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SUPPLEMENT TO PROSPECTUS
AND STATEMENT OF ADDITIONAL INFORMATION
OF WESTERN-SOUTHERN LIFE ASSURANCE COMPANY
SEPARATE ACCOUNT 1 AND SEPARATE ACCOUNT 2
IN CONNECTION WITH THE GROWTH AND INCOME PORTFOLIO
OF SELECT ADVISORS PORTFOLIOS
THIS SUPPLEMENT IS DATED AS OF JANUARY 1, 1998.
The Prospectuses and Statements of Additional Information of
Western-Southern Life Assurance Company Separate Account 1 and Separate
Account 2, each dated May 1, 1997, are hereby amended and supplemented
as follows:
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PORTFOLIO ADVISOR
As of January 1, 1998, Scudder Kemper Investments, Inc. ("Scudder Kemper")
became the Portfolio Advisor to the Growth and Income Portfolio (the
"Portfolio"). This change resulted from the completion of a strategic alliance
between Scudder, Stevens & Clark, Inc. ("Scudder"), the Portfolio's previous
portfolio advisor, and the Zurich Group ("Zurich"). As part of the strategic
alliance, the operations of Scudder and Zurich Kemper Investments, Inc., a
subsidiary of Zurich, were combined and the combined operations were named
Scudder Kemper Investments, Inc.
Scudder Kemper is owned 69.5% by Zurich and 30.5% by senior employees of
Scudder Kemper. Scudder Kemper provides investment advisory services to mutual
fund investors, retirement and pension plans, institutional and corporate
clients, insurance companies, and private family and individual accounts. As of
December 31, 1997, Scudder Kemper had assets under management of more than $200
billion. Scudder Kemper's headquarters are located in New York, New York.
Robert T. Hoffman, Lori Ensinger, Deborah Chaplin, Benjamin W. Thorndike
and Kathleen T. Millard are the individuals primarily responsible for the
day-to-day management of the Growth & Income Portfolio. Mr. Hoffman, Lead
Product Manager, joined Scudder in 1990. He has 13 years of experience in the
investment industry, including several years of pension fund management
experience. Lori Ensinger, Lead Portfolio Manager, focuses on stock selection
and investment strategy. She has worked as a portfolio manager since 1983 and
joined Scudder in 1993. Deborah Chaplin, Portfolio Manager, also focuses on
stock selection and investment strategy. Ms. Chaplin, who joined Scudder in
1996, has over four years of experience as a securities analyst and portfolio
manager. Prior to joining Scudder, Ms. Chaplin was a research fellow in the
Faculty of Letters at Kyoto University, Japan. Benjamin W. Thorndike, Portfolio
Manager, is the Growth & Income Portfolio's chief analyst and strategist for
convertible securities. Mr. Thorndike, who has 18 years of investment
experience, joined Scudder in 1983. Kathleen T. Millard, Portfolio Manager, has
been involved in the investment industry since 1983 and has worked as a
portfolio manager since 1986. Ms. Millard, who joined Scudder in 1991, focuses
on strategy and stock selection.
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NEW PORTFOLIO ADVISORY AGREEMENT
A new Portfolio Advisory Agreement (the "New Agreement") with Scudder
Kemper became effective January 1, 1998. The terms of the New Agreement are
identical to the terms of the previous Portfolio Advisory Agreement with
Scudder, except for the effective date, the name of the portfolio
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advisor and certain language that became inapplicable upon shareholder approval
of the previous Portfolio Advisory Agreement. Under the New Agreement, the
Portfolio Advisor pays Scudder Kemper a fee equal to an annual rate to 0.50% of
the first $150 million of the Portfolio's average net assets and 0.45% of the
Portfolio's average net assets in excess of $150 million. The New Agreement was
approved by the Board of Trustees of Select Advisors Portfolio (the "SA Trust")
on August 15, 1997 and by the shareholders of the Portfolio on September 18,
1997. The Portfolio is a separate portfolio of the SA Trust.
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AMENDMENT TO INVESTMENT ADVISORY AGREEMENT
In connection with the assumption by Scudder of the role of Portfolio
Advisor to the Portfolio, the Board of Trustees of the SA Trust, at a meeting
held on August 15, 1997, approved an amendment (the "Amendment") to the
investment advisory agreement (the "Investment Advisory Agreement"), dated
September 9, 1994, between the SA Trust, on behalf of the Portfolio, and the
Advisor. On September 18, 1997, the shareholders of the Portfolio also approved
the Amendment. The Amendment increased the fee paid by the SA Trust, on behalf
of the Portfolio, to the Advisor. The Amendment increased the fee on the first
$150 million of average daily net assets of the Portfolio, on an annual basis,
from 0.75% of such average daily net assets of the Portfolio, to 0.80% of such
average daily net assets of the Portfolio. The fee on average daily net assets
of the Portfolio in excess of $150 million remains 0.75% of such assets. The
Amendment did not change the Investment Advisory Agreement in any other respect.
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INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
In connection with the assumption by Scudder of the role of Portfolio
Advisor to the Portfolio, the Board of Trustees of the SA Trust, at a meeting
held on August 15, 1997, approved certain changes and additions to the
investment objectives, policies and restrictions of the Portfolio. The text that
follows replaces or adds to the corresponding text in the Prospectus or
Statement of Additional Information. Unless otherwise specified, the following
changes became effective on October 1, 1997.
AMENDMENT TO INVESTMENT OBJECTIVES AND POLICIES
PROSPECTUS, PART II - "INVESTMENT OBJECTIVES, POLICIES AND
RESTRICTIONS - GROWTH & INCOME PORTFOLIO"
The investment objective of the Portfolio is long term capital appreciation
and dividend income by investing primarily in a diversified portfolio of
dividend-paying common stocks, preferred stock and securities convertible into
common stocks. The Fund may also purchase such securities which do not pay
current dividends but which offer prospects for growth of capital and future
income. Convertible securities (which may be current coupon or zero coupon
securities) are bonds, notes, debentures, preferred stocks and other securities
which may be converted or exchanged at a stated or determinable exchange ratio
into underlying shares of common stock. The Portfolio may also invest in
non-convertible preferred stocks consistent with the Portfolio's objective.
Under normal conditions, at least 80% of the Portfolio's total assets will be
invested in common stocks and at least 65% of the Portfolio's total assets will
be invested in common stocks that, at the time of investment, will be expected
to pay regular dividends.
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The Portfolio will generally invest a majority of its assets in common
stocks of issuers with total market capitalization of $1 billion or greater at
the time of purchase, but may invest in securities of companies having various
levels of market capitalization, including smaller companies whose securities
may be more volatile and less liquid than securities issued by larger companies
with higher levels of net worth. Investments will be in companies in various
industries.
The Portfolio may also invest up to 20% of its total assets in foreign
securities, including securities of foreign issuers in the form of ADRs. The
Portfolio may not invest more than 5% of its total assets in the securities of
companies based in an emerging market. See "Risk Factors, Restrictions and
Certain Investment Techniques -- Foreign Securities" and "--Risks Associated
with `Emerging Markets' Securities."
The Portfolio may invest under normal circumstances up to 20% of its total
assets in preferred stocks, convertible preferred stock, bonds, convertible
debentures and other fixed-income instruments (the "Fixed Income Instruments").
Within this 20% limitation, the Portfolio may invest in any combination of Fixed
Income Instruments subject to the following additional limitations: (1) the
Portfolio may invest up to 20% of its total assets in convertible preferred
stock and convertible debentures rated at least Ba by Moody's or BB by S&P, (2)
the Portfolio may invest up to 20% of its total assets in non-convertible fixed
income instruments rated at least Baa by Moody's or BBB by S&P and (3) the
Portfolio may invest up to 5% of its total assets in non-convertible debt rated
below Baa by Moody's or BBB by S&P. See "Risk Factors, Restrictions and Certain
Investment Techniques -- Convertible Securities" and "--Medium and Lower Rated
(`Junk Bonds') and Unrated Debt Securities."
The Fund may invest up to 10% of its total assets in real estate investment
trusts ("REITs"), which pool investors' funds for investment primarily in
income-producing real estate or real estate-related loans or interests. See
"Risk Factors, Restrictions and Certain Investment Techniques -- Real Estate
Investment Trusts."
The Portfolio may also invest up to 5% of its total assets in Standard &
Poor's Depositary Receipts ("SPDRs") in order to invest uncommitted cash
balances, to maintain liquidity to meet shareholder redemptions, or to minimize
trading costs. SPDRs represent ownership in a unit investment trust that holds a
portfolio of stocks designed to track the performance of the S&P 500 Index.
SPDRs are traded on the American Stock Exchange. See "Risk Factors, Restrictions
and Certain Investment Techniques -- Standard & Poor's Depositary Receipts."
ADDITIONAL DISCLOSURE ABOUT CONVERTIBLE SECURITIES, REITS AND SPDRS AND
ASSOCIATED RISK FACTORS
PROSPECTUS, PART II - "RISK FACTORS, RESTRICTIONS AND CERTAIN
INVESTMENT TECHNIQUES"
Convertible Securities. Convertible securities may offer higher income than
the common stocks into which they are convertible and include fixed-income or
zero coupon debt securities, which may be converted or exchanged at a stated or
determinable exchange ratio into underlying shares of common stock. Prior to
their conversion, convertible securities may have characteristics similar to
both non-convertible debt securities and equity securities.
While convertible securities generally offer lower yields than
non-convertible debt securities of similar quality, their prices may reflect
changes in the value of the underlying common stock. Convertible securities
entail less credit risk than the issuer's common stock.
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Real Estate Investment Trusts. REITs can generally be classified as equity
REITs, mortgage REITs and hybrid REITs. Equity REITs, which invest the majority
of their assets directly in real property, derive their income primarily from
rents. Equity REITs can also realize capital gains by selling properties that
have appreciated in value. Mortgage REITs, which invest the majority of their
assets in real estate mortgages, derive their income primarily from interest
payments on real estate mortgages in which they are invested. Hybrid REITs
combine the characteristics of both equity REITs and mortgage REITs.
Investment in REITs is subject to risks similar to those associated with
the direct ownership of real estate (in addition to securities markets risks).
REITs are sensitive to factors such as changes in real estate values and
property taxes, interest rates, cash flow of underlying real estate assets,
supply and demand, and the management skill and creditworthiness of the issuer.
REITs may also be affected by tax and regulatory requirements.
Standard & Poor's Depositary Receipts ("SPDRs"). The Growth & Income
Portfolio may invest in SPDRs. SPDRs typically trade like a share of common
stock and provide investment results that generally correspond to the price and
yield performance of the component common stocks of the S&P 500 Index. There can
be no assurance that this can be accomplished as it may not be possible for the
Portfolio to replicate and maintain exactly the composition and relative
weightings of the S&P 500 Index securities. SPDRs are subject to the risks of an
investment in a broadly based portfolio of common stocks, including the risk
that the general level of stock prices may decline, thereby adversely affecting
the value of such investment.
REVISIONS TO INVESTMENT RESTRICTION FOR GROWTH & INCOME PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION - "INVESTMENT OBJECTIVES, TECHNIQUES,
POLICIES AND RESTRICTIONS - INVESTMENT RESTRICTIONS"
As of September 18, 1997, investment restriction number 4 relating to
investments in real estate no longer applies with respect to the Portfolio. The
following two investment restrictions replace investment restriction number 4
only with respect to the Portfolio:
"As a matter of fundamental policy, the Growth & Income Portfolio may not:
4a) purchase or sell real estate except that (a) the Portfolio may invest
in (i) securities of entities that invest or deal in real estate,
mortgages, or interests therein and (ii) securities secured by real
estate or interests therein and (b) the Portfolio may hold and sell
real estate acquired as a result of the Portfolio's ownership of
securities;
4b) purchase or sell interests in oil, gas or mineral leases, commodities
or commodity contracts (except futures and option contracts) in the
ordinary course of business."
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