation Unit Value, End of Period $ 19.80 $12.61
Total Return** 57.09% 26.05%
Ratios and Supplemental Data:
Net Assets at End of Period (in thousands) $14,151 $2,637
Ratio of Net Investment Income/(Loss) to Average Net
Assets*** (.52)% .35%
</TABLE>
- ---------------
* Per unit information has been computed using average units outstanding
throughout each year.
** Not annualized for periods of less than one full year.
*** Annualized for periods of less than one full year.
(1)Period May 1, 1997, (inception) to December 31, 1997.
See Notes to Financial Statements.
31
<PAGE>
<TABLE>
<CAPTION>
International Growth
Sub-Account
For the year or period ended December 31 1998 1997 1996 1995 1994(1)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value, Beginning of Period $ 18.58 $ 15.78 $ 11.80 $ 9.66 $ 10.00
Income from Operations:
Net investment income/(loss) .29 .05 .24 (.06) (.05)
Net realized and unrealized gain/(loss) on
investment 2.78 2.75 3.74 2.20 (.29)
------- ------- ------- ------- -------
Total Income/(Loss) from Operations 3.07 2.80 3.98 2.14 (.34)
======= ======= ======= ======= =======
Accumulation Unit Value, End of Period $ 21.65 $ 18.58 $ 15.78 $ 11.80 $ 9.66
Total Return** 16.48% 17.74% 33.75% 22.11% (3.35)%
Ratios and Supplemental Data:
Net Assets at End of Period (in thousands) $14,537 $15,266 $ 6,156 $ 1,596 $ 904
Ratio of Net Investment Income/(Loss) to Average Net
Assets*** 1.38% .26% 1.72% (.66)% (.89)%
</TABLE>
<TABLE>
<CAPTION>
Worldwide Growth
Sub-Account
For the year or period ended December 31 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value, Beginning of Period $ 23.55 $ 19.40 $ 15.14 $ 11.99 $ 11.91
Income from Operations:
Net investment income/(loss) .87 .23 .19 (.04) (.10)
Net realized and unrealized gain/(loss) on
investment 5.74 3.92 4.07 3.19 .18
------- ------- ------- ------- -------
Total Income/(Loss) from Operations 6.61 4.15 4.26 3.15 .08
======= ======= ======= ======= =======
Accumulation Unit Value, End of Period $ 30.16 $ 23.55 $ 19.40 $ 15.14 $ 11.99
Total Return** 28.09% 21.36% 28.12% 26.29% .68%
Ratios and Supplemental Data:
Net Assets at End of Period (in thousands) $58,560 $44,154 $23,501 $11,099 $ 6,738
Ratio of Net Investment Income/(Loss) to Average Net
Assets*** 3.18% 1.01% 1.12% (.32)% (.86)%
</TABLE>
<TABLE>
<CAPTION>
Balanced
Sub-Account
For the year or period ended December 31 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value, Beginning of Period $ 18.56 $ 15.30 $ 13.26 $ 10.72 $ 10.72
Income from Operations:
Net investment income/(loss) .81 .49 .28 .13 .05
Net realized and unrealized gain/(loss) on
investment 5.39 2.77 1.76 2.41 (.05)
------- ------- ------- ------- -------
Total Income/(Loss) from Operations 6.20 3.26 2.04 2.54 --
======= ======= ======= ======= =======
Accumulation Unit Value, End of Period $ 24.76 $ 18.56 $ 15.30 $ 13.26 $ 10.72
Total Return** 33.42% 21.31% 15.36% 23.73% 0.00%
Ratios and Supplemental Data:
Net Assets at End of Period (in thousands) $18,155 $11.287 $ 5,336 $ 3,283 $ 2,161
Ratio of Net Investment Income/(Loss) to Average Net
Assets*** 3.85% 2.84% 1.98% 1.08% .51%
</TABLE>
- ---------------
* Per unit information has been computed using average units outstanding
throughout each year.
** Not annualized for periods of less than one full year.
*** Annualized for periods of less than one full year.
(1)Period May 2, 1994, (inception) to December 31, 1994.
See Notes to Financial Statements.
32
<PAGE>
<TABLE>
<CAPTION>
Equity Income Growth and Income
Sub-Account Sub-Account
For the year or period ended December 31 1998 1997(1) 1998(2)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Accumulation Unit Value, Beginning of Period $13.41 $ 10.00 $ 10.00
Income from Operations:
Net investment income/(loss) .13 (.03) (.01)
Net realized and unrealized gain/(loss) on investment 5.95 3.44 1.94
------ ------- -------
Total Income/(Loss) from Operations 6.08 3.41 1.93
====== ======= =======
Accumulation Unit Value, End of Period $19.49 $ 13.41 $ 11.93
Total Return** 45.30% 34.12% 19.28%
Ratios and Supplemental Data:
Net Assets at End of Period (in thousands) $9,017 $ 3,048 $ 4,326
Ratio of Net Investment Income/(Loss) to Average Net
Assets*** .81% (.32)% (.21)%
</TABLE>
<TABLE>
<CAPTION>
Flexible Income
Sub-Account
For the year or period ended December 31 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value, Beginning of Period $14.63 $ 13.17 $ 12.15 $ 9.90 $ 10.07
Income from Operations:
Net investment income/(loss) .99 .88 .83 .57 .41
Net realized and unrealized gain/(loss) on
investment .24 .58 .19 1.68 (.58)
------ ------- ------- ------ -------
Total Income/(Loss) from Operations 1.23 1.46 1.02 2.25 (.17)
====== ======= ======= ====== =======
Accumulation Unit Value, End of Period $15.86 $ 14.63 $ 13.17 $12.15 $ 9.90
Total Return** 8.40% 11.04% 8.41% 22.81% (1.74)%
Ratios and Supplemental Data:
Net Assets at End of Period (in thousands) $6,781 $ 3,662 $ 2,198 $2,436 $ 893
Ratio of Net Investment Income/(Loss) to Average Net
Assets*** 6.47% 6.33% 6.75% 5.53% 4.69%
</TABLE>
- ---------------
* Per unit information has been computed using average units outstanding
throughout each year.
** Not annualized for periods of less than one full year.
*** Annualized for periods of less than one full year.
(1)Period May 1, 1997, (inception) to December 31, 1997.
(2)Period May 1, 1998, (inception) to December 31, 1998.
See Notes to Financial Statements.
33
<PAGE>
<TABLE>
<CAPTION>
High-Yield
Sub-Account
For the year or period ended December 31 1998 1997 1996(1)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Accumulation Unit Value, Beginning of Period $12.90 $ 11.19 $ 10.00
Income from Operations:
Net investment income/(loss) 1.23 .90 .55
Net realized and unrealized gain/(loss) on investment (1.16) .81 .64
------ ------- -------
Total Income/(Loss) from Operations .07 1.71 1.19
====== ======= =======
Accumulation Unit Value, End of Period $12.97 $ 12.90 $ 11.19
Total Return** .61% 15.22% 11.91%
Ratios and Supplemental Data:
Net Assets at End of Period (in thousands) $2,979 $ 2,913 $ 659
Ratio of Net Investment Income/(Loss) to Average Net
Assets*** 9.21% 7.37% 7.88%
</TABLE>
<TABLE>
<CAPTION>
Money Market
Sub-Account
For the year or period ended December 31 1998 1997 1996 1995(2)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Accumulation Unit Value, Beginning of Period $ 11.23 $10.74 $10.30 $10.00
Income from Operations:
Net investment income/(loss) .52 .49 .44 .30
Net realized and unrealized gain/(loss) on investment -- -- -- --
------- ------ ------ ------
Total Income/(Loss) from Operations .52 .49 .44 .30
======= ====== ====== ======
Accumulation Unit Value, End of Period $ 11.75 $11.23 $10.74 $10.30
Total Return** 4.68% 4.49% 4.28% 3.03%
Ratios and Supplemental Data:
Net Assets at End of Period (in thousands) $16,399 $7,369 $6,095 $1,725
Ratio of Net Investment Income/(Loss) to Average Net
Assets*** 4.55% 4.43% 4.19% 4.42%
</TABLE>
- ---------------
* Per unit information has been computed using average units outstanding
throughout each year.
** Not annualized for periods of less than one full year.
*** Annualized for periods of less than one full year.
(1)Period May 1, 1996, (inception) to December 31, 1996.
(2)Period May 1, 1995, (inception) to December 31, 1995.
See Notes to Financial Statements.
34
<PAGE>
Notes - to Financial Statements
1. ORGANIZATION AND 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 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 ("Portfolio") of
Janus Aspen Series (the "Trust"), which is registered as an open-end
management investment company under the Investment Company Act of
1940, as amended.
The Account's equity transactions are accounted for using the
appropriate effective date at the corresponding accumulation unit
value.
On May 1, 1998, WRL made an initial depositor's equity contribution of
$30,000 to the Growth and Income Sub-Account for which it received
3,000 units.
On September 28, 1998, pursuant to an exemptive order (Rel. No.
IC-23417) received from the Securities and Exchange Commission for the
substitution of securities issued by the Trust and held by the Account
to support individual flexible premium deferred variable annuity
contracts, investments were transferred from the Short-Term Bond
Sub-Account to the Money Market Sub-Account.
The following significant accounting policies, which are in conformity
with generally accepted accounting principles, have been consistently
used in preparation of the Account's financial statements. The
preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those
estimates.
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 Trust on December 31,
1998. Investment transactions are accounted for on the trade date,
using the Portfolio NAV per share next determined after receipt of
sale or redemption orders without sales charges. Dividend income and
capital gains 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 of federal income taxes has been made.
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.
35
<PAGE>
3. DIVIDENDS AND DISTRIBUTIONS
Dividends are not declared by the Annuity Account, since the increase
in the value of the underlying investment in a Portfolio is reflected
daily in the accumulation unit value used to calculate the equity
value within the Annuity Account B. Consequently, a dividend
distribution by an underlying Portfolio does not change either the
accumulation unit value or equity values with the Annuity Account B.
4. SECURITIES TRANSACTIONS
Securities transactions are summarized as follows:
For the period ended December 31, 1998 (in thousands)
<TABLE>
<CAPTION>
Purchases Proceeds from sales
Sub-Account of securities of securities
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Growth $12,655 $ 7,123
Aggressive Growth 12,224 14,176
Capital Appreciation 10,821 2,956
International Growth 14,037 17,107
Worldwide Growth 53,709 50,711
Balanced 6,550 3,345
Equity Income 6,116 2,535
Growth and Income(1) 4,712 1,044
Flexible Income 6,651 3,529
High-Yield 4,557 4,905
Money Market 87,424 76,787
</TABLE>
- ---------------
(1)Period May 1, 1998, (inception) to December 31, 1998.
5. OTHER MATTERS
At December 31, 1998, net unrealized appreciation/depreciation on investments
are as follows (in thousands):
<TABLE>
<CAPTION>
Sub-Account
- -------------------------------------------------
<S> <C>
Growth $10,876
Aggressive Growth 5,702
Capital Appreciation 3,049
International Growth 802
Worldwide Growth 6,246
Balanced 4,068
</TABLE>
<TABLE>
<CAPTION>
Sub-Account
- -------------------------------------------------
<S> <C>
Equity Income $ 1,996
Growth and Income 616
Flexible Income (45)
High-Yield (265)
Money Market N/A
</TABLE>
36
<PAGE>
Report - of Independent Accountants
The Board of Directors of Western Reserve Life
Assurance Co. of Ohio Contract Owners of the Janus
Retirement Advantage WRL Series Annuity Account B
In our opinion, the accompanying statements of assets and liabilities
and the related statements of operations and of changes in net assets
and the financial highlights present fairly, in all material respects,
the financial position of each of the 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, 1998, the results of
each of their operations, the changes in each of their net assets and
the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles. These
financial statements and financial highlights (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
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 29, 1999
37
<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, 1998 and
1997, 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, 1998. 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, 1998 and 1997, or the results of its
operations or its cash flows for each of the three years in the period
ended December 31, 1998.
However, in our opinion, based on our audits and the reports of other
auditors, the financial statements referred to above present fairly,
in all material respects, the financial position of Western Reserve
Life Assurance Co. of Ohio at December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the three
years in the period ended December 31, 1998 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.
Des Moines, Iowa
February 19, 1999
38
<PAGE>
Balance - sheets - statutory basis
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31
1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C>
ADMITTED ASSETS
Cash and invested assets:
Cash and short-term investments $ 73,808 $ 13,896
Bonds 184,697 255,919
Common stocks:
Affiliated entities (cost: 1998 - $243; 1997 - $150) 704 319
Other (cost: 1998 and 1997 - $302) 384 428
Mortgage loans on real estate 9,916 4,824
Home office properties 34,583 19,964
Investment properties 11,594 --
Policy loans 112,982 76,741
Other invested assets 396 --
---------- ----------
Total cash and invested assets 429,064 372,091
Premiums deferred and uncollected 900 1,928
Accrued investment income 2,867 4,088
Transfers from separate accounts 350,633 279,958
Cash surrender value of life insurance policies 45,445 --
Other assets 9,239 5,221
Separate account assets 6,999,290 4,814,594
---------- ----------
Total admitted assets $7,837,438 $5,477,880
========== ==========
</TABLE>
See accompanying notes.
39
<PAGE>
<TABLE>
<CAPTION>
December 31
1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Aggregate reserves for policies and contracts:
Life $ 231,596 $ 186,523
Annuity 265,418 296,290
Policy and contract claim reserves 9,233 10,929
Other policyholders' funds 38,080 3,877
Remittances and items not allocated 20,569 9,184
Federal income taxes payable 5,716 2,283
Asset valuation reserve 2,848 2,436
Interest maintenance reserve 9,684 9,134
Short-term note payable to affiliate 44,200 8,200
Payable to affiliate 37,907 1,925
Other liabilities 31,151 19,257
Separate account liabilities 6,997,456 4,812,979
---------- ----------
Total liabilities 7,693,858 5,363,017
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 120,107 88,015
Unassigned surplus 21,973 25,348
---------- ----------
Total capital and surplus 143,580 114,863
---------- ----------
Total liabilities and capital and surplus $7,837,438 $5,477,880
========== ==========
</TABLE>
See accompanying notes.
40
<PAGE>
Statements - of operations - statutory basis
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Year ended December 31
1998 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Premiums and other considerations, net of reinsurance:
Life $ 476,053 $ 394,370 $ 293,590
Annuity 794,841 822,149 740,125
Net investment income 36,315 40,013 36,067
Amortization of interest maintenance reserve 744 1,576 1,335
Commissions and expense allowances on reinsurance ceded 15,333 11 11
Other income 67,751 3,016 13,398
---------- ---------- ----------
1,391,037 1,261,135 1,084,526
Benefits and expenses:
Benefits paid or provided for:
Life 42,982 28,060 21,256
Surrender benefits 551,528 431,939 286,406
Other benefits 31,280 28,112 23,270
Increase (decrease) in aggregate reserves for policies
and contracts:
Life 42,940 29,485 80,139
Annuity (30,872) (35,940) 12,877
Other 32,178 794 422
---------- ---------- ----------
670,036 482,450 424,370
Insurance expenses:
Commissions 205,939 179,106 140,261
General insurance expenses 102,611 70,546 47,406
Taxes, licenses and fees 15,545 13,101 10,848
Net transfer to separate accounts 402,618 519,214 452,471
Other expenses 59 21 60
---------- ---------- ----------
726,772 781,988 651,046
---------- ---------- ----------
1,396,808 1,264,438 1,075,416
---------- ---------- ----------
Gain (loss) from operations before federal income taxes
(benefit) and realized capital gains (losses) on
investments (5,771) (3,303) 9,110
Federal income tax expense (benefit) (347) 469 9,297
---------- ---------- ----------
Loss from operations before realized capital gains (losses)
on investments (5,424) (3,772) (187)
Net realized capital gains (losses) on investments (net of
related federal income taxes and amounts transferred to
interest maintenance reserve) 1,494 747 (811)
---------- ---------- ----------
Net loss $ (3,930) $ (3,025) $ (998)
========== ========== ==========
</TABLE>
See accompanying notes.
41
<PAGE>
Statements - of changes in capital and surplus -
statutory basis
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Total
Common Paid-In Unassigned Capital and
Stock Surplus Surplus Surplus
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at January 1, 1996 $1,500 $ 68,015 $28,424 $ 97,939
Net loss for 1996 -- -- (998) (998)
Net unrealized capital gains -- -- 1,294 1,294
Change in non-admitted assets -- -- 199 199
Change in asset valuation reserve -- -- (120) (120)
Change 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)
Change in non-admitted assets -- -- (702) (702)
Change in asset valuation reserve -- -- 3,274 3,274
Change in surplus in separate accounts -- -- (2,115) (2,115)
Change in reserve valuation -- -- (1,872) (1,872)
Capital contribution -- 20,000 -- 20,000
Tax effect of capital loss carry-forward utilized by
affiliates -- -- 3,747 3,747
------ -------- ------- --------
Balance at December 31, 1997 1,500 88,015 25,348 114,863
Net loss for 1998 -- -- (3,930) (3,930)
Net unrealized capital gains -- -- 248 248
Change in non-admitted assets -- -- (1,815) (1,815)
Change in asset valuation reserve -- -- (412) (412)
Change in surplus in separate accounts -- -- (341) (341)
Change in reserve valuation -- -- (2,132) (2,132)
Capital contribution -- 32,092 -- 32,092
Settlement of prior period tax returns -- -- 353 353
Tax benefits on stock options exercised -- -- 4,654 4,654
------ -------- ------- --------
Balance at December 31, 1998 $1,500 $120,107 $21,973 $143,580
====== ======== ======= ========
</TABLE>
See accompanying notes.
42
<PAGE>
Statements - of cash flows - statutory basis
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Year ended December 31
1998 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Premiums and other considerations, net of reinsurance $1,356,732 $1,223,898 $1,046,548
Net investment income 38,294 43,802 38,666
Life and accident and health claims (44,426) (26,005) (20,655)
Surrender benefits and other fund withdrawals (551,528) (431,939) (286,406)
Other benefits to policyholders (31,231) (28,147) (22,129)
Commissions, other expenses and other taxes (326,080) (262,901) (196,373)
Net transfers to separate accounts (461,982) (596,347) (658,326)
Federal income taxes received (paid) 11,956 5,006 (9,449)
Interest paid -- (731) --
Other, net (7,109) (14,901) 28,325
---------- ---------- ----------
Net cash used in operating activities (15,374) (88,265) (79,799)
INVESTING ACTIVITIES
Proceeds from investments sold, matured or repaid:
Bonds and preferred stocks 143,449 146,963 122,820
Mortgage loans on real estate 221 2,116 132
Real estate -- -- 4,304
Other -- -- 175
---------- ---------- ----------
143,670 149,079 127,431
Cost of investments acquired
Bonds and preferred stocks (68,202) (40,418) (26,826)
Common stocks (93) (150) (4)
Mortgage loans on real estate (5,313) (891) --
Real estate (26,213) (12,002) (7,837)
Policy loans (36,241) (24,137) (15,479)
Other (414) -- (5)
---------- ---------- ----------
(136,476) (77,598) (50,151)
---------- ---------- ----------
Net cash provided by investing activities 7,194 71,481 77,280
FINANCING ACTIVITIES
Issuance of short-term note payable to affiliate 36,000 8,200 --
Capital contribution 32,092 20,000 --
---------- ---------- ----------
Net cash provided by financing activities 68,092 28,200 --
---------- ---------- ----------
Increase (decrease) in cash and short-term investments 59,912 11,416 (2,519)
Cash and short-term investments at beginning of year 13,896 2,480 4,999
---------- ---------- ----------
Cash and short-term investments at end of year $ 73,808 $ 13,896 $ 2,480
========== ========== ==========
</TABLE>
See accompanying notes.
43
<PAGE>
Notes - to financial statements - statutory basis
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1998
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 N.V., a holding company organized
under the laws of The Netherlands.
NATURE OF BUSINESS. The Company operates predominantly in the variable
universal life and variable annuity areas of the life insurance
business. The Company is licensed in 49 states, District of Columbia,
Puerto Rico and Guam. Sales of the Company's products are through
financial planners, independent representatives, financial
institutions and stockbrokers. The majority of the Company's new life
insurance written and a substantial portion of new annuities written
is done through one marketing organization; the Company expects to
maintain this relationship for the foreseeable future.
BASIS OF PRESENTATION. The preparation of financial statements of
insurance companies requires management to make estimates and
assumptions that affect amounts reported in the financial statements
and accompanying notes. Such estimates and assumptions could change in
the future as more information becomes known, which could impact the
amounts reported and disclosed herein.
The accompanying financial statements have been prepared in conformity
with accounting practices prescribed or permitted by the Insurance
Department of the State of Ohio ("Insurance Department"), which
practices differ from generally accepted accounting principles. The
more significant of these differences are as follows: (a) bonds are
generally reported at amortized cost rather than segregating the
portfolio into held-to-maturity (reported at amortized cost),
available-for-sale (reported at fair value), and trading (reported at
fair value) classifications; (b) acquisition costs of acquiring new
business are expensed as incurred rather than deferred and amortized
over the life of the policies; (c) policy reserves on traditional life
products are based on statutory mortality rates and interest which may
differ from reserves based on reasonable assumptions of expected
mortality, interest, and withdrawals which include a provision for
possible unfavorable deviation from such assumptions; (d) policy
reserves on certain investment products use discounting methodologies
utilizing statutory interest rates rather than full account values;
(e) reinsurance amounts are netted against the corresponding asset or
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, but are presumed to be material.
44
<PAGE>
In 1998, the National Association of Insurance Commissioners (NAIC)
adopted codified statutory accounting principles ("Codification").
Codification will likely change, to some extent, prescribed statutory
accounting practices and may result in changes to the accounting
practices that the Company uses to prepare its statutory-basis
financial statements. Codification will require adoption by the
various states before it becomes the prescribed statutory basis of
accounting for insurance companies domesticated within those states.
Accordingly, before Codification becomes effective for the Company,
the State of Ohio must adopt Codification as the prescribed basis of
accounting on which domestic insurers must report their
statutory-basis results to the Insurance Department. At this time it
is unclear whether the State of Ohio will adopt Codification. However,
based on current guidance, management believes that the impact of
Codification will not be material to the Company's statutory-basis
financial statements.
Other significant statutory accounting practices are as follows:
CASH AND CASH EQUIVALENTS. For purposes of the statements of cash
flows, the Company considers all highly liquid investments with
remaining maturities of one year or less when purchased to be cash
equivalents.
INVESTMENTS. Investments in bonds (except those to which the
Securities Valuation Office of the NAIC has ascribed a value),
mortgage loans on real estate and short-term investments are reported
at cost adjusted for amortization of premiums and accrual of
discounts. Amortization is computed using methods which result in a
level yield over the expected life of the investment. The Company
reviews its prepayment assumptions on mortgage and other asset backed
securities at regular intervals and adjusts amortization rates
retrospectively when such assumptions are changed due to experience
and/or expected future patterns. Common stocks of unaffiliated
companies are carried at market and 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 and investment properties are reported at cost less allowances
for depreciation. Depreciation is computed principally by the
straight-line method. Policy loans are reported at unpaid principal.
Other "admitted assets" are valued, principally at cost, as required
or permitted by Ohio Insurance Laws.
Realized capital gains and losses are determined on the basis of
specific identification and are recorded net of related federal income
taxes. The Asset Valuation Reserve (AVR) is established by the Company
to provide for 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 1998, 1997 and 1996, net realized capital gains of $1,294,
$3,259 and $2,394, respectively, were credited to the IMR rather than
being immediately recognized in the statements of operations.
Amortization of these net gains aggregated $744, $1,576 and $1,335 for
the years ended December 31, 1998, 1997 and 1996, 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
45
<PAGE>
accrued when collection is uncertain. No investment income due and
accrued has been excluded for the years ended December 31, 1998, 1997
and 1996, with respect to such practices.
AGGREGATE RESERVES FOR POLICIES. Life and annuity reserves are
developed by actuarial methods and are determined based on published
tables using statutorily specified interest rates and valuation
methods that will provide, in the aggregate, reserves that are greater
than or equal to the minimum required by law.
The aggregate policy reserves for life insurance policies are based
principally upon the 1941, 1958 and 1980 Commissioners' Standard
Ordinary Mortality Tables. The reserves are calculated using interest
rates ranging from 2.25 to 5.50 percent and are computed principally
on the Net Level Premium Valuation and the Commissioners' Reserve
Valuation Methods. Reserves for universal life policies are based on
account balances adjusted for the Commissioners' Reserve Valuation
Method.
Deferred annuity reserves are calculated according to the
Commissioners' Annuity Reserve Valuation Method including excess
interest reserves to cover situations where the future interest
guarantees plus the decrease in surrender charges are in excess of the
maximum valuation rates of interest. Reserves for immediate annuities
and supplementary contracts with life contingencies are equal to the
present value of future payments assuming interest rates ranging from
5.75 to 8.75 percent and mortality rates, where appropriate, from a
variety of tables.
POLICY AND CONTRACT CLAIM RESERVES. Claim reserves represent the
estimated accrued liability for claims reported to the Company and
claims incurred but not yet reported through the statement date. These
reserves are estimated using either individual case-basis valuations
or statistical analysis techniques. These estimates are subject to the
effects of trends in claim severity and frequency. The estimates are
continually reviewed and adjusted as necessary as experience develops
or new information becomes available.
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 $1,240,858, $1,164,013
and $997,513 in 1998, 1997 and 1996, respectively. All variable
account contracts are subject to discretionary withdrawal by the
policyholder at the market value of the underlying assets less the
current surrender charge. Separate account contractholders have no
claim against the assets of the general account.
STOCK OPTION PLAN. AEGON N.V. sponsors a stock option plan for
eligible employees of the Company. Under this plan, certain employees
have indicated a preference to immediately sell shares received as a
result of their exercise of the stock options; in these situations,
AEGON N.V. has settled such options in cash rather than issuing stock
to these employees. These cash settlements are paid by the Company and
AEGON N.V. subsequently reimburses the Company for such payments.
Under statutory accounting principles, the Company does not record any
expense related to this plan, as the expense is recognized by AEGON
N.V. However, the Company is allowed to record a deduction in the
consolidated tax return filed by the Company and certain affiliates.
The tax benefit of this deduction has been credited directly to
surplus.
RECLASSIFICATIONS. Certain reclassifications have been made to the
1997 and 1996 financial statements to conform to the 1998
presentation.
46
<PAGE>
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.
47
<PAGE>
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
1998 1997
Carrying Value Fair Value Carrying Value Fair Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ADMITTED ASSETS
Cash and short-term investments $ 73,808 $ 73,808 $ 13,896 $ 13,896
Bonds 184,697 192,556 255,919 267,763
Common stocks, other than affiliates 384 384 428 428
Mortgage loans on real estate 9,916 10,390 4,824 5,143
Policy loans 112,982 112,982 76,741 76,741
Separate account assets 6,999,290 6,999,290 4,814,594 4,814,594
LIABILITIES
Investment contract liabilities 297,349 294,105 280,121 276,113
Separate account annuities 5,096,680 5,038,296 3,615,255 3,565,557
</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, 1998
Bonds:
United States Government and agencies $ 4,749 $ 83 $ -- $ 4,832
State, municipal and other government 3,234 117 -- 3,351
Public utilities 18,792 818 251 19,359
Industrial and miscellaneous 96,332 6,685 577 102,440
Mortgage-backed securities 61,590 1,235 251 62,574
-------- ------- ------ --------
Total bonds $184,697 $ 8,938 $1,079 $192,556
======== ======= ====== ========
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
======== ======= ====== ========
</TABLE>
48
<PAGE>
The carrying value and fair value of bonds at December 31, 1998 by
contractual maturity are shown below. Expected maturities may differ
from contractual maturities because borrowers may have the right to
call or prepay obligations with or without penalties.
<TABLE>
<CAPTION>
Estimated
Carrying Fair
Value Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 2,706 $ 2,743
Due one through five years 61,340 64,696
Due five through ten years 43,233 45,352
Due after ten years 15,828 17,191
-------- --------
123,107 129,982
Mortgage and other asset backed securities 61,590 62,574
-------- --------
$184,697 $192,556
======== ========
</TABLE>
A detail of net investment income is presented below:
<TABLE>
<CAPTION>
Year ended December 31
1998 1997 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest on bonds $17,150 $25,723 $33,969
Dividends on equity investments from subsidiary 13,233 10,855 --
Interest on mortgage loans 499 478 559
Rental income on real estate 2,839 1,371 919
Interest on policy loans 6,241 4,656 3,339
Other investment income 540 26 9
------- ------- -------
Gross investment income 40,502 43,109 38,795
Investment expenses (4,187) (3,096) (2,728)
------- ------- -------
Net investment income $36,315 $40,013 $36,067
======= ======= =======
</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
1998 1997 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Proceeds $143,449 $146,963 $122,820
======== ======== ========
Gross realized gains $ 4,641 $ 3,921 $ 2,984
Gross realized losses 899 626 791
-------- -------- --------
Net realized gains $ 3,742 $ 3,295 $ 2,193
======== ======== ========
</TABLE>
At December 31, 1998, bonds with an aggregate carrying value of $4,297
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.
49
<PAGE>
Realized investment gains (losses) and changes in unrealized gains
(losses) for investments are summarized below:
<TABLE>
<CAPTION>
Realized
Year ended December 31
1998 1997 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Debt securities $ 3,742 $ 3,295 $ 2,193
Real estate -- -- (606)
Other invested assets (18) -- (4)
------- ------- -------
3,724 3,295 1,583
Tax expense (936) (711) --
Transfer to interest maintenance reserve (1,294) (3,259) (2,394)
------- ------- -------
Net realized gains (losses) $ 1,494 $ 747 $ (811)
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Change in Unrealized
Year ended December 31
1998 1997 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Debt securities $(3,985) $(896) $(14,442)
Common stock 248 -- (66)
------- ----- --------
Change in unrealized appreciation (depreciation) $(3,737) $(896) $(14,508)
======= ===== ========
</TABLE>
Gross unrealized gains (losses) on common stocks were as follows:
<TABLE>
<CAPTION>
Unrealized
Year ended December 31
1998 1997 1996
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unrealized gains $579 $295 $295
Unrealized losses (36) -- --
---- ---- ----
Net unrealized gains $543 $295 $295
==== ==== ====
</TABLE>
During 1998, the Company issued one mortgage loan with an interest
rate of 6.71%. The maximum percentage of any one mortgage loan to the
value of the underlying real estate at origination was 75%. The
Company requires all mortgagees to carry fire insurance equal to the
value of the underlying property.
During 1998, 1997 and 1996, no mortgage loans were foreclosed and
transferred to real estate. During 1998 and 1997, the Company held a
mortgage loan loss reserve in the asset valuation reserve of $112 and
$54, respectively.
At December 31, 1998, 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
50
<PAGE>
event that the assuming insurance company became unable to meet its
obligations under the reinsurance treaty.
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Direct premiums $1,345,752 $1,219,271 $1,034,757
Reinsurance assumed 461 2,389 2,063
Reinsurance ceded (75,319) (5,141) (3,105)
---------- ---------- ----------
Net premiums earned $1,270,894 $1,216,519 $1,033,715
========== ========== ==========
</TABLE>
The Company received reinsurance recoveries in the amount of $5,260,
$2,288 and $2,156 during 1998, 1997 and 1996, respectively. At
December 31, 1998 and 1997, estimated amounts recoverable from
reinsurers that have been deducted from policy and contract claim
reserves totaled $1,003 and $2,721, respectively. The aggregate
reserves for policies and contracts were reduced for reserve credits
for reinsurance ceded at December 31, 1998 and 1997 of $2,849 and
$1,369, respectively.
5. INCOME TAXES
For federal income tax purposes, the Company joins in a consolidated
tax return filing with certain affiliated companies. Under the terms
of a tax-sharing agreement between the Company and its affiliates, the
Company computes federal income tax expense as if it were filing a
separate income tax return, except that tax credits and net operating
loss carryforwards are determined on the basis of the consolidated
group. Additionally, the alternative minimum tax is computed for the
consolidated group and the resulting tax, if any, is allocated back to
the separate companies on the basis of the separate companies'
alternative minimum taxable income.
Federal income tax expense (benefit) differs from the amount computed
by applying the statutory federal income tax rate to gain (loss) from
operations before income taxes (benefit) and realized capital gains
(losses) on investments for the following reasons:
<TABLE>
<CAPTION>
1998 1997 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed tax (benefit) at federal statutory rate (35%) $(2,019) $(1,156) $3,189
Deferred acquisition costs - tax basis 9,672 9,164 7,172
Tax reserve valuation 1,513 (194) (696)
Excess tax depreciation (442) (127) (65)
Amortization of IMR (260) (552) (467)
Dividend received deduction (6,657) (5,326) --
Prior year over-accrual (2,322) (1,541) (9)
Other, net 168 201 173
------- ------- ------
Federal income tax expense (benefit) $ (347) $ 469 $9,297
======= ======= ======
</TABLE>
Federal income tax expense differs from the amount computed by
applying the statutory federal income tax rate to realized gains
(losses) due to the differences in book and tax asset bases at the
time certain investments are sold.
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, 1998). To the extent dividends are paid from the amount
accumulated in the policyholders'
51
<PAGE>
surplus account, net earnings would be reduced by the amount of tax
required to be paid. Should the entire amount in the policyholders'
surplus account become taxable, the tax thereon computed at current
rates would amount to approximately $103.
At December 31, 1996, the Company had capital loss carryforwards of
approximately $10,705, which were utilized by the Company's affiliates
in the consolidated tax return filing in 1997. This transaction
resulted in a receipt from the Company's affiliate of $3,747, which
was credited directly to unassigned surplus.
In 1998, the Company reached a final settlement with the Internal
Revenue Service for 1994 and 1995 resulting in a tax refund of $300
and interest received of $53.
6. POLICY AND CONTRACT ATTRIBUTES
A portion of the Company's policy reserves and other policyholders'
funds relate to liabilities established on a variety of the Company's
products, primarily separate accounts, that are not subject to
significant mortality or morbidity risk; however, there may be certain
restrictions placed upon the amount of funds that can be withdrawn
without penalty. The amount of reserves on these products, by
withdrawal characteristics are summarized as follows:
<TABLE>
<CAPTION>
December 31
1998 1997
Percent Percent
Amount of Total Amount of Total
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal with market value
adjustment $ 12,810 $ 13,812 1%
Subject to discretionary withdrawal at book value less
surrender charge 76,289 1% 68,376 2
Subject to discretionary withdrawal at market value 5,096,680 94 3,615,255 91
Subject to discretionary withdrawal at book value (minimal
or no charges or adjustments) 210,270 4 201,457 5
Not subject to discretionary withdrawal provision 15,681 1 16,572 1
---------- --- ---------- ---
5,411,730 100% 3,915,472 100%
=== ===
Less reinsurance ceded 1,131 --
---------- ----------
Total policy reserves on annuities and deposit fund
liabilities $5,410,599 $3,915,472
========== ==========
</TABLE>
A reconciliation of the amounts transferred to and from the separate
accounts is presented below:
<TABLE>
<CAPTION>
1998 1997 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Transfers as reported in the summary of operations of the
separate accounts statement:
Transfers to separate accounts $1,240,858 $1,164,013 $ 997,513
Transfers from separate accounts 847,507 646,477 339,523
---------- ---------- ---------
Net transfers to separate accounts 393,351 517,536 657,990
Reconciling adjustments - change in accruals for investment
management, administration fees and contract guarantees,
and separate account surplus 9,267 1,678 (205,519)
---------- ---------- ---------
Transfers as reported in the summary of operations of the
life, accident and health annual statement $ 402,618 $ 519,214 $ 452,471
========== ========== =========
</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
52
<PAGE>
date. At December 31, 1998 and 1997, 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, 1998
Ordinary direct renewal business $1,101 $201 $ 900
------ ---- ------
$1,101 $201 $ 900
====== ==== ======
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
====== ==== ======
</TABLE>
In 1994, the NAIC enacted a guideline to clarify reserving
methodologies for contracts that require immediate payment of claims
upon proof of death of the insured. Companies were allowed to grade
the effects of the change in reserving methodologies over five years.
A direct charge to surplus of $2,132, $1,872 and $2,995 was made for
the years ended December 31, 1998, 1997 and 1996, respectively,
related to the change in reserve methodology.
7. DIVIDEND RESTRICTIONS
The Company is subject to limitations, imposed by the State of Ohio,
on the payment of dividends to its parent company. Generally,
dividends during any twelve month period may not be paid; without
prior regulatory approval, in excess of the lesser of (a) 10 percent
of statutory capital and surplus as of the preceding December 31, or
(b) statutory gain from operations for the preceding year. Subject to
the availability of unassigned surplus at the time of such dividend,
the maximum payment which may be made in 1999, without the prior
approval of insurance regulatory authorities, is $14,657.
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 $917, $659 and $581 for the
years ended December 31, 1998, 1997 and 1996, 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 $632, $448 and
$184 for the years ended December 31, 1998, 1997 and 1996,
respectively.
53
<PAGE>
AEGON sponsors supplemental retirement plans to provide the Company's
senior management with benefits in excess of normal pension benefits.
The plans are noncontributory and benefits are based on years of
service and the employee's compensation level. The plans are unfunded
and nonqualified under the Internal Revenue Code. In addition, AEGON
has established incentive deferred compensation plans for certain key
employees of the Company. AEGON also sponsors an employee stock option
plan for individuals employed at least three years and a stock
purchase plan for its producers, with the participating affiliated
companies establishing their own eligibility criteria, producer
contribution limits and company matching formula. These plans have
been accrued for or funded as deemed appropriate by management of
AEGON and the Company.
In addition to pension benefits, the Company participates in plans
sponsored by AEGON that provide postretirement medical, dental and
life insurance benefits to employees meeting certain eligibility
requirements. Portions of the medical and dental plans are
contributory. The expenses of the postretirement plans calculated on
the pay-as-you-go basis are charged to affiliates in accordance with
an intercompany cost sharing arrangement. The Company expensed $157,
$99 and $98 for the years ended December 31, 1998, 1997 and 1996,
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 1998, 1997 and 1996, the Company paid $12,763,
$10,040 and $10,038, respectively, for such services, which
approximates their costs to the affiliates. The Company provides
office space, marketing and administrative services to certain
affiliates. During 1998, 1997 and 1996, the Company received $5,125,
$4,395 and $3,271, respectively, for such services, which approximates
their cost. The Company had a net payable with affiliates of $33,449
and $1,925 at December 31, 1998 and 1997, respectively.
Payable to affiliates and intercompany borrowings bear interest at the
thirty-day commercial paper rate of 4.74% at December 31, 1998. During
1998, 1997 and 1996, the Company paid net interest of $1,090, $364 and
$138, respectively, to affiliates.
The Company received capital contributions of $32,092 and $20,000 from
its parent in 1998 and 1997, respectively.
At December 31, 1998 and 1997, the Company had short-term note
payables to an affiliate of $44,200 and $8,200, respectively. Interest
on these notes ranged from 5.13% to 5.54% at December 31, 1998 and was
5.60% at December 31. 1997.
During 1998, the Company purchased life insurance policies covering
the lives of certain employees of the Company. Premiums of $43,500
were paid to an affiliate for these policies. At December 31, 1998,
the cash surrender value of these policies is $45,445.
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
54
<PAGE>
event of insolvency of other insurance companies. Assessments are
charged to operations when received by the Company except where right
of offset against other taxes paid is allowed by law; amounts
available for future offsets are recorded as an asset on the Company's
balance sheet. The future obligation has been based on the most recent
information available from the National Organization of Life and
Health Insurance Guaranty Association. Potential future obligations
for unknown insolvencies are not determinable by the Company. The
Company has established a reserve of $3,489 and $4,007 and an
offsetting premium tax benefit of $828 and $1,070 at December 31, 1998
and 1997, respectively, for its estimated share of future guaranty
fund assessments related to several major insurer insolvencies. The
guaranty fund expense (credit) was $(74), $0 and $212 at December 31,
1998, 1997 and 1996, respectively.
11. YEAR 2000 (UNAUDITED)
The term Year 2000 Issue generally refers to the improper processing
of dates and incorrect date calculations that might occur in computer
software and hardware and embedded systems as the Year 2000 is
approached. The use of computer programs that rely on two-digit date
fields to perform computations and decision-making functions may cause
systems to malfunction when processing information involving dates
after 1999. For example, any computer software that has date-sensitive
coding might recognize a code of 00 as the year 1900 rather than the
year 2000.
The Company has developed a Year 2000 Project Plan (the Plan) to
address the Year 2000 issue as it affects the Company's internal IT
and non-IT systems, and to assess Year 2000 issues relating to third
parties with whom the Company has critical relationships.
The Plan for addressing internal systems generally includes an
assessment of internal IT and non-IT systems and equipment affected by
the Year 2000 issue; definition of strategies to address affected
systems and equipment; remediation of identified systems and
equipment; internal testing and certification that each internal
system is Year 2000 compliant; and a review of existing and revised
business resumption and contingency plans to address potential Year
2000 issues. The Company has remediated and tested substantially all
of its mission-critical internal IT systems as of December 31, 1998.
The Company continues to remediate and test certain non-critical
internal IT systems, internal non-IT systems and will continue with a
revalidation testing program throughout 1999.
The Company's Year 2000 issues are more complex because a number of
its systems interface with other systems not under the Company's
control. The Company's most significant interfaces and uses of third-
party vendor systems are in the bank, financial services and trust
areas. The Company utilizes various banks to handle numerous types of
financial and sales transactions. Several of these banks also provide
trustee and custodial services for the Company's investment holdings
and transactions. These services are critical to a financial services
company such as the Company as its business centers around cash
receipts and disbursements to policyholders and the investment of
policyholder funds. The Company has received written confirmation from
its vendor banks regarding their status on Year 2000. The banks
indicate their dedication to resolving any Year 2000 issues related to
their systems and services prior to December 31, 1999. The Company
anticipates that a considerable effort will be necessary to ensure
that its corrected or new systems can properly interface with those
business partners with whom it transmits and receives data and other
information (external systems). The Company has undertaken specific
testing regimes with these third-party business partners and expects
to continue working with its business partners on any interfacing of
systems. However, the timing of external system compliance cannot
currently be predicted with accuracy because the implementation of
Year 2000 readiness will vary from one company to another.
55
<PAGE>
The Company does have some exposure to date sensitive embedded
technology such as micro-controllers, but the Company views this
exposure as minimal. Unlike other industries that may be equipment
intensive, like manufacturing, the Company is a life insurance and
financial services organization providing insurance, annuities and
pension products to its customers. As such, the primary equipment and
electronic devices in use are computers and telephone related
equipment. This type of hardware can have date sensitive embedded
technology which could have Year 2000 problems. Because of this
exposure, the Company has reviewed its computer hardware and telephone
systems, with assistance from the applicable vendors, and has
upgraded, or replaced, or is in the process of replacing any equipment
that will not properly process date sensitive data in the Year 2000 or
beyond.
For the Company, a reasonably likely worst case scenario might include
one or more of the Company's significant policyholder systems being
non-compliant. Such an event could result in a material disruption of
the Company's operations. Specifically, a number of the Company's
operations could experience an interruption in the ability to collect
and process premiums or deposits, process claim payments, accurately
maintain policyholder information, accurately maintain accounting
records, and or perform adequate customer service. Should the worst
case scenario occur, it could, dependent upon its duration, have a
material impact on the Company's business and financial condition.
Simple failures can be repaired and returned to production within a
matter of hours with no material impact. Unanticipated failures with a
longer service disruption period could have a more serious impact. For
this reason, the Company is placing significant emphasis on risk
management and Year 2000 business resumption contingency planning in
1999 by modifying its existing business resumption and disaster
recovery plans to address potential Year 2000 issues.
The actions taken by management under the Year 2000 Project Plans are
intended to significantly reduce the Company's risk of a material
business interruption based on the Year 2000 issues. It should be
noted that the Year 2000 computer problem, and its resolution, is
complex and multifaceted, and any company's success cannot be
conclusively known until the Year 2000 is reached. In spite of its
efforts or results, the Company'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. It
is anticipated that there may be problems that will have to be
resolved in the ordinary course of business on and after the Year
2000. However, the Company does not believe that the problems will
have a material adverse affect on the Company's operations or
financial condition.
12. RECONCILIATION OF CAPITAL AND SURPLUS AND NET INCOME
The following table reconciles capital and surplus and net income as
reported in the Annual Statement filed with the Insurance Department
of the State of Ohio, to the amounts reported in the accompanying
financial statements:
<TABLE>
<CAPTION>
December 31, 1998 Year ended
Total Capital December 31, 1998
and Surplus Net Income/(Loss)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Amounts reported in Annual Statement $148,038 $ 528
Adjustment to federal income tax benefit (4,458) (4,458)
-------- -------
Amounts reported herein $143,580 $(3,930)
======== =======
</TABLE>
56
<PAGE>
Schedule - I
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
SUMMARY OF INVESTMENTS OTHER THAN
INVESTMENTS IN RELATED PARTIES
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1998
<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 $ 19,899 $ 20,673 $ 19,899
States, municipalities and political subdivisions 6,676 6,930 6,676
Public utilities 18,792 19,359 18,792
All other corporate bonds 139,330 145,594 139,330
-------- -------- --------
Total fixed maturities 184,697 192,556 184,697
EQUITY SECURITIES
Common stocks:
Affiliated entities 243 704
Industrial, miscellaneous and all other 302 384
-------- -------- --------
Total equity securities 545 1,088
Mortgage loans on real estate 9,916 9,916
Real estate 34,583 34,583
Policy loans 112,982 112,982
Other invested assets 396 396
Cash and short-term investments 73,808 73,808
Investment properties 11,594 11,594
-------- --------
Total investments $429,655 $429,064
======== ========
</TABLE>
- ---------------
(1) Original cost of equity securities and, as to fixed maturities, original
cost reduced by repayments and adjusted for amortization of premiums or
accruals of discounts.
57
<PAGE>
Schedule - III
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
SUPPLEMENTARY INSURANCE INFORMATION
(DOLLARS IN THOUSANDS)
<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, 1998
Individual life $221,050 $ 8,624 $ 474,120 $ 9,884 $122,542 $230,368
Group life 10,546 100 1,933 723 1,962 2,281
Annuity 265,418 509 794,841 25,708 545,532 91,505
-------- ------- ---------- ------- -------- --------
$497,014 $ 9,233 $1,270,894 $36,315 $670,036 $324,154
======== ======= ========== ======= ======== ========
YEAR ENDED DECEMBER 31, 1997
Individual life $177,088 $ 9,533 $ 390,452 $13,742 $ 88,738 $176,303
Group life 9,435 805 3,918 810 3,986 3,292
Annuity 296,290 591 822,149 25,461 389,726 83,179
-------- ------- ---------- ------- -------- --------
$482,813 $10,929 $1,216,519 $40,013 $482,450 $262,774
======== ======= ========== ======= ======== ========
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
======== ======= ========== ======= ======== ========
</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.
58
<PAGE>
Schedule - IV
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
REINSURANCE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Percentage
of Amount
Ceded to Other Assumed From Net Assumed
Gross Amount Companies Other Companies Amount to Net
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
Life insurance in force $51,064,173 $9,862,460 $ -- $41,201,713 0.0%
=========== ========== ========== =========== =====
Premiums:
Individual life $ 493,633 $ 19,512 $ -- $ 474,121 0.0%
Group life and health 1,691 220 461 1,932 23.8
Annuity 850,428 55,587 -- 794,841 0.0
----------- ---------- ---------- ----------- -----
$ 1,345,752 $ 75,319 $ 461 $ 1,270,894 .03%
=========== ========== ========== =========== =====
YEAR ENDED DECEMBER 31, 1997
Life insurance in force $40,221,361 $6,776,447 $2,692,822 $36,137,736 7.5%
=========== ========== ========== =========== =====
Premiums:
Individual life $ 395,361 $ 4,910 $ -- $ 390,452 0.0%
Group life 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%
=========== ========== ========== =========== =====
</TABLE>
59
<PAGE>
WRL Series Annuity Account B
PART C
OTHER INFORMATION
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. 1/
(2) Not Applicable.
(3) Distribution of Contracts
(a) Form of Master Agreement. 3/
(b) Amendment to Master Agreement 6/
(c) Form of Participation Agreement. 3/
(d) Principal Underwriting and Distribution Agreement.
6/
(e) First Amendment to Principal Underwriting and
Distribution Agreement 6/
(f) Broker-Dealer Selling Agreement. 6/
(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/
(10) (a) Written Consent of Sutherland Asbill & Brennan LLP
(b) Written Consent of Ernst & Young LLP
(c) Written Consent of PricewaterhouseCoopers LLP
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(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/
- -------------------------------------
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.
6/ This exhibit was previously filed on Post-Effective Amendment No. 4 to
Form S-6 Registration Statement dated April 21, 1999 (File No. 333-23359)
and is incorporated herein by reference.
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) 570 Carillon Parkway, St. Petersburg, Florida 33716
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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) 570 Carillon Parkway, St. Petersburg, Florida 33716
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
VERENGING AEGON Netherlands Membership Association
AEGON N.V. Netherlands Corporation (53.63%)
AEGON Netherland N.V. Netherlands Corporation (100%)
AEGON Nevark Holding B.V. Netherlands Corporation (100%)
Groninger Financieringen B.V. Netherlands Corporation (100%)
AEGON International N.V. Netherlands Corporation (100%)
Voting Trust - (Trustees - K.J. Storm, Donald J. Shepard, H.B. Van
Wijk, Dennis Hersch)
AEGON U.S. Holding Corporation (DE) (100%)
Short Hills Management Company (NJ) (100%)
CORPA Reinsurance Company (NY) (100%)
AEGON Management Company (IN) (100%)
RCC North America Inc. (DE) (100%)
AEGON USA, Inc. - Holding Co. (IA) (100%)
First AUSA Life Insurance Company - Insurance Holding Co. (MD) (100%)
AUSA Life Insurance Company, Inc. - Insurance (NY) (100%)
Life Investors Insurance Company of America - Insurance (IA) (100%)
Bankers United Life Assurance Company - Insurance (IA) (100%)
PFL Life Insurance Company - Insurance (IA) (100%)
Southwest Equity Life Insurance Company - Insurance (AZ) (100% Voting
Common)
Iowa Fidelity Life Insurance Company - Insurance (AZ) (100% Voting
Common)
Western Reserve Life Assurance Co. of Ohio - Insurance (OH) (100%)
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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 coverage's (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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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, 1999, 4,464 non-qualified contracts and 100 qualified
contracts were In Force.
Item 28. INDEMNIFICATION
Provisions exist under the Ohio General Corporation Law, the Second
Amended Articles of Incorporation of Western Reserve and the Amended Code
of Regulations of Western Reserve whereby Western Reserve may indemnify
certain persons against certain payments incurred by such persons. The
following excerpts contain the substance of these provisions.
OHIO GENERAL CORPORATION LAW
SECTION 1701.13 AUTHORITY OF CORPORATION.
(E)(1) A corporation may indemnify or agree to indemnify any person who
was or is a party or is threatened to be made a party, to any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, other than an action by or in the right of
the corporation, by reason of the fact that he is or was a director, officer,
employee, or agent of the corporation, or is or was serving at the request of
the corporation as a director, trustee, officer, employee, or agent of another
corporation (including a subsidiary of this corporation), domestic or foreign,
nonprofit or for profit, partnership, joint venture, trust, or other
enterprise, against expenses, including attorneys' fees, judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit, or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
(2) A corporation may indemnify or agree to indemnify any person who was
or is a party, or is threatened to be made a party to any threatened, pending,
or completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee, or agent of the corporation, or is or was serving at the
request of the corporation as a director, trustee, officer, employee, or agent
of another corporation, domestic or foreign, nonprofit or for profit,
partnership, joint venture, trust, or other enterprise, against expenses,
including attorneys' fees, actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation, except that no indemnification shall
be made in respect of any of the following:
(a) Any claim, issue, or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the corporation unless, and only to the extent that the court of
common pleas, or the court in which such action or suit was brought determines
upon application that, despite the adjudication of liability, but in view of
all the circumstances
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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 contendere or its equivalent, shall not, of itself create
a presumption that the person did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
(2) The corporation may indemnify or agree to indemnify any person who
was or is a party, or is threatened to be made a party to any threatened,
pending, or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee, or agent of the corporation, or is or was serving
at the request of the corporation as a director, trustee, officer, employee,
or agent of another corporation (including a subsidiary of this corporation),
domestic or foreign, nonprofit or for profit, partnership, joint venture,
trust, or other enterprise against expenses, including attorneys' fees,
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made in respect of any
claim, issue, or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation unless, and only to the extent that the court of common pleas, or
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability, but in view of all
the circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses as the court of common pleas or such other
court shall deem proper.
(3) To the extent that a director, trustee, officer, employee, or agent
has been successful on the merits or otherwise in defense of any action, suit,
or proceeding referred to in sections (1) and (2) of this article, or in
defense of any claim, issue, or matter therein, he shall be indemnified
against expenses, including attorneys' fees, actually and reasonably incurred
by him in connection therewith.
(4) Any indemnification under sections (1) and (2) of this article,
unless ordered by a court, shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the
director, trustee, officer, employee, or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in sections
(1) and (2) of this article. Such determination shall be made (a) by a
majority vote of a quorum consisting of directors of the indemnifying
corporation who were not and are not parties to or threatened with any such
action, suit, or proceeding, or (b) if such a quorum is not obtainable or if a
majority vote of a quorum of disinterested directors so directs, in a written
opinion by independent legal counsel other than an attorney, or a firm having
associated with it an attorney, who has been retained by or who has performed
services for the corporation, or any person to be indemnified within the past
five years, or (c) by the shareholders, or (d) by the court of common pleas or
the court in which such action, suit, or proceeding was brought. Any
determination made by the disinterested directors under section (4)(a) or by
independent legal counsel under section (4)(b) of this article shall be
promptly communicated to the person who threatened or brought the action or
suit by or in the right of the corporation under section (2) of this article,
and within ten days after receipt of such notification, such person shall have
the right to petition the court of common pleas or the court in which such
action or suit was brought to review the reasonableness of such determination.
(5) Expenses, including attorneys' fees incurred in defending any action,
suit, or proceeding referred to in sections (1) and (2) of this article, may
be paid by the corporation in advance of the final disposition of such action,
suit, or proceeding as authorized by the directors in the specific case upon
receipt of a written undertaking by or on behalf of the director, trustee,
officer, employee, or agent to repay such amount, unless it shall ultimately
be determined that he is entitled to be indemnified by the corporation as
authorized in this article. If a majority vote of a quorum of disinterested
directors so directs by resolution, said written undertaking need not be
submitted to the corporation. Such a determination that a written undertaking
need not be submitted to the corporation shall in no way affect the
entitlement of indemnification as authorized by this article.
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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) AFSG Securities Corporation ("AFSG") is the principal underwriter for
the Contracts. AFSG currently serves as principal underwriter for the
PFL Endeavor VA Separate Account, the PFL Retirement Builder Variable
Annuity Account, the PFL Life Variable Annuity Account A, the PFL
Wright Variable Annuity Account, the AUSA Endeavor Variable Annuity
Account, Separate Account C of First Providian Life and Health
Insurance Company, and the Separate Account I, Separate Account II, and
Separate Account V of Providian Life and Health Insurance Company, the
WRL Series Life Account, the WRL Series Annuity Account and the AUSA
Series Life Account.
(b) Directors and Officers of AFSG
PRINCIPAL POSITION AND OFFICES
NAME BUSINESS ADDRESS WITH UNDERWRITER
---- ---------------- --------------------
Larry N. Norman (1) Director and President
Harvey E. Willis (1) Vice President and Secretary
Lisa Wachendorf (1) Compliance Officer
Debra C. Cubero (1) Vice President
Gregory J. Garvin (1) Vice President
Michael F. Lane (1) Vice President
Sara J. Stange (1) Director and Vice President
Brenda K. Clancy (1) Vice President
Michael G. Ayers (1) Treasurer/Controller
Colleen S. Lyons (1) Assistant Secretary
John F. Reesor (1) Assistant Secretary
Anne Spaes (1) Vice President
Priscilla I. Hechler (2) Assistant Vice President and
Assistant Secretary
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<PAGE>
Thomas E. Pierpan (2) Assistant Secretary
Richard C. Hicks (2) Assistant Vice President
and Assistant Secretary
Nancy C. Hassett (2) Assistant Secretary
Gina A. Babka (2) Assistant Secretary
- -----------------------------------------------------------------------------
(1) 4333 Edgewood Road, N.E., Cedar Rapids, IA 52499-0001
(2) 570 Carillon Parkway, St. Petersburg, FL 33716-1202.
(c) Compensation to Principal Underwriter
Not Applicable
Item 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books, or other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules promulgated thereunder
are maintained by the Registrant through Western Reserve, 570
Carillon Parkway, St. Petersburg, Florida 33716.
Item 31. MANAGEMENT SERVICES
Not Applicable
Item 32. UNDERTAKINGS
Western Reserve 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.
C-11
<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. 7 to its Registration Statement to be signed
on its behalf by the undersigned, thereunder duly authorized, in the City of St.
Petersburg, State of Florida, on this 22nd day of April, 1999.
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. 7 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 22, 1999
- -------------------- Chief Executive Officer
John R. Kenney and President
(Principal Executive
Officer)
/s/ ALLAN J. HAMILTON Vice President, Treasurer April 22, 1999
- --------------------- and Controller
Allan J. Hamilton
<PAGE>
/s/ ALAN M. YAEGER Executive Vice President, April 22, 1999
- --------------------- Actuary and Chief Financial
Alan M. Yaeger */ Officer
/s/ PATRICK S. BAIRD Director April 22, 1999
- ---------------------
Patrick S. Baird */
/s/ JAMES R. WALKER Director April 22, 1999
- ---------------------
James R. Walker */
/s/ LYMAN H. TREADWAY Director April 22, 1999
- ---------------------
Lyman H. Treadway */
/s/JACK E. ZIMMERMAN Director April 22, 1999
- ---------------------
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. 7 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
(10)(a) Consent of Sutherland Asbill & Brennan LLP
(10)(b) Consent of Ernst & Young LLP
(10)(c) Consent of PricewaterhouseCoopers LLP
EXHIBIT (10)(A)
WRITTEN CONSENT OF SUTHERLAND ASBILL & BRENNAN LLP
<PAGE>
S.A.B. letterhead
April 21, 1999
Board of Directors
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account B
570 Carillon Parkway
St. Petersburg, Florida 33716
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. 7 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
----------------------------
Stephen E. Roth
EXHIBIT (10)(B)
WRITTEN CONSENT OF ERNST & YOUNG LLP
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent
Accountants" and to the use of our report dated February 19, 1999, with respect
to the statutory-basis financial statements and schedules of Western Reserve
Life Assurance Co. of Ohio included in Post-Effective Amendment No. 7 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 20, 1999
EXHIBIT (10)(C)
WRITTEN CONSENT OF PRICEWATERHOUSECOOPERS LLP
<PAGE>
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.
7 to the Registration Statement on Form N-4 of our report dated January 29,
1999, relating to the financial statements and financial highlights of the
sub-accounts comprising the Janus Retirement Advantage of the 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.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
April 20, 1999
