As filed with the Securities and Exchange Commission on April 28, 2000
Registration No. 33-63246/811-7754
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. 8 (X)
---
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 9 (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.
Senior Vice President, General Counsel and Assistant Secretary
Western Reserve Life Assurance Co. of Ohio
570 Carillon Parkway
St. Petersburg, Florida 33716
(Name and Address of Agent for Service)
Copy to:
Stephen E. Roth, Esq.
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2415
Title of securities being registered: Units of interest in the separate account
under flexible payment deferred variable annuity contracts.
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, 2000 pursuant to paragraph (b) of Rule 486
- ------ -----------
60 days after filing pursuant to paragraph (a) of Rule 485
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on pursuant to paragraph (a) of Rule 486
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<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE>
[JANUS LOGO]
JANUS RETIREMENT
ADVANTAGE()(R)
VARIABLE ANNUITY
PROSPECTUS
Issued Through
WRL SERIES ANNUITY ACCOUNT B
By
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
This prospectus gives you important information about the Janus Retirement
Advantage(R), a flexible payment variable accumulation deferred annuity
contract. Please read this prospectus and the prospectuses 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 15 investment choices: a fixed account and 14
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 14 portfolios we currently offer through the subaccounts under this Contract
are:
JANUS ASPEN SERIES
<TABLE>
<S> <C>
GROWTH PORTFOLIO INTERNATIONAL GROWTH
AGGRESSIVE GROWTH PORTFOLIO PORTFOLIO
CAPITAL APPRECIATION WORLDWIDE GROWTH PORTFOLIO
PORTFOLIO GLOBAL LIFE SCIENCES
BALANCED PORTFOLIO PORTFOLIO
EQUITY INCOME PORTFOLIO GLOBAL TECHNOLOGY PORTFOLIO
GROWTH AND INCOME PORTFOLIO FLEXIBLE INCOME PORTFOLIO
STRATEGIC VALUE PORTFOLIO HIGH-YIELD PORTFOLIO
MONEY MARKET PORTFOLIO
</TABLE>
MAY 1, 2000
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
<PAGE>
If you would like more information about the Janus Retirement Advantage(R), you
can obtain a free copy of the Statement of Additional Information ("SAI") dated
May 1, 2000. Please call us at 1-800-504-4440 or write us at: Western Reserve,
Administrative Office - Annuity Department 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 (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
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
DEFINITIONS OF SPECIAL TERMS.................... 3
SUMMARY......................................... 7
ANNUITY CONTRACT FEE TABLE...................... 14
EXAMPLE......................................... 16
1. THE ANNUITY CONTRACT........................ 18
2. ANNUITY PAYMENTS (THE INCOME PHASE)......... 20
Annuity Payment Options Under the
Contract................................. 21
Fixed Annuity Payment Options.............. 22
Variable Annuity Payment Options........... 23
3. PURCHASE.................................... 25
Contract Issue Requirements................ 25
Purchase Payments.......................... 25
Initial Purchase Requirements.............. 25
Additional Purchase Payments............... 26
Maximum Annual Purchase Payments........... 26
Allocation of Purchase Payments............ 26
Right to Cancel Period..................... 27
Annuity Value.............................. 27
Accumulation Units......................... 27
4. INVESTMENT CHOICES.......................... 29
The Separate Account....................... 29
Janus Aspen Series......................... 29
The Fixed Account.......................... 30
Transfers.................................. 31
Systematic Exchanges....................... 32
Asset Rebalancing Program.................. 33
Telephone Transactions..................... 34
5. EXPENSES.................................... 35
Partial Withdrawals and Complete
Surrenders............................... 35
Mortality and Expense Risk Charge.......... 35
Administrative Charge...................... 35
Annual Contract Charge..................... 36
Transfer Charge............................ 36
Premium Taxes.............................. 36
Federal, State and Local Taxes............. 37
Portfolio Management Fees.................. 37
</TABLE>
Janus Retirement Advantage Variable Annuity prospectus 1
<PAGE>
<TABLE>
<S> <C>
6. TAXES....................................... 38
Annuity Contracts in General............... 38
Qualified and Nonqualified Contracts....... 38
Partial Withdrawals and Complete Surrenders
- Nonqualified Contracts................. 39
Multiple Contracts......................... 40
Diversification and Distribution
Requirements............................. 41
Partial Withdrawals and Complete Surrenders
- Qualified Contracts.................... 41
Taxation of Death Benefit Proceeds......... 42
Annuity Payments........................... 42
Transfers, Assignments or Exchanges of
Contracts................................ 43
Possible Tax Law Changes................... 43
7. ACCESS TO YOUR MONEY........................ 44
Partial Withdrawals and Complete
Surrenders............................... 44
Delay of Payment and Transfers............. 45
Systematic Partial Withdrawals............. 46
8. PERFORMANCE................................. 47
9. DEATH BENEFIT............................... 48
When We Pay a Death Benefit................ 48
When We Do Not Pay a Death Benefit......... 49
Amount of Death Benefit During the
Accumulation Period...................... 50
Alternate Payment Elections Before the
Maturity Date............................ 50
10. OTHER INFORMATION........................... 52
Ownership.................................. 52
Annuitant.................................. 52
Beneficiary................................ 52
Assignment................................. 52
Western Reserve Life Assurance Co. of
Ohio..................................... 53
The Separate Account....................... 53
Voting Rights.............................. 54
Distribution of the Contracts.............. 55
Non-Participating Contract................. 55
Variations in Contract Provisions.......... 55
IMSA....................................... 55
Legal Proceedings.......................... 56
Financial Statements....................... 56
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL
INFORMATION................................... 57
APPENDIX A
Condensed Financial Information............ 58
APPENDIX B
Historical Performance Data................ 62
</TABLE>
2 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
DEFINITIONS OF SPECIAL TERMS
- --------------------------------------------------------------------------------
accumulation period The period between the Contract date and the
maturity date while the Contract is in force.
accumulation unit value An accounting unit of measure we use to
calculate subaccount values during the
accumulation period.
administrative office Our administrative office and mailing address
is P.O. Box 5068, Clearwater, Florida
33758-5068. Our street address is 570 Carillon
Parkway, St. Petersburg, Florida 33716. Our
phone number is 1-800-851-9777.
age The issue age which is the annuitant's age on
the birthday nearest the Contract date, plus
the number of completed Contract years. When we
use the term "age" in this prospectus, it has
the same meaning as "attained age" in the
Contract.
annuitant The person you named on the application (or
later changed), to receive annuity payments.
The annuitant may be changed as provided in the
Contract's death benefit provisions and annuity
provision.
annuity unit value An accounting unit of measure we use to
calculate annuity payments from certain
subaccounts after the maturity date.
annuity value The sum of the separate account value and the
fixed account value.
beneficiary(ies) The person(s) you elect to receive the death
benefit proceeds under the Contract.
cash value The annuity value less any applicable premium
taxes.
Code The Internal Revenue Code of 1986, as amended.
Contract date The later of the date on which the initial
purchase payment is received or the date that
the
Janus Retirement Advantage Variable Annuity prospectus 3
<PAGE>
properly completed application is received at
Western Reserve's administrative office. We
measure Contract years, Contract months and
Contract anniversaries from the Contract date.
death report day The valuation date on which we have received
both proof of annuitant's death and your
beneficiary's election regarding payment.
fixed account An option to which you can direct your money
under the Contract, other than the separate
account. It provides a guarantee of principal
and interest. The assets supporting the fixed
account are held in the general account. The
fixed account is not available in all states.
fixed account value During the accumulation period, your Contract's
value in the fixed account.
in force Condition under which the Contract is active
and the owner is entitled to exercise all
rights under the Contract.
maturity date The date on which the accumulation period ends
and annuity payments begin. The latest maturity
date is the annuitant's 90th birthday.
NYSE New York Stock Exchange.
nonqualified Contracts Contracts issued other than in connection with
retirement plans.
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
4 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
the benefits provided by the Contract. When we
use the term "purchase payment" in this
prospectus, it has the same meaning as "net
payment" in the Contract, which means the
purchase payment less any applicable premium
taxes.
qualified Contracts 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 several subaccounts
established to receive and invest purchase
payments not allocated to the fixed account.
separate account value During the accumulation period, your Contract's
value in the separate account, which equals the
total value in each subaccount.
subaccount A subdivision of the separate account that
invests exclusively in the shares of a
specified portfolio and supports the Contracts.
Subaccounts corresponding to each portfolio
hold assets under the Contract during the
accumulation period. Other subaccounts
corresponding to each portfolio will hold
assets after the maturity date if you select a
variable annuity option.
surrender The termination of a Contract at the option of
the owner.
Trust Janus Aspen Series, an investment company
registered with the U.S. Securities and Exchange Commission.
valuation date/business
day Each day on which the NYSE is open for trading,
except when a subaccount's corresponding
portfolio does not value its shares. Western
Reserve is open for business on each day that
the NYSE
Janus Retirement Advantage Variable Annuity prospectus 5
<PAGE>
is open. When we use the term "business day,"
it has the same meaning as valuation date.
valuation period The period of time over which we determine the
change in the value of the subaccounts in order
to price accumulation units and annuity units.
Each valuation period begins at the close of
normal trading on the NYSE (currently 4:00 p.m.
Eastern time on each valuation date) and ends
at the close of normal trading of the NYSE on
the next valuation date.
Western Reserve
(we, us, our) Western Reserve Life Assurance Co. of Ohio.
6 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
SUMMARY
- --------------------------------------------------------------------------------
THE SECTIONS IN THIS SUMMARY CORRESPOND TO SECTIONS IN THIS
PROSPECTUS, WHICH DISCUSS THE TOPICS IN MORE DETAIL. PLEASE READ
THE ENTIRE PROSPECTUS CAREFULLY.
1. THE ANNUITY CONTRACT
The Janus Retirement Advantage(R) is a flexible payment variable
accumulation deferred annuity contract (the "Contract") offered
by Western Reserve. It is a contract between you, as the owner,
and Western Reserve, a life insurance company. The Contract
provides a way for you to invest on a tax-deferred basis in the
subaccounts of the separate account and the fixed account. We
intend the Contract to be used to accumulate money for retirement
or other long-term investment purposes.
The Contract allows you to direct your money into any of the 14
subaccounts. Each subaccount invests exclusively in a single
portfolio of the Janus Aspen Series (the "Trust"). The money you
invest in the subaccounts will fluctuate daily based on the
portfolio's investment results. The value of your investment in
the subaccounts is not guaranteed and may increase or decrease.
You bear the investment risk for amounts you invest in the
subaccounts.
You can also direct money to the fixed account. Amounts in the
fixed account earn interest annually at a fixed rate that is
guaranteed by us never to be less than 4%, and may be more. We
guarantee the interest, as well as principal, on money placed in
the fixed account.
You can transfer money between any of the investment choices
during the accumulation period, subject to certain limits on
transfers from the fixed account.
The Contract, like all deferred annuity contracts, has two
phases: the "accumulation period" and the "income phase." During
the accumulation period, earnings accumulate on a tax-deferred
basis and are taxed as ordinary income when you take them out of
the Contract. The income phase starts on the maturity date when
you begin receiving regular payments from your Contract. The
money
Janus Retirement Advantage Variable Annuity prospectus 7
<PAGE>
you can accumulate during the accumulation period, as well as the
annuity payment option you choose, will largely determine the
amount of any income payments you receive during the income
phase.
2. ANNUITY PAYMENTS (THE INCOME PHASE)
The Contract allows you to receive income under one of five
annuity payment options. You may choose from fixed payment
options or variable payment options. If you select a variable
payment option, the dollar amount of the payments you receive may
go up or down depending on the investment results of the
portfolios you invest in at that time. You cannot annuitize until
your Contract's fifth anniversary.
3. PURCHASE
You can buy this Contract with $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 14 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:
JANUS ASPEN SERIES
<TABLE>
<S> <C>
Growth Portfolio International Growth Portfolio
Aggressive Growth Portfolio Worldwide Growth Portfolio
Capital Appreciation Global Life Sciences Portfolio
Portfolio Global Technology Portfolio
Balanced Portfolio Flexible Income Portfolio
Equity Income Portfolio High-Yield Portfolio
Growth and Income Portfolio Money Market Portfolio
Strategic Value Portfolio
</TABLE>
Depending upon market conditions, you can make or lose money in
any of these subaccounts. We reserve the right to offer other
investment choices in the future.
8 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
You can also allocate your purchase payments to the fixed
account. The fixed account is not available in all states.
Residents of New Jersey and Washington may not direct or transfer
any money to the fixed account.
TRANSFERS. You have the flexibility to transfer assets within
your Contract. At any time during the accumulation period you may
transfer amounts among the subaccounts and between the
subaccounts and the fixed account. Certain restrictions apply.
5. EXPENSES
We do not take any deductions from purchase payments at the time
you buy the Contract. You invest the full amount of each purchase
payment in one or more of the investment choices.
During the accumulation period and the income phase, we deduct a
daily mortality and expense risk charge of 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. We currently waive this charge if the annuity value
of your Contract equals or exceeds $25,000 on the Contract
anniversary when this charge is payable. Although the Contract
permits us to assess this charge if you surrender your Contract,
we currently waive this charge at surrender.
We impose a $10 charge per transfer if you make more than 12
transfers among the subaccounts per Contract year.
We may deduct state premium taxes, which currently range from 0%
to 3.50%, when you make your purchase payments, if you surrender
the Contract or partially withdraw its value, or if we pay out
death benefit proceeds, or if you begin to receive regular
annuity payments. We only charge you premium taxes in those
states that require us to pay premium taxes.
Janus Retirement Advantage Variable Annuity prospectus 9
<PAGE>
The portfolios deduct management fees and expenses from amounts
you have invested in the portfolios. These charges currently
range from 0.43% to 1.25% annually, depending on the portfolio.
See the prospectuses for the Trust and the Annuity Contract Fee
Table on page 14 of this prospectus.
6. TAXES
The Contract's earnings are generally not taxed until you take
them out. For federal tax purposes, if you take money out during
the accumulation period, earnings come out first and are taxed as
ordinary income. If you are younger than 59 1/2 when you take
money out, you may be charged a 10% federal penalty tax on the
earnings. The annuity payments you receive during the income
phase are considered partly a return of your original investment
so that part of each payment is not taxable as income until the
"investment in the contract" has been fully recovered. Different
tax consequences may apply for a Contract used in connection with
a qualified retirement plan.
Death benefits are taxable and generally are included in the
income of the recipient as follows: if received under an annuity
payment option, death benefits are taxed in the same manner as
annuity payouts; if not received under an annuity payment option
(for instance, if paid out in a lump sum), death benefits are
taxed in the same manner as a partial withdrawal or complete
surrender.
7. ACCESS TO YOUR MONEY
You can take some or all of your money out anytime during the
accumulation period. However, you may not take a partial
withdrawal if it reduces the cash value below $2,500. No
withdrawals may be made from the fixed account without prior
consent from us. Access to amounts held in qualified contracts
may be restricted or prohibited. You may also have to pay federal
income tax and a penalty tax on any money you take out. No
withdrawal charges apply.
10 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
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.
The death benefit will be the greater of:
- the annuity value of your Contract on the death report day; or
- the total purchase payments you make to the Contract, reduced
by partial withdrawals.
The death benefit payable, if any, on or after the maturity date
depends on the annuity payment option selected. See Fixed Annuity
Payment Options and Variable Annuity Payment Options on pages 22
and 23 for a description of the annuity payment options. Please
note that not all payment options provide for a death benefit.
10. OTHER INFORMATION
RIGHT TO CANCEL PERIOD. You may return your Contract for a refund
within 10 days after you receive it. In most states, the amount
of the refund will generally be the total purchase payments we
have received, plus (or minus) any gains (or losses) in the
amounts you invested in the subaccounts. You will keep any gains,
and bear any losses, on amounts that you invested in the
subaccounts. If state law requires, we will refund your original
purchase payment(s). We determine the value of the refund as of
Janus Retirement Advantage Variable Annuity prospectus 11
<PAGE>
the date we receive the returned Contract at our administrative
office. We will pay the refund within 7 days after we receive
your written notice of cancellation and the returned Contract.
The Contract will then be deemed void. In some states you may
have more than 10 days, and/or receive a different refund amount.
WHO SHOULD PURCHASE THE CONTRACT? We have designed this Contract
for people seeking long-term tax deferred accumulation of assets,
generally for retirement. This includes persons who have
maximized their use of other retirement savings methods, such as
401(k) plans and individual retirement accounts. The tax-deferred
feature is most attractive to people in high federal and state
tax brackets. You should not buy this Contract if you are looking
for a short-term investment or if you cannot take the risk of
getting back less money than you put in. If you are purchasing
the Contract through a tax-favored arrangement, including
traditional IRAs and Roth IRAs, you should consider carefully the
costs and benefits of the Contract (including annuity income
benefits) before purchasing the Contract, since the tax-favored
arrangement itself provides tax-sheltered growth.
ADDITIONAL FEATURES. This Contract has additional features that
might interest you. These include the following:
- 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.
- SYSTEMATIC EXCHANGES: You can arrange to have a certain amount
of money automatically transferred monthly from one or any
combination of the fixed account, the Money Market, Flexible
Income, or the High-Yield subaccounts 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.
12 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
- 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 additional purchase
payments, transfers, withdrawals and/or change the allocation
of 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 annuity payment options, 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
Administrative Office
Attention: Annuity Department
P.O. Box 9052
Clearwater, FL 33758-9052
1-800-504-4440
www.janus.com
Janus Retirement Advantage Variable Annuity prospectus 13
<PAGE>
ANNUITY CONTRACT FEE TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average separate
OWNER TRANSACTION EXPENSES account value)
------------------------------------------------------------------------------------
<S> <C>
Sales Load On Purchase Payments...... Mortality and Expense Risk
None Charge(1)..................... 0.50%
Maximum Withdrawal Charge....... None Administrative Charge(1)...... 0.15%
Transfer Charge.............$10 After ----
12 Per Contract Year TOTAL SEPARATE ACCOUNT ANNUAL
EXPENSES....................... 0.65%
-------------------------------------
OTHER EXPENSES
-------------------------------------
ANNUAL CONTRACT CHARGE*.......$30 Per
Contract Year
* We waive the annual Contract charge
when the annuity value on the
Contract anniversary is equal to or
greater than $25,000.
------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO ANNUAL EXPENSES(2)
(as a percentage of average net assets)
----------------------------------------------------------------------------------------------
Total Annual
Total Annual Portfolio
Portfolio Operating
Janus Aspen Series Management Other Operating Expenses Total Expenses with
Portfolios Fee Expenses Without Waivers Waivers Waivers(3)
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Growth 0.65% 0.02% 0.67% N/A 0.67%
Aggressive Growth 0.65% 0.02% 0.67% N/A 0.67%
Capital Appreciation 0.65% 0.04% 0.69% N/A 0.69%
Balanced 0.65% 0.02% 0.67% N/A 0.67%
Equity Income 0.65% 0.63% 1.28% 0.03% 1.25%
Growth and Income 0.65% 0.40% 1.05% N/A 1.05%
Strategic Value 0.65% 0.35% 1.00% N/A 1.00%
International Growth 0.65% 0.11% 0.76% N/A 0.76%
Worldwide Growth 0.65% 0.05% 0.70% N/A 0.70%
Global Life Sciences 0.65% 0.19% 0.84% N/A 0.84%
Global Technology 0.65% 0.13% 0.78% N/A 0.78%
Flexible Income 0.65% 0.07% 0.72% N/A 0.72%
High-Yield 0.75% 4.17% 4.92% 3.92% 1.00%
Money Market 0.25% 0.18% 0.43% N/A 0.43%
--------------------------------------------------------------------------------------------------
</TABLE>
(1) These charges apply to each subaccount. They do not apply to the fixed
account. These charges apply during the accumulation period and the income
phase.
(2) The fee table information relating to the Janus portfolios was provided to
Western Reserve by the Trust. Western Reserve has not independently verified
such information. Actual future expenses of the portfolios may be greater or
less than those shown in the table.
(3) Expenses (except for Global Technology, Global Life Sciences and Strategic
Value Portfolios) are based upon expenses for the fiscal year ended December
31, 1999, restated to reflect a reduction in the management fee for Growth,
Aggressive Growth, Capital Appreciation, International
14 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
Growth, Worldwide Growth, Balanced, Equity Income and Growth and Income
Portfolios. Expenses for Global Technology, Global Life Sciences and
Strategic Value Portfolios are based on the estimated expenses that those
Portfolios expect to incur in their initial fiscal year. Expenses are stated
both with and without contractual waivers by Janus Capital. Waivers, if
applicable, are first applied against the management fee and then against
other expenses, and will continue until at least the next annual renewal of
the advisory agreement. All expenses are shown without the effect of any
expense offset arrangements.
Janus Retirement Advantage Variable Annuity prospectus 15
<PAGE>
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.
Because the Contract does not assess withdrawal charges, you will
pay the same amount of expenses whether or not you surrender,
annuitize, or remain invested in the Contract.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
If You Surrender, Annuitize* or
Remain Invested in the Contract at the
End of the Applicable Time Period
Subaccounts 1 Year 3 Years 5 Years 10 Years
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth $14 $43 $ 74 $163
Aggressive Growth $14 $43 $ 74 $163
Capital Appreciation $14 $44 $ 75 $166
Balanced $14 $43 $ 74 $163
Equity Income $20 $61 $105 $226
Growth and Income $18 $55 $ 94 $205
Strategic Value $17 $53 $ 92 $200
International Growth $15 $46 $ 79 $173
Worldwide Growth $14 $44 $ 76 $167
Global Life Sciences $16 $48 $ 83 $182
Global Technology $15 $46 $ 80 $176
Flexible Income $14 $45 $ 77 $169
High-Yield $17 $53 $ 92 $200
Money Market $11 $36 $ 62 $136
-----------------------------------------------------------------------------------------
</TABLE>
* You cannot annuitize your Contract before your Contract's fifth anniversary.
The fee table and example above will help you understand the
costs of investing in the subaccounts. The fee table and example
reflect the 1999 expenses (except as noted in the footnotes) of
the portfolios of the Trust and the subaccount fees and charges
without waivers or reductions but do not reflect premium taxes
which may range up to 3.50%, depending on the jurisdiction.
PLEASE REMEMBER THAT THE EXAMPLE IS AN ILLUSTRATION AND DOES NOT
REPRESENT PAST OR FUTURE EXPENSES. YOUR ACTUAL EXPENSES MAY BE
HIGHER OR LOWER THAN THOSE SHOWN. SIMILARLY, YOUR RATE OF RETURN
MAY BE MORE OR LESS THAN THE 5% ASSUMED RATE IN HE EXAMPLE.
16 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
The example above assumes that no transfer charges have been
assessed. In addition, the $30 annual Contract charge is
reflected as a charge of 0.04% based on an average Contract size
of $77,421.
FINANCIAL INFORMATION. We have included in Appendix A a financial
history of the accumulation unit values for the subaccounts.
Janus Retirement Advantage Variable Annuity prospectus 17
<PAGE>
1. THE ANNUITY CONTRACT
- --------------------------------------------------------------------------------
This prospectus describes the Janus Retirement Advantage(R)
Variable Annuity Contract offered by Western Reserve.
An annuity is a contract between you, the owner, and an insurance
company (in this case Western Reserve), where the insurance
company promises to pay you an income in the form of annuity
payments. These payments begin after the maturity date. (See
Section 2 on page 20.) Until the maturity date, your annuity is
in the accumulation period and the earnings are tax deferred. Tax
deferral means you generally are not taxed on your annuity until
you take money out of your annuity. After the maturity date, your
annuity switches to the income phase.
The Contract is a flexible payment variable accumulation deferred
annuity. You can use the Contract to accumulate funds for
retirement or other long-term financial planning purposes.
It is a "flexible payment" Contract because after you purchase
it, you can generally make additional investments of $100 or more
at any time, until the maturity date. But you are not required to
make any additional investments.
The Contract is a "variable" annuity because the value of your
Contract can go up or down based on the performance of your
investment choices. If you select the variable annuity portion of
the Contract, the amount of money you are able to accumulate in
your Contract during the accumulation period depends upon the
performance of your investment choices. If you elect to receive
variable annuity payments during the income phase of your
Contract, the amount of your annuity payments will also depend
upon investment performance.
The Contract also contains a fixed account. The fixed account
offers an interest rate that is guaranteed by Western Reserve to
equal at least 4% per year. There may be different interest rates
for each payment or transfer you direct to the fixed account
which are equal to or greater than the guaranteed rate. The
interest rates we set will be credited for periods of at least
one year measured from each payment or transfer date.
18 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
The fixed account is not available in all states. Residents of
New Jersey and Washington may not direct or transfer any money to
the fixed account.
Janus Retirement Advantage Variable Annuity prospectus 19
<PAGE>
2. ANNUITY PAYMENTS (THE INCOME PHASE)
- --------------------------------------------------------------------------------
You choose the date when annuity payments start under the
Contract. This is the maturity date. You can change this date by
giving us 30 days written notice. The maturity date cannot be
earlier than the end of the fifth Contract year. The maturity
date cannot be later than the annuitant's 90(th) birthday. The
maturity date may be earlier for qualified Contracts.
ELECTION OF ANNUITY PAYMENT OPTION. Before the maturity date, if
the annuitant is alive, you may choose an annuity payment option
or change your option. If you do not choose an annuity option by
the maturity date, we will make payments under Option D (see
below) as a Variable Life Income with 10 years of guaranteed
payments. You cannot change the annuity payment option after the
maturity date.
If you choose a variable payment option, you must specify how you
want the annuity proceeds divided among the subaccounts as of the
maturity date. If you do not specify, we will allocate the
annuity proceeds in the same proportion as the annuity value is
allocated among the investment options on the maturity date.
After the maturity date, you may make transfers among the
subaccounts, but you may not make transfers from or to the fixed
account; we may limit subaccount transfers to one per Contract
year.
Unless you specify otherwise, the annuitant named on the
application will receive the annuity payments. You can change the
annuitant or add a co-annuitant on the maturity date. 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.
20 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
ANNUITY PAYMENT OPTIONS UNDER THE CONTRACT
The Contract provides five annuity payment options that are
described below. You may choose any annuity payment option under
your Contract. You can choose to receive payments monthly,
quarterly, semi-annually or annually.
We will use your "annuity proceeds" to provide these payments.
The "annuity proceeds" is your annuity value on the maturity
date, less any premium tax that may apply. If your annuity
payment would be less than $20, then we will pay you the annuity
proceeds in one lump sum.
FIXED ANNUITY INCOME PAYMENTS. If you choose annuity payment
Option A, B or C, the dollar amount of each annuity payment will
be fixed on the maturity date and guaranteed by us. The payment
amount will depend on three things:
- The amount of the annuity proceeds on the maturity date;
- The interest rate we credit on those amounts (we guarantee a
minimum annual interest rate of 3%); and
- The specific payment option you choose.
VARIABLE ANNUITY INCOME PAYMENTS. If you choose variable annuity
payment Option D or E, the dollar amount of the first variable
payment will be determined in accordance with the annuity payment
rates set forth in the applicable table contained in the
Contract. The dollar amount of each additional variable payment
will vary based on the investment performance of the
subaccount(s) you invest in and the Contract's assumed investment
return of 5%. The dollar amount of each variable payment after
the first may increase, decrease or remain constant. If, after
all charges are deducted, the actual investment performance
exactly matches the Contract's assumed investment return of 5% at
all times, then the amount of the next variable annuity payment
would remain the same. If actual investment performance, after
all charges are deducted, exceeds the assumed investment return,
then the amount of the variable annuity payments would increase.
Janus Retirement Advantage Variable Annuity prospectus 21
<PAGE>
But, if actual investment performance, less charges, is lower
than the 5% assumed investment return, then the amount of the
variable annuity payments would decrease. The portfolio in which
you are invested must grow at a rate at least equal to the 5%
assumed investment return (plus the mortality and expense risk
charge of 0.50% annually and the administrative charge of 0.15%
annually) in order to avoid a decrease in the dollar amount of
variable annuity payments. For more information on how variable
annuity income payments are determined, see the SAI.
The annuity payment options are explained below. Some of the
annuity payment options may not be available in all states.
Options A, B, and C are fixed only. Options D and E are variable
only.
FIXED ANNUITY PAYMENT OPTIONS
PAYMENT OPTION A - FIXED INSTALLMENTS: We will pay the annuity in
equal payments over a fixed period of 5, 10, 15 or 20 years or
any other fixed period acceptable to Western Reserve.
PAYMENT OPTION B - LIFE INCOME - FIXED PAYMENTS:
- 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 10 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.
22 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
VARIABLE ANNUITY PAYMENT OPTIONS
PAYMENT OPTION D - VARIABLE LIFE INCOME: The annuity proceeds are
used to purchase variable annuity units in the subaccounts you
select. You may choose between:
- 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 10 years.
PAYMENT OPTION E - VARIABLE JOINT AND SURVIVOR LIFE INCOME: We
will make variable payments during the joint lifetime of the
annuitant and a co-annuitant of your choice. Payments will be
made as long as either person is living.
Other annuity payment options may be arranged by agreement with
us.
NOTE CAREFULLY: The death benefit payable after the maturity date
will be affected by the annuity option you choose.
IF:
- you choose Life Income with No Period Certain or a Joint and
Survivor Life Income (fixed or variable); and
- the annuitant(s), for example, dies before the due date of the
second annuity payment;
THEN:
- we may make only one annuity payment and there will be no death
benefit payable.
IF:
- you choose Fixed Installments, Life Income with 10 Years
Certain, Life Income with Guaranteed Return of Annuity Proceeds
or Variable Life Income with 10 Years Certain; and
- the person receiving payments dies prior to the end of the
guaranteed period;
Janus Retirement Advantage Variable Annuity prospectus 23
<PAGE>
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.
We will not pay interest on amounts represented by uncashed
annuity payment checks if the postal or other delivery service is
unable to deliver checks to the annuitant's address of record.
The annuitant is responsible to keep Western Reserve informed of
the annuitant's current address of record.
24 Janus Retirement Advantage Variable Annuity prospectus
<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 our administrative
office. Your check or draft must be honored in order for us to
pay any associated payments and benefits due under the Contract.
INITIAL PURCHASE REQUIREMENTS
The initial purchase payment for 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 at
our administrative office and your complete Contract information.
If we are unable to credit your initial purchase payment, we will
contact you within five business days and explain why. We will
also return your initial purchase payment at that time unless you
tell us to keep it. We will credit 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.
If you wish to make purchase payments by bank wire, please
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.
Janus Retirement Advantage Variable Annuity prospectus 25
<PAGE>
ADDITIONAL PURCHASE PAYMENTS
You are not required to make any additional purchase payments.
However, you can make additional purchase payments as often as
you like during the lifetime of the annuitant and prior to the
maturity date. We will accept purchase payments by bank wire or
check. Additional purchase payments must be at least $100 ($1,000
if by wire). We will credit any additional purchase payments you
make to your Contract at the accumulation unit value computed at
the end of the business day on which we receive them at our
administrative office. Our business day closes at 4:00 p.m.
Eastern Time. If we receive your purchase payments after the
close of our business day, we will calculate and credit them as
of the close of the next business day.
MAXIMUM ANNUAL PURCHASE PAYMENTS
We allow purchase payments up to a total of $1,000,000 per
Contract year without prior approval.
ALLOCATION OF PURCHASE PAYMENTS
On the Contract date, we will allocate your purchase payment to
the investment choices you selected on your application. Your
allocation must be in whole percentages and must total 100%. We
may in the future require that you allocate at least 10% of each
payment to any particular investment choice. We will allocate
additional purchase payments as you selected on your application,
unless you request a different allocation.
You may change allocations for future additional purchase
payments by writing or telephoning the administrative office,
subject to the limitations described below under Telephone
Transactions on page 34. The allocation change will apply to
purchase payments received after the date we receive the change
request.
26 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
YOU SHOULD REVIEW PERIODICALLY HOW YOUR PAYMENTS ARE DIVIDED
AMONG THE SUBACCOUNTS BECAUSE MARKET CONDITIONS AND YOUR OVERALL
FINANCIAL OBJECTIVES MAY CHANGE.
RIGHT TO CANCEL PERIOD
You may return your Contract for a refund within 10 days after
you receive it. In most states, the amount of the refund will
generally be the total purchase payments we have received, plus
(or minus) any gains (or losses) in the amounts you invested in
the subaccounts. You will keep any gains, and bear any losses, on
amounts that you invested in the subaccounts. If state law
requires, we will refund your original purchase payment(s). We
determine the value of the refund as of the date we receive the
returned Contract at our administrative office. We will pay the
refund within 7 days after we receive your written notice of
cancellation and the returned Contract. The Contract will then be
deemed void. In some states you may have more than 10 days,
and/or receive a different refund amount.
ANNUITY VALUE
You should expect your annuity value to change from valuation
period to valuation period to reflect the investment performance
of the portfolios, the interest credited to your value in the
fixed account, and the fees and charges we deduct. A valuation
period begins at the close of business on each business day and
ends at the close of business on the next succeeding valuation
date. A valuation date is any day the NYSE is open. Our business
day closes when the NYSE closes, usually 4:00 P.M. Eastern time.
We observe the same holidays as the NYSE.
ACCUMULATION UNITS
We measure the value of your Contract during the accumulation
period by using a measurement called an accumulation unit. During
the income phase, we use a measurement called an annuity unit.
When you direct money into a subaccount, we
Janus Retirement Advantage Variable Annuity prospectus 27
<PAGE>
credit your Contract with accumulation units for that subaccount.
We determine how many accumulation units to credit by dividing
the dollar amount you direct to the subaccount by the
subaccount's accumulation unit value as of the end of that
valuation date. If you withdraw or transfer out of a subaccount,
or if we assess a transfer 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 valuation date. The new
value reflects the investment performance of the underlying
portfolio and the daily deduction of the mortality and expense
risk charge and the administrative charge. For a detailed
discussion of how we determine accumulation unit values, see the
SAI.
28 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
4. INVESTMENT CHOICES
- --------------------------------------------------------------------------------
THE SEPARATE ACCOUNT
The separate account currently consists of 14 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
Balanced Portfolio
Equity Income Portfolio
Growth and Income Portfolio
Strategic Value Portfolio
International Growth Portfolio
Worldwide Growth Portfolio
Global Life Sciences Portfolio
Global Technology Portfolio
Flexible Income Portfolio
High-Yield Portfolio
Money Market Portfolio
The general public may not purchase these portfolios. Their
investment objectives and policies may be similar to other
portfolios and mutual funds managed by the same investment
adviser 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(S). MORE DETAILED INFORMATION, INCLUDING AN EXPLANATION
OF EACH PORTFOLIO'S INVESTMENT OBJECTIVE, MAY BE FOUND IN THE
TRUST'S CURRENT PROSPECTUSES, WHICH ARE ATTACHED TO THIS
PROSPECTUS. YOU SHOULD READ THE PROSPECTUSES FOR THE TRUST
CAREFULLY BEFORE YOU INVEST.
Janus Retirement Advantage Variable Annuity prospectus 29
<PAGE>
THE FIXED ACCOUNT
Purchase payments you allocate to and amounts you transfer to the
fixed account become part of the general account of Western
Reserve. Interests in the general account have not been
registered under the Securities Act of 1933 (the "1933 Act"), nor
is the general account registered as an investment company under
the Investment Company Act of 1940, as amended (the "1940 Act").
Accordingly, neither the general account nor any interests
therein are generally subject to the provisions of the 1933 Act
or 1940 Act. Western Reserve has been advised that the staff of
the SEC has not reviewed the disclosure in this prospectus which
relate to the fixed account.
We guarantee that the interest credited to the fixed account will
not be less than 4% per year. We have no formula for determining
fixed account interest rates. We establish the interest rate, at
our sole discretion, for each purchase payment or transfer into
the fixed account. Rates are guaranteed for at least one year.
If you select the fixed account, your money will be placed with
the other general assets of Western Reserve. All assets in our
general account are subject to the general liabilities of our
business operations. The amount of money you are able to
accumulate in the fixed account during the accumulation period
depends upon the total interest credited. The amount of annuity
payments you receive during the income phase under a fixed
annuity option will remain level for the entire income phase. You
may not transfer money between the fixed account and the
subaccounts during the income phase.
When you request a transfer or partial withdrawal from the fixed
account, we will account for it on a first-in, first-out ("FIFO")
basis, for purposes of crediting your interest. This means that
we will take the deduction from the oldest money you have put in
the fixed account. You may not make partial withdrawals from the
fixed account unless we consent.
30 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
The fixed account is not available in all states. Residents of
New Jersey and Washington may not direct or transfer any money to
the fixed account.
TRANSFERS
During the accumulation period, you may make transfers from any
subaccount as often as you wish. However, if you elect the asset
rebalancing program, you may not make any transfers if you want
to continue in the program. A transfer would automatically cancel
your participation in the asset rebalancing program. We may also
limit "substantive" transfers as discussed below.
Transfers from the fixed account are allowed once each Contract
year. We must receive written notice within 30 days after a
Contract anniversary. The amount that may be transferred is the
greater of: (1) 25% of the dollar amount in the fixed account, or
(2) the amount you transferred out of the fixed account in the
previous Contract year.
During the income phase of your Contract, you may transfer values
from one subaccount to another. No transfers may be made to or
from the fixed account. The minimum amount that can be
transferred during this phase is the lesser of $10 of monthly
income, or the entire monthly income of the variable annuity
units in the subaccount from which the transfer is being made. We
may limit subaccount transfers to one per Contract year.
The fixed account is not available in all states. Residents of
New Jersey and Washington may not transfer any of their Contract
value to the fixed account.
Transfers may be made by telephone, subject to limitations
described below under Telephone Transactions on page 34.
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.
Janus Retirement Advantage Variable Annuity prospectus 31
<PAGE>
Transfers to and from the subaccounts will be processed based on
the accumulation unit values determined at the end of the
business day on which we receive your written, telephoned, or
faxed request at our administrative office, provided we receive
your request before the close of our business day (usually 4:00
p.m. Eastern Time). If we receive your request at our
administrative office after the close of our business day, we
will process the transfer request using the accumulation unit
value for the next business day.
The Contract's transfer privilege is not intended to afford
Contract owners a way to speculate on short-term movements in the
market. Excessive use of the transfer privilege can potentially
disrupt the management of the portfolios and increase transaction
costs. Accordingly, we have established a policy of limiting
excessive transfer activity. We will limit transfer activity to
two substantive transfers (at least 30 days apart) from each
portfolio, except from the Money Market Portfolio during any
12-month period. We interpret "substantive" to mean either a
dollar amount large enough to have a negative impact on a
portfolio's operations, or a series of movements between
portfolios. We will not limit non-substantive transfers.
We may, at any time, discontinue transfer privileges, modify our
procedures, or limit the number of transfers we permit.
SYSTEMATIC EXCHANGES
Systematic exchanges allows you to transfer systematically a
specific amount each month from the fixed account, the Money
Market subaccount, the Flexible Income subaccount, the High-
Yield subaccount, or any combination of these accounts to a
different subaccount. You may specify the dollar amount to be
transferred monthly; however, you must transfer a total of $100
monthly. 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 12 free
transfers allowed during each Contract year.
32 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
If you make systematic exchanges from the fixed account, each
month you may transfer no more than 1/10th of the dollar amount
in the fixed account on the date you start systematic exchanges.
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. Systematic exchanges do 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 are not
available if you have elected the asset rebalancing program or if
you elect to participate in any asset allocation service provided
by a third party.
ASSET REBALANCING PROGRAM
During the accumulation period you can instruct us to rebalance
automatically the amounts in your subaccounts to maintain your
desired asset allocation. This feature is called asset
rebalancing and can be started and stopped at any time free of
charge. However, we will not rebalance if you are in systematic
exchanges, you elect to participate in any asset allocation
service provided by a third party, or if you request any other
transfer. Asset rebalancing ignores amounts in the fixed account.
You can choose to rebalance monthly, quarterly, semi-annually, or
annually.
To qualify for asset rebalancing, a minimum annuity value of
$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.
There is no charge for this program. Each reallocation which
occurs under asset rebalancing will be counted towards the 12
free transfers allowed during each Contract year.
We reserve the right to discontinue, modify or suspend the asset
rebalancing program at any time.
Janus Retirement Advantage Variable Annuity prospectus 33
<PAGE>
TELEPHONE TRANSACTIONS
You may make additional purchase payments, request 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.
34 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
5. EXPENSES
- --------------------------------------------------------------------------------
There are charges and expenses associated with your Contract that
reduce the return on your investment in the Contract. Unless we
indicate otherwise, the expenses described below apply only
during the accumulation period.
PARTIAL WITHDRAWALS AND COMPLETE SURRENDERS
During the accumulation period, you can withdraw part or all of
the cash value. We will not deduct any withdrawal charges. Cash
value is the annuity value less premium taxes.
MORTALITY AND EXPENSE RISK CHARGE
We charge a fee as compensation for bearing certain mortality and
expense risks under the Contract. Examples include a guarantee of
annuity rates, the death benefits, certain Contract expenses, and
assuming the risk that the current charges will be insufficient
in the future to cover costs of administering the Contract. The
mortality and expense risk charge is equal, on an annual basis,
to 0.50% of the average daily net assets that you have invested
in each subaccount. This charge is deducted daily from the
subaccounts during both the accumulation period and the income
phase.
If this charge does not cover our actual mortality and expense
risk costs, we absorb the loss. Conversely, if the charge covers
more than actual costs, the excess is added to our surplus. We
expect to profit from this charge. We may use any profits to
cover distribution costs.
ADMINISTRATIVE CHARGE
We deduct an annual administrative charge to cover the costs of
administering the Contracts. This charge is assessed daily and is
equal to 0.15% per year of the daily net assets that you have
invested in each subaccount. This charge is deducted from the
subaccounts during both the accumulation period and the income
phase. This charge is guaranteed not to be increased.
Janus Retirement Advantage Variable Annuity prospectus 35
<PAGE>
ANNUAL CONTRACT CHARGE
We deduct an annual Contract charge of $30 from your annuity
value on each Contract anniversary. We deduct this charge from
the fixed account and each subaccount in proportion to the amount
of annuity value in each account. We deduct the charge to cover
our costs of administering the Contract. We currently waive this
charge if the annuity value of your Contract equals or exceeds
$25,000 on the Contract anniversary when this charge is payable.
Although the Contract permits us to assess this charge if you
surrender your Contract, we currently waive this charge on
surrender. We reserve the right to modify this waiver upon 30
days written notice to you.
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.
PREMIUM TAXES
Some states assess premium taxes on the purchase payments you
make. A premium tax is a regulatory tax that some states assess
on the purchase payments made into a contract. If we should have
to pay any premium tax, we may deduct the tax from each purchase
payment or from the accumulation unit value as we incur the tax.
We may deduct the total amount of premium taxes, if any, from the
annuity value when:
- you elect to begin receiving annuity payments;
- you surrender the Contract;
36 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
- you request a partial withdrawal; or
- a death benefit is paid.
As of the date of this prospectus, the following states assess a
premium tax on all initial and subsequent purchase payments:
<TABLE>
<CAPTION>
State Qualified Contracts Nonqualified Contracts
----- ------------------- ----------------------
<S> <C> <C>
South Dakota 0.00% 1.25%
Wyoming 0.00% 1.00%
</TABLE>
As of the date of this prospectus, the following states assess a
premium tax against the accumulation unit value if you choose an
annuity payment option instead of receiving a lump sum
distribution:
<TABLE>
<CAPTION>
State Qualified Contracts Nonqualified Contracts
----- ------------------- ----------------------
<S> <C> <C>
California 0.50% 2.35%
Kentucky 2.00% 2.00%
Maine 0.00% 2.00%
Nevada 0.00% 3.50%
West Virginia 1.00% 1.00%
</TABLE>
FEDERAL, STATE AND LOCAL TAXES
We may in the future deduct charges from the Contract for any
taxes we incur because of the Contract. However, no deductions
are being made at the present time.
PORTFOLIO MANAGEMENT FEES
The value of the assets in each subaccount is reduced by the
management fees and expenses paid by the portfolios of the Trust.
A description of these fees and expenses is found in the Annuity
Contract Fee Table section on page 14 of this prospectus and in
the Trust prospectuses.
Janus Retirement Advantage Variable Annuity prospectus 37
<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 nonqualified (discussed below).
You will generally not be taxed on increases in the value of your
Contract until a distribution occurs - either as a partial
withdrawal, complete surrender or as annuity payments.
When a non-natural person (e.g., corporations or certain other
entities other than tax-qualified trusts) owns a nonqualified
Contract, the Contract will generally not be treated as an
annuity for tax purposes.
QUALIFIED AND NONQUALIFIED CONTRACTS
If you purchase the Contract under an individual retirement
annuity, your Contract is referred to as a qualified Contract.
If you purchase the Contract as an individual and not under a
qualified Contract, your Contract is referred to as a
nonqualified Contract.
38 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
Because variable annuity contracts provide federal tax deferral
whether purchased as a qualified Contract or nonqualified
Contract, you should consider whether the features and benefits
unique to variable annuities are appropriate for your needs when
purchasing a qualified Contract.
A qualified Contract may be used in connection with an:
- 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 IRAs and the
tax consequences associated with them in the SAI.
PARTIAL WITHDRAWALS AND COMPLETE SURRENDERS - NONQUALIFIED
CONTRACTS
In general, if you make a withdrawal (partial or systematic) from
your Contract, the Code treats that withdrawal as first coming
from earnings and then from your purchase payments. When you make
a withdrawal you are taxed on the amount of the withdrawal that
is earnings. When you make a complete surrender you are generally
taxed on the amount that your surrender proceeds exceed your
total purchase payments. Pledges and assignments are taxed in the
same manner as partial withdrawals and complete surrenders.
Different rules apply for annuity payments.
In the event of a partial withdrawal or systematic partial
withdrawal from, or complete surrender of, a nonqualified
Janus Retirement Advantage Variable Annuity prospectus 39
<PAGE>
Contract, we will withhold for tax purposes the minimum amount
required by law, unless the owner affirmatively elects, before
payments begin, to have either nothing withheld or a different
amount withheld.
The Code also provides that withdrawn earnings may be subject to
a penalty. The amount of the penalty is equal to 10% of the
amount that is includable in income. Some withdrawals will be
exempt from the penalty. They include any amounts:
- paid on or after the taxpayer reaches age 59 1/2;
- paid after the owner 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
- which come from purchase payments made prior to August 14,
1982.
MULTIPLE CONTRACTS
All nonqualified, deferred annuity contracts entered into after
October 21, 1988 that we issue (or our affiliates issue) to the
same owner during any calendar year are to be treated as one
annuity contract for purposes of determining the amount
includable in an individual's gross income. There may be other
situations in which the Treasury may conclude that it would be
appropriate to aggregate two or more annuity contracts purchased
by the same owner. You should consult a competent tax advisor
before purchasing more than one Contract or other annuity
contracts.
40 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
DIVERSIFICATION AND DISTRIBUTION REQUIREMENTS
The Code provides that the underlying investments for a
nonqualified variable annuity must satisfy certain
diversification requirements in order to be treated as an annuity
contract. Qualified and nonqualified Contracts must meet certain
distribution requirements upon an owner's death in order to be
treated as an annuity contract. A qualified Contract (except a
Roth IRA) must also meet certain distribution requirements during
the owner's life. These diversification and distribution
requirements are discussed in the SAI. Western Reserve may modify
the Contract to attempt to maintain favorable tax treatment.
PARTIAL WITHDRAWALS AND COMPLETE SURRENDERS - QUALIFIED CONTRACTS
The above information describing the taxation of nonqualified
Contracts does not apply to qualified Contracts. There are
special rules that govern qualified Contracts, including rules
restricting when amounts can be paid from the Contracts and
providing that a penalty tax may be assessed on amounts
distributed from the Contract prior to the date you reach age
59 1/2, unless you meet one of the exceptions to this rule. We
have provided more information in the SAI.
In the case of a partial withdrawal, systematic partial
withdrawal, or complete surrender distributed to a participant or
beneficiary under a qualified Contract (other than a Roth IRA as
to which there are special rules), a ratable portion of the
amount received is taxable, generally based on the ratio of the
investment in the Contract to the total annuity value. The
"investment in the contract" generally equals the portion, if
any, of any purchase payments paid by or on behalf of an
individual under a Contract which is not excluded from the
individual's gross income. For Contracts issued in connection
with qualified plans, the "investment in the contract" can be
zero.
Pledges and assignments of qualified Contracts are taxed in the
same manner as withdrawals from such Contracts.
Janus Retirement Advantage Variable Annuity prospectus 41
<PAGE>
TAXATION OF DEATH BENEFIT PROCEEDS
We may distribute amounts from the Contract because of the death
of an owner or the annuitant. Generally, such amounts are
includable in the income of the recipient:
- if distributed in a lump sum, these amounts are taxed in the
same manner as a full surrender; or
- if distributed under an annuity payment option, these amounts
are taxed in the same manner as annuity payments.
For these purposes, the "investment in the contract" is not
affected by the owner's or annuitant's death. That is, the
"investment in the contract" remains generally the total purchase
payments, less amounts received which were not includable in
gross income.
ANNUITY PAYMENTS
Although the tax consequences may vary depending on the annuity
payment option you select, in general, for nonqualified and
certain qualified Contracts (other than a Roth IRA, as to which
there are special rules), only a portion of the annuity payments
you receive will be includable in your gross income.
The excludable portion of each annuity payment you receive
generally will be determined as follows:
- 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 includable in gross
income. Once the "investment in the contract" has been fully
42 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
recovered, the full amount of any additional annuity payments is
includable in gross income.
If we permit you to select more than one annuity payment option,
special rules govern the allocation of the Contract's entire
"investment in the contract" to each such option, for purposes of
determining the excludable amount of each payment received under
that option. We advise you to consult a competent tax advisor as
to the potential tax effects of allocating amounts to any
particular annuity payment option.
If, after the maturity date, annuity payments stop because of an
annuitant's death, the excess (if any) of the "investment in the
contract" as of the maturity date over the aggregate amount of
annuity payments received that was excluded from gross income is
generally allowable as a deduction for your last tax return.
TRANSFERS, ASSIGNMENTS OR EXCHANGES OF CONTRACTS
If you transfer your ownership or assign a Contract, designate an
annuitant or other beneficiary who is not also the owner, select
certain maturity dates, or change annuitants, you may trigger
certain income or gift tax consequences that are beyond the scope
of this discussion. If you contemplate any such transfer,
assignment, selection, or change, you should contact a competent
tax advisor with respect to the potential tax effects of such a
transaction.
POSSIBLE TAX LAW CHANGES
Although the likelihood of legislative changes is uncertain,
there is always the possibility that the tax treatment of the
Contract could change by legislation or otherwise. You should
consult a tax advisor with respect to legal developments and
their effect on the Contract.
Janus Retirement Advantage Variable Annuity prospectus 43
<PAGE>
7. ACCESS TO YOUR MONEY
- --------------------------------------------------------------------------------
PARTIAL WITHDRAWALS AND COMPLETE SURRENDERS
You can have access to the money in your Contract in several
ways:
- by making a withdrawal (either a partial withdrawal or complete
surrender); or
- by taking annuity payments.
If you want to surrender your Contract completely, you will
receive cash value, which equals the annuity value of your
Contract minus any premium taxes.
The cash value will be determined at the accumulation unit value
next determined as of the end of the business day (usually 4:00
p.m. Eastern Time) on which we receive your request for partial
withdrawal or complete surrender at our administrative office,
unless you specify a later date in your request.
No partial withdrawal is permitted if the withdrawal would reduce
the cash value below $2,500. You may not make partial withdrawals
from the fixed account unless we consent. Unless you tell us
otherwise, we will take the withdrawal from each of the
investment choices in proportion to the cash value.
Remember that any withdrawal you make will reduce the annuity
value and might reduce the amount of the death benefit. See
Section 9, Death Benefit, and the SAI for more details.
Income taxes, federal tax penalties and certain restrictions may
apply to any partial withdrawals or any complete surrender you
make.
We must receive a properly completed surrender request which must
contain your original signature. If you live in a community
property state, your spouse must also sign the surrender request.
We will accept telephone requests for partial withdrawals as long
as the withdrawal proceeds are being sent to the address of
record. The maximum withdrawal amount you may request by
telephone is $50,000.
44 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
When we incur extraordinary expenses, such as wire transfers or
overnight mail expenses, for expediting delivery of your partial
withdrawal or complete surrender payment, we will deduct that
charge from the payment. We charge $15 for a wire transfer and
$20 for an overnight delivery ($30 for Saturday delivery).
For your protection, we will require a signature guarantee for:
- all requests for partial withdrawals or surrenders over
$500,000; or
- 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.
Notarization is not an acceptable form of signature guarantee.
If the Contract's owner is not an individual, additional
information may be required. If you own a qualified Contract, the
Code may require your spouse to consent to any withdrawal. 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 partial
withdrawal, a complete surrender, a death benefit, or the death
of the owner of a nonqualified Contract, will generally occur
within seven business days from the date all required information
is received by us. We may be permitted to defer such payment from
the separate account if:
- the NYSE is closed for other than usual weekends or holidays or
trading on the NYSE is otherwise restricted; or
Janus Retirement Advantage Variable Annuity prospectus 45
<PAGE>
- 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
complete surrenders from the fixed account for up to six months.
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 ($50 if by direct deposit)..
Your initial purchase payment, if a new Contract, or your cash
value, if an existing Contract, must equal at least $2,500. We
will not process a systematic partial withdrawal if the cash
value for the entire Contract would be reduced below $25,000. No
systematic partial withdrawals are permitted from the fixed
account.
You may stop systematic partial withdrawals at any time, but we
must receive written notice at least 30 days prior to the date
systematic partial withdrawals are to be discontinued. We reserve
the right to discontinue offering systematic partial withdrawals
30 days after we send you written notice.
Income taxes, federal tax penalties and other restrictions may
apply to any systematic partial withdrawal you receive.
46 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
8. PERFORMANCE
- --------------------------------------------------------------------------------
We periodically advertise performance of the subaccounts and
investment portfolios. We may disclose at least four different
kinds of performance.
First, we may disclose standardized total return figures for the
subaccounts that reflect the deduction of all charges assessed
during the accumulation period under the Contract, including the
mortality and expense charge, the administrative charge, and the
annual Contract charge. These figures are based on the actual
historical performance investing in the underlying portfolios of
the subaccounts since their inception, adjusted to reflect
current Contract charges.
Second, we may disclose total return figures on a
non-standardized basis. This means that the data may be presented
for different time periods and different dollar amounts. We will
only disclose non-standardized performance data if it is
accompanied by standardized total return data.
Third, we may present historic performance data for the
portfolios since their inception reduced by some or all fees and
charges under the Contract. Such adjusted historic performance
includes data that precedes the inception dates of the
subaccounts, but is designed to show the performance that would
have resulted if the Contract had been available during that
time.
Fourth, we may include in our advertising and sales materials,
tax-deferred compounding charts and other hypothetical
illustrations, which may include comparisons of currently taxable
and tax-deferred investment programs, based on selected tax
brackets.
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.
Janus Retirement Advantage Variable Annuity prospectus 47
<PAGE>
9. DEATH BENEFIT
- --------------------------------------------------------------------------------
We will pay a death benefit to your beneficiary, under certain
circumstances, if you are both the owner and the annuitant and
you die during the accumulation period. (If you are not the
annuitant, a death benefit may or may not be paid. See below.)
The beneficiary may choose an annuity payment option, or may
choose to receive a lump sum.
WHEN WE PAY A DEATH BENEFIT
BEFORE THE MATURITY DATE
We will pay a death benefit to your beneficiary IF:
- 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.
Federally prescribed mandatory distribution requirements apply to
the annuity value upon the death of any owner or annuitant. These
restrictions are detailed in the SAI.
AFTER THE MATURITY DATE
The death benefit payable, if any, on or after the maturity date
depends on the annuity payment option selected. See Fixed Annuity
Payment Options and Variable Annuity Payment Options on pages 22
and 23 for a description of the annuity payment options. Please
note that not all payment options provide for a death benefit.
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;
48 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
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.
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:
- if the successor owner is alive and is the owner's spouse, that
person becomes the new owner and the Contract will continue;
- if the successor owner is alive and is not the owner's spouse,
the successor owner will become the new owner. This new owner
generally must surrender the Contract for the cash value within
five years of the former owner's death; or
- if the owner does not name a successor owner or no successor
owner is alive, the owner's estate will become the new owner
and cash value must generally be distributed within 5 years of
the former owner's death.
NOTE CAREFULLY. If no probate estate is opened because the owner
has precluded the opening of a probate estate by means of
Janus Retirement Advantage Variable Annuity prospectus 49
<PAGE>
a trust or other instrument, unless Western Reserve receives
written notice of the trust as a successor owner signed prior to
the owner's death, that trust may not exercise ownership rights
to the Contract. It may be necessary to open a probate estate in
order to exercise ownership rights to the Contract if no
contingent owner is named in a written notice received by Western
Reserve.
AMOUNT OF DEATH BENEFIT DURING THE ACCUMULATION PERIOD
Death benefit provisions may differ from state to state. The
death benefit may be paid as a lump sum or as annuity payments,
but in all events will be paid in accordance with any applicable
federal and state laws, rules and regulations.
If the annuitant dies during the accumulation period and if a
death benefit is payable, the death benefit will be the greater
of:
- the annuity value of your Contract on the death report day; or
- the total purchase payments you make to the Contract, reduced
by partial withdrawals.
ALTERNATE PAYMENT ELECTIONS BEFORE THE MATURITY DATE
The beneficiary may elect to receive the death benefit in a lump
sum payment, or (if not your surviving spouse) to receive
payment:
1. within 5 years of the date of the annuitant's death;
2. over a specific number of years, not to exceed the
beneficiary's life expectancy, with payments starting within
one year of the annuitant's death; or
3. under a life annuity payout option, with payments starting
within one year of the annuitant's death.
Multiple beneficiaries may choose individually among any of the
three options.
If the beneficiary chooses 1 or 2 above, this Contract remains in
effect and remains in the accumulation period until it terminates
50 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
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.
Janus Retirement Advantage Variable Annuity prospectus 51
<PAGE>
10. OTHER INFORMATION
- --------------------------------------------------------------------------------
OWNERSHIP
You, as owner of the Contract, exercise all rights under the
Contract, including the right to transfer of ownership (subject
to any assignee or irrevocable beneficiary's consent). You can
change the owner at any time by notifying us in writing. An
ownership change may be a taxable event.
ANNUITANT
The annuitant is the person named in the application to receive
annuity payments. If no person is named, the owner will be the
annuitant. As of the maturity date, and upon our agreement, the
owner may change the annuitant or, if either annuity Option C or
Option E has been selected, add a co-annuitant. On the maturity
date, the annuitant(s) will become the payee(s) and receive the
annuity payments.
BENEFICIARY
The beneficiary is the person who receives the death benefit upon
the death of the annuitant when the owner is the annuitant. You
may change the beneficiary during the lifetime of the annuitant,
subject to the rights of any irrevocable beneficiary. Any change
must be made in writing and received by us at our administrative
office and, if accepted, will be effective as of the date on
which the request was signed by the owner. Prior to the maturity
date, if no owner or beneficiary survives the annuitant, the
owner's estate will be the beneficiary. In the case of certain
qualified Contracts, the Treasury Regulations prescribe certain
limitations on the designation of a beneficiary. See the SAI for
more details on the beneficiary.
ASSIGNMENT
You can also assign the Contract any time prior to the maturity
date. Western Reserve will not be bound by the assignment until
we receive written notice of the assignment. Western Reserve will
52 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
not be liable for any payment or other action we take in
accordance with the Contract before we receive notice of the
assignment. An assignment may be a taxable event. There may be
limitations on your ability to assign a qualified Contract and
such assignments may be subject to tax penalties and taxed as
distributions under the Code.
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
Western Reserve was incorporated under the laws of Ohio on
October 1, 1957. It is engaged in the business of writing life
insurance policies and annuity contracts. Western Reserve is
wholly-owned by First AUSA Life Insurance Company, a stock life
insurance company which is wholly-owned indirectly by AEGON USA,
Inc. ("AEGON USA"), which conducts most of its operations through
subsidiary companies engaged in the insurance business or in
providing non-insurance financial services. All of the stock of
AEGON USA is indirectly owned by AEGON N.V. of the Netherlands,
the securities of which are publicly traded. AEGON N.V., a
holding company, conducts its business through subsidiary
companies engaged primarily in the insurance business. Western
Reserve is licensed in the District of Columbia, Guam, Puerto
Rico and in all states except New York.
THE SEPARATE ACCOUNT
Western Reserve established a separate account, called the WRL
Series Annuity Account 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
portfolio. Currently, there are 14 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.
Janus Retirement Advantage Variable Annuity prospectus 53
<PAGE>
The separate account is registered with the SEC as a unit
investment trust under the 1940 Act. However, the SEC does not
supervise the management, the investment practices, or the
Contracts of the separate account or Western Reserve.
The assets of the separate account are held in Western Reserve's
name on behalf of the separate account and belong to Western
Reserve. However, the assets underlying the Contracts are not
chargeable with liabilities arising out of any other business
Western Reserve may conduct. The income, gains and losses,
realized and unrealized, from the assets allocated to each
subaccount are credited to and charged against that subaccount
without regard to the income, gains and losses from any other of
our accounts or subaccounts.
Information about the separate account can be reviewed and copied
at the SEC's Public Reference Room in Washington, D.C. You may
obtain information about the operation of the public reference
room by calling the SEC at 1-800-SEC-0330. In addition, the SEC
maintains a web site (www.sec.gov) that contains other
information regarding the separate account.
VOTING RIGHTS
Western Reserve will vote all shares of the portfolios in
accordance with instructions we receive from you and other owners
that have voting interests in the portfolios. We will send you
and other owners written requests for instructions on how to vote
those shares. When we receive those instructions, we will vote
all of the shares in accordance with those instructions. We will
vote shares for which no timely instructions were received in the
same proportion as the voting instructions we received. However,
if we determine that we are permitted to vote the shares in our
own right, we may do so. Each person having a voting interest
will receive proxy material, reports, and other materials
relating to the appropriate portfolio. More information on voting
rights is provided in the SAI.
54 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
DISTRIBUTION OF THE CONTRACTS
AFSG Securities Corporation ("AFSG") is the principal underwriter
of the Contracts. Like Western Reserve, it is an indirect wholly-
owned subsidiary of AEGON USA. It is located at 4333 Edgewood
Road N.E., Cedar Rapids, IA 52499-0001. AFSG is registered as a
broker/dealer under the Securities Exchange Act of 1934. It is a
member of the National Association of Securities Dealers, Inc.
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.
The fixed account is not available in all states. Residents of
New Jersey and Washington may not direct or transfer any money to
the fixed account.
IMSA
We are a member of the Insurance Marketplace Standards
Association ("IMSA"). IMSA is an independent, voluntary
organization of life insurance companies. It promotes high
ethical standards in the sales and advertising of individual life
insurance and annuity products. Companies must undergo a rigorous
self and independent assessment of their practices to become a
Janus Retirement Advantage Variable Annuity prospectus 55
<PAGE>
member of IMSA. The IMSA logo in our sales literature shows our
ongoing commitment to these standards.
LEGAL PROCEEDINGS
Western Reserve, like other life insurance companies, is involved
in lawsuits. We are not aware of any class lawsuits naming us as
a defendant or involving the separate account. In some lawsuits
involving other insurers, substantial damages have been sought
and/or material settlement payments have been made. Although the
outcome of any litigation cannot be predicted with certainty, We
believe that at the present time there are no pending or
threatened lawsuits that are reasonably likely to have a material
adverse impact on the separate account, AFSG, or Western Reserve.
FINANCIAL STATEMENTS
The financial statements of Western Reserve and the separate
account are included in the SAI.
56 Janus Retirement Advantage Variable Annuity prospectus
<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 an SAI should be directed to:
Western Reserve Life
Administrative Office
Attention: Annuity Department
P.O. Box 9052
Clearwater, Florida 33758-9052
1-800-504-4440
Janus Retirement Advantage Variable Annuity prospectus 57
<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
12/31/99 $26.315 $37.644 2,014,953.327
---------------------------------------------------------------------------------------------
</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
12/31/99 $27.546 $61.688 1,646,464.597
---------------------------------------------------------------------------------------------
</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
12/31/99 $19.801 $32,853 1,511,875.364
---------------------------------------------------------------------------------------------
</TABLE>
58 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
<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
12/31/99 $24.764 $31.187 882,216.822
---------------------------------------------------------------------------------------------
</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
12/31/99 $19.487 $27.411 692,274.711
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
GROWTH AND 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>
5/1/98(1)-12/31/98 $10.000 $11.928 359,656.882
12/31/99 $11.928 $20.625 808,516.942
---------------------------------------------------------------------------------------------
</TABLE>
(1) Commencement of operations of these subaccounts.
Janus Retirement Advantage Variable Annuity prospectus 59
<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
12/31/99 $21.647 $39.200 823,130.768
---------------------------------------------------------------------------------------------
</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
12/31/99 $30.160 $49.277 1,946,606.109
---------------------------------------------------------------------------------------------
</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
12/31/99 $15.858 $16.008 324,319.325
---------------------------------------------------------------------------------------------
</TABLE>
60 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
<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
12/31/99 $12.973 $13.772 117,693.841
---------------------------------------------------------------------------------------------
</TABLE>
<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
12/31/99 $11.752 $12.257 2,812,034.805
---------------------------------------------------------------------------------------------
</TABLE>
Because the Global Life Sciences Portfolio and the Global Technology Portfolio
did not commence operations until January 15, 2000 and because the Strategic
Value Portfolio did not commence operations until May 1, 2000, there is no
condensed financial information for these subaccounts for the year ended
December 31, 1999.
Janus Retirement Advantage Variable Annuity prospectus 61
<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, 1999, the yield of the Money Market subaccount was 5.20%, and
the effective yield was 5.33%.
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 a subaccount for various periods of time including a
period measured from the date the first subaccount investing in
the underlying portfolios began operations. When the first
subaccount investing in the underlying portfolios has been in
operation for 1, 5, and 10 years, the total return for these
periods will be provided, adjusted to reflect current subaccount
charges. The total return quotations will represent the average
annual
62 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
compounded rates of return of investment of $1,000 in the
subaccount as of the last day of each period.
The yield and total return calculations for a subaccount are not
reduced by any premium taxes. For additional information
regarding yields and total returns, please refer to the SAI.
Based on the method of calculation described in the SAI, the
standardized average annual total returns of the subaccounts for
periods from inception of the subaccounts investing in the
underlying portfolios to December 31, 1999, and for the one and
three year periods ended December 31, 1999 are shown in Table 1
below. Total returns shown in Table 1 reflect deductions of 0.50%
for the mortality and expense risk charge, 0.15% for the
administrative charge and $30 for the annual Contract charge.
(Based on an average Contract size of $77,421, the annual
Contract charge translates into a charge of 0.04%.)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
TABLE 1
STANDARDIZED 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 12/31/99 12/31/99 12/31/99 to 12/31/99 Date
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Growth 42.99% 32.92% 28.93% 23.36% 09/13/1993
Aggressive Growth 123.86% 49.47% 35.23% 33.43% 09/13/1993
Capital Appreciation 65.86% N/A N/A 56.11% 05/01/1997
Balanced 25.89% 26.74% 23.76% 19.73% 09/13/1993
Equity Income 40.62% N/A N/A 45.86% 05/01/1997
Growth and Income 72.84% N/A N/A 54.26% 05/01/1998
Strategic Value N/A N/A N/A N/A 05/01/2000
International Growth 81.02% 35.37% 32.27% 27.20% 05/02/1994
Worldwide Growth 63.33% 36.39% 32.62% 28.75% 09/13/1993
Global Life Sciences N/A N/A N/A N/A 01/15/2000
Global Technology N/A N/A N/A N/A 01/15/2000
Flexible Income 0.91% 6.67% 10.06% 7.71% 09/13/1993
High-Yield 6.12% 7.12% N/A 9.08% 05/01/1996
Money Market* 4.26% 4.45% N/A 4.41% 05/01/1995
-------------------------------------------------------------------------------------------
</TABLE>
* Yield more closely reflects the current earnings of the Money Market
subaccount than its total return.
Janus Retirement Advantage Variable Annuity prospectus 63
<PAGE>
NON-STANDARDIZED PERFORMANCE DATA
In addition to the standardized data discussed above, similar
performance data for other periods may also be shown.
We may from time to time also disclose average annual total
return or other performance data in non-standardized formats for
the subaccounts. The non-standardized performance data may make
different assumptions regarding the amount invested, the time
periods shown, or the effect of partial withdrawals or annuity
payments.
All non-standardized performance data will be advertised only if
the standard performance data as shown in Table 1 is also
disclosed. For additional information regarding the calculation
of other performance data, please see the SAI.
64 Janus Retirement Advantage Variable Annuity prospectus
<PAGE>
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
[JANUS LOGO]
JANUS RETIREMENT ADVANTAGE(R)
VARIABLE ANNUITY
STATEMENT OF ADDITIONAL INFORMATION
Issued through
WRL Series Annuity Account B
Offered by
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
570 Carillon Parkway
St. Petersburg, Florida 33716
MAY 1, 2000
This Statement of Additional Information ("SAI") is not a prospectus and should
be read only in conjunction with the prospectus for the Contract and the WRL
Series Annuity Account B.
<PAGE>
This Statement of Additional Information expands upon subjects discussed in the
current prospectus for the Janus Retirement Advantage(R) Variable Annuity
offered by Western Reserve Life Assurance Co. of Ohio. You may obtain a copy of
the prospectus dated May 1, 2000, by calling 1-800-504-4440, 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.
<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............................................... 8
Proof of Age, Gender and Survival........................ 8
Non-Participating........................................ 8
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................... 9
Tax Status of the Contract............................... 9
Taxation of Western Reserve.............................. 11
INVESTMENT EXPERIENCE....................................... 12
Accumulation Units....................................... 12
Accumulation Unit Value.................................. 12
Annuity Unit Value and Annuity Payment Rates............. 13
HISTORICAL PERFORMANCE DATA................................. 15
Money Market Yields...................................... 15
Other Subaccount Yields.................................. 16
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............................... 20
OTHER PRODUCTS.............................................. 20
CUSTODY OF ASSETS........................................... 20
LEGAL MATTERS............................................... 21
INDEPENDENT ACCOUNTANTS..................................... 21
OTHER INFORMATION........................................... 21
FINANCIAL STATEMENTS........................................ 22
</TABLE>
1
<PAGE>
DEFINITIONS OF SPECIAL TERMS
- --------------------------------------------------------------------------------
accumulation period The period between the Contract date and the maturity
date while the Contract is in force.
accumulation unit value An accounting unit of measure we use to calculate
subaccount values during the accumulation period.
administrative office Our administrative office and mailing address is P.O.
Box 5068, Clearwater, Florida 33716. Our street address
is 570 Carillon Parkway, St. Petersburg, Florida 33716.
Our phone number is 1-800-851-9777.
age The issue age, which is the annuitant's age on the
birthday nearest the Contract date, plus the number of
completed Contract years. When we use the term "age" in
this SAI, it has the same meaning as "attained age" in
the Contract.
annuitant The person you named in the application (or later
changed), to receive annuity payments. The annuitant may
be changed as provided in the Contract's death benefit
provisions and annuity provision.
annuity unit value An accounting unit of measure we use to calculate
annuity payments from certain subaccounts after the
maturity date.
annuity value The sum of the separate account value and the fixed
account value.
beneficiary(ies) The person(s) you elect to receive the death benefit
proceeds under the Contract.
cash value The annuity value less any applicable premium taxes.
Code The Internal Revenue Code of 1986, as amended.
Contract date The later of the date on which the initial purchase
payment is received or the date that the properly
completed application is received at Western Reserve's
administrative office. We measure Contract years,
Contract months and Contract anniversaries from the
Contract date.
death report day The valuation date on which we have received both proof
of annuitant's death and your beneficiary's election
regarding payment.
fixed account An option to which you can direct your money under the
Contract, other than the separate account. It provides a
guarantee of principal and interest. The assets
supporting the fixed account are held in the general
account. The fixed account is not available in all
states.
fixed account value During the accumulation period, 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. The latest maturity date is the
annuitant's 90th birthday.
NYSE New York Stock Exchange.
nonqualified Contracts Contracts issued other than in connection with
retirement plans.
2
<PAGE>
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 SAI, it has the same meaning as "net
payment" in the Contract, which means the purchase
payment less any applicable premium taxes.
qualified Contracts Contracts issued in connection with retirement plans
that qualify for special federal income tax treatment
under the Code.
separate account WRL Series Annuity Account B, your separate account
composed of several subaccounts established to receive
and invest purchase payments not allocated to the fixed
account.
separate account value During the accumulation period, your Contract's value in
the separate account, which equals the total value in
each subaccount.
subaccount A subdivision of the separate account that invests
exclusively in the shares of a specified portfolio and
supports the Contracts. Subaccounts corresponding to
each portfolio hold assets under the Contract during the
accumulation period. Other subaccounts corresponding to
each portfolio will hold assets after the maturity date
if you select a variable annuity option.
surrender The termination of a Contract at the option of the
owner.
Trust Janus Aspen Series, an investment company registered
with the U.S. Securities and Exchange Commission.
valuation date/
business day Each day on which the NYSE is open for trading, except
when a subaccount's corresponding portfolio does not
value its shares. Western Reserve is open for business
on each day that the NYSE is open. When we use the term
"business day," it has the same meaning as valuation
date.
valuation period The period of time over which we determine the change in
the value of the subaccounts in order to price
accumulation units and annuity units. Each valuation
period begins at the close of normal trading on the NYSE
(currently 4:00 p.m. Eastern time on each valuation
date) and ends at the close of normal trading of the
NYSE on the next valuation date.
Western Reserve
(we, us, our) Western Reserve Life Assurance Co. of Ohio.
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 may be named in the Contract application or in a
written notice. The successor owner will become the new owner upon the
owner's death, if the owner is not the annuitant and dies before the
annuitant. If no successor owner survives the owner and the owner dies
before the annuitant, the owner's estate will become the owner.
The owner may change the ownership of the Contract in a written
notice. When this change takes effect, all rights of ownership in the
Contract will pass to the new owner. A change of ownership may have
tax consequences.
When there is a change of owner or successor owner, the change will
take effect as of the date Western Reserve accepts the written notice.
We assume no liability for any payments made, or actions taken before
a change is accepted, and shall not be responsible for the validity or
effect of any change of ownership. Changing the owner or naming a new
successor owner cancels any prior choice of successor owner, but does
not change the designation of the beneficiary or the annuitant.
ENTIRE CONTRACT
The Contract and any endorsements thereon and the Contract application
constitute the entire contract between Western Reserve and the owner.
All statements in the application are representations and not
warranties. No statement will cause the Contract to be void or to be
used in defense of a claim unless contained in the application.
MISSTATEMENT OF AGE OR GENDER
If the age or gender of the annuitant has been misstated, Western
Reserve will change the annuity benefit payable to that which the
purchase payments would have purchased for the correct age or gender.
The dollar amount of any underpayment Western Reserve makes shall be
paid in full with the next payment due such person or the beneficiary.
The dollar amount of any overpayment Western Reserve makes due to any
misstatement shall be deducted from payments subsequently accruing to
such person or beneficiary. Any underpayment or overpayment will
include interest at 5% per year, from the date of the wrong payment to
the date of the adjustment. The age of the annuitant may be
established at any time by the submission of proof Western Reserve
finds satisfactory.
ADDITION, DELETION, OR SUBSTITUTION OF INVESTMENTS
We reserve the right, subject to compliance with applicable law, to
make additions to, deletions from, or substitutions for the shares
that are held by the separate account or that the separate account may
purchase. We reserve the right to eliminate the shares of any of the
portfolios of the Trust and to substitute
4
<PAGE>
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 judgment, further
investment in any portfolio should become inappropriate in view of the
purposes of the separate account. We will not, however, substitute
shares attributable to an owner's interest in a subaccount without
notice to, and prior approval of, the Securities and Exchange
Commission (the "SEC") to the extent required by the Investment
Company Act of 1940, as amended (the "1940 Act"), or other applicable
law.
We also reserve the right to establish additional subaccounts, each of
which would invest in a new portfolio of 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 other 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
other 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 us to be in the best interests of persons having voting
rights under the Contracts, the separate account may be operated as a
management company under the 1940 Act, or subject to any required
approval, it may be deregistered under the 1940 Act in the event such
registration is no longer required.
We reserve the right to change the investment objective of any
subaccount. Additionally, if required by law or regulation, we will
not materially change an investment objective of the separate account
or of a portfolio designated for a subaccount unless a statement of
change is filed with and approved by the appropriate insurance
official of the state of Western Reserve's domicile, or deemed
approved in accordance with such law or regulation.
ANNUITY PAYMENT OPTIONS
During the lifetime of the annuitant and prior to the maturity date,
the owner may choose an annuity payment option or change the election.
If no election is made prior to the maturity date, annuity payments
will be made under payment Option D, as Variable Life Income with 10
years of guaranteed payments.
Thirty days prior to the maturity date, we will mail to the owner a
notice and a form upon which the owner can select allocation options
for the annuity proceeds as of the maturity date, which cannot be
changed thereafter and will remain in effect until the Contract
terminates. If a separate account annuity option is chosen, the owner
must include in the written notice the subaccount allocation of the
annuity proceeds as of the maturity date. If we do not receive that
form or other written notice acceptable to us prior to the maturity
date, the Contract's existing allocation options will remain in effect
until the Contract terminates. The owner may also, prior to the
maturity date, select or change the frequency of annuity payments,
which may be monthly, quarterly, semi-annually or annually, provided
that the annuity option and payment frequency provides for payments of
at least $20 per period. If none of these is possible, a lump sum
payment will be made.
DETERMINATION OF THE FIRST VARIABLE PAYMENT. The amount of the first
variable payment is determined by multiplying the annuity proceeds
times the appropriate rate for the variable option selected. The rates
are based on the Society of Actuaries 1983 Individual Mortality Table
A with projection Scale G and a 5% effective annual assumed investment
return and assuming a maturity date in the year 2000. Gender based
mortality tables will be used unless prohibited by law. The amount of
the first variable payment depends
5
<PAGE>
upon the gender (if consideration of gender is allowed under state
law) and adjusted age of the annuitant. The adjusted age is the
annuitant's actual age nearest birthday, at the maturity date,
adjusted as follows:
<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 successor owner who has become a current owner) dies before the
maturity date, then the entire value of the Contract must generally be
distributed within five years of the date of death of such owner.
Special rules apply where (1) the spouse of the deceased owner is the
sole beneficiary, (2) an owner is not a natural person and the primary
annuitant dies or is changed, or (3) any owner dies after the maturity
date. See Certain Federal Income Tax Consequences on page 9 for a
detailed description of these rules. Other rules may apply to
qualified Contracts.
If an owner is not the annuitant and dies before the annuitant:
- if no successor owner is named and alive, the owner's estate will
become the new owner. The cash value must be distributed within five
years of the former owner's death;
- if the successor owner is alive and is the owner's spouse, the
Contract will continue with the spouse as the new owner; or
- if the successor owner is alive and is not the owner's spouse, the
successor owner will become the new owner. The cash value must be
distributed either:
- within five years of the former owner's death; or
- over the lifetime of the new owner, if a natural person, with
payments beginning within one year of the former owner's death; or
- over a period that does not exceed the life expectancy (as defined
by the Code and regulations adopted under the Code) of the new
owner, if a natural person, with payments beginning within one year
of the former owner's death.
6
<PAGE>
DEATH OF ANNUITANT. Due proof of death of the annuitant is proof that
the annuitant who is an owner died prior to the commencement of
annuity payments. Upon receipt of this proof and an election of a
method of settlement and return of the Contract, the death benefit
generally will be paid within seven days, or as soon thereafter as we
have sufficient information about the beneficiary to make the payment.
The beneficiary may receive the amount payable in a lump sum cash
benefit, or, subject to any limitation under any state or federal law,
rule, or regulation, under one of the annuity payment options, unless
a settlement agreement is effective at the owner's death preventing
such election.
If the annuitant who is not an owner dies during the accumulation
period and the owner is a natural person other than the annuitant, the
owner will automatically become the annuitant and this Contract will
continue. If a successor owner is named and is the owner's spouse, the
successor owner will automatically become the new annuitant and this
Contract will continue. If the annuitant dies during the accumulation
period and an owner is either (1) the same individual as the
annuitant; or (2) other than a natural person, then the death benefit
proceeds are payable to the beneficiary. The new owner generally must
surrender the Contract for the annuity value within five years of
death.
If the annuitant was an owner, and the beneficiary was not the
deceased annuitant's spouse, (1) the death benefit must be distributed
within five years of the date of the annuitant/deceased owner's death,
or (2) payments must begin no later than one year after the
annuitant/deceased owner's death and must be made for the
beneficiary's lifetime or for a period certain (so long as any certain
period does not exceed the beneficiary's life expectancy). Death
proceeds which are not paid to or for the benefit of a natural person
must be distributed within five years of the date of the
annuitant/deceased owner's death. If the sole beneficiary is the
annuitant/deceased owner's surviving spouse, such spouse may elect to
continue the Contract as the new annuitant and owner instead of
receiving the death benefit. (See Certain Federal Income Tax
Consequences on page 9.)
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 partial withdrawal
must be made at the time option (1) is elected; (b) we will allow the
beneficiary to make ONE transfer to and from the subaccounts and the
fixed account during the five-year period. That transfer must be made
at the time option (1) is elected; (c) we will deduct the annual
Contract charge each year during the five-year period; (d) we will not
permit annuitization at the end of the five-year period; and (e) if
the beneficiary dies during the five-year period, we will pay the
remaining value of the Contract first to the contingent beneficiary
named by the owner. If no contingent beneficiary is named, then we
will make payments to the beneficiary's estate. The beneficiary is not
permitted to name his or her own beneficiary.
BENEFICIARY. The beneficiary designation in the application will
remain in effect until changed. The owner may change the designated
beneficiary during the annuitant's lifetime by sending written notice
to us. The beneficiary's consent to such change is not required unless
the beneficiary was irrevocably designated or law requires consent.
(If an irrevocable beneficiary dies, the owner may then designate a
new beneficiary.) The change will take effect as of the date the owner
signs the written notice. We will not be liable for any payment made
before the written notice is received. Unless we receive written
notice from the owner to the contrary, no beneficiary may assign any
payments under the Contract before such payments are due. To the
extent permitted by law, no payments under the Contract will be
subject to the claims of any beneficiary's creditors.
7
<PAGE>
ASSIGNMENT
During the annuitant's lifetime and prior to the maturity date
(subject to any irrevocable beneficiary's rights) the owner may assign
any rights or benefits provided by a nonqualified Contract. The
assignment of a Contract will be treated as a distribution of the
annuity value for federal tax purposes. Any assignment must be made in
writing and accepted by us. An assignment will be effective as of the
date the request is received at our administrative office and is
accepted by us. We assume no liability for any payments made or
actions taken before a change is accepted and shall not be responsible
for the validity or effect of any assignment.
With regard to qualified Contracts, ownership of the Contract
generally may be assigned, but any assignment may be subject to
restrictions, penalties, taxation as a distribution, or even
prohibition under the Code, and must be permitted under the terms of
the underlying retirement plan.
PROOF OF AGE, GENDER, AND SURVIVAL
We may require proper proof of age and gender of any annuitant or
co-annuitant prior to making the first annuity payment. Prior to
making any payment, we may require proper proof that the annuitant or
co-annuitant is alive and legally qualified to receive such payment.
If required by law to ignore differences in gender of any payee,
annuity payments will be determined using unisex rates.
NON-PARTICIPATING
The Contract will not share in Western Reserve's surplus earnings; no
dividends will be paid.
8
<PAGE>
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 nonqualified Contracts as well as qualified Contracts.
OWNER CONTROL. In certain circumstances, owners of variable annuity
contracts may be considered the owners, for federal income tax
purposes, of the assets of the separate account used to support their
contracts. In those circumstances, income and gains from the separate
account assets would be includable in the variable annuity contract
owner's gross income. The ownership rights under the Contract are
similar to, but different in certain respects from, those described by
the IRS in rulings in which it was determined that contract owners
were not owners of separate account assets. For example, the owner of
a Contract has the choice of one or more subaccounts in which to
allocate purchase payments and annuity values, and may be able to
transfer among these accounts more frequently than in such rulings.
These differences could result in owners being treated as the owners
of the assets of the separate account. We, therefore, reserve the
right to modify the Contracts as necessary to attempt to prevent the
owners from being considered the owners of a pro rata share of the
assets of the separate account.
DISTRIBUTION REQUIREMENTS. The Code also requires that nonqualified
contracts contain specific provisions for distribution of contract
proceeds upon the death of an owner. In order to be treated as an
annuity contract for federal income tax purposes, the Code requires
that such contracts provide that if any owner dies on or after the
maturity date and before the entire interest in the Contract has been
distributed, the remaining portion must be distributed at least as
rapidly as under the method in effect on such owner's death. If any
owner dies before the maturity date, the entire interest in the
contract must generally be
9
<PAGE>
distributed within five years after such owner's date of death or be
applied to provide an immediate annuity under which payments will
begin within one year of such owner's death and will be made for the
life of the beneficiary or for a period not extending beyond the life
expectancy of the beneficiary. However, if such owner's death occurs
prior to the maturity date, and such owner's surviving spouse is named
beneficiary, then the Contract may be continued with the surviving
spouse as the new owner. If any owner is not a natural person, then
for purposes of these distribution requirements, the primary annuitant
shall be treated as an owner and any death or change of such primary
annuitant shall be treated as the death of the owner. The Contract
contains provisions intended to comply with these requirements of the
Code. No regulations interpreting these requirements of the Code have
yet been issued and thus no assurance can be given that the provisions
contained in the Contracts satisfy all such Code requirements. The
provisions contained in the Contracts will be reviewed and modified if
necessary to maintain their compliance with the Code requirements when
clarified by regulation or otherwise.
WITHHOLDING. The portion of any distribution under a Contract that is
includable in gross income will be subject to federal income tax
withholding unless the recipient of such distribution elects not to
have federal income tax withheld and properly notifies us. For certain
qualified Contracts, certain distributions are subject to mandatory
withholding. The withholding rate varies according to the type of
distribution and the owner's tax status. For qualified Contracts,
"eligible rollover distributions" from section 401(a) plans are
subject to a mandatory federal income tax withholding of 20%. An
eligible rollover distribution is the taxable portion of any
distribution from such a plan, except certain distributions such as
distributions required by the Code or distributions in a specified
annuity form. The 20% withholding does not apply, however, if the
owner chooses a "direct rollover" from the plan to another
tax-qualified plan or IRA.
QUALIFIED CONTRACTS. The qualified Contract is designed for use with
several types of tax-qualified retirement plans. The tax rules
applicable to participants and beneficiaries in tax-qualified
retirement plans vary according to the type of plan and the terms and
conditions of the plan. Special favorable tax treatment may be
available for certain types of contributions and distributions.
Adverse tax consequences may result from contributions in excess of
specified limits; distributions prior to age 59 1/2 (subject to
certain exceptions); distributions that do not conform to specified
commencement and minimum distribution rules; and in other specified
circumstances. Some retirement plans are subject to distribution and
other requirements that are not incorporated into the Contracts and
our Contract administration procedures. Owners, participants and
beneficiaries are responsible for determining that contributions,
distributions and other transactions with respect to the Contract
comply with applicable law.
We make no attempt to provide more than general information about use
of the Contract with the various types of retirement plans. Purchasers
of Contracts for use with any retirement plan should consult their
legal counsel and tax advisor regarding the suitability of the
Contract.
INDIVIDUAL RETIREMENT ANNUITIES. In order to qualify as a traditional
individual retirement annuity ("IRA") under section 408(b) of the
Code, a Contract must contain certain provisions: (i) the owner must
be the annuitant; (ii) the Contract generally is not transferable by
the owner, e.g., the owner may not designate a new owner, designate a
contingent owner or assign the Contract as collateral security; (iii)
the total purchase payments for any calendar year on behalf of any
individual may not exceed $2,000, except in the case of a rollover
amount or contribution under section 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
10
<PAGE>
selected; (vi) certain payments of death benefits must be made in the
event the annuitant dies prior to the distribution of the annuity
value; and (vii) the entire interest of the owner is non-forfeitable.
Contracts intended to qualify as traditional IRAs under section 408(b)
of the Code contain such provisions. If your Contract is used in
connection with an IRA, only rollover or transfer contributions are
permitted. No regular contributions may be made. Amounts in the IRA
(other than nondeductible contributions) are taxed when distributed
from the IRA. Distributions prior to age 59 1/2 (unless certain
exceptions apply) are subject to a 10% penalty tax.
No part of the funds for an IRA, including a Roth IRA, may be invested
in a life insurance contract, but the regulations thereunder allow
such funds to be invested in an annuity contract that provides a death
benefit that equals the greater of the premiums paid or the cash value
for the Contract.
ROTH INDIVIDUAL RETIREMENT ANNUITIES (ROTH IRA). The Roth IRA, under
section 408A of the Code, contains many of the same provisions as a
traditional IRA. However, there are some differences. First, the
contributions are not deductible and must be made in cash or as a
rollover or transfer from another Roth IRA or other IRA. A rollover
from or conversion of an IRA to a Roth IRA may be subject to tax and
other special rules may apply to the rollover or conversion and to
distributions attributable thereto. You should consult a tax advisor
before combining any converted amounts with any other Roth IRA
contributions, including any other conversion amounts from other tax
years. The Roth IRA is available to individuals with earned income and
whose modified adjusted gross income is under $110,000 for single
filers, $160,000 for married filing jointly, and $10,000 for married
filing separately. The amount per individual that may be contributed
to all IRAs (Roth and traditional) is $2,000. As with the traditional
IRA, only rollover or transfer contributions are permitted. Secondly,
the distributions are taxed differently. The Roth IRA offers tax-free
distributions when made five tax years after the first contribution to
any Roth IRA of the individual and made after attaining age 59 1/2, or
to pay for qualified first time homebuyer expenses (lifetime maximum
of $10,000), or due to death or disability. All other distributions
are subject to income tax when made from earnings and may be subject
to a premature withdrawal penalty tax unless an exception applies.
Unlike the traditional IRA, there are no minimum required
distributions during the owner's lifetime; however, required
distributions at death are generally the same.
TAXATION OF WESTERN RESERVE
Western Reserve at present is taxed as a life insurance company under
Part I of Subchapter L of the Code. The separate account is treated as
part of us and, accordingly, will not be taxed separately as a
"regulated investment company" under Subchapter M of the Code. We do
not expect to incur any federal income tax liability with respect to
investment income and net capital gains arising from the activities of
the separate account retained as part of the reserves under the
Contract. Based on this expectation, it is anticipated that no charges
will be made against the separate account for federal income taxes.
If, in future years, any federal income taxes are incurred by us with
respect to the separate account, we may make a charge to the separate
account.
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 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 NYSE, on each day the NYSE is open.
ACCUMULATION UNIT VALUE
The accumulation unit value will vary from one valuation period to the
next depending on the investment results experienced by each
subaccount. The accumulation unit value for each subaccount at the end
of a valuation period is the result of:
1. The total value of the assets held in the subaccount. This value is
determined by multiplying the number of shares of the designated
Trust portfolio owned by the subaccount times the portfolio's net
asset value per share; minus
2. The accrued daily percentage for the mortality and expense risk
charge and the administrative charge multiplied by the net assets
of the subaccount; minus
3. The accrued amount of reserve for any taxes that are determined by
us to have resulted from the investment operations of the
subaccount; divided by
4. The number of outstanding units in the subaccount.
During the accumulation period, the mortality and expense risk charge
is deducted at an annual rate of 0.50% of net assets for each day in
the valuation period and compensates us for certain mortality and
expense risks. The administrative charge is deducted at an annual rate
of 0.15% of net assets for each day
12
<PAGE>
in the valuation period and compensates us for certain administrative
expenses. The accumulation unit value may increase, decrease, or
remain the same from valuation period to valuation period.
ANNUITY UNIT VALUE AND ANNUITY PAYMENT RATES
The amount of variable annuity payments will vary with annuity unit
values. Annuity unit values rise if the net investment performance of
the subaccount (that is, the portfolio performance minus subaccount
fees and charges) exceeds the assumed interest rate of 5% annually.
Conversely, annuity unit values fall if the net investment performance
of the subaccount is less than the assumed rate. The value of a
variable annuity unit in each subaccount was established at $10.00 on
the date operations began for that subaccount. The value of a variable
annuity unit on any subsequent business day is equal to (a) multiplied
by (b) multiplied by (c), where:
(a) is the variable annuity unit value for that subaccount on the
immediately preceding business day;
(b) is the net investment factor for that subaccount for the valuation
period; and
(c) is the investment 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
we determine to have resulted from the investment operations
of the subaccount.
(ii) is the net asset value of a portfolio share held in that
subaccount determined as of the end of the immediately preceding
valuation period.
(iii) is a factor representing the mortality and expense risk charge
and the administrative charge. This factor is equal, on an annual
basis, to 0.65% of the daily net asset value of the portfolio share
held in that subaccount.
The dollar amount of subsequent variable annuity payments will depend
upon changes in applicable annuity unit values.
The annuity payment rates vary according to the annuity option elected
and the gender and adjusted age of the annuitant at the maturity date.
See Annuity Payment Options - Determination of the First Variable
Payment on page 5, which contains a table for determining the adjusted
age of the annuitant.
13
<PAGE>
ILLUSTRATION OF CALCULATIONS FOR ANNUITY UNIT VALUE
AND VARIABLE ANNUITY PAYMENTS
FORMULA AND ILLUSTRATION FOR DETERMINING ANNUITY UNIT VALUE
Annuity unit value = ABC
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: $XYZ = $Q
FORMULA AND ILLUSTRATION FOR DETERMINING AMOUNT OF
FIRST MONTHLY VARIABLE ANNUITY PAYMENT
<TABLE>
<S> <C>
AB
First monthly variable annuity payment = ------
$1,000
</TABLE>
Where: A = The annuity value as of the maturity date.
Assume................................................ = $X
B = The annuity purchase rate per $1,000 based upon the option
selected, the gender and adjusted age of the annuitant
according to the tables contained in the Contract.
Assume................................................ = $Y
<TABLE>
<S> <C>
$XY = $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 = ([BASE PERIOD RETURN + 1](365/7)) - 1
The effective yield is shown at least to the nearest hundredth of one
percent.
HYPOTHETICAL CHARGE. For purposes of the yield and effective yield
computations, the hypothetical charge reflects all fees and charges
that are charged to all owner accounts in proportion to the length of
the base period. Such fees and charges include the $30 annual Contract
charge, calculated on the basis of an average Contract size of
$77,421, which translates into a charge of 0.04%. 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,
1999, the yield of the Money Market subaccount was 5.20%, and the
effective yield was 5.33%.
15
<PAGE>
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 30-day period ended on the date of the
most recent balance sheet of the separate account and are computed by
dividing the net investment income per unit earned during the period
by the maximum offering price per unit on the last date of the period,
according to the following formula:
<TABLE>
<S> <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 Contract size of $77,421, which
translates into a charge of 0.04%. 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 first date any subaccount investing in an
underlying portfolio commenced operations until the aforesaid date.
The quotations are computed by determining the average annual
compounded rates of return over the relevant periods that would equate
the initial amount invested to the ending redeemable value, adjusted
to reflect current subaccount charges, according to the following
formula:
P(1 + T)(n) = ERV
<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 of a hypothetical $1,000 payment
made at the beginning of each period at the end of each
period.
</TABLE>
16
<PAGE>
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 under the Contract to all owner
accounts during the accumulation period. Such fees include the
mortality and expense risk charge of 0.50%, the administrative charge
of 0.15%, and the $30 annual Contract charge, calculated on the basis
of an average Contract size of $77,421, which translates into a charge
of 0.04%. The calculations do not reflect any deduction for premium
taxes or any transfer charges that may be applicable to a particular
Contract.
OTHER PERFORMANCE DATA
We may present the total return data stated in the prospectus on a
non-standardized basis. This means that the data will not be reduced
by 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-STANDARDIZED PERFORMANCE DATA WILL ONLY BE
DISCLOSED IF STANDARDIZED PERFORMANCE DATA FOR THE REQUIRED PERIODS IS
ALSO DISCLOSED.
We may also disclose cumulative total returns and average annual
compound rates of return (T) for the subaccounts based on the
inception date of the subaccounts investing in the underlying
portfolios. We calculate cumulative total returns according to the
following formula:
(1 + T)(n) - 1
Where: T and N are the same values as above.
In addition, we may present historic performance data for the
portfolios since their inception reduced by some or all of the fees
and charges under the Contract. Such adjusted historic performance
includes data that precedes the inception dates of the subaccounts.
This data is designed to show the performance that would have resulted
if the Contract had been in existence during that time.
For instance, we may disclose average annual total returns for the
portfolios reduced by all fees and charges under the Contract, as if
the Contract had been in existence. Such fees and charges include the
mortality and expense risk charge of 0.50%, the administrative charge
of 0.15% and the $30 annual Contract charge (based on average Contract
size of $77,421, the annual Contract charge translates into a charge
of 0.04%).
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
17
<PAGE>
provide an historical overview of the performance of a variety of
investment market indices, the performance of these indices over time,
and the performance of different asset classes, such as stocks, bonds,
cash equivalents, etc. We may also discuss investment volatility
including the range of returns for different asset classes and over
different time horizons, and the correlation between the returns of
different asset classes. We may also discuss the basis of portfolio
optimization including the required inputs and the construction of
efficient portfolios using sophisticated computer-based techniques.
Finally, we may describe various investment strategies and methods of
implementation, the periodic rebalancing of diversified portfolios,
the use of dollar cost averaging techniques, a comparison of the tax
impact of purchase payments made on a "before tax" basis through a
tax-qualified plan with those made on an "after tax" basis outside of
a tax-qualified plan, and a comparison of tax-deferred versus non
tax-deferred accumulation of purchase payments.
As described in the prospectus, in general, an owner is not taxed on
increases in value under a Contract until a distribution is made under
the Contract. As a result, the Contract will benefit from tax deferral
during the accumulation period, as the annuity value may grow more
rapidly than under a comparable investment where certain increases in
value are taxed on a current basis. From time to time, we may use
narrative, numerical or graphic examples to show hypothetical benefits
of tax deferral in advertising and sales literature.
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 separate account will be
maintained by WRL Investment Services, Inc. As presently required by
the 1940 Act and regulations promulgated thereunder, Western Reserve
will mail to all Contract owners at their last known address of
record, at least annually, reports containing such information as may
be required under the 1940 Act or by any other applicable law or
regulation. Contract owners will also receive confirmation of each
financial transaction and any other reports required by law or
regulation.
19
<PAGE>
DISTRIBUTION OF THE CONTRACTS
- --------------------------------------------------------------------------------
AFSG Securities Corporation ("AFSG") is the principal underwriter of
the Contracts. AFSG is located at 4333 Edgewood Rd., N.E., Cedar
Rapids, Iowa 52499. AFSG is registered with the SEC under the
Securities Exchange Act of 1934 and, is a member of the National
Association of Securities Dealers, Inc. AFSG will not be compensated
for its services as principal underwriter of the Contracts.
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 the separate account are held by Western Reserve. The
assets of the separate account are kept physically segregated and held
apart from our general account and any other separate account. WRL
Investment Services, Inc. maintains records of all purchases and
redemptions of shares of the Trust. Additional protection for the
assets of the separate account is provided by a blanket bond issued to
AEGON USA, Inc. ("AEGON USA") in the aggregate amount of $12 million,
covering all of the employees of AEGON USA and its affiliates,
including Western Reserve. A Stockbrokers Blanket Bond, issued to
AEGON U.S.A. Securities, Inc. provides additional fidelity coverage to
a limit of $10 million.
20
<PAGE>
LEGAL MATTERS
- --------------------------------------------------------------------------------
Sutherland Asbill & Brennan LLP has provided advice on certain legal
matters concerning federal securities laws applicable to the issue and
sale of the Contracts. All matters of Ohio law pertaining to the
Contracts, including the validity of the Contracts and Western
Reserve's right to issue the Contracts under Ohio insurance law, have
been passed upon by Thomas E. Pierpan, Esq., Senior Vice President,
General Counsel and Assistant Secretary of Western Reserve.
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
The accounting firm of PricewaterhouseCoopers LLP, independent
certified public accountants, provided audit services to the separate
account for the year ended December 31, 1999. The principal business
address of PricewaterhouseCoopers LLP is 400 North Ashley Street,
Suite 2800, Tampa Florida 33602-4319. The accounting firm of Ernst &
Young LLP, independent auditors, provided audit services to Western
Reserve for the year ended December 31, 1999. The principal business
address of Ernst & Young LLP is 801 Grand Avenue, Suite 3400, Des
Moines, Iowa 50309-2764.
OTHER INFORMATION
- --------------------------------------------------------------------------------
A Registration Statement has been filed with the SEC, under the
Securities Act of 1933 as amended, with respect to the Contracts
discussed in this SAI. Not all of the information set forth in the
Registration Statement, amendments and exhibits thereto has been
included in the prospectus or this SAI. Statements contained in the
prospectus and this SAI concerning the content of the Contracts and
other legal instruments are intended to be summaries. For a complete
statement of the terms of these documents, reference should be made to
the instruments filed with the SEC.
21
<PAGE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The values of an owner's interest in the separate account will be
affected solely by the investment results of the selected
subaccount(s). Western Reserve's financial statements which are
included in this SAI, should be considered only as bearing on our
ability to meet our obligations under the Contracts. They should not
be considered as bearing on the investment performance of the assets
held in the separate account.
Financial statements for Western Reserve for the years ended December
31, 1999 and 1998 have been prepared on the basis of statutory
accounting principles, rather than generally accepted accounting
principles.
22
<PAGE>
INDEX TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WRL SERIES ANNUITY ACCOUNT B
Report of Independent Certified Public Accountants dated February 16,
2000
Statement of Assets and Liabilities as of December 31, 1999.
Statement of Operations for the year or period ended December 31,
1999.
Statement of Changes in Net Assets for the years or periods ended
December 31, 1999 and 1998
Financial Highlights for the years or periods ended December 31, 1999,
1998, 1997, 1996 and 1995
Notes to Financial Statements
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
Report of Independent Auditors dated February 18, 2000
Statutory-basis balance sheets at December 31, 1999 and 1998
Statutory-basis statements of operations for the years ended December
31, 1999, 1998 and 1997
Statutory-basis statements of changes in capital and surplus for the
years ended December 31, 1999, 1998 and 1997
Statutory-basis statements of cash flows for the years ended December
31, 1999, 1998 and 1997
Notes to statutory-basis financial statements
Statutory-basis financial statement schedules
23
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Western Reserve Life Assurance Co. of Ohio and
Contract Owners of the 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 Subaccounts constituting the Janus Retirement Advantage WRL Series
Annuity Account B (a separate account of Western Reserve Life Assurance Co. of
Ohio ("WRL")) at December 31, 1999, the results of each of their operations,
the changes in each of their net assets and financial highlights for each of
the periods indicated, in conformity with accounting principles generally
accepted in the United States. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of WRL's management; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits of
these financial statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Tampa, Florida
February 16, 2000
<PAGE>
JANUS RETIREMENT ADVANTAGE
WRL SERIES ANNUITY ACCOUNT B
STATEMENTS OF ASSETS AND LIABILITIES
AT DECEMBER 31, 1999
ALL AMOUNTS (EXCEPT PER UNIT AMOUNTS) IN THOUSANDS
<TABLE>
<CAPTION>
AGGRESSIVE CAPITAL INTERNATIONAL
GROWTH GROWTH APPRECIATION GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C>
ASSETS:
Investment in Janus Aspen Series Trust:
Shares ............................................. 2,258 1,699 1,498 832
===== ===== ===== ===
Cost ............................................... $ 46,829 $ 56,028 $ 35,275 $ 20,030
========= ========== ========= =========
Investment, at net asset value ...................... $ 75,998 $ 101,425 $ 49,689 $ 32,190
Transfers receivable from depositor ................. 0 142 0 77
--------- ---------- --------- ---------
Total assets ....................................... 75,998 101,567 49,689 32,267
--------- ---------- --------- ---------
LIABILITIES:
Accrued expenses .................................... 0 0 0 0
Transfers payable to depositor ...................... 147 0 19 0
--------- ---------- --------- ---------
Total liabilities .................................. 147 0 19 0
--------- ---------- --------- ---------
Net assets ......................................... $ 75,851 $ 101,567 $ 49,670 $ 32,267
========= ========== ========= =========
NET ASSETS CONSISTS OF:
Contract Owners' equity ............................. $ 75,851 $ 101,567 $ 49,670 $ 32,267
Depositor's equity .................................. 0 0 0 0
--------- ---------- --------- ---------
Net assets applicable to units outstanding ......... $ 75,851 $ 101,567 $ 49,670 $ 32,267
========= ========== ========= =========
Contract Owners' units .............................. 2,015 1,646 1,512 823
Depositor's units ................................... 0 0 0 0
--------- ---------- --------- ---------
Units outstanding .................................. 2,015 1,646 1,512 823
========= ========== ========= =========
Accumulation unit value ............................ $ 37.64 $ 61.69 $ 32.85 $ 39.20
========= ========== ========= =========
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
JANUS RETIREMENT ADVANTAGE
WRL SERIES ANNUITY ACCOUNT B
STATEMENTS OF ASSETS AND LIABILITIES
AT DECEMBER 31, 1999
ALL AMOUNTS (EXCEPT PER UNIT AMOUNTS) IN THOUSANDS
<TABLE>
<CAPTION>
EQUITY GROWTH AND
WORLDWIDE BALANCED INCOME INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C>
ASSETS:
Investment in Janus Aspen Series Trust:
Shares ......................................................... 2,004 985 696 821
===== === === ===
Cost ........................................................... $ 57,250 $ 19,994 $ 13,667 $ 11,984
========= ========= ========= =========
Investment, at net asset value .................................. $ 95,705 $ 27,497 $ 19,024 $ 17,054
Transfers receivable from depositor ............................. 219 17 0 0
--------- --------- --------- ---------
Total assets ................................................... 95,924 27,514 19,024 17,054
--------- --------- --------- ---------
LIABILITIES:
Accrued expenses ................................................ 0 0 0 0
Transfers payable to depositor .................................. 0 0 48 378
--------- --------- --------- ---------
Total liabilities .............................................. 0 0 48 378
--------- --------- --------- ---------
Net assets ..................................................... $ 95,924 $ 27,514 $ 18,976 $ 16,676
========= ========= ========= =========
NET ASSETS CONSISTS OF:
Contract Owners' equity ......................................... $ 95,924 $ 27,514 $ 18,976 $ 16,676
Depositor's equity .............................................. 0 0 0 0
--------- --------- --------- ---------
Net assets applicable to units outstanding . . . . . . ......... $ 95,924 $ 27,514 $ 18,976 $ 16,676
========= ========= ========= =========
Contract Owners' units .......................................... 1,947 882 692 809
Depositor's units ............................................... 0 0 0 0
--------- --------- --------- ---------
Units outstanding .............................................. 1,947 882 692 809
========= ========= ========= =========
Accumulation unit value ........................................ $ 49.28 $ 31.19 $ 27.41 $ 20.62
========= ========= ========= =========
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
JANUS RETIREMENT ADVANTAGE
WRL SERIES ANNUITY ACCOUNT B
STATEMENTS OF ASSETS AND LIABILITIES
AT DECEMBER 31, 1999
ALL AMOUNTS (EXCEPT PER UNIT AMOUNTS) IN THOUSANDS
<TABLE>
<CAPTION>
FLEXIBLE MONEY
INCOME HIGH-YIELD MARKET
SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C>
ASSETS:
Investment in Janus Aspen Series Trust:
Shares ......................................................... 455 155 33,980
=== === ======
Cost ........................................................... $ 5,478 $ 1,713 $ 33,980
======== ======== =========
Investment, at net asset value .................................. $ 5,193 $ 1,621 $ 33,980
Transfers receivable from depositor ............................. 0 0 486
-------- -------- ---------
Total assets ................................................... 5,193 1,621 34,466
-------- -------- ---------
LIABILITIES:
Accrued expenses ................................................ 0 0 0
Transfers payable to depositor .................................. 1 0 0
-------- -------- ---------
Total liabilities .............................................. 1 0 0
-------- -------- ---------
Net assets ..................................................... $ 5,192 $ 1,621 $ 34,466
======== ======== =========
NET ASSETS CONSISTS OF:
Contract Owners' equity ......................................... $ 5,192 $ 1,621 $ 34,466
Depositor's equity .............................................. 0 0 0
-------- -------- ---------
Net assets applicable to units outstanding . . . . . . ......... $ 5,192 $ 1,621 $ 34,466
======== ======== =========
Contract Owners' units .......................................... 324 118 2,812
Depositor's units ............................................... 0 0 0
-------- -------- ---------
Units outstanding .............................................. 324 118 2,812
======== ======== =========
Accumulation unit value ........................................ $ 16.01 $ 13.77 $ 12.26
======== ======== =========
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
JANUS RETIREMENT ADVANTAGE
WRL SERIES ANNUITY ACCOUNT B
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
ALL AMOUNTS IN THOUSANDS
<TABLE>
<CAPTION>
AGGRESSIVE CAPITAL INTERNATIONAL
GROWTH GROWTH APPRECIATION GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividend income ................................................. $ 128 $ 548 $ 169 $ 43
Capital gain distributions ...................................... 284 947 0 0
-------- -------- -------- --------
Total investment income ........................................ 412 1,495 169 43
EXPENSES:
Mortality and expense risk ...................................... 361 282 212 109
-------- -------- -------- --------
Net investment income (loss) ................................... 51 1,213 (43) (66)
-------- -------- -------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investment securities . . . ......... 3,115 3,587 5,316 1,412
Change in unrealized appreciation (depreciation) . . ............ 18,293 39,695 11,365 11,358
-------- -------- -------- --------
Net gain (loss) on investment securities ....................... 21,408 43,282 16,681 12,770
-------- -------- -------- --------
Net increase (decrease) in net assets resulting
from operations ............................................. $ 21,459 $ 44,495 $ 16,638 $ 12,704
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
WORLDWIDE EQUITY GROWTH AND
GROWTH BALANCED INCOME INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividend income ........................................... $ 112 $ 539 $ 97 $ 31
Capital gain distributions ................................ 0 0 0 0
-------- ------- ------- -------
Total investment income .................................. 112 539 97 31
EXPENSES:
Mortality and expense risk ................................ 423 150 95 56
-------- ------- ------- -------
Net investment income (loss) ............................. (311) 389 2 (25)
-------- ------- ------- -------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investment securities ......... 4,458 1,624 1,670 1,173
Change in unrealized appreciation (depreciation) .......... 32,209 3,435 3,361 4,454
-------- ------- ------- -------
Net gain (loss) on investment securities ................. 36,667 5,059 5,031 5,627
-------- ------- ------- -------
Net increase (decrease) in net assets resulting
from operations ....................................... $ 36,356 $ 5,448 $ 5,033 $ 5,602
======== ======= ======= =======
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
JANUS RETIREMENT ADVANTAGE
WRL SERIES ANNUITY ACCOUNT B
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
ALL AMOUNTS IN THOUSANDS
<TABLE>
<CAPTION>
FLEXIBLE MONEY
INCOME HIGH-YIELD MARKET
SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividend income ........................................... $ 363 $ 208 $ 1,242
Capital gain distributions ................................ 18 0 0
------ ------ -------
Total investment income .................................. 381 208 1,242
EXPENSES:
Mortality and expense risk ................................ 39 16 164
------ ------ -------
Net investment income (loss) ............................. 342 192 1,078
------ ------ -------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investment securities ......... (49) (235) 0
Change in unrealized appreciation (depreciation) .......... (240) 173 0
------ ------ -------
Net gain (loss) on investment securities ................. (289) (62) 0
------ ------ -------
Net increase (decrease) in net assets resulting
from operations ....................................... $ 53 $ 130 $ 1,078
====== ====== =======
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
JANUS RETIREMENT ADVANTAGE
WRL SERIES ANNUITY ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
ALL AMOUNTS IN THOUSANDS
<TABLE>
<CAPTION>
GROWTH AGGRESSIVE GROWTH
SUBACCOUNT SUBACCOUNT
------------------------ -------------------------
DECEMBER 31, DECEMBER 31,
------------------------ -------------------------
1999 1998 1999 1998
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ......................... $ 51 $ 2,034 $ 1,213 $ (126)
Net gain (loss) on investment securities ............. 21,408 8,645 43,282 6,080
-------- -------- --------- --------
Net increase (decrease) in net assets
resulting from operations ........................... 21,459 10,679 44,495 5,954
-------- -------- --------- --------
CAPITAL UNIT TRANSACTIONS:
Proceeds from units sold (transferred) ............... 11,929 4,633 33,571 (1,046)
-------- -------- --------- --------
Less cost of units redeemed:
Administrative charges .............................. 12 12 9 11
Surrender benefits .................................. 988 1,342 794 821
Death benefits ...................................... 27 38 20 80
-------- -------- --------- --------
1,027 1,392 823 912
-------- -------- --------- --------
Increase (decrease) in net assets from
capital unit transactions .......................... 10,902 3,241 32,748 (1,958)
-------- -------- --------- --------
Net increase (decrease) in net assets ............... 32,361 13,920 77,243 3,996
Depositor's equity contribution (redemption) ......... 0 0 0 0
NET ASSETS:
Beginning of year .................................... 43,490 29,570 24,324 20,328
-------- -------- --------- --------
End of year .......................................... $ 75,851 $ 43,490 $ 101,567 $ 24,324
======== ======== ========= ========
UNIT ACTIVITY:
Units outstanding - beginning of year ................ 1,653 1,515 883 984
Units issued ......................................... 931 731 1,287 636
Units redeemed ....................................... (569) (593) (524) (737)
-------- -------- --------- --------
Units outstanding - end of year ...................... 2,015 1,653 1,646 883
======== ======== ========= ========
<CAPTION>
CAPITAL APPRECIATION
SUBACCOUNT
-------------------------
DECEMBER 31,
-------------------------
1999 1998
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ......................... $ (43) $ (34)
Net gain (loss) on investment securities ............. 16,681 3,449
-------- --------
Net increase (decrease) in net assets
resulting from operations ........................... 16,638 3,415
-------- --------
CAPITAL UNIT TRANSACTIONS:
Proceeds from units sold (transferred) ............... 19,811 8,256
-------- --------
Less cost of units redeemed:
Administrative charges .............................. 4 1
Surrender benefits .................................. 897 115
Death benefits ...................................... 29 0
-------- --------
930 116
-------- --------
Increase (decrease) in net assets from
capital unit transactions .......................... 18,881 8,140
-------- --------
Net increase (decrease) in net assets ............... 35,519 11,555
Depositor's equity contribution (redemption) ......... 0 (41)
NET ASSETS:
Beginning of year .................................... 14,151 2,637
-------- --------
End of year .......................................... $ 49,670 $ 14,151
======== ========
UNIT ACTIVITY:
Units outstanding - beginning of year ................ 715 209
Units issued ......................................... 2,136 847
Units redeemed ....................................... (1,339) (341)
-------- --------
Units outstanding - end of year ...................... 1,512 715
======== ========
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
JANUS RETIREMENT ADVANTAGE
WRL SERIES ANNUITY ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
ALL AMOUNTS IN THOUSANDS
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH
SUBACCOUNT
-------------------------
DECEMBER 31,
-------------------------
1999 1998
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ......................... $ (66) $ 213
Net gain (loss) on investment securities ............. 12,770 1,927
-------- --------
Net increase (decrease) in net assets
resulting from operations .......................... 12,704 2,140
-------- --------
CAPITAL UNIT TRANSACTIONS:
Proceeds from units sold (transferred) ............... 6,097 (2,277)
-------- --------
Less cost of units redeemed:
Administrative charges .............................. 4 6
Surrender benefits .................................. 1,052 567
Death benefits ...................................... 15 19
-------- --------
1,071 592
-------- --------
Increase (decrease) in net assets from
capital unit transactions ......................... 5,026 (2,869)
-------- --------
Net increase (decrease) in net assets ............... 17,730 (729)
Depositor's equity contribution (redemption) ......... 0 0
NET ASSETS:
Beginning of year .................................... 14,537 15,266
-------- --------
End of year .......................................... $ 32,267 $ 14,537
======== ========
UNIT ACTIVITY:
Units outstanding - beginning of year ................ 672 821
Units issued ......................................... 606 855
Units redeemed ....................................... (455) (1,004)
-------- --------
Units outstanding - end of year ...................... 823 672
======== ========
<CAPTION>
WORLDWIDE GROWTH BALANCED
SUBACCOUNT SUBACCOUNT
------------------------- -----------------------
DECEMBER 31, DECEMBER 31,
------------------------- -----------------------
1999 1998 1999 1998
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ......................... $ (311) $ 1,701 $ 389 $ 521
Net gain (loss) on investment securities ............. 36,667 10,963 5,059 3,671
-------- -------- -------- --------
Net increase (decrease) in net assets
resulting from operations .......................... 36,356 12,664 5,448 4,192
-------- -------- -------- --------
CAPITAL UNIT TRANSACTIONS:
Proceeds from units sold (transferred) ............... 2,621 3,557 4,860 3,051
-------- -------- -------- --------
Less cost of units redeemed:
Administrative charges .............................. 15 17 4 4
Surrender benefits .................................. 1,497 1,716 818 371
Death benefits ...................................... 101 82 127 0
-------- -------- -------- --------
1,613 1,815 949 375
-------- -------- -------- --------
Increase (decrease) in net assets from
capital unit transactions ......................... 1,008 1,742 3,911 2,676
-------- -------- -------- --------
Net increase (decrease) in net assets ............... 37,364 14,406 9,359 6,868
Depositor's equity contribution (redemption) ......... 0 0 0 0
NET ASSETS:
Beginning of year .................................... 58,560 44,154 18,155 11,287
-------- -------- -------- --------
End of year .......................................... $ 95,924 $ 58,560 $ 27,514 $ 18,155
======== ======== ======== ========
UNIT ACTIVITY:
Units outstanding - beginning of year ................ 1,942 1,875 733 608
Units issued ......................................... 837 2,522 477 407
Units redeemed ....................................... (832) (2,455) (328) (282)
-------- -------- -------- --------
Units outstanding - end of year ...................... 1,947 1,942 882 733
======== ======== ======== ========
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
JANUS RETIREMENT ADVANTAGE
WRL SERIES ANNUITY ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
ALL AMOUNTS IN THOUSANDS
<TABLE>
<CAPTION>
EQUITY INCOME GROWTH AND INCOME FLEXIBLE INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------------------- -------------------------- ----------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
----------------------- -------------------------- ----------------------
1999 1998 1999 1998(1) 1999 1998
----------- ----------- ------------ ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ......................... $ 2 $ 45 $ (25) $ (3) $ 342 $ 322
Net gain (loss) on investment securities ............. 5,031 2,282 5,627 615 (289) 41
-------- ------- -------- ------ -------- -------
Net increase (decrease) in net assets
resulting from operations ........................... 5,033 2,327 5,602 612 53 363
-------- ------- -------- ------ -------- -------
CAPITAL UNIT TRANSACTIONS:
Proceeds from units sold (transferred) ............... 5,636 3,792 6,990 3,700 (1,020) 3,049
-------- ------- -------- ------ -------- -------
Less cost of units redeemed:
Administrative charges .............................. 2 1 1 0 1 2
Surrender benefits .................................. 623 109 200 16 621 291
Death benefits ...................................... 85 0 0 0 0 0
-------- ------- -------- ------ -------- -------
710 110 201 16 622 293
-------- ------- -------- ------ -------- -------
Increase (decrease) in net assets from
capital unit transactions ......................... 4,926 3,682 6,789 3,684 (1,642) 2,756
-------- ------- -------- ------ -------- -------
Net increase (decrease) in net assets ............... 9,959 6,009 12,391 4,296 (1,589) 3,119
Depositor's equity contribution (redemption) ......... 0 (40) (41) 30 0 0
NET ASSETS:
Beginning of year .................................... 9,017 3,048 4,326 0 6,781 3,662
-------- ------- -------- ------ -------- -------
End of year .......................................... $ 18,976 $ 9,017 $ 16,676 $ 4,326 $ 5,192 $ 6,781
======== ======= ======== ======= ======== =======
UNIT ACTIVITY:
Units outstanding - beginning of year ................ 463 227 363 0 428 250
Units issued ......................................... 627 525 955 517 241 541
Units redeemed ....................................... (398) (289) (509) (154) (345) (363)
-------- ------- -------- ------- -------- -------
Units outstanding - end of year ...................... 692 463 809 363 324 428
======== ======= ======== ======= ======== =======
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
JANUS RETIREMENT ADVANTAGE
WRL SERIES ANNUITY ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
ALL AMOUNTS IN THOUSANDS
<TABLE>
<CAPTION>
HIGH-YIELD MONEY MARKET
SUBACCOUNT SUBACCOUNT
------------------------- --------------------------
DECEMBER 31, DECEMBER 31,
------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ......................... $ 192 $ 301 $ 1,078 $ 671
Net gain (loss) on investment securities ............. (62) (256) 0 0
-------- ------- -------- --------
Net increase (decrease) in net assets
resulting from operations ........................... 130 45 1,078 671
-------- ------- -------- --------
CAPITAL UNIT TRANSACTIONS:
Proceeds from units sold (transferred) ............... (1,349) 123 20,834 16,471
-------- ------- -------- --------
Less cost of units redeemed:
Administrative charges .............................. 0 0 2 1
Surrender benefits .................................. 139 102 3,837 8,111
Death benefits ...................................... 0 0 6 0
-------- ------- -------- --------
139 102 3,845 8,112
-------- ------- -------- --------
Increase (decrease) in net assets from
capital unit transactions .......................... (1,488) 21 16,989 8,359
-------- ------- -------- --------
Net increase (decrease) in net assets ............... (1,358) 66 18,067 9,030
Depositor's equity contribution (redemption) ......... 0 0 0 0
NET ASSETS:
Beginning of year .................................... 2,979 2,913 16,399 7,369
-------- ------- -------- --------
End of year .......................................... $ 1,621 $ 2,979 $ 34,466 $ 16,399
======== ======= ======== ========
UNIT ACTIVITY:
Units outstanding - beginning of year ................ 230 226 1,395 656
Units issued ......................................... 155 412 8,273 9,807
Units redeemed ....................................... (267) (408) (6,856) (9,068)
-------- ------- -------- --------
Units outstanding - end of year ...................... 118 230 2,812 1,395
======== ======= ======== ========
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
JANUS RETIREMENT ADVANTAGE
WRL SERIES ANNUITY ACCOUNT B
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
GROWTH SUBACCOUNT
---------------------------------------------------------------------
DECEMBER 31,
---------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Accumulation unit value, beginning of period ......... $ 26.31 $ 19.52 $ 16.01 $ 13.61 $ 10.55
Income from operations:
Net investment income (loss) ....................... 0.03 1.30 0.42 0.32 0.26
Net realized and unrealized gain (loss) on
investment ........................................ 11.30 5.49 3.09 2.08 2.80
-------- -------- -------- -------- --------
Net income (loss) from operations ................. 11.33 6.79 3.51 2.40 3.06
-------- -------- -------- -------- --------
Accumulation unit value, end of period ............... $ 37.64 $ 26.31 $ 19.52 $ 16.01 $ 13.61
======== ======== ======== ======== ========
Total return ......................................... 43.05 % 34.78 % 21.95 % 17.61 % 29.07 %
Ratios and supplemental data:
Net assets at end of period (in thousands) .......... $ 75,851 $ 43,490 $ 29,570 $ 16,696 $ 10,125
Ratio of net investment income (loss) to average
net assets ......................................... 0.09 % 5.92 % 2.30 % 2.10 % 2.08 %
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH SUBACCOUNT
---------------------------------------------------------------------
DECEMBER 31,
---------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Accumulation unit value, beginning of period ......... $ 27.55 $ 20.65 $ 18.45 $ 17.21 $ 13.62
Income from operations:
Net investment income (loss) ....................... 1.08 ( 0.14) ( 0.12) 0.07 0.15
Net realized and unrealized gain (loss) on
investment ........................................ 33.06 7.04 2.32 1.17 3.44
-------- -------- -------- -------- --------
Net income (loss) from operations ................. 34.14 6.90 2.20 1.24 3.59
-------- -------- -------- -------- --------
Accumulation unit value, end of period ............... $ 61.69 $ 27.55 $ 20.65 $ 18.45 $ 17.21
======== ======== ======== ======== ========
Total return ......................................... 123.95 % 33.39 % 11.93 % 7.18 % 26.41 %
Ratios and supplemental data:
Net assets at end of period (in thousands) .......... $ 101,567 $ 24,324 $ 20,328 $ 18,820 $ 11,681
Ratio of net investment income (loss) to average
net assets ......................................... 2.77 % ( 0.65)% ( 0.65)% 0.42 % 1.00 %
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
JANUS RETIREMENT ADVANTAGE
WRL SERIES ANNUITY ACCOUNT B
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
CAPITAL APPRECIATION SUBACCOUNT
--------------------------------------------
DECEMBER 31,
--------------------------------------------
1999 1998 1997(1)
------------- ------------- ------------
<S> <C> <C> <C>
Accumulation unit value, beginning of period ......... $ 19.80 $ 12.61 $ 10.00
Income from operations:
Net investment income (loss) ....................... ( 0.03) ( 0.08) 0.03
Net realized and unrealized gain (loss) on
investment ........................................ 13.08 7.27 2.58
-------- -------- --------
Net income (loss) from operations ................. 13.05 7.19 2.61
-------- -------- --------
Accumulation unit value, end of period ............... $ 32.85 $ 19.80 $ 12.61
======== ======== ========
Total return ......................................... 65.92 % 57.09 % 26.05 %
Ratios and supplemental data:
Net assets at end of period (in thousands) .......... $ 49,670 $ 14,151 $ 2,637
Ratio of net investment income (loss) to average
net assets ......................................... ( 0.13)% ( 0.52)% 0.35 %
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH SUBACCOUNT
--------------------------------------------------------------------
DECEMBER 31,
--------------------------------------------------------------------
1999 1998 1997 1996 1995
------------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Accumulation unit value, beginning of period ......... $ 21.65 $ 18.58 $ 15.78 $ 11.80 $ 9.66
Income from operations:
Net investment income (loss) ....................... ( 0.10) 0.29 0.05 0.24 ( 0.06)
Net realized and unrealized gain (loss) on
investment ........................................ 17.65 2.78 2.75 3.74 2.20
-------- -------- -------- -------- --------
Net income (loss) from operations ................. 17.55 3.07 2.80 3.98 2.14
-------- -------- -------- -------- --------
Accumulation unit value, end of period ............... $ 39.20 $ 21.65 $ 18.58 $ 15.78 $ 11.80
======== ======== ======== ======== ========
Total return ......................................... 81.09 % 16.48 % 17.74 % 33.75 % 22.11 %
Ratios and supplemental data:
Net assets at end of period (in thousands) .......... $ 32,267 $ 14,537 $ 15,266 $ 6,156 $ 1,596
Ratio of net investment income (loss) to average
net assets ......................................... ( 0.39)% 1.38 % 0.26 % 1.72 % ( 0.66)%
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
JANUS RETIREMENT ADVANTAGE
WRL SERIES ANNUITY ACCOUNT B
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
WORLDWIDE GROWTH SUBACCOUNT
--------------------------------------------------------------------
DECEMBER 31,
--------------------------------------------------------------------
1999 1998 1997 1996 1995
------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Accumulation unit value, beginning of period ......... $ 30.16 $ 23.55 $ 19.40 $ 15.14 $ 11.99
Income from operations:
Net investment income (loss) ....................... ( 0.17) 0.87 0.23 0.19 ( 0.04)
Net investment and unrealized gain (loss) on
investment ........................................ 19.29 5.74 3.92 4.07 3.19
-------- -------- -------- -------- --------
Net income (loss) from operations ................. 19.12 6.61 4.15 4.26 3.15
-------- -------- -------- -------- --------
Accumulation unit value, end of period ............... $ 49.28 $ 30.16 $ 23.55 $ 19.40 $ 15.14
======== ======== ======== ======== ========
Total return ......................................... 63.39 % 28.09 % 21.36 % 28.12 % 26.29 %
Ratios and supplemental data:
Net assets at end of period (in thousands) .......... $ 95,924 $ 58,560 $ 44,154 $ 23,501 $ 11,099
Ratio of net investment income (loss) to average
net assets ......................................... ( 0.48)% 3.18 % 1.01 % 1.12 % ( 0.32)%
</TABLE>
<TABLE>
<CAPTION>
BALANCED SUBACCOUNT
-------------------------------------------------------------------
DECEMBER 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Accumulation unit value, beginning of period ......... $ 24.76 $ 18.56 $ 15.30 $ 13.26 $ 10.72
Income from operations:
Net investment income (loss) ....................... 0.46 0.81 0.49 0.28 0.13
Net realized and unrealized gain (loss) on
investment ........................................ 5.97 5.39 2.77 1.76 2.41
-------- -------- -------- -------- --------
Net income (loss) from operations ................. 6.43 6.20 3.26 2.04 2.54
-------- -------- -------- -------- --------
Accumulation unit value, end of period ............... $ 31.19 $ 24.76 $ 18.56 $ 15.30 $ 13.26
======== ======== ======== ======== ========
Total return ......................................... 25.94 % 33.42 % 21.31 % 15.36 % 23.73 %
Ratios and supplemental data:
Net assets at end of period (in thousands) .......... $ 27,514 $ 18,155 $ 11,287 $ 5,336 $ 3,283
Ratio of net investment income (loss) to average
net assets ......................................... 1.68 % 3.85 % 2.84 % 1.98 % 1.08 %
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
JANUS RETIREMENT ADVANTAGE
WRL SERIES ANNUITY ACCOUNT B
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
GROWTH AND INCOME
EQUITY INCOME SUBACCOUNT SUBACCOUNT
--------------------------------------- ---------------------------
DECEMBER 31 DECEMBER 31,
--------------------------------------- ---------------------------
1999 1998 1997(1) 1999 1998(1)
------------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Accumulation unit value, beginning of period ......... $ 19.49 $ 13.41 $ 10.00 $ 11.93 $ 10.00
Income from operations:
Net investment income (loss) ....................... 0.00 0.13 ( 0.03) ( 0.04) ( 0.01)
Net realized and unrealized gain (loss) on
investment ........................................ 7.92 5.95 3.44 8.73 1.94
-------- -------- -------- -------- --------
Net income (loss) from operations ................. 7.92 6.08 3.41 8.69 1.93
-------- -------- -------- -------- --------
Accumulation unit value, end of period ............... $ 27.41 $ 19.49 $ 13.41 $ 20.62 $ 11.93
======== ======== ======== ======== ========
Total return ......................................... 40.67 % 45.30 % 34.12 % 72.91 % 19.28 %
Ratios and supplemental data:
Net assets at end of period (in thousands) .......... $ 18,976 $ 9,017 $ 3,048 $ 16,676 $ 4,326
Ratio of net investment income (loss) to average
net assets ......................................... 0.01 % 0.81 % ( 0.32)% ( 0.29)% ( 0.21)%
</TABLE>
<TABLE>
<CAPTION>
FLEXIBLE INCOME SUBACCOUNT
-----------------------------------------------------------------
DECEMBER 31,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Accumulation unit value, beginning of period ......... $ 15.86 $ 14.63 $ 13.17 $ 12.15 $ 9.90
Income from operations:
Net realized income (loss) ......................... 0.90 0.99 0.88 0.83 0.57
Net realized and unrealized gain (loss) on
investment ........................................ ( 0.75) 0.24 0.58 0.19 1.68
-------- -------- -------- -------- --------
Net income (loss) from operations ................. 0.15 1.23 1.46 1.02 2.25
-------- -------- -------- -------- --------
Accumulation unit value, end of period ............... $ 16.01 $ 15.86 $ 14.63 $ 13.17 $ 12.15
======== ======== ======== ======== ========
Total return ......................................... 0.95 % 8.40 % 11.04 % 8.41 % 22.81 %
Ratios and supplemental data:
Net assets at end of period (in thousands) .......... $ 5,192 $ 6,781 $ 3,662 $ 2,198 $ 2,436
Ratio of net investment income (loss) to average
net assets ......................................... 5.68 % 6.47 % 6.33 % 6.75 % 5.53 %
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
JANUS RETIREMENT ADVANTAGE
WRL SERIES ANNUITY ACCOUNT B
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED
<TABLE>
<CAPTION>
HIGH-YIELD SUBACCOUNT
-----------------------------------------------------------
DECEMBER 31,
-----------------------------------------------------------
1999 1998 1997 1996(1)
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Accumulation unit value, beginning of period ......... $ 12.97 $ 12.90 $ 11.19 $ 10.00
Income from operations:
Net investment income (loss) ....................... 1.06 1.23 0.90 0.55
Net realized and unrealized gain (loss) on
investment ........................................ ( 0.26) ( 1.16) 0.81 0.64
-------- -------- -------- --------
Net income (loss) from operations ................. 0.80 0.07 1.71 1.19
-------- -------- -------- --------
Accumulation unit value, end of period ............... $ 13.77 $ 12.97 $ 12.90 $ 11.19
======== ======== ======== ========
Total return ......................................... 6.16 % 0.61 % 15.22 % 11.91 %
Ratios and supplemental data:
Net assets at end of period (in thousands) .......... $ 1,621 $ 2,979 $ 2,913 $ 659
Ratio of net investment income (loss) to average
net assets ......................................... 7.89 % 9.21 % 7.37 % 7.88 %
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET SUBACCOUNT
------------------------------------------------------------------
DECEMBER 31,
------------------------------------------------------------------
1999 1998 1997 1996 1995(1)
------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Accumulation unit value, beginning of period ......... $ 11.75 $ 11.23 $ 10.74 $ 10.30 $ 10.00
Income from operations:
Net investment income (loss) ....................... 0.51 0.52 0.49 0.44 0.30
Net realized and unrealized gain (loss) on
investment ........................................ 0.00 0.00 0.00 0.00 0.00
-------- -------- -------- -------- --------
Net income (loss) from operations ................. 0.51 0.52 0.49 0.44 0.30
-------- -------- -------- -------- --------
Accumulation unit value, end of period ............... $ 12.26 $ 11.75 $ 11.23 $ 10.74 $ 10.30
======== ======== ======== ======== ========
Total return ......................................... 4.30 % 4.68 % 4.49 % 4.28 % 3.03 %
Ratios and supplemental data:
Net assets at end of period (in thousands) .......... $ 34,466 $ 16,399 $ 7,369 $ 6,095 $ 1,725
Ratio of net investment income (loss) to average
net assets ......................................... 4.26 % 4.55 % 4.43 % 4.19 % 4.42 %
</TABLE>
See Notes to the Financial Statements, which is an integral part of this
report.
<PAGE>
JANUS RETIREMENT ADVANTAGE
WRL SERIES ANNUITY ACCOUNT B
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 1999
NOTE 1 -- ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
The Janus Retirement Advantage WRL Series Annuity Account B (the "Annuity
Account"), was established as a variable accumulation deferred annuity separate
account of Western Reserve Life Assurance Co. of Ohio ("WRL" or the
"depositor") and is registered as a unit investment trust under the Investment
Company Act of 1940, as amended. The Annuity Account encompasses the Janus
Retirement Advantage, a tax deferred variable annuity contract (the
"Contracts") issued by WRL. The Annuity Account contains eleven investment
options referred to as subaccounts. Each subaccount invests in the
corresponding portfolio ("Portfolio") of the Janus Aspen Series Trust (the
"Trust"), which is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended.
The Financial Statements reflect a full twelve month period, for each year
reported on, except as follows:
<TABLE>
<CAPTION>
SUBACCOUNT INCEPTION DATE
- ----------------------- ---------------
<S> <C>
Money Market 05/01/1995
High-Yield 05/01/1996
Capital Appreciation 05/01/1997
Equity Income 05/01/1997
Growth and Income 05/01/1998
</TABLE>
The Annuity Account's equity transactions are accounted for using the
appropriate effective date at the corresponding accumulation unit value.
The following significant accounting policies, which are in conformity with
accounting principles generally accepted in the United States, have been
consistently applied in the preparation of the Annuity Account Financial
Statements. The preparation of the Financial Statements required management to
make estimates and assumptions that affect the reported amounts and
disclosures. Actual results could differ from those estimates.
A. VALUATION OF INVESTMENTS AND SECURITIES TRANSACTIONS
Investments in the Trust's shares are valued at the closing net asset value
("NAV") per share of the underlying Portfolio as determined by the Trust.
Investment transactions are accounted for on the trade date, using the Portfolio
NAV per share next determined after receipt of sale or redemption order without
sales charges. Dividend income and capital gains distributions are recorded on
the ex-dividend date. The cost of investments sold is determined on a first-in,
first-out basis.
B. FEDERAL INCOME TAXES
The operations of the Annuity Account are a part of and are taxed with the
total operations of WRL, which is taxed as a life insurance company under the
Internal Revenue Code of 1986, as amended. Under the current Internal Revenue
Code, the investment income of the Annuity Account, including realized and
unrealized capital gains, is not taxable to WRL. Accordingly, no provision for
Federal income taxes has been made.
NOTE 2 -- CHARGES AND DEDUCTIONS
Charges are assessed by WRL in connection with the issuance and administration
of the Contracts.
A. CONTRACT CHARGES
No deduction for sales expenses is made from the purchase payments. A
contingent deferred sales charge may, however, be assessed against Contract
values when withdrawn or surrendered. On each anniversary through maturity
date, WRL will deduct an annual Contract charge as partial compensation for
providing administrative services under the Contracts. 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 SUBACCOUNT CHARGES
A daily charge equal to an annual rate of .65% of average daily net assets of
each subaccount 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.
<PAGE>
JANUS RETIREMENT ADVANTAGE
WRL SERIES ANNUITY ACCOUNT B
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 1999
NOTE 3 -- DIVIDEND 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. Consequently, a dividend distribution by the underlying Portfolio does
not change either the accumulation unit value or equity values within the
Annuity Account.
NOTE 4 -- SECURITIES TRANSACTIONS
Securities transactions for the year ended December 31, 1999 are as follows (in
thousands):
<TABLE>
<CAPTION>
PURCHASES PROCEEDS
OF FROM SALES
SUBACCOUNT SECURITIES OF SECURITIES
- ---------------------- ------------ --------------
<S> <C> <C>
Growth $ 17,955 $ 6,821
Aggressive Growth 41,821 7,985
Capital Appreciation 32,712 13,616
International Growth 12,934 8,003
Worldwide Growth 17,777 17,241
Balanced 8,364 4,049
Equity Income 9,268 4,128
Growth and Income 10,900 3,756
Flexible Income 2,803 4,080
High-Yield 1,944 3,230
Money Market 61,518 44,418
</TABLE>
NOTE 5 -- FINANCIAL HIGHLIGHTS
Per unit information has been computed using average units outstanding
throughout each period. Total return is not annualized for periods of less than
one year. The ratio of net investment income (loss) to average net assets is
annualized for periods of less than one year.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Western Reserve Life Assurance Co. of Ohio
We have audited the accompanying statutory-basis balance sheets of Western
Reserve Life Assurance Co. of Ohio (wholly owned indirectly by AEGON N.V.) as
of December 31, 1999 and 1998, and the related statutory-basis statements of
operations, changes in capital and surplus, and cash flows for each of the
three years in the period ended December 31, 1999. Our audits also included the
statutory-basis financial statement schedules required by Regulation S-X,
Article 7. These financial statements and schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits. We did not audit the
"Separate Account Assets" and "Separate Account Liabilities" in the
statutory-basis balance sheets of the Company. The Separate Account financial
statements were audited by other auditors whose reports have been furnished to
us, and our opinion, insofar as it relates to the data included for the
Separate Accounts, is based solely upon the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the reports of other
auditors provide a reasonable basis for our opinion.
As described in Note 1 to the financial statements, the Company presents
its financial statements in conformity with accounting practices prescribed or
permitted by the Insurance Department of the State of Ohio, which practices
differ from generally accepted accounting principles. The variances between
such practices and generally accepted accounting principles are also described
in Note 1. The effects on the financial statements of these variances are not
reasonably determinable but are presumed to be material.
In our opinion, because of the effects of the matter described in the
preceding paragraph, the financial statements referred to above do not present
fairly, in conformity with generally accepted accounting principles, the
financial position of Western Reserve Life Assurance Co. of Ohio at December
31, 1999 and 1998, or the results of its operations or its cash flows for each
of the three years in the period ended December 31, 1999.
However, in our opinion, based on our audits and the reports of other
auditors, the financial statements referred to above present fairly, in all
material respects, the financial position of Western Reserve Life Assurance Co.
of Ohio at December 31, 1999 and 1998, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1999, in conformity with accounting practices prescribed or permitted by the
Insurance Department of the State of Ohio. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
statutory-basis financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
ERNST & YOUNG LLP
Des Moines, Iowa
February 18, 2000
116
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
BALANCE SHEETS -- STATUTORY BASIS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------
1999 1998
------------- -------------
<S> <C> <C>
ADMITTED ASSETS
Cash and invested assets:
Cash and short-term investments .......................... $ 23,932 $ 73,808
Bonds .................................................... 119,731 184,697
Common stocks:
Affiliated entities (cost: 1999 and 1998 - $243)......... 2,156 704
Other (cost: 1999 and 1998 - $302)....................... 358 384
Mortgage loans on real estate ............................ 9,698 9,916
Home office properties .................................. 34,066 34,583
Investment properties ................................... 11,078 11,594
Policy loans ............................................ 182,975 112,982
Other invested assets ................................... -- 396
----------- ----------
Total cash and invested assets ............................ 383,994 429,064
Premiums deferred and uncollected ......................... 785 900
Accrued investment income ................................. 1,638 2,867
Transfers from separate accounts due or accrued ........... 463,721 350,633
Cash surrender value of life insurance policies ........... 47,518 45,445
Other assets .............................................. 6,614 9,239
Separate account assets ................................... 11,587,982 6,999,290
----------- ----------
Total admitted assets ..................................... $12,492,252 $7,837,438
=========== ==========
</TABLE>
SEE ACCOMPANYING NOTES.
117
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
BALANCE SHEETS -- STATUTORY BASIS
(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------
1999 1998
-------------- ------------
<S> <C> <C>
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Aggregate reserves for policies and contracts:
Life .................................................................... $ 302,138 $ 231,596
Annuity ................................................................. 268,864 265,418
Policy and contract claim reserves ....................................... 9,269 9,233
Other policyholders' funds ............................................... 38,633 38,080
Remittances and items not allocated ...................................... 20,686 20,569
Federal income taxes payable ............................................. 5,873 5,716
Asset valuation reserve .................................................. 3,809 2,848
Interest maintenance reserve ............................................. 7,866 9,684
Short-term note payable to affiliate ..................................... 17,100 44,200
Payable to affiliate ..................................................... 964 37,907
Other liabilities ........................................................ 49,478 31,151
Separate account liabilities ............................................. 11,582,656 6,997,456
----------- ----------
Total liabilities ......................................................... 12,307,336 7,693,858
Commitments and contingencies (NOTE 11) ...................................
Capital and surplus:
Common stock, $1.00 par value, 3,000,000 shares authorized and
2,500,000 shares issued and outstanding at December 31, 1999 and
1,500,000 shares authorized, issued and outstanding at December 31, 1998 2,500 1,500
Paid-in surplus .......................................................... 120,107 120,107
Unassigned surplus ....................................................... 62,309 21,973
----------- ----------
Total capital and surplus ................................................. 184,916 143,580
----------- ----------
Total liabilities and capital and surplus ................................. $12,492,252 $7,837,438
=========== ==========
</TABLE>
SEE ACCOMPANYING NOTES.
118
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
STATEMENTS OF OPERATIONS -- STATUTORY BASIS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------
1999 1998 1997
------------- ------------- ------------
<S> <C> <C> <C>
Revenues:
Premiums and other considerations, net of reinsurance:
Life .................................................................. $ 584,729 $ 476,053 $ 394,370
Annuity ............................................................... 1,104,525 794,841 822,149
Net investment income .................................................. 39,589 36,315 40,013
Amortization of interest maintenance reserve ........................... 1,751 744 1,576
Commissions and expense allowances on reinsurance ceded ................ 4,178 15,333 11
Income from fees associated with investment management,
administration and contract guarantees for separate accounts ......... 19,620 72,817 --
Other income ........................................................... 44,366 67,751 3,016
---------- ---------- ----------
1,798,758 1,463,854 1,261,135
Benefits and expenses:
Benefits paid or provided for:
Life .................................................................. 35,591 42,982 28,060
Surrender benefits .................................................... 689,535 551,528 431,939
Other benefits ........................................................ 32,201 31,280 28,112
Increase (decrease) in aggregate reserves for policies and
contracts:
Life ................................................................. 70,542 42,940 29,485
Annuity .............................................................. 3,446 (30,872) (35,940)
Other ................................................................ (121) 32,178 794
---------- ---------- ----------
831,194 670,036 482,450
Insurance expenses:
Commissions ............................................................ 246,334 205,939 179,106
General insurance expenses ............................................. 112,536 102,611 70,546
Taxes, licenses and fees ............................................... 19,019 15,545 13,101
Net transfers to separate accounts ..................................... 540,443 475,435 519,214
Other expenses ......................................................... -- 59 21
---------- ---------- ----------
918,332 799,589 781,988
---------- ---------- ----------
1,749,526 1,469,625 1,264,438
---------- ---------- ----------
Gain (loss) from operations before federal income tax expense
(benefit) and net realized capital gains
(losses) on investments ............................................... 49,232 (5,771) (3,303)
Federal income tax expense (benefit) .................................... 11,816 (347) 469
---------- ---------- ----------
Gain (loss) from operations before net realized capital gains (losses)
on investments ........................................................ 37,416 (5,424) (3,772)
Net realized capital gains (losses) on investments
(net of related federal income taxes and amounts transferred to
interest maintenance reserve) ......................................... (716) 1,494 747
---------- ---------- ----------
Net income (loss) ....................................................... $ 36,700 $ (3,930) $ (3,025)
========== ========== ==========
</TABLE>
SEE ACCOMPANYING NOTES.
119
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS -- STATUTORY BASIS
(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, 1997 .......................... $1,500 $ 68,015 $ 26,041 $ 95,556
Net loss ........................................... -- -- (3,025) (3,025)
Change in non-admitted assets ...................... -- -- (702) (702)
Change in asset valuation reserve .................. -- -- 3,274 3,274
Change in surplus in separate accounts ............. -- -- (2,115) (2,115)
Change in reserve valuation ........................ -- -- (1,872) (1,872)
Capital contribution ............................... -- 20,000 -- 20,000
Tax effect of capital loss carry-forward utilized by
affiliates ....................................... -- -- 3,747 3,747
------ -------- -------- --------
Balance at December 31, 1997 ........................ 1,500 88,015 25,348 114,863
Net loss ........................................... -- -- (3,930) (3,930)
Change in net unrealized capital gains ............. -- -- 248 248
Change in non-admitted assets ...................... -- -- (1,815) (1,815)
Change in asset valuation reserve .................. -- -- (412) (412)
Change in surplus in separate accounts ............. -- -- (341) (341)
Change in reserve valuation ........................ -- -- (2,132) (2,132)
Capital contribution ............................... -- 32,092 -- 32,092
Settlement of prior period tax returns ............. -- -- 353 353
Tax benefits on stock options exercised ............ -- -- 4,654 4,654
------ -------- -------- --------
Balance at December 31, 1998 ........................ 1,500 120,107 21,973 143,580
Net income .......................................... -- -- 36,700 36,700
Change in net unrealized capital gains ............. -- -- 1,421 1,421
Change in non-admitted assets ...................... -- -- 703 703
Change in asset valuation reserve .................. -- -- (961) (961)
Change in surplus in separate accounts ............. -- -- 451 451
Transfer from unassigned surplus to common
stock (stock dividend) ........................... 1,000 -- (1,000) --
Settlement of prior period tax returns ............. -- -- 1,000 1,000
Tax benefits on stock options exercised ............ -- -- 2,022 2,022
------ -------- -------- --------
Balance at December 31, 1999 ........................ $2,500 $120,107 $ 62,309 $184,916
====== ======== ======== ========
</TABLE>
SEE ACCOMPANYING NOTES.
120
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO STATEMENTS OF CASH FLOWS --
STATUTORY BASIS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Premiums and other considerations, net of reinsurance .......... $1,738,870 $1,356,732 $1,223,898
Net investment income .......................................... 44,235 38,294 43,802
Life and accident and health claims ............................ (35,872) (44,426) (26,005)
Surrender benefits and other fund withdrawals .................. (689,535) (551,528) (431,939)
Other benefits to policyholders ................................ (32,642) (31,231) (28,147)
Commissions, other expenses and other taxes .................... (382,372) (326,080) (262,901)
Net transfers to separate accounts ............................. (628,762) (461,982) (596,347)
Federal income taxes received (paid) ........................... (9,637) 11,956 5,006
Interest paid .................................................. -- -- (731)
Other, net ..................................................... (21,054) (7,109) (14,901)
---------- ---------- ----------
Net cash used in operating activities .......................... (16,769) (15,374) (88,265)
INVESTING ACTIVITIES
Proceeds from investments sold, matured or repaid:
Bonds and preferred stocks .................................... 114,177 143,449 146,963
Mortgage loans on real estate ................................. 212 221 2,116
Other ......................................................... 18 -- --
114,407 143,670 149,079
Cost of investments acquired
Bonds and preferred stocks .................................... (49,279) (68,202) (40,418)
Common stocks ................................................. -- (93) (150)
Mortgage loans on real estate ................................. (1) (5,313) (891)
Real estate ................................................... (286) (26,213) (12,002)
Policy loans .................................................. (69,993) (36,241) (24,137)
Other ......................................................... (855) (414) --
---------- ---------- ----------
(120,414) (136,476) (77,598)
Net cash provided by (used in) investing activities ............ (6,007) 7,194 71,481
FINANCING ACTIVITIES
Issuance (payment) of short-term note payable to
affiliate, net ............................................... (27,100) 36,000 8,200
Capital contribution ........................................... -- 32,092 20,000
---------- ---------- ----------
Net cash provided by (used in) financing activities ............ (27,100) 68,092 28,200
---------- ---------- ----------
Increase (decrease) in cash and short-term investments ......... (49,876) 59,912 11,416
Cash and short-term investments at beginning of year ........... 73,808 13,896 2,480
---------- ---------- ----------
Cash and short-term investments at end of year ................. $ 23,932 $ 73,808 $ 13,896
========== ========== ==========
</TABLE>
SEE ACCOMPANYING NOTES.
121
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS -- STATUTORY-BASIS
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1999
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Western Reserve Life Assurance Co. of Ohio ("the Company") is a stock life
insurance company and is a wholly-owned subsidiary of First AUSA Life Insurance
Company which, in turn, is a wholly-owned subsidiary of AEGON USA, Inc.
("AEGON"). AEGON is an indirect wholly-owned subsidiary of AEGON N.V., a
holding company organized under the laws of The Netherlands.
NATURE OF BUSINESS
The Company operates predominantly in the variable universal life and
variable annuity areas of the life insurance business. The Company is licensed
in 49 states, District of Columbia, Puerto Rico and Guam. Sales of the
Company's products are through financial planners, independent representatives,
financial institutions and stockbrokers. The majority of the Company's new life
insurance written and a substantial portion of new annuities written is done
through one marketing organization; the Company expects to maintain this
relationship for the foreseeable future.
BASIS OF PRESENTATION
The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported in
the financial statements and accompanying notes. Such estimates and assumptions
could change in the future as more information becomes known, which could
impact the amounts reported and disclosed herein.
The accompanying financial statements have been prepared in conformity
with accounting practices prescribed or permitted by the Insurance Department
of the State of Ohio ("Insurance Department"), which practices differ from
generally accepted accounting principles. The more significant of these
differences are as follows: (a) bonds are generally reported at amortized cost
rather than segregating the portfolio into held-to-maturity (reported at
amortized cost), available-for-sale (reported at fair value), and trading
(reported at fair value) classifications; (b) acquisition costs of acquiring
new business are expensed as incurred rather than deferred and amortized over
the life of the policies; (c) policy reserves on traditional life products are
based on statutory mortality rates and interest which may differ from reserves
based on reasonable assumptions of expected mortality, interest, and
withdrawals which include a provision for possible unfavorable deviation from
such assumptions; (d) policy reserves on certain investment products use
discounting methodologies utilizing statutory interest rates rather than full
account values; (e) reinsurance amounts are netted against the corresponding
asset or
122
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS -- STATUTORY-BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1999
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
liability rather than shown as gross amounts on the balance sheet; (f) deferred
income taxes are not provided for the difference between the financial
statement amounts and income tax bases of assets and liabilities; (g) net
realized gains or losses attributed to changes in the level of interest rates
in the market are deferred and amortized over the remaining life of the bond or
mortgage loan, rather than recognized as gains or losses in the statement of
operations when the sale is completed; (h) potential declines in the estimated
realizable value of investments are provided for through the establishment of a
formula-determined statutory investment reserve (reported as a liability),
changes to which are charged directly to surplus, rather than through
recognition in the statement of operations for declines in value, when such
declines are judged to be other than temporary; (i) certain assets designated
as "non-admitted assets" have been charged to unassigned surplus rather than
being reported as assets; (j) revenues for universal life and investment
products consist of the entire premiums received rather than policy charges for
the cost of insurance, policy administration charges, amortization of policy
initiation fees and surrender charges assessed; (k) pension expense is recorded
as amounts are paid rather than accrued and expensed during the periods in
which the employers provide service; (l) stock options settled in cash are
recorded as an expense of the Company's indirect parent rather than charged to
current operations; (m) adjustments to federal income taxes of prior years are
charged or credited directly to unassigned surplus, rather than reported as a
component of income tax expense in the statement of operations; and (n) the
financial statements of wholly-owned affiliates are not consolidated with those
of the Company. The effects of these variances have not been determined by the
Company, but are presumed to be material.
In 1998, the National Association of Insurance Commissioners (NAIC)
adopted codified statutory accounting principles ("Codification") effective
January 1, 2001. Codification will likely change, to some extent, prescribed
statutory accounting practices and may result in changes to the accounting
practices that the Company uses to prepare its statutory-basis financial
statements. Codification will require adoption by the various states before it
becomes the prescribed statutory basis of accounting for insurance companies
domesticated within those states. Accordingly, before Codification becomes
effective for the Company, the State of Ohio must adopt Codification as the
prescribed basis of accounting on which domestic insurers must report their
statutory-basis results to the Insurance Department. At this time it is unclear
whether the State of Ohio will adopt Codification. However, based on current
guidance, management believes that the impact of Codification will not be
material to the Company's statutory-basis financial statements.
123
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS -- STATUTORY-BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1999
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Other significant statutory accounting practices are as follows:
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers all
highly liquid investments with remaining maturities of one year or less when
purchased to be cash equivalents.
INVESTMENTS
Investments in bonds (except those to which the Securities Valuation
Office of the NAIC has ascribed a value), mortgage loans on real estate and
short-term investments are reported at cost adjusted for amortization of
premiums and accrual of discounts. Amortization is computed using methods which
result in a level yield over the expected life of the investment. The Company
reviews its prepayment assumptions on mortgage and other asset backed
securities at regular intervals and adjusts amortization rates retrospectively
when such assumptions are changed due to experience and/or expected future
patterns. Common stocks of unaffiliated companies are carried at market, and
the related unrealized capital gains/(losses) are reported in unassigned
surplus without any adjustment for federal income taxes. Common stocks of the
Company's wholly-owned affiliates are recorded at the equity in net assets.
Home office and investment properties are reported at cost less allowances for
depreciation. Depreciation is computed principally by the straight-line method.
Policy loans are reported at unpaid principal. Other "admitted assets" are
valued, principally at cost, as required or permitted by Ohio Insurance Laws.
Realized capital gains and losses are determined on the basis of specific
identification and are recorded net of related federal income taxes. The Asset
Valuation Reserve (AVR) is established by the Company to provide for potential
losses in the event of default by issuers of certain invested assets. These
amounts are determined using a formula prescribed by the NAIC and are reported
as a liability. The formula for the AVR provides for a corresponding adjustment
for realized gains and losses. Under a formula prescribed by the NAIC, the
Company defers, in the Interest Maintenance Reserve (IMR), the portion of
realized gains and losses on sales of fixed income investments, principally
bonds and mortgage loans, attributable to changes in the general level of
interest rates and amortizes those deferrals over the remaining period to
maturity of the security.
During 1999, 1998 and 1997, net realized capital gains (losses) of $(67),
$1,294 and $3,259, respectively, were credited to the IMR rather than being
immediately
124
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS -- STATUTORY-BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1999
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
recognized in the statements of operations. Amortization of these net gains
aggregated $1,751, $744 and $1,576 for the years ended December 31, 1999, 1998
and 1997, respectively.
Interest income is recognized on an accrual basis. The Company does not
accrue income on bonds in default, mortgage loans on real estate in default
and/or foreclosure or which are delinquent more than twelve months, or real
estate where rent is in arrears for more than three months. Further, income is
not accrued when collection is uncertain. No investment income due and accrued
has been excluded for the years ended December 31, 1999, 1998 and 1997, with
respect to such practices.
AGGREGATE RESERVES FOR POLICIES
Life and annuity reserves are developed by actuarial methods and are
determined based on published tables using statutorily specified interest rates
and valuation methods that will provide, in the aggregate, reserves that are
greater than or equal to the minimum required by law.
The aggregate policy reserves for life insurance policies are based
principally upon the 1941, 1958 and 1980 Commissioners' Standard Ordinary
Mortality Tables. The reserves are calculated using interest rates ranging from
2.25 to 5.50 percent and are computed principally on the Net Level Premium
Valuation and the Commissioners' Reserve Valuation Methods. Reserves for
universal life policies are based on account balances adjusted for the
Commissioners' Reserve Valuation Method.
Deferred annuity reserves are calculated according to the Commissioners'
Annuity Reserve Valuation Method including excess interest reserves to cover
situations where the future interest guarantees plus the decrease in surrender
charges are in excess of the maximum valuation rates of interest. Reserves for
immediate annuities and supplementary contracts with life contingencies are
equal to the present value of future payments assuming interest rates ranging
from 5.75 to 8.75 percent and mortality rates, where appropriate, from a
variety of tables.
POLICY AND CONTRACT CLAIM RESERVES
Claim reserves represent the estimated accrued liability for claims
reported to the Company and claims incurred but not yet reported through the
statement date. These reserves are estimated using either individual case-basis
valuations or statistical analysis techniques. These estimates are subject to
the effects of trends in claim severity and frequency. The estimates are
continually reviewed and adjusted as necessary as experience develops or new
information becomes available.
125
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS -- STATUTORY-BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1999
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
SEPARATE ACCOUNTS
Assets held in trust for purchases of variable universal life and variable
annuity contracts and the Company's corresponding obligation to the contract
owners are shown separately in the balance sheets. The assets in the separate
accounts are valued at market. Income and gains and losses with respect to the
assets in the separate accounts accrue to the benefit of the policyholders and,
accordingly, the operations of the separate accounts are not included in the
accompanying financial statements. The separate accounts do not have any
minimum guarantees and the investment risks associated with market value
changes are borne entirely by the policyholders. The Company received variable
contract premiums of $1,675,642, $1,240,858 and $1,164,013 in 1999, 1998 and
1997, respectively. All variable account contracts are subject to discretionary
withdrawal by the policyholder at the market value of the underlying assets
less the current surrender charge. Separate account contractholders have no
claim against the assets of the general account.
STOCK OPTION PLAN
AEGON N.V. sponsors a stock option plan for eligible employees of the
Company. Under this plan, certain employees have indicated a preference to
immediately sell shares received as a result of their exercise of the stock
options; in these situations, AEGON N.V. has settled such options in cash
rather than issuing stock to these employees. These cash settlements are paid
by the Company, and AEGON N.V. subsequently reimburses the Company for such
payments. Under statutory accounting principles, the Company does not record
any expense related to this plan, as the expense is recognized by AEGON N.V.
However, the Company is allowed to record a deduction in the consolidated tax
return filed by the Company and certain affiliates. The tax benefit of this
deduction has been credited directly to unassigned surplus.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1998 and 1997 financial
statements to conform to the 1999 presentation.
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
126
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS -- STATUTORY-BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1999
2. FAIR VALUES OF FINANCIAL INSTRUMENTS--(CONTINUED)
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.
127
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS -- STATUTORY-BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1999
2. FAIR VALUES OF FINANCIAL INSTRUMENTS--(CONTINUED)
The following sets forth a comparison of the fair values and carrying
amounts of the Company's financial instruments subject to the provisions of
Statement of Financial Accounting Standards No. 107:
<TABLE>
<CAPTION>
December 31
-----------------------------------------------------
1999 1998
--------------------------- -------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
ADMITTED ASSETS
Cash and short-term investments ..... $ 23,932 $ 23,932 $ 73,808 $ 73,808
Bonds ............................... 119,731 119,076 184,697 192,556
Common stocks, other than affiliates 358 358 384 384
Mortgage loans on real estate ....... 9,698 9,250 9,916 10,390
Policy loans ........................ 182,975 182,975 112,982 112,982
Separate account assets ............. 11,587,982 11,587,982 6,999,290 6,999,290
LIABILITIES
Investment contract liabilities ..... 301,403 294,342 297,349 294,105
Separate account annuities .......... 8,271,548 8,079,141 5,096,680 5,038,296
</TABLE>
128
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS -- STATUTORY-BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1999
3. INVESTMENTS
The carrying amount and estimated fair value of investments in debt
securities are as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Amount Gains Losses Value
---------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1999
Bonds:
United States Government and agencies .......... $ 4,755 $ 4 $ 66 $ 4,693
State, municipal and other government .......... 2,185 12 -- 2,197
Public utilities ............................... 13,134 129 368 12,895
Industrial and miscellaneous ................... 52,997 1,213 1,208 53,002
Mortgage and other asset-backed securities ..... 46,660 480 851 46,289
-------- ------ ------ --------
Total bonds ..................................... $119,731 $1,838 $2,493 $119,076
======== ====== ====== ========
DECEMBER 31, 1998
Bonds: ..........................................
United States Government and agencies .......... $ 4,749 $ 83 $ -- $ 4,832
State, municipal and other government .......... 3,234 117 -- 3,351
Public utilities ............................... 18,792 818 251 19,359
Industrial and miscellaneous ................... 96,332 6,685 577 102,440
Mortgage and other asset-backed securities ..... 61,590 1,235 251 62,574
-------- ------ ------ --------
Total bonds ..................................... $184,697 $8,938 $1,079 $192,556
======== ====== ====== ========
</TABLE>
The carrying amount and fair value of bonds at December 31, 1999 by
contractual maturity are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without penalties.
<TABLE>
<CAPTION>
Estimated
Carrying Fair
Amount Value
---------- ----------
<S> <C> <C>
Due in one year or less ............................ $ 10,521 $ 10,560
Due one through five years ......................... 32,248 31,993
Due five through ten years ......................... 17,342 17,104
Due after ten years ................................ 12,960 13,130
-------- --------
73,071 72,787
Mortgage and other asset-backed securities ......... 46,660 46,289
-------- --------
$119,731 $119,076
======== ========
</TABLE>
129
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS -- STATUTORY-BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1999
3. INVESTMENTS--(CONTINUED)
A detail of net investment income is presented below:
<TABLE>
<CAPTION>
Year ended December 31
------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Interest on bonds .................... $ 12,094 $ 17,150 $ 25,723
Dividends on equity investments from
subsidiaries ........................ 18,555 13,233 10,855
Interest on mortgage loans ........... 746 499 478
Rental income on real estate ......... 5,794 2,839 1,371
Interest on policy loans ............. 9,303 6,241 4,656
Other investment income .............. 414 540 26
-------- -------- --------
Gross investment income .............. 46,906 40,502 43,109
Investment expenses .................. (7,317) (4,187) (3,096)
-------- -------- --------
Net investment income ................ $ 39,589 $ 36,315 $ 40,013
======== ======== ========
</TABLE>
Proceeds from sales and maturities of debt securities and related gross
realized gains and losses were as follows:
<TABLE>
<CAPTION>
Year ended December 31
---------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Proceeds ...................... $114,177 $143,449 $146,963
======== ======== ========
Gross realized gains .......... $ 1,762 $ 4,641 $ 3,921
Gross realized losses ......... 1,709 899 626
-------- -------- --------
Net realized gains ............ $ 53 $ 3,742 $ 3,295
======== ======== ========
</TABLE>
At December 31, 1999, bonds with an aggregate carrying value of $4,152
were on deposit with certain state regulatory authorities or were restrictively
held in bank custodial accounts for benefit of such state regulatory
authorities, as required by statute.
130
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS -- STATUTORY-BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1999
3. INVESTMENTS--(CONTINUED)
Realized investment gains (losses) and changes in unrealized gains
(losses) for investments are summarized below:
<TABLE>
<CAPTION>
Realized
-------------------------------------
Year ended December 31
-------------------------------------
1999 1998 1997
--------- ----------- -----------
<S> <C> <C> <C>
Debt securities .................................. $ 53 $ 3,742 $ 3,295
Other invested assets ............................ 18 (18) --
------ -------- --------
71 3,724 3,295
Tax expense ...................................... (854) (936) (711)
Transfer to interest maintenance reserve ......... 67 (1,294) (3,259)
------ -------- --------
Net realized gains (losses) ...................... $ (716) $ 1,494 $ 747
====== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Changes in Unrealized
----------------------------------------
Year ended December 31
----------------------------------------
1999 1998 1997
------------ ------------ ----------
<S> <C> <C> <C>
Debt securities .......................................... $ (8,514) $ (3,985) $ (896)
Common stocks ............................................ 1,426 248 --
-------- -------- ------
Change in unrealized appreciation (depreciation) ......... $ (7,088) $ (3737) $ (896)
======== ======== ======
</TABLE>
Gross unrealized gains (losses) on common stocks were as follows:
<TABLE>
<CAPTION>
Unrealized
-------------------
December 31
-------------------
1999 1998
--------- -------
<S> <C> <C>
Unrealized gains ............. $1,995 $ 579
Unrealized losses ............ (26) (36)
------ -----
Net unrealized gains ......... $1,969 $ 543
====== =====
</TABLE>
During 1999, the Company did not issue any mortgage loans. The Company
requires all mortgagees to carry fire insurance equal to the value of the
underlying property.
During 1999, 1998 and 1997, no mortgage loans were foreclosed and
transferred to real estate. During 1999 and 1998, the Company held a mortgage
loan loss reserve in the asset valuation reserve of $110 and $112,
respectively.
At December 31, 1999, the Company had no investments (excluding U. S.
Government guaranteed or insured issues) which individually represented more
than ten percent of capital and surplus and the asset valuation reserve,
collectively.
131
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS -- STATUTORY-BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1999
4. REINSURANCE
The Company reinsures portions of certain insurance policies which exceed
its established limits, thereby providing a greater diversification of risk and
minimizing exposure on larger risks. The Company remains contingently liable
with respect to any insurance ceded, and this would become an actual liability
in the event that the assuming insurance company became unable to meet its
obligations under the reinsurance treaty.
<TABLE>
<CAPTION>
Year ended December 31
---------------------------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Direct premiums ............. $1,748,265 $1,345,752 $1,219,271
Reinsurance assumed ......... -- 461 2,389
Reinsurance ceded ........... (59,011) (75,319) (5,141)
---------- ---------- ----------
Net premiums earned ......... $1,689,254 $1,270,894 $1,216,519
========== ========== ==========
</TABLE>
The Company received reinsurance recoveries in the amount of $4,916,
$5,260 and $2,288 during 1999, 1998 and 1997, respectively. At December 31,
1999 and 1998, estimated amounts recoverable from reinsurers that have been
deducted from policy and contract claim reserves totaled $1,557 and $1,003,
respectively. The aggregate reserves for policies and contracts were reduced
for reserve credits for reinsurance ceded at December 31, 1999 and 1998 of
$3,487 and $2,849, respectively.
5. INCOME TAXES
For federal income tax purposes, the Company joins in a consolidated tax
return filing with certain affiliated companies. Under the terms of a
tax-sharing agreement between the Company and its affiliates, the Company
computes federal income tax expense as if it were filing a separate income tax
return, except that tax credits and net operating loss carryforwards are
determined on the basis of the consolidated group. Additionally, the
alternative minimum tax is computed for the consolidated group and the
resulting tax, if any, is allocated back to the separate companies on the basis
of the separate companies' alternative minimum taxable income.
132
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS -- STATUTORY-BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1999
5. INCOME TAXES--(CONTINUED)
Federal income tax expense (benefit) differs from the amount computed by
applying the statutory federal income tax rate to gain (loss) from operations
before federal income tax expense (benefit) and realized capital gains (losses)
on investments for the following reasons:
<TABLE>
<CAPTION>
Year ended December 31
------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Computed tax (benefit) at federal statutory rate (35%) ......... $ 17,231 $ (2,019) $ (1,156)
Deferred acquisition costs -- tax basis ........................ 11,344 9,672 9,164
Tax reserve valuation .......................................... (2,272) 1,513 (194)
Excess tax depreciation ........................................ (727) (442) (127)
Amortization of IMR ............................................ (613) (260) (552)
Dividend received deduction .................................... (10,784) (6,657) (5,326)
Prior year over-accrual ........................................ (3,167) (2,322) (1,541)
Other, net ..................................................... 804 168 201
--------- -------- --------
Federal income tax expense (benefit) ........................... $ 11,816 $ (347) $ 469
========= ======== ========
</TABLE>
Federal income tax expense (benefit) differs from the amount computed by
applying the statutory federal income tax rate to realized gains (losses) due
to the differences in book and tax asset bases at the time certain investments
are sold.
Prior to 1984, as provided for under the Life Insurance Company Tax Act of
1959, a portion of statutory income was not subject to current taxation, but
was accumulated for income tax purposes in a memorandum account referred to as
the policyholders' surplus account. No federal income taxes have been provided
for in the financial statements on income deferred in the policyholders'
surplus account ($293 at December 31, 1999). To the extent dividends are paid
from the amount accumulated in the policyholders' surplus account, net earnings
would be reduced by the amount of tax required to be paid. Should the entire
amount in the policyholders' surplus account become taxable, the tax thereon
computed at current rates would amount to approximately $103.
At December 31, 1996, the Company had capital loss carryforwards of
approximately $10,705, which were utilized by the Company's affiliates in the
consolidated tax return filing in 1997. This transaction resulted in a receipt
from the Company's affiliate of $3,747, which was credited directly to
unassigned surplus.
In 1999, the Company received $1,000 from its former parent, an
unaffiliated company, for reimbursement of prior period tax payments made by
the Company but owed by the former parent. In 1998, the Company reached a final
settlement with the
133
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS -- STATUTORY-BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1999
Internal Revenue Service for 1994 and 1995 resulting in a tax refund of $300
and interest received of $53. Tax settlements for 1999 and 1998 were credited
directly to unassigned surplus.
6. POLICY AND CONTRACT ATTRIBUTES
A portion of the Company's policy reserves and other policyholders' funds
relate to liabilities established on a variety of the Company's products,
primarily separate accounts, that are not subject to significant mortality or
morbidity risk; however, there may be certain restrictions placed upon the
amount of funds that can be withdrawn without penalty. The amount of reserves
on these products, by withdrawal characteristics are summarized as follows:
<TABLE>
<CAPTION>
December 31
------------------------------------------------------
1999 1998
-------------------------- -------------------------
Percent Percent
Amount of Total Amount of Total
------------- ---------- ------------- ---------
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal with
market value adjustment ..................... $ 12,534 0% $ 12,810 0%
Subject to discretionary withdrawal at book
value less surrender charge ................. 73,903 1 76,289 1
Subject to discretionary withdrawal at market
value ....................................... 8,271,441 96 5,096,680 94
Subject to discretionary withdrawal at book
value (minimal or no charges or
adjustments) ................................ 217,372 3 210,270 4
Not subject to discretionary withdrawal
provision ................................... 15,433 0 15,681 1
---------- -- ---------- --
8,590,683 100% 5,411,730 100%
=== ===
Less reinsurance ceded ....................... 1,581 1,131
---------- ----------
Total policy reserves on annuities and deposit
fund liabilities ............................ $8,589,102 $5,410,599
========== ==========
</TABLE>
134
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS -- STATUTORY-BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1999
6. POLICY AND CONTRACT ATTRIBUTES--(CONTINUED)
A reconciliation of the amounts transferred to and from the separate
accounts is presented below:
<TABLE>
<CAPTION>
Year ended December 31
---------------------------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Transfers as reported in the summary of
operations of the separate accounts statement:
Transfers to separate accounts ................. $1,675,642 $1,240,858 $1,164,013
Transfers from separate accounts ............... 1,056,207 774,690 646,477
---------- ---------- ----------
Net transfers to separate accounts ............. 619,435 466,168 517,536
Reconciling adjustments -- change in accruals
for investment management, administration
fees and contract guarantees, reinsurance and
separate account surplus ..................... (78,992) 9,267 1,678
---------- ---------- ----------
Transfers as reported in the summary of
operations of the life, accident and health
annual statement ............................. $ 540,443 $ 475,435 $ 519,214
========== ========== ==========
</TABLE>
Reserves on the Company's traditional life insurance products are computed
using mean reserving methodologies. These methodologies result in the
establishment of assets for the amount of the net valuation premiums that are
anticipated to be received between the policy's paid-through date to the
policy's next anniversary date. At December 31, 1999 and 1998, these assets
(which are reported as premiums deferred and uncollected) and the amounts of
the related gross premiums and loadings, are as follows:
<TABLE>
<CAPTION>
Gross Loading Net
--------- --------- -------
<S> <C> <C> <C>
DECEMBER 31, 1999
Ordinary direct renewal business ......... $1,017 $232 $785
------ ---- ----
$1,017 $232 $785
====== ==== ====
DECEMBER 31, 1998
Ordinary direct renewal business ......... $1,101 $201 $900
------ ---- ----
$1,101 $201 $900
====== ==== ====
</TABLE>
In 1994, the NAIC enacted a guideline to clarify reserving methodologies
for contracts that require immediate payment of claims upon proof of death of
the insured. Companies were allowed to grade the effects of the change in
reserving methodologies over five years. A direct charge to surplus of $2,132
and $1,872 was made for the years ended December 31, 1998 and 1997,
respectively, related to the change in reserve methodology.
135
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS -- STATUTORY-BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1999
7. DIVIDEND RESTRICTIONS
The Company is subject to limitations, imposed by the State of Ohio, on
the payment of dividends to its parent company. Generally, dividends during any
twelve month period may not be paid; without prior regulatory approval, in
excess of the greater of (a) 10 percent of statutory capital and surplus as of
the preceding December 31, or (b) statutory gain from operations for the
preceding year. Subject to the availability of unassigned surplus at the time
of such dividend, the maximum payment which may be made in 2000, without the
prior approval of insurance regulatory authorities, is $36,700.
8. CAPITAL STRUCTURE
During 1999, the Company's Board of Director's approved an amendment to
the Company's Articles of Incorporation which increased the number of
authorized capital shares to 3,000,000. The Board of Directors also authorized
a stock dividend in the amount of $1,000, which was transferred from unassigned
surplus. This amendment and stock dividend were in response to a change in
California law which requires all life insurance companies which do business in
the state to have capital stock of at least $2,500.
9. RETIREMENT AND COMPENSATION PLANS
The Company's employees participate in a qualified benefit plan sponsored
by AEGON. The Company has no legal obligation for the plan. The Company
recognizes pension expense equal to its allocation from AEGON. The pension
expense is allocated among the participating companies based on the Statement
of Financial Accounting Standards No. 87 expense as a percent of salaries. The
benefits are based on years of service and the employee's compensation during
the highest five consecutive years of employment. Pension expense aggregated
$1,105, $917 and $659 for the years ended December 31, 1999, 1998 and 1997,
respectively. The plan is subject to the reporting and disclosure requirements
of the Employee Retirement and Income Security Act of 1974.
The Company's employees also participate in a contributory defined
contribution plan sponsored by AEGON which is qualified under Section 401(k) of
the Internal Revenue Service Code. Employees of the Company who customarily
work at least 1,000 hours during each calendar year and meet the other
eligibility requirements are participants of the plan. Participants may elect
to contribute up to fifteen percent of their salary to the plan. The Company
will match an amount up to three percent of the participant's salary.
Participants may direct all of their contributions and plan balances to be
invested in a variety of investment options. The plan is subject to the
reporting and disclosure requirements of the Employee Retirement and Income
Security Act of 1974.
136
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS -- STATUTORY-BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1999
9. RETIREMENT AND COMPENSATION PLANS--(CONTINUED)
Pension expense related to this plan was $816, $632 and $448 for the years
ended December 31, 1999, 1998 and 1997, respectively.
AEGON sponsors supplemental retirement plans to provide the Company's
senior management with benefits in excess of normal pension benefits. The plans
are noncontributory and benefits are based on years of service and the
employee's compensation level. The plans are unfunded and nonqualified under
the Internal Revenue Code. In addition, AEGON has established incentive
deferred compensation plans for certain key employees of the Company. AEGON
also sponsors an employee stock option plan for individuals employed at least
three years and a stock purchase plan for its producers, with the participating
affiliated companies establishing their own eligibility criteria, producer
contribution limits and company matching formula. These plans have been accrued
for or funded as deemed appropriate by management of AEGON and the Company.
In addition to pension benefits, the Company participates in plans
sponsored by AEGON that provide postretirement medical, dental and life
insurance benefits to employees meeting certain eligibility requirements.
Portions of the medical and dental plans are contributory. The expenses of the
postretirement plans calculated on the pay-as-you-go basis are charged to
affiliates in accordance with an intercompany cost sharing arrangement. The
Company expensed $81, $157 and $99 for the years ended December 31, 1999, 1998
and 1997, respectively.
10. RELATED PARTY TRANSACTIONS
The Company shares certain officers, employees and general expenses with
affiliated companies.
The Company receives data processing, investment advisory and management,
marketing and administration services from certain affiliates. During 1999,
1998 and 1997, the Company paid $16,905 $12,763 and $10,040, respectively, for
such services, which approximates their costs to the affiliates. The Company
provides office space, marketing and administrative services to certain
affiliates. During 1999, 1998 and 1997, the Company received $3,755, $5,125 and
$4,395, respectively, for such services, which approximates their cost.
Payable to affiliates and intercompany borrowings bear interest at the
thirty-day commercial paper rate of 5.06% at December 31, 1999. During 1999,
1998 and 1997, the Company paid net interest of $1,997, $1,090 and $364,
respectively, to affiliates.
The Company received capital contributions of $32,092 and $20,000 from its
parent in 1998 and 1997, respectively.
137
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS -- STATUTORY-BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1999
10. RELATED PARTY TRANSACTIONS--(CONTINUED)
At December 31, 1999 and 1998, the Company had short-term note payables to
an affiliate of $17,100 and $44,200, respectively. Interest on these notes
ranged from 5.15% to 5.9% at December 31, 1999 and 5.13% to 5.54% at December
31, 1998.
During 1998, the Company purchased life insurance policies covering the
lives of certain employees of the Company. Premiums of $43,500 were paid to an
affiliate for these policies. At December 31, 1999 and 1998, the cash surrender
value of these policies was $47,518 and $45,445, respectively.
11. COMMITMENTS AND CONTINGENCIES
The Company is a party to legal proceedings incidental to its business.
Although such litigation sometimes includes substantial demands for
compensatory and punitive damages in addition to contract liability, it is
management's opinion, after consultation with counsel and a review of available
facts, that damages arising from such demands will not be material to the
Company's financial position.
The Company is subject to insurance guaranty laws in the states in which
it writes business. These laws provide for assessments against insurance
companies for the benefit of policyholders and claimants in the event of
insolvency of other insurance companies. Assessments are charged to operations
when received by the Company except where right of offset against other taxes
paid is allowed by law; amounts available for future offsets are recorded as an
asset on the Company's balance sheet. The future obligation has been based on
the most recent information available from the National Organization of Life
and Health Insurance Guaranty Association. Potential future obligations for
unknown insolvencies are not determinable by the Company. The Company has
established a reserve of $3,498 and $3,489 and an offsetting premium tax
benefit of $837 and $828 at December 31, 1999 and 1998, respectively, for its
estimated share of future guaranty fund assessments related to several major
insurer insolvencies. The guaranty fund expense (credit) was $(20), $(74) and
$0 at December 31, 1999, 1998 and 1997, respectively.
12. RECONCILIATION OF CAPITAL AND SURPLUS AND NET INCOME
The following table reconciles capital and surplus and net income as
reported in the 1998 Annual Statement filed with the Insurance Department of
the State of Ohio, to the amounts reported in the accompanying financial
statements:
138
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
NOTES TO FINANCIAL STATEMENTS -- STATUTORY-BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1999
12. RECONCILIATION OF CAPITAL AND SURPLUS AND NET INCOME--(CONTINUED)
<TABLE>
<CAPTION>
Year ended
December 31, 1998 December 31, 1998
------------------- ------------------
Total Capital
and Surplus Net Income/Loss
------------------- ------------------
<S> <C> <C>
Amounts reported in Annual Statement ............. $148,038 $ 528
Adjustment to federal income tax benefit ......... (4,458) (4,458)
-------- --------
Amounts reported herein .......................... $143,580 $ (3,930)
======== ========
</TABLE>
139
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
SUMMARY OF INVESTMENTS OTHER THAN
INVESTMENTS IN RELATED PARTIES
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1999
SCHEDULE I
<TABLE>
<CAPTION>
AMOUNT AT WHICH
FAIR 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 ................................ $ 5,827 $ 5,820 $ 5,827
States, municipalities and political subdivisions ......... 7,110 7,275 7,110
Public utilities .......................................... 13,134 12,895 13,134
All other corporate bonds ................................. 93,660 93,086 93,660
--------- ------- ---------
Total fixed maturities ..................................... 119,731 119,076 119,731
EQUITY SECURITIES
Common stocks:
Affiliated entities ....................................... 243 2,156 2,156
Industrial, miscellaneous and all other ................... 302 358 358
--------- ------- ---------
Total equity securities .................................... 545 2,514 2,514
Mortgage loans on real estate .............................. 9,698 9,698
Real estate ................................................ 45,144 45,144
Policy loans ............................................... 182,975 182,975
Cash and short-term investments ............................ 23,932 23,932
--------- ---------
Total investments .......................................... $ 382,025 $ 383,994
========= =========
</TABLE>
- ----------------
(1) Original cost of equity securities and, as to fixed maturities, original
cost reduced by repayments and adjusted for amortization of premiums or
accruals of discounts.
140
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
SUPPLEMENTARY INSURANCE INFORMATION
(DOLLARS IN THOUSANDS)
SCHEDULE III
<TABLE>
<CAPTION>
BENEFITS,
CLAIMS,
FUTURE POLICY POLICY AND NET LOSSES 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, 1999
Individual life ................ $ 291,106 $ 9,152 $ 583,656 $ 10,754 $ 178,237 $ 261,284
Group life ..................... 11,032 100 1,073 706 1,437 599
Annuity ........................ 268,864 17 1,104,525 28,129 651,520 116,006
--------- -------- ----------- -------- --------- ---------
$ 571,002 $ 9,269 $ 1,689,254 $ 39,589 $ 831,194 $ 377,889
========= ======== =========== ======== ========= =========
YEAR ENDED DECEMBER 31, 1998
Individual life ................ $ 221,050 $ 8,624 $ 474,120 $ 9,884 $ 122,542 $ 230,368
Group life ..................... 10,546 100 1,933 723 1,962 2,281
Annuity ........................ 265,418 509 794,841 25,708 545,532 91,505
--------- -------- ----------- -------- --------- ---------
$ 497,014 $ 9,233 $ 1,270,894 $ 36,315 $ 670,036 $ 324,154
========= ======== =========== ======== ========= =========
YEAR ENDED DECEMBER 31, 1997
Individual life ................ $ 177,088 $ 9,533 $ 390,452 $ 13,742 $ 88,738 $ 176,303
Group life ..................... 9,435 805 3,918 810 3,986 3,292
Annuity ........................ 296,290 591 822,149 25,461 389,726 83,179
--------- -------- ----------- -------- --------- ---------
$ 482,813 $ 10,929 $ 1,216,519 $ 40,013 $ 482,450 $ 262,774
========= ======== =========== ======== ========= =========
</TABLE>
- ----------------
* Allocations of net investment income and other operating expenses are based
on a number of assumptions and estimates, and the results would change if
different methods were applied.
141
<PAGE>
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
REINSURANCE
(DOLLARS IN THOUSANDS)
SCHEDULE IV
<TABLE>
<CAPTION>
ASSUMED PERCENTAGE
CEDED TO FROM OF AMOUNT
GROSS OTHER OTHER NET ASSUMED
AMOUNT COMPANIES COMPANIES AMOUNT TO NET
-------------- -------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Life insurance in force ........ $63,040,741 $11,297,250 $ -- $51,743,494 0.0%
=========== =========== ========== =========== ===
Premiums:
Individual life ............... $ 604,628 $ 20,972 $ -- $ 583,656 0.0%
Group life and health ......... 1,383 310 -- 1,073 0.0
Annuity ....................... 1,142,254 37,729 -- 1,104,525 0.0
----------- ----------- ---------- ----------- ---
$ 1,748,265 $ 59,011 $ -- $ 1,689,254 0.0%
=========== =========== ========== =========== ===
YEAR ENDED DECEMBER 31, 1998
Life insurance in force ........ $51,064,173 $ 9,862,460 $ -- $41,201,713 0.0%
=========== =========== ========== =========== ===
Premiums:
Individual life ............... $ 493,633 $ 19,512 $ -- $ 474,121 0.0%
Group life 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%
=========== =========== ========== =========== ====
</TABLE>
142
<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) Resolution of the Board of Directors of
Western Reserve establishing the separate
account. 1/
(2) Not Applicable.
(3) Distribution of Contracts
(a) Form of Master Agreement. 2/
(b) Amendment to Master Agreement. 3/
(c) Form of Participation Agreement. 2/
(d) Principal Underwriting and
Distribution Agreement.3/
(e) First Amendment to Principal
Underwriting and Distribution
Agreement. 3/
(f) Broker-Dealer Selling Agreement. 3/
(4) Form of Specimen Flexible Payment Variable
Accumulation Deferred Annuity Contract. 1/
(5) (a) Application for Flexible Payment
Variable Accumulation Deferred Annuity
Contract. 2/
(b) Endorsement (Form END00117-04/95).
4/
(6) (a) Second Amended Articles of
Incorporation of Western Reserve. 1/
(b) Certificate of First Amendment to
Second Amended Articles of
Incorporation of Western Reserve. 5/
(c) Amended Code of Regulations of
Western Reserve. 1/
(7) Not Applicable.
(8) 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
(11) Not Applicable.
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<PAGE>
(12) Not Applicable.
(13) Schedules for Computation of Performance
Quotations. 6/
(14) Not Applicable.
(15) (a) Powers of Attorney. 5/
(b) Power of Attorney - James R.
Walker. 7/
- ----------------------------------
1/ This exhibit was previously filed on Form N-4 dated May 25, 1993 (File
No. 33-63246) and is incorporated herein by reference.
2/ This exhibit was previously filed on Pre-Effective Amendment No. 1 to
Form N-4 dated August 18, 1993 (File No. 33-63246) and is incorporated
herein by reference.
3/ This exhibit was previously filed on Post-Effective Amendment No. 4 to
Form S-6 dated April 21, 1999 (File No. 333-23359) and is incorporated
herein by reference.
4/ This exhibit was previously filed on Post-Effective Amendment No. 2 to
Form N-4 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. 1 to
Form N-4 dated April 21, 2000 (File 333-82705) and is incorporated
herein by reference.
6/ This exhibit was previously filed on Post-Effective Amendment No. 1 to
Form N-4 dated April 29, 1993 (File No. 33-49550) and is incorporated
herein by reference.
7/ This exhibit was previously filed on Post-Effective Amendment No. 4 to
Form N-4 dated April 23, 1997 (File No. 33-63246) and is incorporated
herein by reference.
Item 25. Directors and Officers of the Depositor
<TABLE>
<CAPTION>
Name Principal Business Address Position and Offices with Depositor
- ---- -------------------------- -----------------------------------
<S> <C> <C>
John R. Kenney (1) Chairman of the Board and
Chief Executive Officer
Jerome C. Vahl (1) Director and President
Lyman H. Treadway 30195 Chagrin Boulevard Director
Suite 210N
Cleveland, Ohio 44124
Jack E. Zimmerman 507 St.Michel Circle Director
Kettering, Ohio 45429
James R. Walker 3320 Office Park Drive Director
Dayton, Ohio 45439
Alan M. Yaeger (1) Executive Vice President, Actuary and
Chief Financial Officer
William H. Geiger (1) Senior Vice President, Secretary
Corporate Counsel and Group Vice
President - Compliance
</TABLE>
C-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Allan J. Hamilton (1) Vice President, Treasurer and Controller
- -------------------------
</TABLE>
(1) 570 Carillon Parkway, St. Petersburg, Florida 33716.
Item 26. Persons Controlled By Or Under Common Control With The Depositor Or
Registrant.
VERENGING AEGON - Netherlands Membership Association
AEGON N.V. - Netherlands corporation (51.16%)
Transamerica Corporation and subsidiaries (100%) (DE)
AEGON Nederland N.V. - Netherlands corporation (100%)
AEGON NEVAK HOLDING B.V. - Netherlands corporation (100%)
GRONINGER FINANCIERINGEN B.V. - Netherlands corporation (100%)
AEGON INTERNATIONAL N.V. - Netherlands corporation (100%)
Voting Trust - (Trustees - K.J. Storm, Donald J. Shepard, H.B. Van Wijk,
Dennis Hersch)(DE)
AEGON U.S. Holding Corporation (DE) (100%)
Short Hills Management Company (NJ) (100%)
CORPA Reinsurance Company (NY) (100%)
AEGON Management Company (IN) (100%)
RCC North America Inc. (DE) (100%)
AEGON USA, Inc. - holding co. (IA) (100%)
AEGON Funding Corp. (DE) (100%)
First AUSA Life Insurance Company - insurance holding co. (MD) (100%)
AUSA Life Insurance Company, Inc. - insurance (NY) (82.33%)
Life Investors Insurance Company of America - insurance (IA)
(100%)
Bankers United Life Assurance Company - insurance (IA) (100%)
Great American Insurance Agency, Inc. (IA) (100%)
Life Investors Alliance, LLC (DE) (100%)
PFL Life Insurance Company - insurance (IA) (100%)
AEGON Financial Services Group, Inc. (MN) (100%)
AEGON Assignment Corporation of Kentucky (KY) (100%)
AEGON Assignment Corporation (IL) (100%)
Southwest Equity Life Insurance Company - insurance (AZ) (100%
Voting Common)
Iowa Fidelity Life Insurance Company - insurance (AZ) (100%
Voting Common)
Western Reserve Life Assurance Co. of Ohio - insurance (OH)
(100%)
WRL Investment Management, Inc. - investment adviser (FL) (100%)
WRL Investment Services, Inc. - transfer agent (FL)(100%)
WRL Series Fund, Inc. - mutual fund (MD)
ISI Insurance Agency, Inc. and subsidiaries (CA) (100%)
AEGON Equity Group, Inc. (FL) (100%)
Monumental General Casualty Company - insurance (MD) (100%)
United Financial Services, Inc. - general agency (MD) (100%)
Bankers Financial Life Insurance Company - insurance (AZ)
The Whitestone Corporation - insurance agency (MD) (100%)
Cadet Holding Corp. - holding company (IA) (100%)
Monumental General Life Insurance Company of Puerto Rico (PR)
(51%)
AUSA Holding Company - holding company (MD) (100%)
Monumental General Insurance Group, Inc. - holding company
(MD) (100%)
Monumental General Administrators, Inc. (MD) (100%)
C-3
<PAGE>
Executive Management and Consultant Services, Inc. - consulting
services (MD) (100%)
Trip Mate Insurance Agency, Inc. (KS) (100%)
Monumental General Mass Marketing, Inc. - marketing (MD) (100%)
AUSA Financial Markets, Inc. - marketing (IA) (100%)
Endeavor Group (CA) (100%)
Endeavor Management Company (CA) (100%)
Universal Benefits Corporation - third party administrator (IA) (100%)
Investors Warranty of America, Inc. - provider of automobile
extended maintenance contracts (IA) (100%)
Massachusetts Fidelity Trust Company - trust company (IA) (100%)
Money Services, Inc. - financial counseling for employees and agents
of affiliated companies (DE) (100%)
ORBA Insurance Services, Inc. (CA) (10.56%)
Zahorik Company, Inc. - broker-dealer (CA) (100%)
ZCI, Inc. (AL) (100%)
Long, Miller & Associates, L.L.C. (CA) (33-1/3%)
AEGON Asset Management Services, Inc. (DE) (100%)
InterSecurities, Inc. - broker-dealer (DE) (100%)
Associated Mariner Financial Group, Inc. - holding company (MI)
(100%)
Mariner Financial Services, Inc. - broker/dealer (MI)(100%)
Associated Mariner Agency of Hawaii, Inc. - insurance agency
(MI) (100%)
Associated Mariner Agency of New Mexico, Inc. (MI) (100%)
Idex Investor Services, Inc. - shareholder services (FL) (100%)
Idex Management, Inc. - investment adviser (DE) (100%)
IDEX Mutual Funds - mutual fund (MA)
Diversified Investment Advisors, Inc. - investment adviser (DE)
(100%)
Diversified Investors Securities Corporation - broker-dealer
(DE) (100%)
AEGON USA Securities, Inc. - broker-dealer (IA) (100%)
AEGON USA Managed Portfolios, Inc. - mutual fund (MD)
Creditor Resources, Inc. - credit insurance (MI) (100%)
CRC Creditor Resources Canadian Dealer Network Inc. -
insurance agency (Canada) (100%)
Weiner Agency, Inc. (MD) (100%)
AEGON USA Investment Management, Inc. - investment adviser
(IA) (100%)
AEGON USA Realty Advisors, Inc. - real estate investment services
(IA) (100%)
QSC Holding, Inc. (DE) (100%)
Landauer Realty Advisors, Inc. - real estate counseling
(IA) (100%)
Landauer Associates, Inc. - real estate counseling (DE)
(100%)
Landauer Realty Associates, Inc. (TX) (100%)
Realty Information Systems, Inc. - information systems for
real estate investment management (IA) (100%)
USP Real Estate Investment Trust - real estate investment
trust (IA)
RCC Properties Limited Partnership (IA)
Item 27. Number of Contract Owners.
As of March 31, 2000, 6,994 nonqualified contracts and 136
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
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<PAGE>
whereby Western Reserve may indemnify certain persons against
certain payments incurred by such persons. The following
excerpts contain the substance of these provisions.
Ohio General Corporation Law
Section 1701.13 Authority of corporation.
(E)(1) A corporation may indemnify or agree to indemnify any person
who was or is a party or is threatened to be made a party, to any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, other than an action by or in the right of
the corporation, by reason of the fact that he is or was a director, officer,
employee, or agent of the corporation, or is or was serving at the request of
the corporation as a director, trustee, officer, employee, or agent of
another corporation (including a subsidiary of this corporation), domestic or
foreign, nonprofit or for profit, partnership, joint venture, trust, or other
enterprise, against expenses, including attorneys' fees, judgments, fines,
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit, or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and with respect to any criminal
action or proceeding, he had reasonable cause to believe that his conduct was
unlawful.
(2) A corporation may indemnify or agree to indemnify any person who
was or is a party, or is threatened to be made a party to any threatened,
pending, or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee, or agent of the corporation, or is or was
serving at the request of the corporation as a director, trustee, officer,
employee, or agent of another corporation, domestic or foreign, nonprofit or
for profit, partnership, joint venture, trust, or other enterprise, against
expenses, including attorneys' fees, actually and reasonably incurred by him
in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, except that no
indemnification shall be made in respect of any of the following:
(a) Any claim, issue, or matter as to which such person shall
have been adjudged to be liable for negligence or misconduct in the
performance of his duty to the corporation unless, and only to the extent
that the court of common pleas, or the court in which such action or suit was
brought determines upon application that, despite the adjudication of
liability, but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses as the court of
common pleas or such other court shall deem proper;
(b) Any action or suit in which the only liability asserted
against a director is pursuant to section 1701.95 of the Revised Code.
(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:
C-5
<PAGE>
(a) By a majority vote of a quorum consisting of directors of
the indemnifying corporation who were not and are not parties to or
threatened with any such action, suit, or proceeding;
(b) If the quorum described in division (E)(4)(a) of this
section is not obtainable or if a majority vote of a quorum of disinterested
directors so directs, in a written opinion by independent legal counsel other
than an attorney, or a firm having associated with it an attorney, who has
been retained by or who has performed services for the corporation, or any
person to be indemnified within the past five years;
(c) By the shareholders;
(d) By the court of common pleas or the court in which such
action, suit, or proceeding was brought.
Any determination made by the disinterested directors under division
(E)(4)(a) or by independent legal counsel under division (E)(4)(b) of this
section shall be promptly communicated to the person who threatened or
brought the action or suit by or in the right of the corporation under
division (E)(2) of this section, and within ten days after receipt of such
notification, such person shall have the right to petition the court of
common pleas or the court in which such action or suit was brought to review
the reasonableness of such determination.
(5)(a) Unless at the time of a director's act or omission that is the
subject of an action, suit or proceeding referred to in divisions (E)(1) and
(2) of this section, the articles or the regulations of a corporation state
by specific reference to this division that the provisions of this division
do not apply to the corporation and unless the only liability asserted
against a director in an action, suit, or proceeding referred to in divisions
(E)(1) and (2) of this section is pursuant to section 1701.95 of the Revised
Code, expenses, including attorney's fees, incurred by a director in
defending the action, suit, or proceeding shall be paid by the corporation as
they are incurred, in advance of the final disposition of the action, suit,
or proceeding upon receipt of an undertaking by or on behalf of the director
in which he agrees to do both of the following:
(i) Repay such amount if it is proved by clear and convincing
evidence in a court of competent jurisdiction that his action or failure to
act involved an act or omission undertaken with deliberate intent to cause
injury to the corporation or undertaken with reckless disregard for the best
interests of the corporation;
(ii) Reasonably cooperate with the corporation concerning the
action, suit, or proceeding.
(b) Expenses, including attorneys' fees incurred by a director,
trustee, officer, employee, or agent in defending any action, suit, or
proceeding referred to in divisions (E)(1) and (2) of this section, may be
paid by the corporation as they are incurred, in advance of the final
disposition of the action, suit, or proceeding as authorized by the directors
in the specific case upon receipt of an undertaking by or on behalf of the
director, trustee, officer, employee, or agent to repay such amount, if it
ultimately is determined that he is entitled to be indemnified by the
corporation.
(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
C-6
<PAGE>
indemnify him against such liability under this section. Insurance may be
purchased from or maintained with a person in which the corporation has a
financial interest.
(8) The authority of a corporation to indemnify persons pursuant to
divisions (E)(1) and (2) of this section does not limit the payment of
expenses as they are incurred, indemnification, insurance, or other
protection that may be provided pursuant to divisions (E)(5), (6), and (7) of
this section. Divisions (E)(1) and (2) of this section do not create any
obligation to repay or return payments made by the corporation pursuant to
divisions (E)(5), (6), or (7).
(9) As used in this division, references to "corporation" include all
constituent corporations in a consolidation or merger and the new or
surviving corporation, so that any person who is or was a director, officer,
employee, or agent of such a constituent corporation, or is or was serving at
the request of such constituent corporation as a director, trustee, officer,
employee or agent of another corporation, domestic or foreign, nonprofit or
for profit, partnership, joint venture, trust, or other enterprise, shall
stand in the same position under this section with respect to the new or
surviving corporation as he would if he had served the new or surviving
corporation in the same capacity.
Second Amended Articles of Incorporation of Western Reserve
ARTICLE EIGHTH
EIGHTH: (1) The corporation may indemnify or agree to indemnify any
person who was or is a party or is threatened to be made a party, to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative, other than an action by or in the
right of the corporation, by reason of the fact that he is or was a director,
officer, employee, or agent of the corporation, or is or was serving at the
request of the corporation as a director, trustee, officer, employee, or
agent of another corporation (including a subsidiary of this corporation),
domestic or foreign, nonprofit or for profit, partnership, joint venture,
trust, or other enterprise, against expenses, including attorneys' fees,
judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit, or proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit, or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the corporation, and with respect to any
criminal action or proceeding, he had reasonable cause to believe that his
conduct was unlawful.
(2) The corporation may indemnify or agree to indemnify any person
who was or is a party, or is threatened to be made a party to any threatened,
pending, or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee, or agent of the corporation, or is or was
serving at the request of the corporation as a director, trustee, officer,
employee, or agent of another corporation (including a subsidiary of this
corporation), 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,
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<PAGE>
suit, or proceeding referred to in sections (1) and (2) of this article, or
in defense of any claim, issue, or matter therein, he shall be indemnified
against expenses, including attorneys' fees, actually and reasonably incurred
by him in connection therewith.
(4) Any indemnification under sections (1) and (2) of this article,
unless ordered by a court, shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of
the director, trustee, officer, employee, or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth
in sections (1) and (2) of this article. Such determination shall be made (a)
by a majority vote of a quorum consisting of directors of the indemnifying
corporation who were not and are not parties to or threatened with any such
action, suit, or proceeding, or (b) if such a quorum is not obtainable or if
a majority vote of a quorum of disinterested directors so directs, in a
written opinion by independent legal counsel other than an attorney, or a
firm having associated with it an attorney, who has been retained by or who
has performed services for the corporation, or any person to be indemnified
within the past five years, or (c) by the shareholders, or (d) by the court
of common pleas or the court in which such action, suit, or proceeding was
brought. Any determination made by the disinterested directors under section
(4)(a) or by independent legal counsel under section (4)(b) of this article
shall be promptly communicated to the person who threatened or brought the
action or suit by or in the right of the corporation under section (2) of
this article, and within ten days after receipt of such notification, such
person shall have the right to petition the court of common pleas or the
court in which such action or suit was brought to review the reasonableness
of such determination.
(5) Expenses, including attorneys' fees incurred in defending any
action, suit, or proceeding referred to in sections (1) and (2) of this
article, may be paid by the corporation in advance of the final disposition
of such action, suit, or proceeding as authorized by the directors in the
specific case upon receipt of a written undertaking by or on behalf of the
director, trustee, officer, employee, or agent to repay such amount, unless
it shall ultimately be determined that he is entitled to be indemnified by
the corporation as authorized in this article. If a majority vote of a quorum
of disinterested directors so directs by resolution, said written undertaking
need not be submitted to the corporation. Such a determination that a written
undertaking need not be submitted to the corporation shall in no way affect
the entitlement of indemnification as authorized by this article.
(6) The indemnification provided by this article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under the articles or the regulations or any agreement, vote of
shareholders or disinterested directors, or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
trustee, officer, employee, or agent and shall inure to the benefit of the
heirs, executors, and administrators of such a person.
(7) The Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, trustee, officer, employee, or agent of another corporation
(including a subsidiary of this corporation), domestic or foreign, nonprofit
or for profit, partnership, joint venture, trust, or other enterprise against
any liability asserted against him and incurred by him in any such capacity
or arising out of his status 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.
C-8
<PAGE>
(9) The foregoing provisions of this article do not apply to any
proceeding against any trustee, investment manager or other fiduciary of an
employee benefit plan in such person's capacity as such, even though such
person may also be an agent of this corporation. The corporation may
indemnify such named fiduciaries of its employee benefit plans against all
costs and expenses, judgments, fines, settlements or other amounts actually
and reasonably incurred by or imposed upon said named fiduciary in connection
with or arising out of any claim, demand, action, suit or proceeding in which
the named fiduciary may be made a party by reason of being or having been a
named fiduciary, to the same extent it indemnifies an agent of the
corporation. To the extent that the corporation does not have the direct
legal power to indemnify, the corporation may contract with the named
fiduciaries of its employee benefit plans to indemnify them to the same
extent as noted above. The corporation may purchase and maintain insurance on
behalf of such named fiduciary covering any liability to the same extent that
it contracts to indemnify.
Amended Code of Regulations of Western Reserve
ARTICLE V
Indemnification of Directors and Officers
Each Director, officer and member of a committee of this Corporation,
and any person who may have served at the request of this Corporation as a
Director, officer or member of a committee of any other corporation in which
this Corporation owns shares of capital stock or of which this Corporation is
a creditor (and his heirs, executors and administrators) shall be indemnified
by the Corporation against all expenses, costs, judgments, decrees, fines or
penalties as provided by, and to the extent allowed by, Article Eighth of the
Corporation's Articles of Incorporation, as amended.
Rule 484 Undertaking
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers, and controlling persons of
Western Reserve pursuant to the foregoing provisions or otherwise, Western
Reserve has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Western
Reserve of expenses incurred or paid by a director, officer or controlling
person of Western Reserve in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, Western Reserve will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
Item 29. Principal Underwriter
(a) AFSG Securities Corporation ("AFSG") is the principal
underwriter for the Contracts. AFSG currently serves as
principal underwriter for the PFL Endeavor VA Separate
Account, the PFL Retirement Builder Variable Annuity
Account, the PFL Life Variable Annuity Account A, the
PFL Wright Variable Annuity Account, the AUSA Endeavor
Variable Annuity Account, Separate Account C of First
Providian Life and Health Insurance Company, the
Separate Account I, Separate Account II, and Separate
Account V of Providian Life and Health Insurance
Company, WRL Series Life Account, WRL Series Annuity
Account B, AUSA Series Life Account and Transamerica
Occidental Life Separate Account VUL-3.
C-9
<PAGE>
(b) Directors and Officers of AFSG
<TABLE>
<CAPTION>
Name Principal Business Address Position and Offices with Underwriter
- ---- -------------------------- -------------------------------------
<S> <C> <C>
Larry N. Norman (1) Director and President
Harvey E. Willis (1) Vice President and Secretary
Lisa Wachendorf (1) Director and Chief Compliance Officer
Debra C. Cubero (1) Vice President
Gregory J. Garvin (1) Vice President
Michael F. Lane (1) Vice President
Sara J. Stange (1) Director and Vice President
Brenda K. Clancy (1) Vice President
Michael G. Ayers (1) Treasurer/Controller
Colleen S. Lyons (1) Assistant Secretary
John F. Reesor (1) Assistant Secretary
Anne Spaes (1) Director and Vice President
Priscilla I. Hechler (2) Assistant Vice President and Assistant
Secretary
Thomas E. Pierpan (2) Assistant Vice President and Assistant
Secretary
Richard C. Hicks (2) Assistant Vice President and Assistant
Secretary
Gina A. Babka (2) Assistant Secretary
</TABLE>
- --------------------------------------
(1) 4333 Edgewood Road, N.E., Cedar Rapids, IA 52499-0001
(2) 570 Carillon Parkway, St. Petersburg, FL 33716-1202.
(a) 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.
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<PAGE>
Item 31. Management Services
Not Applicable
Item 32. Undertakings
Western Reserve hereby represents that the fees and charges
deducted under the Contracts, in the aggregate, are reasonable
in relation to the services rendered, the expenses expected to
be incurred, and the risks assumed by Western Reserve.
Registrant promises to file a post-effective amendment to the
Registration Statement as frequently as is necessary to ensure
that the audited financial statements in the Registration
Statement are never more than 16 months old for so long as
payments under the variable annuity contracts may be accepted.
Registrant furthermore agrees to include either as part of any
application to purchase a contract offered by the prospectus,
a space that an applicant can check to request a Statement of
Additional Information, or a post card or similar written
communication affixed to or included in the Prospectus that
the applicant can remove to send for a Statement of Additional
Information.
Registrant agrees to deliver any Statement of Additional
Information and any financial statements required to be made
available under this Form N-4 promptly upon written or oral
request.
Item 33. Section 403(b)(11) Representation.
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 al 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. 8 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 25th day of April, 2000.
WRL SERIES ANNUITY ACCOUNT B
(Registrant)
By: /s/ John R. Kenney
---------------------------
John R. Kenney, Chairman of the Board and
Chief Executive Officer of
Western Reserve Life Assurance Co. of Ohio
WESTERN RESERVE LIFE ASSURANCE
CO. OF OHIO
(Depositor)
By: /s/ John R. Kenney
---------------------------------
John R. Kenney, Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 8 to this Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ John R. Kenney Chairman of the Board and April 25, 2000
- ----------------------- Chief Executive Officer
John R. Kenney (Principal Executive Officer)
/s/ Allan J. Hamilton Vice President, Treasurer April 25, 2000
- ------------------------ and Controller
Allan J. Hamilton
/s/ Alan M. Yaeger Executive Vice President, April 25, 2000
- --------------------- Actuary and Chief Financial
Alan M. Yaeger Officer
/s/ Jerome C. Vahl Director and President April 25, 2000
- ----------------------
Jerome C. Vahl
/s/ Lyman H.Treadway Director April 25, 2000
- ---------------------
Lyman H. Treadway */
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Jack E. Zimmerman Director April 25, 2000
- ------------------------
Jack E. Zimmerman */
/s/ James R. Walker Director April 25,2000
- -------------------
James R. Walker */
*/s/ Thomas E. Pierpan
- ----------------------------
Signed by Thomas E. Pierpan
As Attorney-in-Fact
</TABLE>
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION 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 25, 2000
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
Janus Retirement Advantage
File No. 33-63246/811-7754
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. 8 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" in the Statement of Additional Information and to the use of our
report dated February 18, 2000, with respect to the statutory-basis financial
statements and schedules of Western Reserve Life Assurance Co. of Ohio included
in Post-Effective Amendment No. 8 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 24, 2000
Exhibit (10)(c)
Written Consent of PricewaterhouseCoopers LLP
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form N-4 of our
report dated February 16, 2000, relating to the financial statements and
financial highlights of the sub-accounts constituting the WRL Series Annuity
Account B, which appear in such Registration Statement. We also consent to the
reference to us under the heading "Independent Accountants" in such Registration
Statement.
PricewaterhouseCoopers LLP
Tampa, Florida
April 24, 2000
