As filed with the Securities and Exchange Commission on April 30, 1999
Registration No. 033-79906
Registration No. 811-8550
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 9 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 10 [X]
(Check appropriate box or boxes)
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WESTERN-SOUTHERN LIFE ASSURANCE COMPANY SEPARATE ACCOUNT 2
(Exact Name of Registrant)
WESTERN-SOUTHERN LIFE ASSURANCE COMPANY
(Name of Depositor)
400 Broadway
Cincinnati, Ohio 45202
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number (513) 629-1800
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Copy to:
DONALD J. WUEBBLING, ESQ. MARK H. LONGENECKER, JR.
400 Broadway Frost & Jacobs LLP
Cincinnati, Ohio 45202 2500 PNC Center
(Name and Address of Agent for Service) 201 East Fifth Street
Cincinnati, Ohio 45202
Approximate Date of Proposed Public Offering: Continuous Offering
It is proposed that this filing will become effective (check appropriate box)
XX immediately upon filing pursuant to paragraph (b) of rule 485
___ on _______________, 1999 pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
___ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
----------------------------------------------
Title of Securities Being Registered:
Touchstone Advisor Variable Annuity Contracts
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<PAGE>
WESTERN-SOUTHERN LIFE ASSURANCE COMPANY SEPARATE ACCOUNT 2
TOUCHSTONE ADVISOR VARIABLE ANNUITY CONTRACT
CROSS-REFERENCE SHEET REQUIRED BY RULE 495(A)
<TABLE>
<CAPTION>
FORM N-4 PART A ITEM NO. HEADING IN PROSPECTUS
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<S> <C> <C>
1. Cover Page Cover Page
2. Definitions Glossary
3. Synopsis
(a) Fee and Expense Tables Fee and Expense Tables
(b) Synopsis Summary
4. Condensed Financial Information
(a) Accumulation Unit Values Accumulation Unit Values, Supplement A
(b) Performance Information Performance Information
(c) Financial Statements Financial Statements
5. General Description of Registrant, Depositor and
Portfolio Companies
(a) Depositor WSLAC and Separate Account 2
(b) Registrant WSLAC and Separate Account 2
(c) Portfolio Company Information about the Investment Options
(d) Prospectus Information about the Investment Options
(e) Voting Voting Rights
(f) Administrator Service Providers
6. Deductions and Expenses
(a) Deductions Charges
(b) Sales load Not Applicable
(c) Special purchase plans Purchasing Your Contract
(d) Commissions Service Providers
(e) Portfolio company expenses Information about the Investment Options
(f) Registrant's expenses Charges
7. General Description of Variable Annuity Contracts
(a) Rights Other Information about Your Contract
(b) Allocations, transfers and exchanges Purchasing Your Contract, Transferring Your Money
1
<PAGE>
(c) Changes in contracts or operations Information about the Investment Options
(d) Contract owner inquiries Summary
8. Annuity Period
(a) Level of benefits Annuity Income Payment Options
(b) Annuity commencement date Annuity Income Payment Options
(c) Annuity payments Annuity Income Payment Options
(d) Assumed investment return Not applicable
(e) Minimums Annuity Income Payment Options
(f) Rights to change options or transfer Annuity Income Payment Options
9. Death Benefit
(a) Death benefit calculation Guaranteed Death Benefit
(b) Forms of benefits Guaranteed Death Benefit
10. Purchases and Contract Value
(a) Procedures for purchases Purchasing Your Contract
(b) Accumulation unit values Accumulation Unit Values, Supplement A
(c) Calculation of accumulation unit
values Valuation of Your Investments
(d) Principal underwriter Service Providers
11. Redemptions
(a) Redemption procedures Accessing Your Money, Annuity Income Payments Options
(b) Texas Optional Retirement Program Supplement C
(c) Delay Accessing Your Money, Other Information about Your Contract
(d) Lapse Other Information about Your Contract
(e) Revocation rights Purchasing Your Contract
12. Taxes
(a) Tax consequences Federal Income Tax Information, Supplement B, Supplement C
(b) Qualified plans Federal Income Tax Information, Supplement B, Supplement C
(c) Impact of taxes Federal Income Tax Information, Supplement B, Supplement C
13. Legal Proceedings Not Applicable
14. Table of Contents for Statement of Additional Table of Contents of Statement of Additional Information
2
<PAGE>
FORM N-4 PART B ITEM NO. HEADING IN SAI OR PROSPECTUS
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15. Cover Page Cover Page (SAI)
16. Table of Contents Table of Contents (SAI)
17. General Information and History
(a) Name change Not Applicable
(b) Attribution of assets Not Applicable
(c) Control of depositor WSLAC and Separate Account 1 (Prospectus)
18. Services
(a) Fees, expenses and costs Not Applicable
(b) Management-related services Service Providers
(c) Custodian and independent public Independent Accountants (SAI)
(d) Other custodianship Not Applicable
(e) Affiliated service agents Not Applicable
(f) Depositor as principal underwriter Not Applicable
19. Purchase of Securities Being Offered
(a) Manner of offering Distribution of the Contracts (SAI), Service Providers (Prospectus)
(b) Sales Load Not Applicable
20. Underwriters Distribution of the Contracts (SAI), Service Providers (Prospectus)
21. Calculation of Performance Data Sub-Account Performance (SAI)
22. Annuity Payments Fixed Annuity Income Payments (SAI)
23. Financial Statements
(a) Registrant Financial Statements (SAI)
(b) Depositor Financial Statements (SAI)
</TABLE>
3
<PAGE>
PART C
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C of the Registration Statement.
4
<PAGE>
Touchstone Variable Series Trust
PROSPECTUS
May 1, 1999
Western-Southern Life Assurance Company
Separate Account I
This Prospectus describes the Touchstone Advisor Variable Annuity Contract and
the investment options available to Contract owners. It contains information you
should know before purchasing a Contract and selecting your investment options.
Please read this Prospectus carefully and keep it for future reference.
The Touchstone Advisor Variable Annuity Contract is issued by Western-Southern
Life Assurance Company (WSLAC). The Contract is an investment alternative for
investors who want to accumulate money on a tax-deferred basis for retirement or
other long-term goals.
You can purchase a Contract for $5,000 or more. You can also purchase a Contract
in connection with certain types of retirement plans, such as a Traditional or
Roth IRA or a 403(b) plan, for $1,000 or more. The Contract also includes a
flexible purchase payment feature that allows you to make additional payments
later.
You tell us how to invest your payments. Your investment options include 18
Sub-Accounts. Each Sub-Account invests in an underlying Fund with the same
investment objective. The Funds include:
s AIM V.I. Growth s Touchstone International Equity
s AIM V.I.Govenment Securities s Touchstone Income Opportunity
s ALGER American Small Capitalization s Touchstone High Yield
s ALGER American Growth s Touchstone Value Plus
s MFS VIT Emerging Growth s Touchstone Growth & Income
s MFS VIT Growth with Income s Touchstone Enhanced 30
s PIMCO Long-Term U.S. Government Bond s Touchstone Balanced
s Touchstone Small Cap Value s Touchstone Bond
s Touchstone Emerging Growth s Touchstone Standby Income
Each Sub-Account invests in a separately managed Fund. Each Fund is part of the
Touchstone Variable Series Trust.
The Statement of Additional Information dated May 1, 1999 contains more
information about the Contract, WSLAC and its Separate Account 2. It has been
filed with the Securities and Exchange Commission (SEC) and is legally part of
this Prospectus. The table of contents for the Statement of Additional
Information is located on page 47 of this Prospectus. For a free copy, call the
Touchstone Variable Annuity Service Center at 800.669.2796 (press 2).
The Securities and Exchange Commission maintains a web site (http://www.sec.gov)
that contains the Statement of Additional Information, certain other material
that is legally part of the registration statement of Separate Account 2, and
other information about Separate Account 2. You can view these documents at the
Public Reference Room of the SEC or obtain copies, for a fee, by writing to the
Public Reference Room of the SEC, 450 Fifth Street N.W., Washington, D.C.
20549-6009. You can also call the SEC at 800.SEC.0330.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the Contracts or determined if this
Prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
The Contracts are not deposits or obligations of any bank. No bank has
guaranteed or endorsed the Contracts. The Contracts are not federally insured by
the Federal Deposit Insurance Corporation, the Federal Reserve Board, the
National Credit Union Share Insurance Fund or any other agency.
Investments in variable annuities involve investment risk, including possible
loss of principal and earnings.
<PAGE>
You should rely only on the information contained in the Contract, the
Touchstone Advisor Variable Annuity Prospectus, the Statement of Additional
Information or our approved sales literature.
No one is authorized to give any information or make any representation other
than those contained in the Contract, this Prospectus, the Statement of
Additional Information or our approved sales literature.
<PAGE>
Table Of Contents
Page
Cover Page ................................................................ 1
Table Of Contents ......................................................... 3
Glossary .................................................................. 4
Fee And Expense Tables .................................................... 5
Summary ................................................................... 7
Purchasing Your Contract .................................................. 9
Transferring Your Money ................................................... 11
Accessing Your Money ...................................................... 13
Charges ................................................................... 15
Information About The Investment Options .................................. 17
Valuation Of Your Investments ............................................. 19
Performance Information ................................................... 20
Annuity Income Payment Options ............................................ 21
Guaranteed Death Benefit .................................................. 24
WSLAC And Separate Account 2 .............................................. 25
Underwriter ............................................................... 26
Voting Rights ............................................................. 27
Other Information About Your Contract ..................................... 28
Federal Income Tax Information ............................................ 30
Supplement A: Accumulation Unit Values ................................... 37
Supplement B: Section 401 Plans and Section 403(b) Plans ................. 38
Supplement C: State of Texas Optional Retirement Program ................ 43
Table Of Contents For Statement Of Additional Information ................. 47
<PAGE>
Glossary
Accumulation Unit
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A unit of measure used to calculate a Contract owner's share of a Sub-Account.
Accumulation Unit Value
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The dollar value of an Accumulation Unit in a Sub-Account.
Annuitant
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The person whose life is used to determine the amount of any annuity income
payments and the length of time for which the payments are made.
Code
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The Internal Revenue Code of 1986, as amended.
Contract
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The Touchstone Advisor Variable Annuity Contract, including the application
and any amendments, riders or endorsements.
Contract Date
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The effective date of a Contract. The Contract Date is shown on page 3 of your
Contract.
Contract Value
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The total value of your Contract at any time before or on the Income Date.
This represents the sum of the value of your investments in the Sub-Accounts.
Contract Year
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A year that starts on your Contract Date or the anniversary of your Contract
Date.
Fund
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Each Sub-Account invests in a Fund that has the same investment objective as
the Sub-Account.
Income Date
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The date on which annuity payments are scheduled to begin.
Sub-Account
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Each Sub-Account invests in a Fund, which has the same investment objective as
the Sub-Account.
Surrender Value
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The Contract Value minus any contract maintenance charge.
WSLAC, we, our and us
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Western-Southern Life Assurance Company.
<PAGE>
Fees and Expense Tables
These tables describe the fees and expenses that you may pay directly or
indirectly if you purchase a Contract. More complete information about these
fees and expenses is located in the discussion about charges on pages __ through
__.
Contract Owner Transaction Expenses
Maximum Contingent Deferred Sales Charge (Surrender Charge) None
(as a percentage of amount surrendered or withdrawn)*
Annual Contract Maintenance Charge* $35.00
Sub-Account
Annual Expenses
as a percentage of
average account value)
Mortality and Expense Risk Charges 0.70%
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Contract Administration Charge 0.10%
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Total 0.80%
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Fund Expenses
(as a percentage of average daily net assets
and after expense reimbursement)* * *
Advisor Fee Other Expenses Total Expenses
AIM V.I. Growth 0.64% 0.08% 0.72%
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AIM V.I. Government Securities 0.50% 0.26% 0.76%
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ALGER American
Small Capitalization 0.85% 0.04% 0.89%
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ALGER American Growth 0.75% 0.04% 0.79%
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MFS VIT Emerging Growth 0.75% 0.10% 0.85%
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MFS VIT Growth with Income 0.75% 0.13% 0.88%
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PIMCO Long-Term
U.S. Government Bond 0.40% 0.25% 0.65%
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Touchstone Small Cap Value 0.80% 0.20% 1.00%
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Touchstone Emerging Growth 0.80% 0.35% 1.15%
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Touchstone International Equity 0.95% 0.30% 1.25%
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Touchstone Income Opportunity 0.65% 0.20% 0.85%
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Touchstone High Yield 0.60% 0.20% 0.80%
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Touchstone Value Plus 0.75% 0.40% 1.15%
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Touchstone Growth & Income 0.80% 0.05% 0.85%
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Touchstone Enhanced 30 0.65% 0.10% 0.75%
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Touchstone Balanced 0.80% 0.10% 0.90%
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Touchstone Bond 0.55% 0.20% 0.75%
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Touchstone Standby Income 0.25% 0.25% 0.50%
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* In certain states and for certain retirement plans, we can waive, reduce or
eliminate the annual contract maintenance charge.
* * Since the Touchstone Value Plus commenced operations in 1998 and the
Touchstone Small Cap Value, High Yield,. Growth & Income, Enhanced 30 and Bond
Funds commenced operations in 1999, expenses for these Funds in this table and
the following table are based on estimates.
<PAGE>
The "Total Expenses" column in this table represents the expenses paid by the
Funds, not necessarily the expenses incurred by the Funds. The advisors or
custodians for some of the Funds have agreed to waive or reimburse certain fees
and expenses incurred by those Funds. The advisors or custodians that have
agreed to limit the expenses paid by one or more of the Funds are:
o The custodian for the each of the MFS Funds has agreed to an expense offset
arrangement if expenses reach a specified level. The expenses for the MFS
Fund did not reach these specified levels in 1999. The MFS Funds may also
have other agreements that reduce the expense actually paid by the MFS Funds.
For example, prior to October 2, 1998, Massachusetts Financial Services
Company had agreed to waive certain fees or reimburse the MFS Growth with
Income Fund so that the Fund's expenses did not exceed specified levels.
o Pacific Investment Management Company has agreed to reduce its administrative
fee, subject to potential future reimbursement, to the extent that total
expenses of the PIMCO Fund would exceed 0.65%.
o Touchstone Advisors, Inc. has agreed to waive certain fees or reimburse each
of the Touchstone Funds so that the each Fund's expenses do not exceed the
percentage listed for that Fund listed in this table. The agreement will
remain in place until at least December 31, 1999.
If these advisors did not agree to waive or reimburse certain fees and expenses
of the respective Funds, the total expenses of each of those Funds would be
higher as indicated in the table that follows. If the Fund is not the subject of
an agreement to waive or reimburse expenses, the "Total Expenses" column in this
table will be the same as the "Total Expenses (Before reimbursement)" column in
the following table.
Total Expenses
(Before reimbursement)
AIM V.I. Growth 0.72%
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AIM V.I. Government Securities 0.76%
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ALGER American Small Capitalization 0.89%
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ALGER American Growth 0.79%
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MFS VIT Emerging Growth 0.85%
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MFS VIT Growth with Income 0.95%
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PIMCO Long-Term U.S. Government Bond 0.67%
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Touchstone Small Cap Value %
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Touchstone Emerging Growth 1.49%
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Touchstone International Equity 1.95%
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Touchstone Income Opportunity 1.25%
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Touchstone High Yield %
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Touchstone Value Plus 7.49%
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Touchstone Growth & Income 1.37%
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Touchstone Enhanced 30 %
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Touchstone Balanced 1.37%
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Touchstone Bond 1.32%
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Touchstone Standby Income 0.95%
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Examples
These examples should help you compare the cost of purchasing a Contract with
the cost of purchasing other variable annuity contracts.
The examples assume that you invest $1,000 in each Sub-Account, your investment
has a 5% return each year and the Fund's total expenses are the same as shown
above in the column entitled "Fund Expenses (After Reimbursement)". Your actual
costs may be higher or lower than the costs shown in the examples.
<PAGE>
<TABLE>
<CAPTION>
Example 1 This example assumes that you surrender your Contract at the end of
the applicable time period.
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
AIM V.I. Growth $93 $124 $155 $256
AIM V.I. Government Securities $93 $125 $157 $260
ALGER American Small Capitalization $94 $129 $164 $274
ALGER American Growth $93 $126 $159 $263
MFS VIT Emerging Growth $94 $128 $162 $270
MFS VIT Growth with Income $94 $129 $164 $273
PIMCO Long-Term U.S. Government Bond $92 $122 $153 $251
Touchstone Small Cap Value $96 $132 * *
Touchstone Emerging Growth $97 $137 $178 $301
Touchstone International Equity $98 $140 $183 $311
Touchstone Income Opportunity $94 $128 $162 $270
Touchstone High Yield $93 $126 * *
Touchstone Value Plus $97 $137 * *
Touchstone Growth & Income $94 $128 $162 $270
Touchstone Enhanced 30 $93 $125 * *
Touchstone Balanced $94 $129 $165 $275
Touchstone Bond $93 $125 $157 $259
Touchstone Standby Income $90 $117 $144 $232
Example 2 This example assumes that you annuitize your Contract at the end of
the applicable time period and choose at least a 5-year payout period.
1 Year 3 Years 5 Years 10 Years
AIM V.I. Growth $93 $70 $119 $256
AIM V.I. Government Securities $93 $71 $121 $260
ALGER American Small Capitalization $94 $75 $128 $274
ALGER American Growth $93 $72 $123 $263
MFS VIT Emerging Growth $94 $74 $126 $270
MFS VIT Growth with Income $94 $75 $128 $273
PIMCO Long-Term U.S. Government Bond $92 $68 $117 $251
Touchstone Small Cap Value $96 $78 * *
Touchstone Emerging Growth $97 $83 $142 $301
Touchstone International Equity $98 $86 $147 $311
Touchstone Income Opportunity $94 $74 $126 $270
Touchstone High Yield $93 $72 * *
Touchstone Value Plus $94 $83 * *
Touchstone Growth & Income $94 $74 $126 $270
Touchstone Enhanced 30 $93 $71 * *
Touchstone Balanced $94 $75 $129 $275
Touchstone Bond $93 $71 $121 $259
Touchstone Standby Income $90 $63 $108 $232
Example 3 This example assumes that you do not surrender your Contract.
1 Year 3 Years 5 Years 10 Years
AIM V.I. Growth $23 $70 $119 $256
AIM V.I. Government Securities $23 $71 $121 $260
ALGER American Small Capitalization $24 $75 $128 $274
ALGER American Growth $23 $72 $123 $263
MFS VIT Emerging Growth $24 $74 $126 $270
MFS VIT Growth with Income $24 $75 $126 $273
PIMCO Long-Term U.S. Government Bond $22 $68 $117 $251
Touchstone Small Cap Value $26 $78 * *
Touchstone Emerging Growth $27 $83 $142 $301
Touchstone International Equity $28 $86 $147 $311
Touchstone Income Opportunity $24 $74 $126 $270
Touchstone High Yield $23 $72 * *
Touchstone Value Plus $24 $74 * *
Touchstone Growth & Income $24 $74 $126 $270
Touchstone Enhanced 30 $23 $71 * *
Touchstone Balanced $24 $75 $129 $275
Touchstone Bond $23 $71 $121 $259
Touchstone Standby Income $20 $63 $108 $232
</TABLE>
<PAGE>
Summary
This summary highlights some basic information about the Touchstone Advisor
Variable Annuity Contract. More information about the Contract is located on
pages 9 through 29 of this Prospectus.
How the Contract Works
The Contract is a contract between you and WSLAC. The Contract, like all
variable annuity contracts, has two phases: the accumulation phase and the
annuity income phase. During the accumulation phase, earnings on your investment
accumulate on a tax-deferred basis. The annuity income phase begins when you
start to receive annuity income payments. The amount of money you accumulate
during the accumulation phase determines the amount of the annuity income
payments you receive. You can select one of several annuity income payment
plans.
The Contract also provides a guaranteed death benefit that is payable to a
designated beneficiary when the Annuitant dies. Generally, the Contract
guarantees that the beneficiary will receive the greater of either the total
purchase payments less any withdrawals or the Contract Value, regardless of
investment performance.
Who Should Purchase the Contract
The Contract allows you to accumulate money on a tax-deferred basis for
retirement or other long-term goals through various investment options.
Generally, the higher your tax bracket, the more you will benefit from the
tax-deferred feature of the Contract. You should not purchase a Contract if you
are looking for a short-term investment or if you cannot take the risk of
getting less money back than you paid for the Contract. You may want to consult
a tax advisor or other investment professional before you purchase a Contract.
Purchasing a Contract
You can purchase a Contract for $5,000 or more. You can also purchase a Contract
in connection with certain types of retirement plans, such as a Traditional or
Roth IRA or a 403(b) plan, for $1,000 or more. The Contract also includes a
flexible purchase payment feature that allows you to make additional payments
later.
Selecting Your Investment Options
You can allocate your purchase payments among the following investment options,
called Sub-Accounts.
<PAGE>
Sub-Accounts
Depending on market conditions, you can make or lose money in any Sub-Account.
s AIM V.I. Growth s Touchstone Small Cap Value
s AIM V.I.Govenment Securities s Touchstone Emerging Growth
s ALGER American Small Capitalization s Touchstone International Equity
s ALGER American Growth s Touchstone Income Opportunity
s MFS VIT Emerging Growth s Touchstone High Yield
s MFS VIT Growth with Income s Touchstone Value Plus
s PIMCO Long-Term U.S. s Touchstone Growth & Income
Government Bond s Touchstone Enhanced 30
s Touchstone Balanced
s Touchstone Bond
s Touchstone Standby Income
Transferring Among Investment Options
You can transfer money from one investment option to another. Like all variable
annuities, transfers between investment options are tax-free. The minimum
transfer amount is $250. We limit the number of times you can transfer between
investment options in each Contract Year.
Accessing Your Money
You can access your money at any time during the accumulation phase. The minimum
withdrawal is $250.
Also be aware that you may be required to pay income taxes and a 10% federal
penalty tax on any amount you withdraw.
Charges and Fees
A $35 contract maintenance charge is ordinarily deducted each year from your
Contract Value. Other administrative charges are deducted at an annual rate of
no more than 0.80% of your Contract Value. Also, you may indirectly pay
investment advisory fees.
10-Day Review Period
You have 10 days to review your Contract after you receive it. If you are not
satisfied with your Contract, you can cancel it but must do so by returning it
to the Touchstone Variable Annuity Service Center at P.O. Box 2850, Cincinnati,
Ohio 45201-2850 within 10 days after you receive it. If you cancel your
Contract, in most cases we will refund the Contract Value to you. However, some
state laws may require us to refund your purchase payments.
<PAGE>
Additional Information
Representatives at the Touchstone Variable Annuity Service Center can answer
your questions about the Contract. You can call the Service Center at
800.669.2796 (press 2).
Accumulation Unit Values
The Accumulation Unit Values for each Sub-Account other than Value Plus are
shown in Supplement A on page 37.
<PAGE>
Purchasing Your Contract
To obtain an application to purchase a Contract, please contact your investment
advisor or the Touchstone Variable Annuity Service Center by mail at P.O. Box
2850, Cincinnati, Ohio 45201-2850 or by phone at 800.669.2796 (press 2).
Minimumand Maximum Purchase Payments s You can purchase a Contract for $5,000
or more.
s A purchase of over $500,000 may be made with prior approval from
Touchstone.
s You can also purchase a Contract in connection with certain types of
retirement plans, such as a Traditional or Roth IRA, a 403(b) plan, a
SIMPLE IRA (Savings Incentive Match Plans for Employees), or a SEP
(Simplified Employee Pension Plans), for $1,000 or more.
s You can make additional investments in your Contract at any time
before the Income Date. Each additional purchase payment must be at
least $1,000.
10-Day Review Period
You have 10 days to review your Contract after you receive it. This 10-day
review period is called the free look period. The state where you live may
require us to give you a longer free look period.
If you are not satisfied with the Contract, you can cancel it during the free
look period. To cancel the Contract, you must return it to the Touchstone
Variable Annuity Service Center at P.O. Box 2850, Cincinnati, Ohio 45201-2850
within 10 days after you receive it. If you cancel the Contract, in most cases
we will refund the Contract Value to you. However, some state laws may require
us to refund your purchase payments.
Investment Options
You decide how to allocate your purchase payments by selecting from the
following investment options, called Sub-Accounts.
s AIM V.I. Growth s Touchstone Small Cap Value
s AIM V.I.Govenment Securities s Touchstone Emerging Growth
s ALGER American Small Capitalization s Touchstone International Equity
s ALGER American Growth s Touchstone Income Opportunity
s MFS VIT Emerging Growth s Touchstone High Yield
s MFS VIT Growth with Income s Touchstone Value Plus
s PIMCO Long-Term U.S. s Touchstone Growth & Income
Government Bond s Touchstone Enhanced 30
s Touchstone Balanced
s Touchstone Bond
s Touchstone Standby Income
Allocation of Purchase Payments
Your instructions are included in your application and shown on page 3 of your
Contract. You can change your allocation instructions by contacting us either by
phone or in writing. When we receive a purchase payment from you, we allocate it
based on the most recent allocation instructions we have received from you.
<PAGE>
The following guidelines apply to the allocation of your purchase payments:
s Allocate at least 5% of your initial purchase payment to each
investment option you choose. When we have received the necessary
state aprovals, you may allocate as little as 1% to each investmetn
option.
s Use whole percentages. For example, you can allocate 33% or 34% to an
investment option, not 331 1/43%.
s Make sure your percentages total 100%.
Allocation Changes by Phone. You can change the allocation of your future
purchase payments over the phone by following these steps:
Step 1. Fill out either the telephone authorization part of the application or a
Telephone Authorization Form. You can get a copy of either form by contacting
the Touchstone Variable Annuity Service Center. You must complete and return one
of these forms before you call to change your allocations over the phone.
Step 2. Call the Touchstone Variable Annuity Service Center at 800.669.2796
(press 2) between 8:00 a.m. and 4:00 p.m. Eastern Time.
Step 3. Give the representative the following information:
s Your Social Security number
s Your Contract number or other precise information that identifies your
Contract
s Your allocation instructions
This privilege is subject to state approval.
Allocation Changes in Writing. You can also change the allocation of your future
purchase payments by writing to the Touchstone Variable Annuity Service Center.
Your written instructions must include the following information:
s Your Contract number or other precise information that identifies your
Contract
s Your allocation instructions
<PAGE>
You can transfer money from one investment option to another. You can make
transfers by phone or in writing.
The following guidelines apply to transfers other than dollar cost averaging
transfers:
s Each transfer must be at least $250.
s The allocation to each investment option must be at least 5% of the
total transfer amount. When we have received the necessary state
approvals, you may allocate as little as 1% to each investment option.
s You can transfer money among the Sub-Accounts once every 30 days.
Transfers by Phone. You can transfer your money over the phone by following
these steps:
Step 1. Fill out either the telephone transfer authorization part of the
application or a Telephone Authorization Form. You can get a copy of either form
by contacting the Touchstone Variable Annuity Service Center. You must complete
and return one of these forms before you call to change your allocations over
the phone.
Step 2. Call the Touchstone Variable Annuity Service Center at 800.669.2796
(press 2) between 8:00 a.m. and 4:00 p.m. Eastern time.
Step 3. Give the representative the following information:
s Your Social Security number
s Your Contract number or other precise information that identifies your
Contract
s Your transfer instructions
Transfers in Writing. You can also transfer your money by writing to the
Touchstone Variable Annuity Service Center. Your written instructions must
include the following information:
s Your Contract number or other precise information that identifies your
Contract
s Your transfer instructions
Third Party Authorization
You can authorize a third party to transfer money for you. To do so, you must
complete the appropriate authorization forms. Contact us at the Touchstone
Variable Annuity Service Center at 800.669.2796 (press 2) for additional
information.
<PAGE>
sidebar
ooo Dollar Cost Averaging
Dollar cost averaging can result in a lower average cost of investing over
time. While dollar cost averaging does not guarantee a profit or prevent a loss,
you have a higher likelihood to profit from this long-term investment method.
Touchstone's Dollar Cost Averaging Program
Dollar cost averaging is a method of investing equal amounts of money at regular
intervals. Dollar cost averaging allows you to purchase more Accumulation Units
when prices are low and fewer when prices are high. For dollar cost averaging to
be effective, you should continue to invest during both market ups and downs.
You should also consider your financial ability to maintain a consistent level
of investment over time.
Touchstone's Dollar Cost Averaging Program allows you to transfer amounts at
regular intervals from the Touchstone Standby Income Sub-Account to other
Sub-Accounts. You can make the following transfers:
s A specific dollar amount
s A specific percentage of your money in the Touchstone Standby Income
Sub-Account
s Earnings in the Touchstone Standby Income Sub-Account
You select the number and the frequency of your transfers in Touchstone's Dollar
Cost Averaging Program. We will transfer the money on the anniversary of your
Contract Date each month or each quarter.
The following guidelines apply to dollar cost averaging transfers:
s Your Contract Value must be at least $10,000.
s Dollar cost averaging transfers must continue for at least 12 months.
s Each transfer must be at least $200.
s The allocation to each Sub-Account must be at least 5% of the transfer
amount. When we have received the necessary state approvals, you may
allocate as little as 1% to each investment option.
To set up dollar cost averaging transfers, contact the Touchstone Variable
Annuity Service Center at 800.669.2796 (press 2) or P.O. Box 2850, Cincinnati,
Ohio 45201-2850.
Dollar cost averaging transfers will stop if we complete the number of transfers
you requested, you ask us to stop after using the program for at least 12
months, you do not have enough money in your accounts to complete the transfer,
or the program is discontinued. If we discontinue the program, you will be
allowed to complete the number of transfers you previously requested.
<PAGE>
Accessing Your Money
Your Contract is designed to help you achieve your long-term investment goals.
However, there may be times when you need to access the money you have invested
in your Contract. You can access your money at any time during the accumulation
phase by making a partial withdrawal, by making systematic withdrawals or by
canceling your Contract.
Partial Withdrawals
To withdraw money from your Contract, send written instructions to the
Touchstone Variable Annuity Service Center at P.O. Box 2850, Cincinnati, Ohio
45201-2850. For help with a partial withdrawal, please call the Service Center
at 800.669.2796 (press 2).
The following guidelines apply to partial withdrawals:
s Include your Contract number or other information that identifies your
Contract and the amount to be withdrawn in your instructions.
s Each withdrawal must be at least $250.
s If your Contract Value is reduced below $5,000 by the partial
withdrawal, we reserve the right to terminate your Contract
by paying you the Surrender Value.
Systematic Withdrawal Plan
The Systematic Withdrawal Plan allows you to withdraw a specific dollar amount
from your Contract on a monthly, quarterly, semiannual or annual basis. The
minimum amount for each systematic withdrawal is $100. To set up systematic
withdrawals, contact the Touchstone Variable Annuity Service Center at
800.669.2796 (press 2) or at P.O. Box 2850, Cincinnati, Ohio 45201-2850.
You can discontinue your systematic withdrawals at any time by sending written
instructions to us.
Canceling Your Contract
You can cancel your Contract at any time during the accumulation phase. When you
cancel your Contract, we pay you the Surrender Value. This payment terminates
your Contract and our obligations under the Contract.
To cancel your Contract, send written instructions to the Touchstone Variable
Annuity Service Center at P.O. Box 2850, Cincinnati, Ohio 45201-2850. Include
your Contract number or other information that identifies your Contract in your
instructions. For assistance, please call the Service Center at 800.669.2796
(press 2).
The Surrender Value will equal the Contract Value, less any applicable contract
maintenance charge and premium taxes. Because investment performance and
applicable charges affect your Contract Value, the Surrender Value may be less
than the total of your purchase payments.
<PAGE>
Penalty Taxes
If you withdraw money from your Contract or cancel your Contract before you or
the Annuitant (as applicable) reach age 591 1/42, you generally will have to pay
a federal penalty tax. This tax is equal to 10% of the amount of the payment you
receive that is treated as taxable income. More information about penalty taxes
is located on pages __ through __.
Processing Withdrawals
When we process your partial or systematic withdrawal, we withdraw money from
each of your investment options on a pro-rata basis. For example, in a situation
where no charges are applicable to the withdrawal, if you have 25% of your money
in the Touchstone Income Opportunity Sub-Account and 75% of your money in the
Touchstone Balanced Sub-Account and you want to withdraw $2,000, we will
withdraw $500 from the Touchstone Income Opportunity Sub-Account (25% of $2,000)
and $1,500 from the Touchstone Balanced Sub-Account (75% of $2,000).
If you want us to process your withdrawal on a different basis, such as
withdrawing all the money from one Sub-Account, you must provide specific
instructions in your withdrawal request.
We will generally send payments to you within 7 days of the date that we process
your request. We may delay calculating the amount of the payment from a
Sub-Account or sending a payment from a Sub-Account for any of the following
reasons:
s The New York Stock Exchange is closed on a day that it normally would
be open.
s Trading on the New York Stock Exchange is restricted.
s Because of an emergency, it is not reasonably practicable for the
Sub-Accounts to sell securities or to fairly determine the value of
their investments.
s The SEC permits us to postpone payments from the Sub-Accounts for your
protection.
<PAGE>
Administrative Charges
We incur administrative costs in setting up your Contract, maintaining records
of your Contract and sending you confirmations and statements about your
Contract. By paying a contract maintenance charge and a contract administration
charge, you reimburse us for the administrative costs we expect to incur.
Contract Maintenance Contract Administration
Charge Charge
o On the anniversary of your o On each day the New
Contract Date each year York Stock Exchange
until annuity payments is open for trading.
begin.
o The date we start annuity
payments.
o The date you completely
surrender your Contract.
When Charged?
================================================================================
o $35 each year o The effective annual rate
of the charge is 0.10%.
How Much Charged?
================================================================================
o We reduce your Contract o We deduct this charge
Value. The number of from the Accumulation
Accumulation Units you Unit Value of each Sub-
own in each Sub-Account Account.
is reduced.
How Charged?
================================================================================
If we receive appropriate governmental approvals, we may reduce or eliminate the
contract maintenance charge.
Mortality and Expense Risk Charges
We assume two risks with every Contract: a mortality risk and an expense risk.
We take a mortality risk that the Annuitant will live longer than expected or we
will pay a death benefit greater than your Contract Value. We also take an
expense risk that the administrative charges will not pay all the administrative
costs of your Contract.
You pay us to assume these risks by paying mortality and expense risk charges.
On each Valuation Date, we deduct the mortality and expense risk charges from
the Accumulation Unit Value of each Sub-Account. The effective annual rate of
these charges is 0.70%, which includes 0.50% for assuming mortality risk and
0.20% for assuming expense risk. If we do not actually incur the risks
associated with these charges, we will make money from collecting these charges.
Premium Taxes
Certain states and government authorities charge a premium tax on your purchase
payments. The premium tax may be as much as 3.5% of your purchase payments.
These premium taxes are charged either when you make purchase payments or when
we begin annuity payments.
<PAGE>
Currently, we pay all of the premium taxes charged by states and government
authorities. However, we may decide to stop paying the premium taxes in the
future. We would then deduct the amount of the premium taxes from your Contract
Value at one of the following times when:
s We pay the premium tax.
s You surrender or withdraw money from your Contract.
s The death benefit is paid.
s Annuity payments begin.
<PAGE>
The Sub-Accounts and the Funds
Each Sub-Account invests in a corresponding Fund. These tables contain
information about the investment objective, Advisor and Sub-Advisor of each
Fund:
<TABLE>
<CAPTION>
Investment Objective Advisors/Sub-Advisors
The Fund seeks to provide growth of capital AIM
Advisors, Inc.
AIM V.I. Growth
====================================================================================================================================
<S> <C> <C>
AIM V.I. The Fund seeks to achieve a high level of
Government current income consistent with reasonable
concern for safety of principal AIM Advisors, Inc.
Securities
====================================================================================================================================
Alger American The Fund seeks to provide long-term
capital appreciation Fred Alger Management, Inc.
Small Capitalization
====================================================================================================================================
Alger The Fund seeks to provide long-term
capital appreciation Fred Alger Management, Inc.
American Growth
====================================================================================================================================
MFS VIT The Fund seeks to provide long-term Massachusetts Financial
growth of capital Services Company
Emerging Growth
====================================================================================================================================
The Fund seeks to provide reasonable
MFS VIT Growth current income and long-term Massachusetts Financial
capital and income growth Services Company
with Income
====================================================================================================================================
The Fund seeks to maximize total
Pimco Long-Term return, consistent with the
U.S. Government preservation of capital and Pacific Investment
prudent investment management Management Company
Bond
====================================================================================================================================
Touchstone The Fund seeks long-term growth
of capital. Todd Investment Advisors, Inc.*
Small Cap Value
====================================================================================================================================
The Fund seeks to increase the value of David L. Babson & Company, Inc.*
Touchstone its shares as a primary goal and to earn Westfield Capital Management
Emerging Growth income as a secondary goal. Company, Inc.
====================================================================================================================================
Touchstone The Fund seeks to increase the value of
its shares over the long-term. Credit Suisse Asset Management *
International Equity
====================================================================================================================================
The Fund seeks to achieve a high level of
current income as its main goal. The Fund
Touchstone may also seek to increase the value of its
shares, if consistent with its main goal. Alliance Capital Management L.P. *
Income Opportunity
====================================================================================================================================
*Sub-Advisors to Touchstone Advisors
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Investment Objective Advisors/Sub-Advisors
<S> <C> <C>
The Fund seeks to achieve a high level of
Touchstone current income as its main goal with Fort Washington Investment *
capital appreciation as a secondary goal. Advisors, Inc.
High Yield
====================================================================================================================================
Touchstone The Fund seeks to increase the value of
FortWashington Investment * its shares over the
long-term. Advisors, Inc.
Value Plus
====================================================================================================================================
The Fund seeks to increase the value of
Touchstone its shares over the long-term, while
receiving dividend income. Scudder Kemper Investments, Inc.*
Growth & Income
====================================================================================================================================
The Fund seeks to achieve a total
Touchstone return that is higher than that of the
Dow Jones Industrial Average (DJIA). Todd Investment Advisors, Inc.*
Enhanced 30
====================================================================================================================================
Touchstone The Fund seeks to achieve an increase in
value and current income. OpCap Advisors, Inc.*
Balanced
====================================================================================================================================
The Fund seeks to provide a high level of Fort
Washington Investment * dividends and
distributions. Advisors, Inc.
Touchstone Bond
====================================================================================================================================
The Fund seeks to provide a higher level of
current income than a money market fund, while
also seeking to prevent large fluctuations in the
value of the Sub- Account's initial investment.
The Fund
Touchstone does not try to keep a constant $1.00 per FortWashington Investment *
share net asset value. Advisors, Inc.
Standby Income
====================================================================================================================================
</TABLE>
*Sub-Advisors to Touchstone Advisors
More complete information about each Fund, including information about its
expenses, is included in its prospectus, which is contained in this booklet.
Please read the Fund's prospectus carefully before you select it as an
investment option.
Changes in the Sub-Accounts and the Funds
We may add, delete or combine Sub-Accounts. New Sub-Accounts will invest in
Funds we consider suitable. We may also substitute a new Fund or similar
investment option for the Fund in which a Sub-Account invests. We would make a
substitution to ensure the underlying Fund continues to be a suitable
investment. A substitution may be triggered by unsatisfactory investment
performance, a change in laws or regulations, a change in a Fund's investment
objectives or restrictions, a change in the availability of the Fund for
investment, or any other reason. Before any substitution, we will obtain any
required approvals, including approval from the SEC or from Contract owners.
<PAGE>
sidebar
ooo Accumulation Unit
A unit of measure used to calculate a Contract owner's share of a Sub-
Account. Although it is not the same as a mutual fund share, it is similar.
ooo Accumulation Unit Value
The dollar value of an Accumulation Unit in a Sub- Account.
Sub-Accounts
The value of your interest in a Sub-Account is measured in Accumulation Units.
An Accumulation Unit is an accounting unit of measure. It is similar to a share
of a mutual fund. The value of an Accumulation Unit varies from day to day
depending on the investment performance of the Fund in which the Sub-Account is
invested and the expenses of the Sub-Account.
The Accumulation Unit Value of each Sub-Account is calculated on each day that
the New York Stock Exchange is open for business (Valuation Date). The
Accumulation Unit Value of a Sub-Account on any Valuation Date is calculated by
dividing the value of the Sub-Account's net assets by the number of Accumulation
Units credited to the Sub-Account on the Valuation Date.
When you allocate purchase payments to a Sub-Account, your Contract is credited
with Accumulation Units. Other transactions, such as withdrawals, exchanges, and
payments of the annual contract maintenance charge, will increase or decrease
the number of Accumulation Units credited to your Contract.
The number of Accumulation Units added to or subtracted from your Contract is
calculated by dividing the dollar amount of the transaction by the Accumulation
Unit Value for the Sub-Account at the close of trading on the Valuation Date
when we process the transaction. To calculate the Accumulation Unit Value of a
Sub-Account on any Valuation Date, we start with the Accumulation Unit Value
from the preceding Valuation Date and adjust it to reflect the following items:
s The investment performance of the Sub-Account, which is based on the
investment performance of the corresponding Fund
s Any dividend or distributions paid by the corresponding Fund
s Any charges or credits for taxes that we determined were the result of
the investment operations of the Sub-Account s The mortality and
expense risk charge
s The contract administration charge
We reserve the right to change the number and value of the Accumulation Units
credited to your Contract so long as the change does not affect your Contract
Value or the benefits or other provisions of your Contract.
<PAGE>
Performance Information
We may include performance information for the Sub-Accounts in advertisements,
sales literature and reports to Contract owners. This performance information
will be based on historical performance. It is not intended to predict the
future performance of a Sub-Account.
Standardized Performance Information
We usually advertise average annual total return. Average annual total return
represents the average compounded rate of return on a hypothetical initial
investment of $1,000. It is calculated by comparing the hypothetical $1,000
investment in a Sub-Account to the hypothetical surrender value of the
investment at the end of a period. The periods that we normally include are 1
year, 5 year and 10 year periods. If a Contract has not been available for the
complete period, we include the period for which it was available.
Average annual total return reflects historical investment results and expenses
of the Sub-Account for a specific period. It does not include any deductions for
premium taxes.
Non-Standardized Performance Information
We may use other performance information, such as cumulative total return and
total return for other periods of time. We may compare the performance of a
Sub-Account to the performance of other separate accounts or investments as
listed in rankings prepared by independent organizations that monitor the
performance of separate accounts and other investments. We may also include
evaluations of the Sub-Accounts published by nationally recognized ranking
services or by nationally recognized financial publications.
<PAGE>
Annuity Income Payment Options
Annuity Phase
During the annuity phase, we will make periodic annuity income payments based on
the annuity income payment option you choose (1A, 1B, 2A, 2B) as described on
the following page. In the Contract, we refer to annuity income payment options
as payout plans.
Determining the Income Date
Annuity income payments start on a specific date called the Income Date. The
Income Date is shown on page 3 of your Contract. If you do not select an Income
Date, the Income Date will be based on the birthday of the Annuitant. The
Annuitant is a natural person selected by you whose life is used to determine
the duration and amount of any annuity payments.
Generally, the Income Date is the first anniversary of your Contract Date on or
after the Annuitant's 80th birthday. If your Contract has not been in effect for
10 years on the Annuitant's 80th birthday, the Income Date will be the 10th
anniversary of your Contract Date.
You can change the Income Date by writing to us. We must receive this notice on
or before the scheduled Income Date. Once annuity income payments begin, you
cannot change the Income Date.
Choosing the Payee
You choose the person or persons to receive the annuity income payments. If you
do not select someone, the Annuitant will automatically receive the annuity
income payments. You can change the person you selected at any time by writing
to us. If the person you select to receive annuity income payments dies, you
will receive the annuity income payments unless you select another payee.
Determining the Payment Amount
Annuity income payment amounts are based on the Surrender Value of your Contract
on the Income Date and the payment option you choose.
Under all payment plans, we guarantee that you will earn interest at a minimum
rate of 3% each year.
Choosing the Frequency
Generally, we make annuity income payments monthly. You can request annuity
income payments on a quarterly, semiannual, or annual basis. If the Surrender
Value of your Contract is less than $1,000, we make one annuity income payment
in an amount equal to the Surrender Value. If each periodic payment will be less
than $50, we will change the frequency of the payments to increase the amount of
each periodic payment to at least $50.
<PAGE>
Choosing the Payment Option
You can select one of the four annuity income payment options described below at
any time before the Income Date.Some states may limit the availability of
payment options.You can change the payment option you selected by writing to
us.We must receive this notice on or before the scheduled Income Date. Once
annuity income payments begin, you cannot change your payment option.
If you do not elect an annuity payment plan, Life Income Option 2A (monthly
payments guaranteed for 10 years) will apply.
<TABLE>
<CAPTION>
Overview of Annuity Income Payment Options
<S> <C>
Fixed Period -- you select the number of years.
Installment Income Option 1A
- --------------------------------------------------------------------------------
Fixed Amount -- you select the amount of the monthly payment.
Installment Income Option 1B
- --------------------------------------------------------------------------------
One Life -- we make payments as long as the Annuitant lives.
Life Income Option 2A
- --------------------------------------------------------------------------------
Joint and Survivor -- we make payments as long as either the
Annuitant or another designated person lives.
Life Income Option 2B
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Annuity Income Payment Options
<S> <C>
Fixed Period
Monthly Payment Amount: Based on the Surrender Value of your Contract
and the number of years in the payment period. The monthly payments
will remain the same throughout the payment period.
Payment Period: You select the number of years, but no more than 30.
Special Rule for Qualified Contract: Payment period may not extend beyond
Installment Income the life expectancy of the Annuitant.
Option 1A Option to Request Lump Sum Payment: Available at any time.
- -----------------------------------------------------------------------------------------------------------
Fixed Amount
Monthly Payment Amount: You select the amount, which must be at least $5
for each $1,000 of Surrender Value. For example, if your Surrender Value is
$60,000, the minimum monthly payment amount is $300 ($5 x 60). The
monthly payments will remain the same throughout the payment period.
Payment Period: Payments are made until the entire amount, including
interest, is paid.
Special Rule for Qualified Contract: Payment period may not extend beyond
Installment Income the life expectancy of the Annuitant.
Option 1B Option to Request Lump Sum Payment: Available at any time.
- -----------------------------------------------------------------------------------------------------------
One Life
Monthly Payment Amount: Based on the Surrender
Value of your Contract, the age and gender of the
Annuitant on the date of the first payment, and
the number of years chosen for guaranteed
payments. The monthly payments will remain the
same throughout the payment period. Payment
Period: You select 10 or 20 years as the
guaranteed payment period. We make payments for as
long as the Annuitant lives even if the Annuitant
lives longer than the selected period. For
example, if you select a 10-year guaranteed
payment period and the Annuitant lives for 12
years, we make payments for 12 years. Special Rule
for Qualified Contract: Payment period may not
extend beyond the life expectancy of the Annuitant
or the joint life expectancies of the Annuitants.
Life Income Option to Request Lump Sum Payment: Not available after the
first payment Option 2A is made.
- -----------------------------------------------------------------------------------------------------------
Joint and Survivor
Monthly Payment Amount: Based on the Surrender
Value of your Contract and the age and gender of
the Annuitant and another designated person on the
date of the first payment. The monthly payments
will remain the same throughout the payment
period. Payment Period: Based on the lifetimes of
the Annuitant and another designated person.
Payments continue as long as either person is
living. If either person dies before the first
payment, we make annuity payments during the
survivor's lifetime under Life Income Option 2A
guaranteed for 10 years. Special Rule for
Qualified Contract: Payment period may not extend
beyond the life expectancy of the Annuitant or the
joint life expectancies of the Annuitants.
Life Income Option to Request Lump Sum Payment: Not available after the first payment
Option 2B is made.
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Guaranteed Death Benefit
If the Annuitant dies before the Income Date, we will pay a guaranteed death
benefit instead of annuity payments.
You select one or more person(s) who will receive this death benefit. These
people are called beneficiaries. You can change your beneficiaries at any time
by writing to us.
To determine the death benefit amount, we must receive proof of death of the
Annuitant and payment instructions for the beneficiary. If we do not receive
payment instructions for the beneficiary within 60 days of receipt of the proof
of death, we may pay the beneficiary in one lump sum.
Based upon the date we receive the proof of death and payment instructions, we
calculate the amount of the death benefit according to the following table:
Annuitant dies before annuity payments begin, before the first day of the
calendar month after the annuitant's 80th birthday.
The death benefit amount will equal the greater of the following 2 amounts:
o The Contract Value on the date we receive proof of death of the Annuitant
and payment instructions for the beneficiary.
o The sum of all purchase payments minus any amounts withdrawn
Annuitant dies before annuity payments begin but on or before the first
day of the calendar month after the annuitant's 80th birthday.
The death benefit amount will equal the Contract Value on the day we receive
proof of death of the Annuitant and payment instructions for the beneficiary.
Annuitant dies annuity income payments begin.
Any remaining benefits will be paid based on the annuity income payment option
in effect.
<PAGE>
WSLAC
Western-Southern Life Assurance Company (WSLAC) is a stock life insurance
company organized under the laws of the State of Ohio on December 1, 1980. It is
a wholly-owned subsidiary of The Western and Southern Life Insurance Company, a
mutual life insurance company originally organized under the laws of the State
of Ohio on February 23, 1888. Both companies issue insurance and annuity
contracts and are located at 400 Broadway, Cincinnati, Ohio 45202.
Separate Account 2
WSLAC established Separate Account 2 (SA2) under Ohio law on June 1, 1994. SA2
supports the Contracts and certain other variable annuity contracts that it
issues. SA2 is registered with the SEC as a unit investment trust. We may
operate SA2 as a management investment company or any other form permitted by
law. We may also deregister SA2 if registration with the SEC is no longer
required.
SA2 is currently divided into 18 Sub-Accounts: SA2 holds the investments
allocated to the Sub-Accounts by the owners of the Contracts. It also holds
assets for the benefit of owners of certain other variable annuity contracts
that it issues. SA2 invests the assets of each Sub-Account in the corresponding
Fund. The investment objective of a Sub-Account and the Fund in which it invests
are identical.
WSLAC owns SA2's assets but it separates SA2's assets from its general account
assets and the assets of its other separate accounts. Liabilities from any other
businesses conducted by WSLAC will not be charged to SA2's assets. We hold SA2's
assets exclusively for the benefit of owners and beneficiaries of the Contracts
and certain other variable annuity contracts issued by SA2. WSLAC is obligated
to pay all benefits provided under the Contracts.
The income, capital gains and capital losses of each Sub-Account are credited to
or charged against the assets of that Sub-Account without regard to the income,
capital gains or capital losses of any other Sub-Account or WSLAC.
<PAGE>
Underwriters
Touchstone Securities, Inc. is the distributor of the Contracts. Its
principal business address is 311 Pike Street, Cincinnati, Ohio 45202.
Touchstone Securities is a wholly-owned subsidiary of IFS Financial Services,
Inc., a wholly-owned subsidiary of WSLAC.
Touchstone Securities pays sales commissions to persons or entities that sell
the Contracts. These persons are called dealers. Sales commissions may be
calculated as a percentage of the purchase payments received for a Contract or a
percentage of the Contract Value (sometimes called a trail commission). Sales
commissions may also be based on a dealer's total sales and other performance
factors (sometimes called production bonuses). Touchstone Securities may also
pay dealers for other services not directly related to contract sales.
<PAGE>
Voting Rights
Because each Sub-Account invests in a corresponding Fund, WSLAC is entitled to
vote at any meeting of the Fund's shareholders. WSLAC, on behalf of SA2, votes
the shares of a Fund that are held by a Sub-Account according to the
instructions of the owners of Contracts who have invested in that Sub-Account.
If you have money in a Sub-Account on the record date for a meeting of the
shareholders of the corresponding Fund, we will ask you for voting instructions.
Your voting instructions will apply to a specific number of Fund shares. We will
calculate this number by determining the percentage of a Sub-Account that you
own and applying this percentage to the total number of Fund shares that the
Sub-Account owns.
We will mail materials to you at least 14 days before the shareholder meeting so
you can provide your voting instructions to us. If we do not receive voting
instructions from you, we will still vote the shares for which you are entitled
to provide instructions. We will vote these shares in the same proportion as the
voting instructions received by Contract owners who provide instructions. If
WSLAC itself is entitled to vote at the shareholder meeting, it will vote its
shares in the same manner.
We may not ask Contract owners for voting instructions if the applicable rules
and regulations change and permit us to vote the shares of a Fund. We may also
change the manner in which we calculate the number of shares for which you can
provide voting instructions if the applicable rules and regulations change.
We may disregard the voting instructions of Contract owners under certain
circumstances and state insurance regulators may require us to disregard these
instructions under certain circumstances. If we disregard the voting
instructions we receive, we will include a summary of our actions in our next
report to you.
<PAGE>
Confirmations and Statements
We will send you a confirmation of each purchase payment and other transactions,
such as transfers and partial withdrawals. We will also send you a statement
each year showing the value of your investment in the Sub-Accounts.
If you have invested money in a Sub-Account, you will also receive semi-annual
reports for SA2. These semi-annual reports will include a list of portfolio
securities held by the underlying Fund.
Processing Guidelines
We use certain guidelines to determine when we will process your Contract
application and other instructions. These processing guidelines determine your
Contract Date and the effective date of instructions that you send to us. The
effective date depends upon the time of day we receive your application or your
instructions, whether the New York Stock Exchange is open at that time and
whether your application and instructions are in good order.
If we receive an incomplete application or incomplete instructions from you, we
will contact you for more information. If we have not received all the
application information that we need within 5 business days of the day we
received your application, we will return your initial purchase payment to you
unless you tell us not to return it.
If you are the sole owner of your Contract, you must sign your Contract
application and other instructions. If you and another person are joint owners
of your Contract, you and your joint owner must both sign your Contract
application and other instructions.
Security Procedures
We have established security procedures for telephone transfers, such as
recording telephone calls. In the future we may also require a personal
identification number (PIN). We will not be liable for losses due to
unauthorized or fraudulent telephone instructions if we follow reasonable
security procedures and reasonably believe the instructions are genuine.
Misstatement of Age or Gender
If the age or gender of the Annuitant is misstated in information sent to us, we
will change any benefits under the Contract to those benefits that your purchase
payments would have purchased if the correct age and gender had been stated. If
we do not discover the misstatement until after annuity payments have started,
we will deduct any overpayments, plus compound interest, from subsequent
payments and we will pay any underpayments, plus compound interest, in a lump
sum.
<PAGE>
Assignment
Generally, you may assign your Contract, but you may assign a Contract purchased
in connection with a retirement plan only if assignment is permitted under
applicable law and the documents governing the plan. We will not be bound by any
assignment until written notice of the assignment is received and recorded at
the Touchstone Variable Annuity Service Center. Your rights and the rights of
your beneficiary will be affected by an assignment. We are not responsible for
the validity or tax consequences of any assignment.
Loans
You may be permitted to take a loan from your Contract if you purchased it in
connection with a 403(b) plan and the plan documents permit such loans. Loans
are not permitted under any other type of Contract.
No Dividends
The Contracts are "non-participating", which means that they do not pay
dividends. The investment results of the investment options that you choose are
reflected in your benefits.
Year 2000 Information
WSLAC began its effort to address the Year 2000 Compliance issue prior to 1990.
As of January 1, 1999, the internal effort is complete. All computer equipment
and software systems, communications equipment and software, and any affected
building equipment and facilities are expected to properly calculate, process
and use dates before, during and after January 1, 2000 without error or
interruption. In addition to its internal efforts, WSLAC has a Year 2000 Task
Force in place to monitor the Year 2000 efforts of its critical business
partners and suppliers. Should this Task Force determine that the Year 2000
efforts of any of these partners or suppliers will not be adequate, WSLAC will
develop contingency plans to address any issues which may arise.
Financial Statements and Additional Contract
Information
Financial statements of WSLAC and SA2 are included in the Statement of
Additional Information along with additional information about the Contracts.
The table of contents of the Statement of Additional Information is included on
page 47. For a free copy, call the Touchstone Variable Annuity Service Center at
800.669.2796 (press 2).
<PAGE>
The following discussion summarizes the impact of certain federal income tax
laws on contributions to, earnings of and distributions from a Contract. It is
based on our understanding of these laws as they are currently in effect and
interpreted. It is not tax advice. You should consult your own tax advisor
before you purchase a Contract. Because this is a summary, it does not contain
all the information that may be important to you.
The impact of federal income taxes on your investment in a Contract depends,
among other things, on the following factors:
s WSLAC's tax status
s The tax status of the Contract
s Your tax status
s The tax status of your beneficiary
s The tax status of the person you select to receive annuity payments
Your investment may also be affected by changes that occur in the federal income
tax laws and by other tax laws, such as state or local income tax laws, federal
estate and gift tax laws and local estate and other similar laws. The effects of
such other laws on your investment in a Contract are not discussed in this
summary.
The following discussion assumes "you" are the owner of a Contract, or, when the
Contract is in connection with a retirement plan that is described below as a
Qulified Plan, "you" are the plan participant for whose benefit the contract is
purchased.
Tax Status ofWSLAC
WSLAC is taxed as a life insurance company. Because the operations of the SA2
are part of WSLAC, WSLAC is responsible for any federal income taxes related to
the income of the SA2 and its Sub-Accounts. You are responsible for all taxes
related to your investment in a Contract.
Tax Status of the Contract
We believe that any Contract will be treated as an "annuity contract" under the
Internal Revenue Code (Code) and thus will provide the federal income tax
consequences discussed in this summary. We do not, however, guarantee the tax
status of any Contract. You bear the complete risk that any Contract you own may
not be treated as an "annuity contract" under the Code. A more detailed
discussion of various matters that might affect your Contract's status as an
"annuity contract" is included in the Statement of Additional Information.
If a Contract you own is not treated as an "annuity contract", the earnings
allocable to your investment in the Contract will be included in your income for
federal income tax purposes on a current basis, even if you have not yet
received payments from the Contract.
The discussions which follow entitled "Tax Treatment of Non-Qualified Contracts"
and "Tax Treatment of Qualified Contracts" will apply only if the applicable
Contract is treated as an "annuity contract" under the Code.
<PAGE>
sidebar
ooo The cost basis of your NonQualified Contract is generally the sum of your
purchase payments for the Contract.
Tax Treatment of Non-Qualified Contracts
The information in this section of the Prospectus relates to Contracts that are
not purchased in connection with a retirement plan or program which qualifies
under Section 401, 403(b), 408, 408A or 457 of the Code. In this section of the
Prospectus, these Contracts will be called "Non-Qualified Contracts."
A Non-Qualified Contract is intended to be a tax-deferred investment. This means
that, if the Contract qualifies as an "annuity contract" under the Code, you
will not have to include in income for federal income tax purposes the
investment earnings of your Non-Qualified Contract until you make a withdrawal
from the Contract, surrender it or start receiving annuity payments from it.
When you make a withdrawal from your Non-Qualified Contract, surrender it or
receive an annuity payment from it, you will have to include in income for
federal income tax purposes the portion of the payment that reflects investment
earnings (but no other part of the payment which reflects an amount that has
already been included in your income for federal tax purposes).
Different rules may apply to an owner of a Non-Qualified Contract that is not a
natural person, such as a corporation or trust. If the owner of a Non-Qualified
Contract is not a natural person, you should consult a tax advisor for more
information about these rules.
The following discussion in this section explains how the general principles of
tax-deferred investing apply to a Non-Qualified Contract when the owner of such
Contract is a natural person. The discussion assumes at all times that your
Non-Qualified Contract will be treated as an "annuity contract" under the Code.
Tax Treatment of Purchase Payments
Generally, any purchase payments that you invest in your Non-Qualified Contract
will not be deductible in determining your federal income tax.
Tax Treatment of Withdrawals, Surrenders and
Distributions
You will generally have to include in income for federal income tax purposes the
portion of any payment from your Non-Qualified Contract that exceeds the portion
of the cost basis (or principal) of the Contract which is allocable to such
payment. The difference between the cost basis and the value of your
Non-Qualified Contract represents the increase in the value of the Contract. The
taxable portion of a payment from your Non-Qualified Contract is generally taxed
at your marginal income tax rate.
Tax Treatment of Partial Withdrawals and Surrenders
Partial Withdrawals. A partial withdrawal refers to a withdrawal from your
Non-Qualified Contract that is less than its total value and is not paid in the
form of an annuity. Usually, a partial withdrawal of the value of your
Non-Qualified Contract will be treated for tax purposes as coming first from
earnings (which represent the increase in the value of the Contract). This
portion of the withdrawal will be included in your income for federal income tax
purposes.
<PAGE>
After the earnings portion is exhausted, the remainder of any partial withdrawal
will be treated as coming from your principal in the Contract (generally the sum
of the purchase payments; it also may include any employer or other payments for
the Contract that were previously included in your income for federal income tax
purposes). This portion of the withdrawal will not be included in your income
for federal income tax purposes.
If your Non-Qualified Contract contains investments made prior to August 14,
1982, a partial withdrawal from the Contract will be treated, to the extent it
is allocable to such pre-August 14, 1982 investments, as coming first from
principal and then, only after the principal portion is exhausted, from
earnings.
Surrenders. If you surrender your Non-Qualified Contract and receive a lump sum
payment of its entire value, the portion of the payment that exceeds your then
remaining cost basis in the Contract will be included in your income for federal
income tax purposes. You will not include in income for federal income tax
purposes the part of the payment that is equal to such cost basis.
Tax Treatment of Annuity Payments
If you receive annuity payments from your Non-Qualified Contract, a fixed
portion of each payment is generally excludable from income for federal income
tax purposes as a tax-free recovery of your cost basis in the Contract and the
balance is included in income for such purposes.
The portion of the payment that is excludable from income is determined under
detailed rules provided in the Code (which in general terms determine such
excludable amount by dividing your cost basis in the Contract at the time the
annuity payments begin by the expected return under such Contract).
If the annuity payments continue after your cost basis has been recovered, such
additional payments will generally be included in full in income for federal
income tax purposes.
For the above purposes, your cost basis in the Contract will be reduced to
reflect the value of any period certain or refund guarantee form in which the
annuity payments are to be made, if applicable.
Penalty Tax on Distributions
Generally, a penalty equal to 10% of the amount of any payment that is
includable in your income for federal income tax purposes will apply to any
distribution you receive from a Non-Qualified Contract in addition to ordinary
income tax.
This 10% penalty will not apply, however, if the distribution meets certain
conditions. Some of the distributions that are excepted from the 10% penalty are
listed below:
s A distribution that is made on or after the date you reach age 59 1/2
s A distribution that is made on or after your death
s A distribution that is made when you are totally disabled (as defined
in Section 72(m) of the Code)
<PAGE>
s A distribution that is made as part of a series of substantially equal
periodic payments which are made at least annually for your life (or
life expectancy) or the joint lives (or joint life expectancies) of
you and your joint Annuitant under the Contract
s A part of a distribution that is attributable to your investment in
the Contract prior to August 14, 1982
s A distribution that is paid as an immediate annuity (within the
meaning of Section 72(u)(4) of the Code)
Tax Treatment of Assignments
An assignment or pledge by you of your Non-Qualified Contract may be treated as
if it were a payment to you of all or part of the value of the Contract and
therefore may be a taxable event. You should consult your own tax advisor before
you assign or pledge your Non-Qualified Contract.
Required Distributions
To qualify as an "annuity contract" under the Code, your Non-Qualified Contract
must meet certain distribution requirements in the event you die.
Generally, if you die before annuity payments begin under the Contract, the
amounts accumulated under your Non-Qualified Contract either must be distributed
within five years of your death or must begin to be paid within one year of your
death under a method that will pay the entire value of the Contract over the
life (or a period not extending beyond the life expectancy) of your designated
beneficiary under the Contract.
Special rules apply, however, if your beneficiary under the Contract is your
surviving spouse. If your spouse is your beneficiary under the Contract, these
rules involving required distributions in the event of death will be applied as
if your surviving spouse had been the original owner of the Contract.
If you die after annuity payments have begun, payments generally must continue
at least as rapidly as under the method in effect at your death (unless such
method provides that payments stop at your death).
Withholding
Payments received from your Non-Qualified Contract are, to the extent includable
in your income for federal income tax purposes, generally subject to federal
income tax withholding, unless you elect not to have taxes withheld and you
notify us that you are making this election.
Your tax status, the type of distribution and any election you make as to the
withholding amount that is to apply will determine how much money must be
withheld if you fail to elect out of withholding.
Multiple Non-Qualified Contracts
All Non-Qualified Contracts that are issued to you by the same company within a
calendar year period are generally treated as one Contract for purposes of
determining the tax consequences of any distribution, and this may cause adverse
<PAGE>
or unanticipated tax consequences. As a result, you should consult a tax advisor
before purchasing more than one Non-Qualified Contract in any calendar year
period in order to discuss the effect of such multiple purchases.
Tax Treatment of Qualified Contracts
The information in this section of the Prospectus relates to Contracts that are
purchased in connection with certain retirement plans. In this section of the
Prospectus, these retirement plans will be called "Qualified Plans" and
Contracts purchased in connection with Qualified Plans will be called "Qualified
Contracts".
A Qualified Contract is intended to be a tax-deferred investment. This means
that, if the Qualified Contract and the Qualified Plan under which it was
purchased meet certain applicable rules of the Code, you will not have to
include in income for federal income tax purposes the investment earnings of
your Qualified Contract until you make a withdrawal from the Contract, surrender
it or start receiving annuity payments from it.
When you make a withdrawal from your Qualified Contract, surrender it or receive
an annuity payment from it, you will generally have to include in income for
federal income tax purposes the entire amount of the payment (except to the
extent it reflects your own "after-tax" contributions to the Contract or any
other cost basis you may have under the Contract).
Types of Qualified Contracts
The Qualified Contracts are designed to be suitable for use with the
following types of Qualified Plans:
s Traditional IRAs (individual
retirement annuities under Section 408 of the Code)
s Roth IRAs (individual retirement annuities under Section 408A of the
Code)
s Section 401 plans (plans qualified under Section 401(a) of the Code,
such as profit sharing plans, including so-called 401(k) plans and
money purchase pension plans)
s Section 403(b) plans (tax sheltered annuities under Section 403(b) of
the Code)
s Section 457 Deferred Compensation plans (deferred compensation plans
under Section 457 of the Code)
s SEPs (simplified Employee Pension Plans under Section 408(k) of the
Code)
s SIMPLE IRAs (Savings Incentive Match Plans for Employees under Section
408(p) of the Code)
s Texas ORP Plans (State of Texas Optional Retirement Program plans)
Because of the minimum purchase payment requirements, Qualified Contracts may
not be appropriate for some retirement plans.
<PAGE>
Limitations Imposed by the Code or the Qualified Plan
In most cases, the Code places limitations and restrictions on how a Qualified
Plan can be designed and operated. These limitations and restrictions relate to
various issues, including:
s Amounts of allowable contributions
s Form, manner and timing of distributions
s Vesting and nonforfeitability of interests
s Nondiscrimination in eligibility, participation, contributions and
benefits
s Tax treatment of distributions, withdrawals and surrenders
s Withdrawal from the plan, such as while the plan participant is still
employed by the employer of the plan s Receipt and taxation of loans
A Qualified Contract that is issued under or in connection with a Qualified Plan
is subject to the terms and conditions of the Qualified Plan. If the information
in the Qualified Plan documents differs from the information in the Qualified
Contract, you should rely on the information in the Qualified Plan.
Tax Consequences of Participating in a Qualified Plan
The tax consequences of participating in a Qualified Plan vary with the type of
plan and the terms and conditions of the plan. Various penalty and excise taxes
may apply to contributions to or distributions from a Qualified Contract if the
contributions or distributions violate the limitations of the Qualified Plan or
the Code. Certain restrictions and penalties may apply to withdrawals and
surrenders from a Qualified Contract.
Traditional and Roth IRAs. To help you understand the tax consequences of
purchasing a Qualified Contract in connection with a Traditional IRA or a Roth
IRA, we will provide you with an IRA Disclosure Statement.
Section 401 Plans and Section 403(b) Plans. To help you understand the tax
consequences of purchasing a Qualified Contract in connection with a Section 401
plan or a Section 403(b) plan, we have included a supplement in this Prospectus
as to such Plans. The supplement summarizes certain federal income tax laws and
is based on our understanding of these laws. Because the supplement is a
summary, it does not contain all the information that may be important to you.
The supplement is for general informational purposes only.
Texas Optional Retirement Program. To help you understand the tax consequences
of purchasing a Qualified Contract in connection with the Texas Optional
Retirement Program, we have included a supplement in this Prospectus as to this
Program. The supplement summarizes certain state and federal income tax laws and
is based on our understanding of these laws. Because the supplement is a
summary, it does not contain all the information that may be important to you.
The supplement is for general informational purposes only.
Other Qualified Plans. You should contact your own tax advisor for more
information about the tax consequences of investing in a Qualified Contract in
connection with a Section 457 Deferred Compensation plan, a SEP or a SIMPLE IRA
plan.
sidebar
ooo The tax rules regarding Qualified Plans are complex, change frequently
and will have different applications depending on individual facts and
circumstances. You should consult your own tax advisors before you purchase a
Qualified Contract.
<PAGE>
sidebar
oooAccumulation Unit
A unit of measure used to calculate a Contract owner's share of a Sub-
Account. Although it is not the same as a mutual fund share, it is similar.
ooo Accumulation Unit Value
The dollar value of an Accumulation Unit in a Sub-Account.
Accumulation Unit Value
The Accumulation Unit Values shown in the table below are for an Accumulation
Unit outstanding throughout the periods. An explanation of how Accumulation Unit
Value is calculated is located on page in this Prospectus.
<TABLE>
<CAPTION>
Years Ended Unit Value at Unit Value at Number of Units
December 31 Beginning of Year End of Year at End of Year
<S> <C> <C> <C> <C>
1995*
1996
Touchstone 1997
Emerging Growth 1998
- -------------------------------------------------------------------------------------------
1995*
1996
Touchstone 1997
International Equity 1998
- -------------------------------------------------------------------------------------------
1995*
1996
Touchstone 1997
Income Opportunity 1998
- -------------------------------------------------------------------------------------------
Touchstone
Value Plus** 1998**
- -------------------------------------------------------------------------------------------
1995*
1996
Touchstone 1997
Growth & Income 1998
- -------------------------------------------------------------------------------------------
1995*
1996
1997
Touchstone Balanced 1998
- -------------------------------------------------------------------------------------------
1995*
1996
1997
Touchstone Bond 1998
- -------------------------------------------------------------------------------------------
1995*
1996
Touchstone 1997
Standby Income 1998
- -------------------------------------------------------------------------------------------
* Operations began on February 23, 1995
** Operations began on May 1, 1998
</TABLE>
<PAGE>
sidebar
ooo Because the provisions of Section 401 plans and Section 403(b) plans vary
from plan to plan, you should contact your plan administrator for additional
information.
Federal Income Tax Information
Section 401 Plans and Section 403(b) Plans
Section 401(a) of the Code permits sole proprietorships, partnerships,
corporations and certain other organizations operating businesses to establish
various types of Qualified Plans (called "Section 401 plans" in this Supplement)
for their employees (and, if applicable, those self-employed persons working in
the businesses). A Qualified Contract may be purchased to provide benefits to a
participant in a Section 401 plan.
Section 403(b) of the Code permits public schools and certain charitable,
educational and scientific organizations described in Section 501(c)(3) of the
Code to purchase Qualified Contracts as "tax sheltered annuities" (called
"Section 403(b) plans" in this Supplement) for their employees.
The Code places limitations and restrictions on all Section 401 and Section
403(b) plans, but the specific rules set forth in the applicable plan will also
affect how the plan works. If the information in the Qualified Plan documents
differs from the information in the Qualified Contract or in this Supplement,
you should rely on the information in the Qualified Plan documents.
This discussion explains certain federal income tax rules applicable to a
Qualified Contract purchased in connection with a Section 401 or a Section
403(b) plan. This discussion assumes at all times that the Contract qualifies as
an "annuity contract" and a "Qualified Contract", and that the plan to which it
relates qualifies as a "Qualified Plan" under the Code.
Tax Treatment of Contributions
Other than "after-tax" contributions made by you to a Section 401 plan,
contributions to a Section 401 or a Section 403(b) plan generally are not
included in your income for federal income tax purposes until the contributions
are distributed from the plan, provided such contributions are not in excess of
any benefit, contribution or nondiscrimination limits that apply to the plan.
Tax Treatment of Distributions
Except for the special tax treatments described below, any distributions from a
Qualified Contract purchased in connection with Section 401 or Section 403(b)
plans generally are included in income for federal income tax purposes as
ordinary income, except to the extent the distributions are allocable to your
after-tax contributions.
Special Tax Treatment for Lump Sum Distributions from a Section 401 Plan. If you
receive (or your beneficiary receives) an amount from a Qualified Contract as
part of a distribution from a Section 401 plan and the distribution qualifies as
a lump sum distribution under the Code, the portion of the distribution that is
included in income may be eligible for special tax treatment. Your plan
administrator should provide you with information about the tax treatment of a
lump sum distribution at the time you receive such a distribution.
<PAGE>
Special Rules for Distributions That Are Rolled Over. In addition, special rules
apply to a distribution from a Qualified Contract that relates to a Section 401
or a Section 403(b) plan if such distribution is properly rolled over in
accordance with the provisions of the Code. These provisions contain various
requirements, including the requirement that the rollover be made directly from
the distributing plan or within 60 days of receipt:
s To a Traditional IRA or to an individual retirement account under
Section 408 of the Code (and the rollover is being made by you or your
spouse as beneficiary)
s To another Section 401 plan or a certain kind of annuity plan under
Section 403(a) of the Code (if the distribution is from a Section 401
plan and the rollover is being made by you)
s To a Section 403(b) plan (if the distribution is from a Section 403(b)
plan and the rollover is being made by you)
These special rules only apply to distributions that qualify as "eligible
rollover distributions" under the Code. In general, a distribution from a
Section 401 Plan or Section 403(b) plan will be an eligible rollover
distribution except to the extent:
s It represents the return of your "after-tax" contributions or is not
otherwise includable in income
s It is part of a series of payments made for your life (or life
expectancy) or the joint lives (or joint life expectancies) of you and
your beneficiary under the plan or for a period of less than ten years
s It is a required minimum distribution under Section 401(a)(9) of the
Code as described below s It is made from a Section 401 plan by reason
of a hardship
Required minimum distributions under Section 401(a)(9) include the following
required payments:
s Required payments for the calendar year in which you reach age 70 1/2
or any later calendar year
s If the plan is a Section 401 plan that is not maintained by certain
governmental or church-sponsored organizations and if you are not
treated under the Code as owning 5% or more of the employer of the
applicable plan, required payments for the later of the calendar year
in which you reach age 70 1/2 or the calendar year you terminate
employment with the employer or for any later calendar year
The administrator of the applicable Section 401 or Section 403(b) plan should
provide additional information about these rollover tax rules when a
distribution is made.
Distributions in the Form of Annuity Payments. If any distribution is made from
a Qualified Contract that relates to a Section 401 or Section 403(b) plan and is
made in the form of annuity payments (and is not eligible for rollover or is not
in any event rolled over), a fixed portion of each payment is generally
excludable from income for federal income tax purposes to the extent it is
treated as allocable to your "after-tax" contributions to the Contract (and any
other cost basis you have in the Contract). To the extent the payment exceeds
such portion, it is includable in income for federal income tax purposes.
<PAGE>
The portion of the annuity payment that is excludable from income is determined
under detailed rules provided in the Code. In very general terms, these detailed
rules determine such excludable amount by dividing your "after-tax"
contributions and other cost basis in the Contract that remain in the plan at
the time the annuity payments begin by the anticipated number of payments to be
made under the Contract. If the annuity payments continue after the number of
anticipated payments has been made, such additional payments will generally be
included in full in income for federal income tax purposes.
Withholding. If any part of a distribution from a Qualified Contract that
relates to a Section 401 or a Section 403(b) plan is eligible for rollover, but
is not directly rolled over to a Traditional IRA or another eligible employer
plan or account pursuant to your election, it is generally subject to federal
income tax withholding at a rate of 20%.
Any taxable part of a distribution from a Qualified Contract that is not
eligible for a direct rollover is subject to different withholding rules that
are described in the Code. You can generally elect completely out of withholding
as to such part.
Penalty Tax on Withdrawals
Generally, there is a penalty tax equal to 10% of the portion of any payment
from a Qualified Contract issued in connection with a Section 401 or a Section
403(b) plan that is included in your income for federal income tax purposes.
This 10% penalty will not apply if the distribution meets certain conditions.
Some of the distributions that are excepted from the 10% penalty are listed
below:
s A distribution that is made on or after the date you reach age 59 1/2
s A distribution that is properly rolled over to a Traditional IRA or to
another eligible employer plan or account
s A distribution that is made on or after your death
s A distribution that is made when you are totally disabled (as defined
in Section 72(m) of the Code)
s A distribution that is made as part of a series of substantially equal
periodic payments which begin after you separate from service with the
employer of the applicable plan and are made at least annually for
your life (or life expectancy) or the joint lives (or joint life
expectancies) of you and your joint Annuitant under the Qualified
Contract
s A distribution that is made to you by reason of your separation from
service with the employer of the applicable plan during or after the
calendar year in which you reach age 55
s A distribution that is made to you to the extent it does not exceed
the amount allowable to you as a deduction for medical care under
<PAGE>
Section 213 of the Code (determined without regard to whether or not
you itemize deductions)
s A distribution that is made to an alternate payee of yours pursuant to
a Qualified Domestic Relations Order (that meets the conditions of
Section 414(p) of the Code)
Required Distributions
Distributions from a Qualified Contract issued in connection with a Section 401
or a Section 403(b) plan must meet certain rules concerning required
distributions that are set forth in the Code. Such rules are summarized below:
s Required distributions generally must start by April 1 of the calendar
year following the calendar year in which you reach age 701 1/42.
s If a Section 401 plan is involved (except for a Section 401 plan
maintained by certain governmental or church-sponsored organizations)
and you are not considered a 5% or more owner of the employer of the
plan under the rules of the Code, the required distributions generally
do not have to start until April 1 of the calendar year following the
later of the calendar year in which you reach age 701 1/42 or the
calendar year in which you terminate employment with the employer.
s When distributions are required under the Code, a certain minimum
amount, determined under the Code and regulations issued thereunder,
must be made each year.
In addition, other rules apply under the Code to determine when and how required
minimum distributions must be made in the event of your death. The applicable
plan documents should contain such rules.
Special Provisions
Loans. Qualified Contracts used for Section 403(b) plans generally allow you to
borrow money from such Contracts. In addition, certain Section 401 plans may
allow you to borrow money from a Qualified Contract that is used for such plans.
In order to meet the rules of the Code so that such loans are not considered
taxable distributions when made, such loans must generally meet the rules listed
below:
s The amount of each loan must generally be at least $1,000.
s The interest rate on each loan must be comparable to the rate charged
by commercial lenders for similar loans.
s The loan must be repaid in substantially equal payments made at least
quarterly.
s Generally, you cannot surrender or annuitize the Contract while a loan
is outstanding.
s There may also be restrictions on the maximum time for repaying the
loan.
<PAGE>
A Section 403(b) or a Section 401 plan may contain additional or different rules
on loans from a Qualified Contract. The administrator of the applicable Section
403(b) or Section 401 plan should be able to provide information about these
rules.
Withdrawal Limitations. The Code limits the withdrawal of amounts from a
Qualified Contract used for a Section 401 or Section 403(b) plan to the extent
it is attributable to contributions made pursuant to a salary reduction
agreement or other cash or deferred arrangement. This limit applies in a
Qualified Contract used for a Section 403(b) plan only to the extent the
withdrawal is attributable to contributions made after December 31, 1988.
If such withdrawal limitations apply, withdrawals of such amounts generally can
be made only when you reach age 591 1/42, when you separate from service with
the employer of the plan, when you become totally disabled or in the case of
your hardship. Withdrawals for hardship do not include earnings allocated for
you under the plan after 1988.
You should consult your own tax advisor about the tax consequences of and rules
for a loan or a withdrawal from a Section 401 or Section 403(b) plan.
<PAGE>
State of Texas Optional Retirement Program
The Contract is eligible for the State of Texas Optional Retirement Program
(ORP). Plans established under the Texas ORP will be referred to as "Texas ORP
Plans" in this Supplement. Contracts purchased in connection with Texas ORP
Plans will be referred to as "ORP Contracts" in this Supplement.
ORP Contracts
Eligible Participants. An ORP Contract may be purchased to provide benefits to a
participant in a Texas ORP Plan. Employees of Texas "state supported
institutions of higher education" may direct contributions and transfers to an
ORP Contract. "State supported institutions of higher education" are defined in
Section 51.351 of Subchapter G of Title 3 of the Higher Education Code of the
State of Texas.
Employer Premiums. Employer premiums are purchase payments applied to the ORP
Contract that are attributable to employer contributions other than
contributions made through a salary reduction agreement. Employer premiums are
subject to vesting under the rules governing Texas ORP Plans.
Loans. Participants in a Texas ORP Plan are not allowed to borrow money from
an ORP Contract.
Distributions. Distributions from an ORP Contract are considered to have
begun if:
s Distributions are made on account of you reaching your required
beginning date
s Before the required beginning date, irrevocable distributions commence
over a period permitted and in an annuity form acceptable under
Section 1.401(a)(9) of the Regulations
Distributions of funds from an ORP Contract may only be made upon the occurrence
of a "distributable event" Title 8, Chapter 830.105 of the Texas Government Code
defines "distributable event" as death, retirement, termination of employment in
all public institutions of higher education in Texas, or attainment of age 701
1/42.
Specific Plan Rules. The Internal Revenue Code and Texas laws place limitations
and restrictions on Texas ORP Plans, but the specific rules set forth in the
applicable plan will also affect how the plan works. Because the provisions of
Texas ORP Plans vary from plan to plan, you should contact your plan
administrator for additional information. If the information in the Texas ORP
Plan documents differs from the information in the ORP Contract or in this
Supplement, you should rely on the information in the Texas ORP Plan documents.
Federal Income Tax Information
This discussion explains certain federal income tax rules applicable to an ORP
Contract. This discussion assumes at all times that the Contract qualifies as an
"annuity contract" under the Code, the Contract qualifies as an "ORP Contract"
under Texas law and the plan to which it relates qualifies as a "Texas ORP Plan"
under Texas law.
<PAGE>
The specific rules related to ORP Contracts and Texas ORP Plans discussed in
Section A above, such as the rules on when distributions may be made from an ORP
Contract, are applicable in addition to the federal income tax rules discussed
in the previous section.
Tax Treatment of Contributions
Contributions to a Texas ORP Plan generally are not included in your income for
federal income tax purposes until the contributions are distributed from the
plan, provided such contributions are not in excess of any benefit, contribution
or nondiscrimination limits that apply to the plan.
Tax Treatment of Distributions
Any distributions from a Texas ORP Plan generally are included in income for
federal income tax purposes as ordinary income, except to the extent the
distributions are allocable to your after-tax contributions.
In addition, special rules apply to a distribution from an ORP Contract if such
distribution is properly rolled over in accordance with the provisions of the
Code. The administrator of the applicable Texas ORP Plan should provide
additional information about these rollover tax rules when a distribution is
made.
Penalty Tax on Withdrawals
Generally, there is a penalty tax equal to 10% of the portion of any payment
from an ORP Contract that is included in your income for federal income tax
purposes.
This 10% penalty will not apply if the distribution meets certain conditions.
Some of the distributions that are excepted from the 10% penalty are listed
below:
s A distribution that is made on or after the date you reach age 59 1/2
s A distribution that is properly rolled over to a Traditional IRA or to
another eligible employer plan or account
s A distribution that is made on or after your death
s A distribution that is made when you are totally disabled (as defined
in Section 72(m) of the Code)
s A distribution that is made as part of a series of substantially equal
periodic payments which begin after you separate from service with the
employer of the applicable plan and are made at least annually for
your life (or life expectancy) or the joint lives (or joint life
expectancies) of you and your joint Annuitant under the ORP Contract
<PAGE>
s A distribution that is made to you by reason of your separation from
service with the employer of the applicable plan during or after the
calendar year in which you reach age 55
s A distribution that is made to you to the extent it does not exceed
the amount allowable to you as a deduction for medical care under
Section 213 of the Code (determined without regard to whether or not
you itemize deductions)
s A distribution that is made to an alternate payee of yours pursuant to
a Qualified Domestic Relations Order (that meets the conditions of
Section 414(p) of the Code)
Required Distributions Under the Code
Distributions from an ORP Contract must meet certain rules concerning required
distributions that are set forth in the Code. Such rules are summarized below:
s Required distributions generally must start by April 1 of the calendar
year following the calendar year in which you reach age 70 1/2.
s If you do not terminate your employment until after age 70 1/2, the
required distributions generally do not have to start until April 1 of
the calendar year following the later of the calendar year in which
you reach age 701 1/42 or the calendar year in which you terminate
employment with the employer.
s When distributions are required under the Code, a certain minimum
amount, determined under the Code and regulations issued thereunder,
must be made each year.
In addition, other rules apply under the Code to determine when and how required
minimum distributions must be made in the event of your death. The applicable
plan documents will contain such rules.
Withdrawal Limitations Under the Code
The Code limits the withdrawal of amounts from an ORP Contract to the extent it
is attributable to contributions made pursuant to a salary reduction agreement
or other cash or deferred arrangement. If such withdrawal limitations apply,
withdrawals of such amounts generally can be made only when you reach age 591
1/42, when you separate from service with the employer of the plan, when you
become totally disabled or in the case of your hardship. Withdrawals for
hardship do not include earnings allocated for you under a Texas ORP Plan after
1988.
You should consult your own tax advisor about the tax consequences of and rules
for a withdrawal from a Texas ORP Plan.
<PAGE>
Page
General .................................................................... 3
Safekeeping Of Assets ...................................................... 3
Distribution Of The Contracts .............................................. 3
Sub-Account Performance .................................................... 4
Sub-Accounts Accumulation Unit Value ....................................... 5
Fixed Annuity Income Payments .............................................. 6
Qualification As An "Annuity Contract" ..................................... 7
Independent Accountants .................................................... 9
Financial Statements ....................................................... 9
<PAGE>
WESTERN-SOUTHERN LIFE ASSURANCE COMPANY
SEPARATE ACCOUNT 2
TOUCHSTONE ADVISOR VARIABLE ANNUITY
FLEXIBLE PURCHASE PAYMENT DEFERRED
VARIABLE ANNUITY CONTRACTS
----------------------------
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1999
----------------------------
This Statement of Additional Information is not a prospectus, but
contains information in addition to that set forth in the current prospectus
dated May 1, 1999 (the "Prospectus") for certain variable annuity contracts
("Contracts") offered by Western-Southern Life Assurance Company ("WSLAC")
through its Separate Account 2 ("SA2"), and should be read in conjunction with
the Prospectus. Unless otherwise noted, the terms used in this Statement of
Additional Information have the same meanings as those set forth in the
Prospectus.
A copy of the Prospectus may be obtained by calling the Touchstone
Variable Annuity Service Center at 1-800-669-2796 (press 2) or by written
request to WSLAC at P.O. Box 2850, Cincinnati, Ohio 45201-2850.
FORM 7135-9905
642318.02
<PAGE>
TABLE OF CONTENTS
OF
STATEMENT OF ADDITIONAL INFORMATION
PAGE
General..........................................................3
Safekeeping of Assets........................................... 3
Distribution of the Contracts................................... 3
Sub-Account Performance......................................... 3
Sub-Accounts Accumulation Unit Value............................ 5
Fixed Annuity Income Payments................................... 6
Qualification as an "Annuity Contract".......................... 6
Diversification........................................ 6
Excessive Control...................................... 7
Required Distributions................................. 7
Independent Accountants......................................... 8
Financial Statements............................................ 9
2
<PAGE>
GENERAL
Except as otherwise indicated herein, all capitalized terms shall have
the meanings assigned to them in the Prospectus.
WSLAC is subject to regulation by the Ohio Department of Insurance,
which periodically examines its financial condition and operations. WSLAC also
is subject to the insurance laws and regulations of all jurisdictions in which
it offers Contracts. Copies of the Contract have been filed with, and, where
required, approved by insurance regulators in those jurisdictions. WSLAC must
submit annual statements of its operations, including financial statements, to
such state insurance regulators so that they may determine solvency and
compliance with applicable state insurance laws and regulations.
WSLAC and SA2 have filed a Registration Statement regarding the
Contracts with the Securities and Exchange Commission under the Investment
Company Act of 1940 and the Securities Act of 1933. The Prospectus and this
Statement of Additional Information do not contain all of the information in the
Registration Statement.
SAFEKEEPING OF ASSETS
The assets of SA2 are held by WSLAC, separate from WSLAC's general
account assets and any other separate accounts that WSLAC has or will establish.
WSLAC maintains records of all purchases and redemptions of the interests in the
Funds held by the Sub-Accounts. WSLAC maintains fidelity bond coverage for the
acts of its officers and employees.
DISTRIBUTION OF THE CONTRACTS
As disclosed in the Prospectus, the Contracts are distributed through
Touchstone Securities, Inc. (the "Distributor"), which is a wholly-owned
subsidiary of IFS Financial Services, Inc. ("IFS"). IFS is a wholly-owned
subsidiary of WSLAC. The Distributor is a member of the National Association of
Securities Dealers, Inc. The offering of the Contracts is continuous, and WSLAC
does not anticipate discontinuing offering the Contracts, although it reserves
the right to do so.
Sales commissions attributable to the Contracts and paid by WSLAC to
the Distributor and amounts retained by the Distributor are shown below for
the periods indicated.
<TABLE>
<CAPTION>
Amounts
Period Sales Commissions Paid Retained by Distributor
- ------------------------------------------------ ------------------------------ ----------------------------
<S> <C> <C>
For the year ended December 31, 1996 $1,902,186 $305,688
For the year ended December 31, 1997 $7,686,342 $790,452
For the year ended December 31, 1998 $10,684,643 $1,437,628
</TABLE>
SUB-ACCOUNT PERFORMANCE
The performance of the Sub-Accounts may be quoted or advertised by
WSLAC in various ways. All performance information supplied by WSLAC in
advertising is based upon historical results of the Sub-Accounts and is not
intended to indicate future performance of either one. Total returns and other
performance information may be quoted numerically or in a table, graph or
3
<PAGE>
similar illustration. The value of an Accumulation Unit and total returns
fluctuate in response to market conditions, interest rates and other factors.
Average annual total returns are calculated by determining the average
annual compounded rates of return over one, five and ten year periods (or since
commencement of operations) that would equate an initial hypothetical investment
to the ending redeemable value according to the following formula:
P (1 + T)n = ERV where:
P = a hypothetical initial purchase payment of $1,000
T = average annual total return
n = number of years and/or portion of a year
ERV = ending redeemable value of a hypothetical initial
purchase payment of $1,000 at the end of the
applicable period
The following table sets forth the type of total return data for each of the
Sub-Accounts that will be used in advertising, in each case for the period ended
December 31, 1998.
<TABLE>
<CAPTION>
Total Return
Average Annual Total Total Return For Year Since Inception
Sub-Account Total Return for Year Return Since Inception* Measured by Change in Accumulation Unit Value**
- ------------------------- ---------------------- ------------------------ -----------------------------------------------
<S> <C> <C> <C> <C>
Touchstone Emerging Growth
Touchstone International Equity
Touchstone Income Opportunity
Touchstone Value Plus
Touchstone Growth & Income
Touchstone Balanced
Touchstone Bond
Touchstone Standby Income
</TABLE>
*Based on a period beginning February 28, 1995 (except for Touchstone Value Plus
which is based on a period begining May, 1 1998).
**Calculated by determining the change in the Accumulation Unit Value from the
beginning of the period to the end of the period and dividing such amount by the
Accumulation Unit Value at the end of the period.
While average annual total returns are convenient means of comparing
investment alternatives, investors should realize that any Sub-Account's
performance is not constant over time, but changes from year to year, and that
average annual total returns represent averaged figures as opposed to the actual
year-to-year performance of any Sub-Account.
Average annual total return is calculated as required by applicable
regulations. In addition to average annual total returns, a Sub-Account may
4
<PAGE>
quote cumulative total returns reflecting the simple change in value of any
investment over a stated period. Average annual and cumulative total returns may
be quoted as a percentage or as a dollar amount.
"Total return" or "average annual total return" quoted in advertising
reflects all aspects of a Sub-Account's return, including the effect of
reinvestment by the Sub-Account of income and capital gain distributions and any
change in the Sub-Account's value over the applicable period. Such quotations
reflect administrative charges and risk charges. Since the Contract is intended
as a long-term investment, total return calculations will assume that no partial
withdrawals from the hypothetical Contract occurred during the applicable
period, but that a Surrender Charge would be incurred upon the hypothetical
withdrawal at the end of the applicable period.
Any total return quotation provided for a Sub-Account should not be
considered as representative of the performance of the Sub-Account in the
future, since the net asset value will vary based not only on the type, quality
and maturities of the securities held in the underlying fund in which the
Sub-Account invests, but also on changes in the current value of such securities
and on changes in the expenses of the Sub-Account and the underlying fund. These
factors and possible differences in the methods used to calculate total return
should be considered when comparing the total return of a Sub-Account to total
returns published for other investment companies or other investment vehicles.
WSLAC may advertise examples of the effects of dollar cost averaging,
whereby a Contract owner periodically invests a fixed dollar amount in a
Sub-Account, thereby purchasing fewer Accumulation Units when prices are high
and more Accumulation Units when prices are low. While such a strategy does not
assure a profit nor guard against a loss in a declining market, the Contract
owner's average cost per Accumulation Unit can be lower than if fixed numbers of
Accumulation Units had been purchased at the same intervals. In evaluating
dollar cost averaging, owners should consider their ability to continue
purchasing Accumulation Units during periods of low price levels.
Performance information for any Sub-Account may be compared, in reports
to Contract owners and in advertising, to stock indices, other variable annuity
separate accounts or other products tracked by Lipper Analytical Services, or
other widely used independent research firms, which rank variable annuities and
investment companies by overall performance, investment objectives and assets.
Unmanaged indices may assume the reinvestment of dividends but generally do not
reflect deductions for annuity charges and investment management costs.
SUB-ACCOUNTS ACCUMULATION UNIT VALUE
In this discussion, the term Valuation Period means the period of time
beginning at the Close of trading on the New York Stock Exchange (NYSE) on one
Valuation Date, as defined below, and ending at the close of trading on the NYSE
on the next succeeding Valuation Date. A Valuation Date is each day valuation of
the Sub-Accounts is required by law including every day that the NYSE is open.
The value of an Accumulation Unit at the close of any Valuation Period
is determined for each Sub-Account by multiplying the Accumulation Unit Value of
the Sub-Account at the close of the immediately preceding Valuation Period by
the "Net Investment Factor" (described below). Depending upon investment
performance of the underlying fund in which the Sub-Account is invested, the
Accumulation Unit Value may increase or decrease.
5
<PAGE>
The Net Investment Factor for each Sub-Account for any Valuation Period
is determined by dividing (a) by (b) and subtracting (c) from the result, where:
(a) equals: (1) the net asset value per share of the underlying
fund at the end of the current Valuation Period, plus
(2) the per share amount of any dividend or capital
gain distribution made by the underlying fund on
shares held in the Sub-Account if the "ex-dividend"
date occurs during the current Valuation Period, plus
or minus
(3) a per share charge or credit for any taxes
reserved, which are determined by WSLAC to have
resulted from the investment operations of the
Sub-Account during the current Valuation Period;
(b) is the net asset value per share of the corresponding
underlying fund determined at the end of the immediately
preceding Valuation Period; and
(c) is a factor representing the charges deducted from the
Sub-Account on a daily basis for the daily portion of the
annual Mortality and Expense Risk Charge and the annual
Contract Administration Charge.
FIXED ANNUITY INCOME PAYMENTS
The Contracts provide only for fixed annuity payment options. The
amount of such payments is calculated by applying the Surrender Value at
annuitization, less any applicable premium tax, to the income payment rates for
the income payment option selected.
Annuity payments will be the larger of:
o the income based on the rates shown in the Contract's Annuity
Tables for the income payment option chosen; and
o the income calculated by applying the proceeds as a single premium
at WSLAC's current rates in effect on the date of the first
annuity payment for the same option.
Annuity payments under any of the income payment options will not vary
in dollar amount and will not be affected by the future investment performance
of the Variable Account.
QUALIFICATION AS AN "ANNUITY CONTRACT"
For the Contract to be treated as an "annuity contract" under the Code,
the Contract must meet certain requirements under the Code. The following
sections discuss various matters that might affect the Contract's status an
"annuity contract."
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on
the underlying assets of all variable annuity contracts. The Code generally
provides that a variable contract will not be treated as an annuity contract for
any period (and any subsequent period) for which the investments are not, in
6
<PAGE>
accordance with regulations prescribed by the United States Treasury Department,
adequately diversified. The Code contains a safe harbor provision which provides
that variable contracts such as the Contracts meet the diversification
requirements if, as of the end of each quarter, (1) the underlying assets meet
the diversification standards prescribed elsewhere in the Code for an entity to
be classified as a regulated investment company and (2) no more than 55% of the
total assets consist of cash, cash items, U.S. government securities and
securities of other regulated investment companies.
In March 1989, the Treasury Department issued regulations that
established diversification requirements for the investment portfolios such as
the Funds underlying variable contracts such as the Contracts. The regulations
amplify the diversification requirements for variable contracts set forth in the
Code and provide an alternative to the safe harbor provision described in
Section 817(h) of the Code. Under the Regulations, an investment portfolio will
be deemed adequately diversified if: (1) no more than 55% of the value of the
total assets of the investment portfolio is represented by any one investment;
(2) no more than 70% of the value of the total assets of the investment
portfolio is represented by any two investments; (3) no more than 80% of the
value of the total assets of the investment portfolio is represented by any
three investments; and (4) no more than 90% of the value of the total assets of
the investment portfolio is represented by any four investments.
The Sub-Accounts, through each of the Funds, intends to comply with the
diversification requirements of the Code and the regulations. The Advisor has
agreed to manage the Funds so as to comply with such requirements.
EXCESSIVE CONTROL
The Treasury Department has from time to time suggested that guidelines
may be forthcoming under which a variable annuity contract will not be treated
as an annuity contract for tax purposes if the owner of the contract has
excessive control over the investments underlying the contract (i.e., the owner
is able to transfer values among Sub-Accounts with only limited restrictions).
If a variable contract is not treated as an annuity contract, the owner of such
contract would be considered the owner of the assets of a separate account, and
income and gains from that account would be included each year in the owner's
gross income. No such guidelines have been issued to date.
The issuance of such guidelines, or regulations or rulings dealing with
excessive control issues, might require the Company to impose limitations on an
owner's right to transfer all or part of the Contract Value among the
Sub-Accounts or to make other changes in the Contract as necessary to attempt to
prevent an owner from being considered the owner of any assets of a Sub-Account.
The Company therefore reserves the right to make such changes. It is not known
whether any such guidelines, regulations or rulings, if adopted, would have
retroactive effect.
REQUIRED DISTRIBUTIONS
Additionally, in order to qualify as an annuity contract under the
Code, a Non-Qualified Contract must meet certain requirements regarding
distributions in the event of the death of the owner. In general, if the owner
dies before the entire value of the Contract is distributed, the remaining value
of the Contract must be distributed according to provisions of the Code. Upon
the death of an owner prior to commencement of annuity payments, (1) the amounts
7
<PAGE>
accumulated under a Contract must be distributed within five years, or (2) if
distributions to a designated beneficiary within the meaning of Section 72 of
the Code begin within one year of the owner's death, distributions are permitted
over a period not extending beyond the life (or life expectancy) of the
designated beneficiary.
The above rules are modified if the designated beneficiary is the
surviving spouse. The surviving spouse is not required to take distributions
from the Contract under the above rules as a beneficiary and may continue the
Contract and take distributions under the above rules as if the surviving spouse
were the original owner. If distributions have begun prior to the death of the
owner, such distributions must continue at least as rapidly as under the method
in effect at the date of the owner's death (unless the method in effect provides
that payments cease at the death of the owner).
For Qualified Contracts issued in connection with tax-qualified plans
and traditional individual retirement annuities, the plan documents and rules
will determine mandatory distribution rules. However, under the Code,
distributions from Contracts issued under Qualified Plans (other than
traditional and Roth individual retirement annuities and certain governmental or
church-sponsored Qualified Plans) for employees who are not 5% owners of the
sponsoring employer generally must commence no later than April 1 of the
calendar year following the calendar year in which the employee terminates
employment or the calendar year in which he or she reaches age 70 1/2, whichever
is later. Such distributions must be made over a period that does not exceed the
life expectancy of the employee or the joint life and last survivor expectancy
of the employee and a designated beneficiary. Distributions from Contracts
issued under traditional individual retirement annuities (but not Roth IRAs) or
to 5% owners of the sponsoring employer from Contracts issued under Qualified
Plans (other than certain governmental or church-sponsored Qualified Plans) must
commence by April 1 of the calendar year after the calendar year in which the
individuals reach age 70 1/2 even if they have not terminated employment.
A penalty tax of 50% may be imposed on any amount by which the required minimum
distribution in any year exceeds the amount actually distributed.
If the Contract is a Qualified Contract issued in connection with a
traditional individual retirement annuity, a SIMPLE account, or a plan which
qualifies under Sections 403(b), 408 or 457 of the Code, the Company will send a
notice to the owner when the owner or Annuitant, as applicable, reaches age 70
1/2. The notice will summarize the required minimum distribution rules and
advise the owner of thE date that such distributions must begin from the
Qualified Contract or other traditional individual retirement annuities of the
owner. The owner has sole responsibility for requesting distributions under the
Qualified Contract or other traditional individual retirement annuities (to the
extent permitted by the Code) that will satisfy the minimum distribution rules.
In the case of a distribution from a Qualified Contract issued under a plan
which qualifies under Section 401 of the Code, the Company will not send a
notice when the owner or Annuitant, as applicable, reaches age 70 1/2, and the
owner (or the employer sponsoring the Qualified Plan) has sole responsibility
for requesting distributions under the Qualified Contract that will satisfy the
minimum distribution rules.
INDEPENDENT ACCOUNTANTS
The financial statements as of December 31, 1998 and for each of the
two years then ended for Western-Southern Life Assurance Company Separate
Account 2 and as of December 31, 1998 and 1997 for Western-Southern Life
Assurance Company included in this registration statement have been so included
in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
8
<PAGE>
FINANCIAL STATEMENTS
The following financial statements for Western-Southern Life Assurance
Company Separate Account 2 at and for the fiscal periods indicated are attached
hereto:
1. Report of PricewaterhouseCoopers LLP.
2. Statement of Net Assets as of December 31, 1998.
3. Statement of Operations and Changes in Net Assets for the years
ended December 31, 1998 and 1997.
4. Notes to Financial Statements.
The following financial statements for Western-Southern Life Assurance
Company at and for the fiscal periods indicated are attached hereto:
1. Report of PricewaterhouseCoopers LLP.
2. Consolidated Balance Sheets as of December 31, 1998 and 1997.
3. Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996.
4. Consolidated Statements of Comprehensive Income for the years
ended December 31, 1998, 1997 and 1996.
5. Consolidated Statements of Changes in Shareholder's Equity for
the years ended December 31, 1998, 1997 and 1996.
6. Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996.
7. Notes to Financial Statements.
9
<PAGE>
DISTRIBUTOR
Touchstone Securities, Inc. SUB-ACCOUNTS
311 Pike Street
Cincinnati, Ohio 45202 o Touchstone Emerging Growth
(800) 669-2796 (press 3) o Touchstone International Equity
o Touchstone Income Opportunity
INVESTMENT ADVISOR AND SPONSOR o Touchstone Value Plus
o Touchstone Growth & Income
Touchstone Advisors, Inc. o Touchstone Balanced
311 Pike Street o Touchstone Bond
Cincinnati, Ohio 45202 o Touchstone Standby Income
TOUCHSTONE VARIABLE ANNUITY SERVICE CENTER
Touchstone Variable Annuity Service Center
P.O. Box 2850
Cincinnati, Ohio 45201-2850
(800) 669-2796 (press 2)
TRANSFER AGENT
State Street Bank and Trust Company
P.O. Box 8578
Boston, Massachusetts 02266-8518
ADMINISTRATOR, CUSTODIAN
AND FUND ACCOUNTING AGENT
Investors Bank & Trust Company STATEMENT OF
200 Clarendon Street ADDITIONAL INFORMATION
Boston, Massachusetts 02116 May 1, 1999
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
312 Walnut Street
Cincinnati, Ohio 45202
LEGAL COUNSEL
Frost & Jacobs LLP
2500 PNC Center
201 East Fifth Street
Cincinnati, Ohio 45202
10
<PAGE>
WESTERN-SOUTHERN LIFE ASSURANCE COMPANY
SEPARATE ACCOUNT 2
STATEMENT OF NET ASSETS 16
December 31, 1998
<TABLE>
<S> <C> <C> <C>
ASSETS:
Investments at current market value:
Select Advisors Variable Insurance
Trust
Emerging Growth Portfolio (11,189 shares, cost $166,980) $ 171,529
International Equity Portfolio (11,556 shares, cost $152,581) 161,316
Balanced Portfolio (12,287 shares, cost $174,676) 171,523
Income Opportunity Portfolio (20,202 shares, cost $196,125) 175,556
Standby Income Portfolio (46,659 shares, cost $467,053) 467,053
Value Plus Portfolio (10 shares, cost $ 97) 102
Select Advisors Portfolios
Growth & Income Portfolio II (0.318505% beneficial interest $201,433) 237,910
Bond Portfolio II (0.283934% beneficial interest $ 96,433) 109,301
- - ---------------------------------------------------------------------------------------------------
Total assets 1,494,290
LIABILITIES:
Accounts payable 35
- - ---------------------------------------------------------------------------------------------------
Total liabilities 35
Total net assets $1,494,255
- - ---------------------------------------------------------------------------------------------------
NET ASSETS:
Variable annuity contracts $1,493,051
Retained in the variable account by Western-Southern Life Assurance Company 1,204
- - ---------------------------------------------------------------------------------------------------
Total net assets $1,494,255
- - ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 21
WESTERN-SOUTHERN LIFE ASSURANCE COMPANY
SEPARATE ACCOUNT 2
17 STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL INCOME STANDBY
GROWTH EQUITY BALANCED OPPORTUNITY INCOME VALUE PLUS
TOTAL SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME:
Dividends and capital gains $ 90,346 $ 5,973 $ 5,347 $ 9,305 $ 63,278 $ 6,443
Miscellaneous income (loss) (4,698) 188 (1,300) (1,800) (2,054) 388 $ 5
EXPENSES:
Mortality and expense risk,
and administrative charge 13,748 1,845 1,312 1,432 5,436 928 5
- - --------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 71,900 4,316 2,735 6,073 55,788 5,903 0
- - --------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized
appreciation (depreciation)
on investments 29,707 (12,141) 6,483 (8,062) 23,279 43 5
Realized gain (loss) on
investments (60,160) 5,778 19,119 10,103 (95,409) 19 230
- - --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (30,453) (6,363) 25,602 2,041 (72,130) 62 235
- - --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations 41,447 (2,047) 28,337 8,114 (16,342) 5,965 235
- - --------------------------------------------------------------------------------------------------------------------------------
CONTRACT OWNERS ACTIVITY:
Payments received from
contract owners 1,109,428 59,053 60,324 32,031 127,683 641,970 100
Net transfers between sub-
accounts -- 103,499 13,119 24,334 (830,696) 617,134 (233)
Withdrawals and surrenders (1,739,080) (247,322) (89,500) (61,060) (131,066) (925,092) --
Contract maintenance charge (1,224) (200) (207) (238) (211) (43) --
- - --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
from contract activity (630,876) (84,970) (16,264) (4,933) (834,290) 333,969 (133)
- - --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets (589,429) (87,017) 12,073 3,181 (850,632) 339,934 102
Net assets, at beginning of
period 2,083,684 258,541 149,238 168,337 1,026,184 127,103 --
- - --------------------------------------------------------------------------------------------------------------------------------
Net assets, at end of period $1,494,255 $171,524 $161,311 $171,518 $ 175,552 $467,037 $102
- - --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
GROWTH &
INCOME BOND
SUB-ACCOUNT SUB-ACCOUNT
<S> <C> <C>
INCOME:
Dividends and capital gains -- --
Miscellaneous income (loss) $ (50) $ (75)
EXPENSES:
Mortality and expense risk,
and administrative charge 2,156 634
- - --------------------------------------------------------
Net investment income (loss) (2,206) (709)
- - --------------------------------------------------------
Net change in unrealized
appreciation (depreciation)
on investments 13,754 6,346
Realized gain (loss) on
investments -- --
- - --------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 13,754 6,346
- - --------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations 11,548 5,637
- - --------------------------------------------------------
CONTRACT OWNERS ACTIVITY:
Payments received from
contract owners 99,943 88,324
Net transfers between sub-
accounts 90,949 (18,106)
Withdrawals and surrenders (232,204) (52,836)
Contract maintenance charge (285) (40)
- - --------------------------------------------------------
Net increase (decrease)
from contract activity (41,597) 17,342
- - --------------------------------------------------------
Net increase (decrease) in net
assets (30,049) 22,979
Net assets, at beginning of
period 267,959 86,322
- - --------------------------------------------------------
Net assets, at end of period $237,910 $109,301
- - --------------------------------------------------------
</TABLE>
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL INCOME STANDBY
GROWTH EQUITY BALANCED OPPORTUNITY INCOME
TOTAL SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME:
Dividends and capital gains $ 98,985 $ 13,867 $ 7,984 $ 12,525 $ 48,689 $ 15,920
Miscellaneous income (loss) 2,046 424 242 151 491 (21)
EXPENSES:
Mortality and expense risk,
and administrative charge 8,013 946 799 789 1,297 2,346
- - --------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 93,018 13,345 7,427 11,887 47,883 13,553
- - --------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized
appreciation (depreciation)
on investments (16,192) 15,477 (131) 1,715 (45,887) (43)
Realized gain (loss) on
investments 15,346 7,624 4,509 2,405 1,824 (1,016)
- - --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (846) 23,101 4,378 4,120 (44,063) (1,059)
- - --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations 92,172 36,446 11,805 16,007 3,820 12,494
- - --------------------------------------------------------------------------------------------------------------------------------
CONTRACT OWNERS ACTIVITY:
Payments received from
contract owners 1,524,644 33,978 41,159 51,326 59,528 1,247,173
Net transfers between sub-
accounts -- 144,764 47,420 48,835 909,558 (1,310,153)
Withdrawals and surrenders (68,116) (9,166) (7,648) (2,812) (3,655) (36,193)
Contract maintenance charge (665) (126) (111) (118) (102) (37)
- - --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
from contract activity 1,455,863 169,450 80,820 97,231 965,329 (99,210)
- - --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets 1,548,035 205,896 92,625 113,238 969,149 (86,716)
Net assets, at beginning of
period 535,649 52,645 56,613 55,099 57,035 213,819
- - --------------------------------------------------------------------------------------------------------------------------------
Net assets, at end of period $2,083,684 $258,541 $149,238 $168,337 $1,026,184 $ 127,103
- - --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
GROWTH &
INCOME BOND
SUB-ACCOUNT SUB-ACCOUNT
<S> <C> <C>
INCOME:
Dividends and capital gains $ -- $ --
Miscellaneous income (loss) 719 40
EXPENSES:
Mortality and expense risk,
and administrative charge 1,413 423
- - ---------------------------------------------------------
Net investment income (loss) (694) (383)
- - ---------------------------------------------------------
Net change in unrealized
appreciation (depreciation)
on investments 8,426 4,251
Realized gain (loss) on
investments -- --
- - ---------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 8,426 4,251
- - ---------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations 7,732 3,868
- - ---------------------------------------------------------
CONTRACT OWNERS ACTIVITY:
Payments received from
contract owners 58,171 33,309
Net transfers between sub-
accounts 143,810 15,766
Withdrawals and surrenders (8,642) --
Contract maintenance charge (140) (31)
- - ---------------------------------------------------------
Net increase (decrease)
from contract activity 193,199 49,044
- - ---------------------------------------------------------
Net increase (decrease) in net
assets 200,931 52,912
Net assets, at beginning of
period 67,028 33,410
- - ---------------------------------------------------------
Net assets, at end of period $267,959 $ 86,322
- - ---------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 22
WESTERN-SOUTHERN LIFE ASSURANCE COMPANY
SEPARATE ACCOUNT 2
NOTES 18
<PAGE> 23
WESTERN-SOUTHERN LIFE ASSURANCE COMPANY
SEPARATE ACCOUNT 2
19
NOTES TO FINANCIAL STATEMENTS
1. Organization
Western-Southern Life Assurance Company Separate Account 2 (the "Account") is a
unit investment trust registered under the Investment Company Act of 1940 (the
"1940 Act), established by the Western-Southern Life Assurance Company (the
"Company"), a life insurance company which is a wholly-owned subsidiary of The
Western and Southern Life Insurance Company ("Western & Southern"). The Account
is a funding vehicle for individual variable annuity contracts and commenced
operations on February 23, 1995.
The variable annuity contracts are designed for individual investors and group
plans that desire to accumulate capital on a tax-deferred basis for retirement
or other long-term objectives. The variable annuity contracts are distributed
across the United States through a network of broker-dealers and wholesalers.
2. Significant Accounting Policies
The Account has eight investment sub-accounts each of which invests in the
corresponding portfolio (a "Portfolio") of Select Advisors Variable Insurance
Trust or of Select Advisors Portfolios, each of which is an open-ended
diversified management investment company. The sub-account's value fluctuates on
a day to day basis depending on the investment performance of the Portfolio in
which each sub-account is invested. Sub-account transactions are recorded on the
trade date and income from dividends is recorded on the ex-dividend date.
Realized gains and losses on the sales of investments are computed on the basis
of specific identification.
Upon annuitization, the contract assets are transferred to the general account
of the Company. Accordingly, contract reserves are recorded by the company. See
the related prospectus for a more detailed description of the annuity contracts.
3. Contract Charges
Certain deductions for administrative and risk charges are deducted from the
contract value, in order to compensate the Company for administrative expenses
and for the assumption of mortality and expense risks. These charges are made
daily at an annual effective rate of .80% of the contract value.
The Company also deducts an annual contract maintenance charge of $35 from the
contract value on each contract anniversary and upon any full surrender.
<PAGE> 24
WESTERN-SOUTHERN LIFE ASSURANCE COMPANY
SEPARATE ACCOUNT 2
20
Notes to Financial Statements continued
4. Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual
results could differ from those estimates.
5. Taxes
The Account is not taxed separately because the operations
of the Account are part of the total operations of the
Company. The Company is taxed as a life insurance company
under the Internal Revenue Code. Under existing federal
income tax law, no taxes are payable on the investment
income or on the capital gains of the Account.
6. Purchases and Sales of Investments
The following table shows aggregate cost of shares and
beneficial interests of the portfolios purchased and
proceeds from shares and beneficial interests of the
portfolios sold by the corresponding sub-accounts for the
period January 1, 1998 to December 31, 1998.
<TABLE>
<CAPTION>
PURCHASES SALES
<S> <C> <C>
Select Advisors Variable Insurance Trust
Emerging Growth Portfolio $ 202,196 $ 282,854
International Equity Portfolio 93,458 106,988
Balanced Portfolio 129,570 128,432
Income Opportunity Portfolio 207,511 986,021
Standby Income Portfolio 1,581,274 1,241,366
Value Plus Portfolio 4,605 4,738
Select Advisors Portfolio
Growth & Income Portfolio II 235,698 279,501
Bond Portfolio II 135,081 118,447
</TABLE>
<PAGE> 25
WESTERN-SOUTHERN LIFE ASSURANCE COMPANY
SEPARATE ACCOUNT 2
21
7. Unit Values
The following table shows a summary of units outstanding
for variable annuity contracts for the period January 1,
1998 to December 31, 1998.
<TABLE>
<CAPTION>
TRANSFERS
BEGINNING UNITS UNITS BETWEEN ENDING UNIT ENDING
UNITS PURCHASED REDEEMED SUB-ACCOUNTS UNITS VALUE VALUE
<S> <C> <C> <C> <C> <C> <C> <C>
Emerging Growth
Sub-Account 15,058 3,505 (15,161) 6,347 9,749 17.592298 $ 171,524
International Equity
Sub-Account 10,507 3,615 (5,519) 921 9,524 16.937997 $ 161,311
Balanced Sub-Account 10,276 1,838 (3,595) 1,490 10,009 17.135699 $ 171,518
Income Opportunity
Sub-account 58,064 8,109 (8,127) (46,622) 11,424 15.367598 $ 175,552
Standby Income
Sub-Account 11,233 54,614 (79,371) 52,878 39,354 11.867636 $ 467,037
Value Plus Sub-Account -- 10 -- -- 10 10.156803 $ 102
Growth & Income
Sub-Account 15,766 5,442 (13,341) 5,265 13,132 18.117147 $ 237,910
Bond Sub-Account 7,005 6,761 (4,064) (1,439) 8,263 13.227693 $ 109,301
- - ------------------------------------------------------------------------------------------------------------
$1,494,255
- - ------------------------------------------------------------------------------------------------------------
</TABLE>
8. Subsequent Event
Effective immediately after the close of business on
December 31, 1998, two new portfolios, namely Touchstone
Growth & Income Fund and Touchstone Bond Fund were
established in the Select Advisors Variable Insurance
Trust. Effective after the close of business on December
31, 1998, Select Advisors Variable Insurance Trust was
renamed Touchstone Variable Series Trust ("VST"). The
shares of the newly established VST: Touchstone Growth &
Income Fund and VST: Touchstone Bond Fund, (collectively
"VST Funds") were substituted for shares of the Select
Advisors Portfolios: Growth & Income Portfolio II and the
Select Advisors Portfolios: Bond Portfolio II respectively,
(collectively "SAP Funds") held by Western-Southern Life
Assurance Company Separate Account 1 and Separate Account 2
and The Western and Southern Life Insurance Company
Separate Account A. This transaction was achieved through
an in-kind redemption from the SAP Funds and a
corresponding in-kind contribution to the VST Funds of the
net assets of the SAP Funds. As a result of this
transaction, the SAP Funds ceased to be available as
investment options for Separate Accounts 1, 2 and A. The
VST Funds have substantially identical investment
objectives, policies and risks as those of the respective
SAP Funds. In addition, the VST Funds will employ the same
investment advisor and investment techniques as those
employed by the respective SAP Funds. The SAP Funds will be
dissolved and terminated as soon as practicable.
<PAGE> 26
WESTERN-SOUTHERN LIFE ASSURANCE COMPANY
SEPARATE ACCOUNT 2
22
Notes to Financial Statements continued
9. Supplementary Information -- Selected Per Share Data and Ratios
TOUCHSTONE VARIABLE ANNUITY
Selected data for an accumulation unit outstanding throughout each year:
<TABLE>
<CAPTION>
TOUCHSTONE EMERGING GROWTH FUND SUB-ACCOUNT
---------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995
<S> <C> <C> <C> <C>
PER SHARE DATA
Investment income $ 0.612142 $ 0.929048 $ 0.337947 $ 0.789879
Expenses 0.134380 0.118607 0.098968 0.073756
- - ----------------------------------------------------------------------------------------
Net investment income
(loss) 0.477762 0.810441 0.238979 0.716123
Net realized and unrealized
gain (loss) on
investments (0.05531) 3.411742 0.967583 1.024979
- - ----------------------------------------------------------------------------------------
Net increase (decrease) in
net asset value 0.422451 4.222183 1.206562 1.741102
Beginning of period 17.169847 12.947664 11.741102 10.000000
- - ----------------------------------------------------------------------------------------
End of period $17.592298 $17.169847 $12.947664 $11.741102
- - ----------------------------------------------------------------------------------------
RATIOS
Ratio of operating expense
to average net assets (%) 0.86% 0.61% 0.76% 0.64%
Ratio of net investment
income (loss) to average
net assets (%) 2.01% 8.58% 0.97% 12.73%
<CAPTION>
TOUCHSTONE INTERNATIONAL EQUITY SUB-ACCOUNT
---------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995
<S> <C> <C> <C> <C>
PER SHARE DATA
Investment income $ 0.560971 $ 0.771640 $ 0.084052 $ 0.033748
Expenses 0.128478 0.107978 0.095651 0.073298
- - ----------------------------------------------------------------------------------------
Net investment income
(loss) 0.432493 0.663662 (0.011599) (0.039550)
Net realized and unrealized
gain (loss) on
investments 2.302091 1.063784 1.204897 1.322219
- - ----------------------------------------------------------------------------------------
Net increase (decrease) in
net asset value 2.734584 1.727446 1.193298 1.282669
Beginning of period 14.203413 12.475967 11.282669 10.000000
- - ----------------------------------------------------------------------------------------
End of period $16.937997 $14.203413 $12.475967 $11.282669
- - ----------------------------------------------------------------------------------------
RATIOS
Ratio of operating expense
to average net assets (%) 0.84% 0.78% 0.70% 0.67%
Ratio of net investment
income (loss) to average
net assets (%) 1.76% 7.22% 1.08% 0.17%
</TABLE>
<TABLE>
<CAPTION>
TOUCHSTONE BALANCED SUB-ACCOUNT
---------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995
<S> <C> <C> <C> <C>
PER SHARE DATA
Investment income $ 0.918046 $ 1.317477 $ 0.569146 $ 1.125981
Expenses 0.134922 0.120752 0.101787 0.076118
- - ----------------------------------------------------------------------------------------
Net investment income
(loss) 0.783124 1.196725 0.467359 1.049863
Net realized and unrealized
gain (loss) on
investments (0.029731) 1.263315 1.436884 0.968160
- - ----------------------------------------------------------------------------------------
Net increase (decrease) in
net asset value 0.753393 2.460040 1.904243 2.018023
Beginning of period 16.382306 13.922266 12.018023 10.000000
- - ----------------------------------------------------------------------------------------
End of period $17.135699 $16.382306 $13.922266 $12.018023
- - ----------------------------------------------------------------------------------------
RATIOS
Ratio of operating expense
to average net assets (%) 0.84% 0.71% 0.78% 0.69%
Ratio of net investment
income (loss) to average
net assets (%) 3.58% 10.64% 5.34% 14.78%
<CAPTION>
TOUCHSTONE INCOME OPPORTUNITY SUB-ACCOUNT
---------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995
<S> <C> <C> <C> <C>
PER SHARE DATA
Investment income $ 1.751570 $ 2.241559 $ 1.977619 $ 1.550039
Expenses 0.134780 0.136658 0.113609 0.076165
- - ----------------------------------------------------------------------------------------
Net investment income
(loss) 1.616790 2.104901 1.864010 1.473874
Net realized and unrealized
gain (loss) on
investments (3.922423) (0.318302) 1.449756 1.098992
- - ----------------------------------------------------------------------------------------
Net increase (decrease) in
net asset value (2.305633) 1.786599 3.313766 2.572866
Beginning of period 17.673231 15.886632 12.572866 10.000000
- - ----------------------------------------------------------------------------------------
End of period $15.367598 $17.673231 $15.886632 $12.572866
- - ----------------------------------------------------------------------------------------
RATIOS
Ratio of operating expense
to average net assets (%) 0.90% 0.24% 0.75% 0.66%
Ratio of net investment
income (loss) to average
net assets (%) 9.28% 8.84% 12.25% 10.26%
</TABLE>
* Calculation of the Value Plus Unit Values began May 1, 1998, when that
sub-account commenced operations.
<PAGE> 27
WESTERN-SOUTHERN LIFE ASSURANCE COMPANY
SEPARATE ACCOUNT 2
23
<TABLE>
<CAPTION>
TOUCHSTONE STANDBY INCOME SUB-ACCOUNT
---------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995
<S> <C> <C> <C> <C>
PER SHARE DATA
Investment income $ 0.633473 $ 0.594041 $ 0.550219 $ 0.483304
Expenses 0.092320 0.088130 0.084812 0.068599
- - --------------------------------------------------------------------------------------------
Net investment income
(loss) 0.541153 0.505911 0.465407 0.414705
Net realized and unrealized
gain (loss) on
investments 0.011590 (0.010926) (0.010339) (0.049865)
- - --------------------------------------------------------------------------------------------
Net increase (decrease) in
net asset value 0.552743 0494985 0.455068 0.364840
Beginning of period 11.314893 10.819908 10.364840 10.000000
- - --------------------------------------------------------------------------------------------
End of period $11.867636 $11.314893 $10.819908 $10.364840
- - --------------------------------------------------------------------------------------------
RATIOS
Ratio of operating expense
to average net assets (%) 0.31% 1.38% 0.50% 0.78%
Ratio of net investment
income (loss) to average
net assets (%) 1.99% 7.95% 2.67% 4.35%
</TABLE>
<TABLE>
<CAPTION>
TOUCHSTONE GROWTH & INCOME SUB-ACCOUNT
---------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995
<S> <C> <C> <C>
PER SHARE DATA
Investment income $ -- $ -- $ -- $ --
Expenses 0.141929 0.122934 0.108541 0.075378
- - -------------------------------------------------------------------------------------------
Net investment income
(loss) (0.141929) (0.122934) (0.108541) (0.075378)
Net realized and unrealized
gain (loss) on
investments 1.263248 2.827415 1.865939 2.609327
- - -------------------------------------------------------------------------------------------
Net increase (decrease) in
net asset value 1.121319 2.704481 1.757398 2.533949
Beginning of period 16.995828 14.291347 12.533949 10.000000
- - -------------------------------------------------------------------------------------------
End of period $18.117147 $16.995828 $14.291347 $12.533949
- - -------------------------------------------------------------------------------------------
RATIOS
Ratio of operating expense
to average net assets (%) 0.85% 0.84% 0.87% 0.62%
Ratio of net investment
income (loss) to average
net assets (%) (0.87)% (0.41)% (9.54)% (0.55)%
</TABLE>
<TABLE>
<CAPTION>
TOUCHSTONE
VALUE PLUS
TOUCHSTONE BOND SUB-ACCOUNT SUB-ACCOUNT*
--------------------------------------------------------- -------------
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED*
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Investment income $ -- $ -- $ -- $ -- $ 0.029387
Expenses 0.101441 0.094423 0.089697 0.071770 0.050319
- - --------------------------------------------------------------------------------------------------------
Net investment income
(loss) (0.101144) (0.094423) (0.089697) (0.071770) (0.020932)
Net realized and unrealized
gain (loss) on
investments 1.007083 0.910882 0.285772 1.381287 0.177735
- - --------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net asset value 0.905642 0.816459 0.196075 1.309517 0.156803
Beginning of period 12.322051 11.505592 11.309517 10.000000 10.000000
- - --------------------------------------------------------------------------------------------------------
End of period $13.227693 $12.322051 $11.505592 $11.309517 $10.156803
- - --------------------------------------------------------------------------------------------------------
RATIOS
Ratio of operating expense
to average net assets (%) 0.65% 0.71% 0.83% 0.69% 9.80%
Ratio of net investment
income (loss) to average
net assets (%) (0.72)% (0.64)% (2.09)% (0.66)% 0.00%
</TABLE>
<PAGE> 28
REPORT OF INDEPENDENT ACCOUNTANTS
REPORT OF INDEPENDENT ACCOUNTANTS 24
To the Contractholders and Board of Directors of
Western-Southern Life Assurance Company
In our opinion, the accompanying statement of net assets and statement of
operations and changes in net assets present fairly, in all material respects,
the financial position of Western-Southern Life Assurance Company Separate
Account 2 as of December 31, 1998 and the results of their operations and
changes in net assets for the years ended December 31, 1998 and 1997 in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
January 22, 1999
Cincinnati, Ohio
<PAGE>
Western-Southern Life
Assurance Company
and Subsidiaries
(A Wholly-Owned Subsidiary of the
Western and Southern Life Insurance
Company) Report on Audits of
Consolidated Financial Statements
for the Years Ended December 31, 1998,
1997 and 1996
<PAGE>
Western-Southern Life Assurance Company and Subsidiaries
Table of Contents
- --------------------------------------------------------------------------------
Pages
Report of Independent Accountants 1
Financial Statements:
Consolidated Balance Sheets as of December 31, 1998 and 1997 2-3
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996 4
Consolidated Statements of Comprehensive Income
for the years ended December 31, 1998, 1997 and 1996 5
Consolidated Statements of Changes in Shareholder's Equity
for the years ended December 31, 1998, 1997 and 1996 6
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 7
Notes to Financial Statements 8-20
<PAGE>
Report of Independent Accountants
To the Board of Directors
Western-Southern Life Assurance Company
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, comprehensive income, changes in
policyholders' surplus and of cash flows present fairly, in all material
respects, the financial position of The Western-Southern Life Assurance Company
and its subsidiaries at December 31, 1998 and 1997, and the consolidated results
of their operations and their cash flows for the three years ended December 31,
1998 in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Cincinnati, Ohio
April 26, 1999
<PAGE>
Western-Southern Life Assurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of The Western and Southern Life Insurance Company)
Consolidated Balance Sheets
for the years ended December 31, 1998, 1997 and 1996.
- --------------------------------------------------------------------------------
1998 1997
-------------------------
(in thousands)
-------------------------
Assets
Investments:
Securities availableforsale, at fair value:
Debt securities $3,234,636 $2,975,472
Equity securities 93,036 98,615
Mortgage loans, net 149,172 114,553
Policy loans 50,767 51,231
Short term investments 79,920 60,357
Other invested assets 20,858 20,159
Cash and cash equivalents 653 281
---------- ----------
Total investments 3,629,042 3,320,668
---------- ----------
Accrued investment income 43,073 39,356
Deferred acquisition costs, net 254,417 248,586
Other assets 7,075 6,619
Assets held in separate accounts 224,275 122,631
---------- ----------
Total assets $4,157,882 $3,737,860
========== ==========
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
Western-Southern Life Assurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of The Western and Southern Life Insurance Company)
Consolidated Balance Sheets (continued)
as of December 31, 1998 and 1997
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
-------------------------
(in thousands)
-------------------------
<S> <C> <C>
Liabilities and Shareholder's Equity
Policy reserves $3,223,860 $2,957,121
Other policyholder funds 38,464 31,865
---------- ----------
Total policy liabilities 3,262,324 2,988,986
---------- ----------
Payable to parent company 177,523 197,358
Other accrued expenses 21,558 21,395
Federal income tax liability
Current 24,289 17,058
Deferred 60,154 62,158
Liabilities related to separate accounts 224,275 122,631
---------- ----------
Total liabilities 3,770,123 3,409,586
---------- ----------
Commitments and contingencies (see Note 8)
Common stock, $1 par value, authorized 10,000,000 shares;
issued and outstanding 1,500,000 shares 1,500 1,500
Paid-in-capital 246,226 221,285
Accumulated other comprehensive income 36,229 34,330
Retained earnings 103,804 71,159
---------- ----------
Total shareholder's equity 387,759 328,274
---------- ----------
Total liabilities and shareholder's equity $4,157,882 $3,737,860
---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
Western-Southern Life Assurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of The Western and Southern Life Insurance Company)
Consolidated Statements of Operations
as of December 31, 1998, 1997 and 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
(in thousands)
-----------------------------------
<S> <C> <C> <C>
Revenue:
Insurance premiums and other considerations $ 64,077 $ 59,458 $ 55,806
Policy and contract charges 68,043 74,889 68,829
Net investment income 247,508 227,047 195,147
Net realized investment gains (losses) 23,202 19,439 14,256
Other income 5,714 3,902 1,093
--------- --------- ---------
Total revenues $ 408,544 $ 384,735 $ 335,131
--------- --------- ---------
Benefits and expenses:
Policy benefits 58,759 58,020 54,575
Interest expense on annuities and financial products 178,610 167,467 143,989
Amortization of deferred policy acquisition costs 56,383 60,992 49,013
Other operating expenses 61,664 61,264 53,744
--------- --------- ---------
Total benefits and expenses 355,416 347,743 301,321
--------- --------- ---------
Income before income taxes 53,128 36,992 33,810
Income tax expense (benefit)
Current 21,256 15,568 8,858
Deferred (3,027) (2,866) 2,818
--------- --------- ---------
18,229 12,702 11,676
--------- --------- ---------
Net income $ 34,899 $ 24,290 $ 22,134
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
Western-Southern Life Assurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of The Western and Southern Life Insurance Company)
Consolidated Statements of Comprehensive Income
for the three Years ended December 31, 1998, 1997 and 1996.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
------- ------ -------
(in thousands)
------------------------------
<S> <C> <C> <C>
Net income $ 34,899 $ 24,290 $ 22,134
-------- -------- --------
Other comprehensive income, net of tax:
Unrealized gains of securities:
Unrealized holding gains (losses) arising during period,
net of taxes of $9,143, $18,640 and $(6,007) for
the years ended 1998, 1997 and 1996, respectively 16,980 34,618 (11,156)
Less: reclassification adjustment for gains
included in net income net of taxes of $8,120,
$6,804 and $4,989 for the years ended, 1998, 1997 and
1996, respectively 15,081 12,636 9,266
-------- -------- --------
Other comprehensive income 1,899 21,982 (20,422)
-------- -------- --------
Comprehensive income $ 36,798 $ 46,272 $ 1,712
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
Western-Southern Life Assurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of The Western and Southern Life Insurance Company)
Consolidated Statements of Changes in Shareholder's Equity
for the three years ended December 31, 1998
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated
Other
Total Common Paid in Comprehensive Retained
Equity Stock Capital Income Earnings
------ ----- ------- ------ --------
(in thousands)
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Shareholder's equity January 1, 1996 $ 286,594 $ 1,500 $ 221,285 $ 32,770 $ 31,039
Net income 22,134 22,134
Other comprehensive income (20,422)
---------
Comprehensive income 1,712
---------
Dividend to parent (1,748) (1,748)
--------- ------- --------- ---------------------
Shareholder's equity December 31, 1996 286,548 1,500 221,285 12,348 51,415
--------- ------- --------- ---------------------
Net income 24,290 24,290
Other comprehensive income 21,982 21,982
---------
Comprehensive income 46,272
---------
Dividend to parent (4,546) (4,546)
--------- ------- --------- ---------------------
Shareholder's equity December 31, 1997 328,274 1,500 221,285 34,330 71,159
========= ======= ========= =====================
Net income 34,899 34,899
Other comprehensive income 1,899 1,899
---------
Comprehensive income 36,798
---------
Capital contribution 24,941 (24,941)
Dividend to parent (2,254) (2,254)
--------- ------- --------- ---------------------
Shareholder's equity December 31, 1998 $ 387,759 $ 1,500 $ 246,226 $ 36,229 $103,804
========= ======= ========= =====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
Western-Southern Life Assurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of The Western and Southern Life Insurance Company)
Consolidated Statements of Cash Flows
for the three years ended December 31, 1998
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
(in thousands)
-----------------------------------------
Operating activities:
<S> <C> <C> <C>
Net income $ 34,899 $ 24,290 $ 22,134
Adjustments to reconcile net income to net cash
provided by operating activities:
Capitalization of deferred policy acquisition costs (54,694) (56,245) (51,036)
Amortization and write-off of deferred policy
acquisition costs 56,383 60,992 49,013
Realized (gains) losses on invested assets, net (23,202) (19,439) (14,256)
Deferred Federal income tax (3,027) (2,866) 2,818
Increase in policy liabilities 62,865 37,190 26,078
Increase in other assets (105,701) (99,078) (29,399)
Increase in other liabilities 89,057 120,878 40,491
----------- ----------- -----------
Net cash provided by operating activities 56,580 65,722 45,843
----------- ----------- -----------
Cash flows from investing activities:
Purchases:
Debt securities, available-for-sale (1,493,016) (1,431,999) (1,447,588)
Equity securities, available-for-sale (55,458) (71,179) (35,851)
Mortgage loans (45,162) (37,415) --
Real estate (401) (437) (583)
Shortterm and other invested assets (4,729,573) (2,706,179) (2,788,146)
Proceeds from sales, calls or maturities
Debt securities, available-for-sale 1,253,769 1,075,974 1,003,920
Equity securities, available-for-sale 57,008 44,121 31,317
Mortgage loans 10,548 18,514 30,109
Real estate 7,826 3,878 7,000
Short-term and other invested assets 4,705,092 2,733,083 2,817,605
----------- ----------- -----------
Net cash used by investing activities (289,367) (371,639) (382,217)
----------- ----------- -----------
Cash flows from financing activities:
Deposits to universal life and investment product
account balances 578,832 595,479 513,635
Withdrawals from universal life and investment
product account balances (368,360) (285,328) (181,424)
Capital contributions from parent 24,941 -- --
Dividends to parent (2,254) (4,546) (1,758)
----------- ----------- -----------
Net cash provided by financing activities 233,159 305,605 330,453
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 372 (312) (5,921)
Cash and cash equivalents at beginning of year 281 593 6,514
----------- ----------- -----------
Cash and cash equivalents at end of year $ 653 $ 281 $ 593
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
Western-Southern Life Assurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of The Western and Southern Life Insurance Company)
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
1. Nature of Operations, Basis of Presentation and Principal Accounting
Policies:
Western-Southern Life Assurance Company (the "Company") is a wholly-owned
subsidiary of The Western and Southern Life Insurance Company (the
"Parent"), a mutual life insurance company.
The Company offers individual annuities and interest-sensitive life
insurance products through its parent company's agents and various
financial institutions. The Company is licensed in forty-three states and
the District of Columbia, actively selling in twenty-one states, and has
94% of its field force located in twelve midwest and south-central states.
Basis of Presentation: The accompanying financial statements have been
prepared in conformity with generally accepted accounting principles
(GAAP).
The Company also files financial statements with insurance regulatory
authorities which are prepared on the basis of statutory accounting
practices which are significantly different from financial statements
prepared in accordance with GAAP. These differences are described in
detail in Note 7.
The following is a description of the principle accounting policies and
practices used in the preparation of these financial statements.
Consolidation: The consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiaries, Courtyard Nursing Care,
Inc. and IFS Financial Services, Inc. Significant intercompany
transactions have been eliminated.
Premium Revenue and Benefits to Policyholders: The premiums and benefits
for whole life and term insurance products and certain annuities with life
contingencies (immediate annuities) are fixed and guaranteed. Such
premiums are recognized as premium revenue when due. Benefits and expenses
are associated with earned premiums so as to result in recognition of
profits over the life of the contracts. This association is accomplished
by means of the provision for liabilities for future policy benefits and
the amortization of deferred policy acquisition costs.
Universal life policies and investment contracts are policies with terms
that are not fixed and guaranteed. The terms that may be changed could
include one or more of the amounts assessed the policyholder, premiums
paid by the policyholder or interest accrued to policyholder balances. The
amounts collected from policyholders for these policies are considered
deposits, and only the deductions during the period for cost of insurance,
policy administration and surrenders are included in revenue. Policy
benefits and claims that are charged to expense include interest credited
to contracts and benefit claims incurred in the period in excess of
related policy account balances.
8
<PAGE>
Western-Southern Life Assurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of The Western and Southern Life Insurance Company)
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
Deferred Policy Acquisition Costs: Those costs of acquiring new business,
which vary with and are primarily related to the production of new
business, have been deferred to the extent that such costs are deemed
recoverable. Such costs include commissions, certain costs of policy
underwriting and issue and certain variable agency expenses. These costs
are amortized with interest as follows:
For universal life-type policies and investment contracts, over the lesser
of the lifetime of the policy or 15-30 years in relation to the present
value of estimated gross profits from surrender charges and investment,
mortality and expense margins, discounted using the interest rate credited
to the policy.
Recoverability of the unamortized balance of deferred policy acquisition
costs is evaluated regularly. For universal life-type contracts and
investment contracts, the accumulated amortization is adjusted (increased
or decreased) whenever there is a material change in the estimated gross
profits expected over the life of a block of business in order to maintain
a constant relationship between cumulative amortization and the present
value of gross profits. For most other contracts, the unamortized asset
balance is reduced by a charge to income only when the present value of
future cash flows, net of the policy liabilities, is not sufficient to
cover such asset balance.
The Company states available-for-sale securities at fair value. The
Company also adjusts the cost of policies produced to reflect the change
in cumulative amortization that would have been recorded if they had sold
the securities at their fair value and reinvested the proceeds at current
yields.
A summary of deferred acquisition costs follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C> <C>
Deferred acquisition costs, January 1 $ 248,586 $ 284,135 $ 242,998
Capitalization of costs 54,694 56,245 51,036
Amortization (56,383) (60,992) (49,013)
Additional amount related to unrealized gains (losses)
on securities 7,520 (30,802) 39,114
--------- --------- ---------
$ 254,417 $ 248,586 $ 284,135
========= ========= =========
</TABLE>
9
<PAGE>
Western-Southern Life Assurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of The Western and Southern Life Insurance Company)
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
Valuation of Investments:
o Debt securities which may be sold to meet liquidity and other needs
of the Company are categorized as available-for-sale and are stated
at fair value. Equity securities are classified as
available-for-sale and are stated at fair value. Realized gains and
losses on sale or maturity of investments are based upon specific
identification of the investments sold and do not include amounts
allocable to separate accounts. At the time a decline in value of an
investment is determined to be other than temporary, a provision for
loss is recorded which is included in realized investment gains and
losses. Unrealized gains and losses, resulting from carrying
available-for-sale securities at fair value, are reported in
shareholder's equity, net of deferred taxes of $19,499 and $18,485,
respectively, and deferred acquisition costs of $52,885 and $60,421,
respectively, at December 31, 1998 and 1997.
o Mortgage loans on real estate are carried at amortized cost less an
impairment allowance for estimated uncollectible amounts. The
Company records interest income from impaired loans on the
cash-basis method.
o Policy loan values are carried at outstanding indebtedness not in
excess of policy cash surrender value.
o Short-term investments are those investments with a maturity of less
than one year at the time of purchase and consist primarily of debt
securities and money market funds.
Reserves for Future Policy and Contract Benefits: Liabilities for future
policy benefits on universal life and investment contracts consist
principally of policy account values plus certain deferred policy fees
which are amortized using the same assumptions and factors used to
amortize the cost of policies produced. If the future benefits on
investment contracts are guaranteed (immediate annuities with benefits
paid for a period certain) the liability for future benefits is the
present value of such guaranteed benefits.
10
<PAGE>
Western-Southern Life Assurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of The Western and Southern Life Insurance Company)
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
Assets Held in Separate Accounts: The Company maintains separate account
funds on which investment income and gains or losses accrue directly to
certain policyholders of variable annuity contracts. The assets of these
accounts are legally segregated and are valued at fair value. The related
liabilities are recorded at amounts equal to the underlying assets; the
fair value of these liabilities is equal to their carrying amount.
Cash and Cash Equivalents: The Company considers short-term investments
with an original maturity of three months or less to be cash and cash
equivalents.
Federal Income Taxes: The provision for income taxes is computed on the
separate return method and includes amounts currently payable and deferred
income taxes resulting from the temporary differences in the assets and
liabilities determined on a tax and financial reporting basis.
The Company's Parent files a consolidated tax return with its eligible
subsidiaries, including the Company. The Company pays tax to its Parent
based on the provisions of a written agreement. Under the agreement, the
benefits from losses of subsidiaries are not retained by the subsidiary
companies but are allocated among those companies in the consolidated
group having taxable income. Differences between the Company's current
provision recorded for financial reporting purposes and the amount of tax
allocated to the Company under its legal tax sharing agreement are
considered to be dividends or capital contributions to/from its Parent.
Comprehensive Income: During 1998, the Company adopted SFAS No. 130 (SFAS
130), "Reporting Comprehensive Income". SFAS 130 establishes standards for
the reporting and presentation of comprehensive income and its components.
Comprehensive income encompasses all changes in equity, excluding
transactions with owners, and includes net income and the change in
unrealized appreciation/depreciation on investment securities. The new
standard requires additional disclosures in the financial statements and
does not affect results of operations or financial position.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Reclassifications: Certain 1997 and 1996 amounts have been reclassified to
conform to the 1998 presentation.
11
<PAGE>
Western-Southern Life Assurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of The Western and Southern Life Insurance Company)
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
2. Debt and Equity Securities:
The amortized cost and estimated fair values of securities
available-for-sale at December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998
-------------------------------------------------
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Securities available-for-sale
U.S. Treasury securities and obligations of $ 57,830 $ 1,721 $ 321 $ 59,230
U.S. government corporations and agencies
Debt securities issued by states of the U.S.
and political subdivisions of the states 85,647 6,581 3 92,225
Corporate securities 1,889,744 91,970 19,520 1,962,194
---------- ---------- ---------- ----------
Mortgage-backed securities 1,094,929 27,111 1,063 1,120,977
---------- ---------- ---------- ----------
Total debt securities $3,128,150 $ 127,383 $ 20,907 $3,234,626
---------- ---------- ---------- ----------
Equity securities $ 90,899 $ 7,219 $ 5,082 $ 93,036
========== ========== ========== ==========
<CAPTION>
1997
-------------------------------------------------
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Securities available-for-sale
U.S. Treasury securities and obligations of $ 21,454 $ 474 $ 17 $ 21,911
U.S. government corporations and agencies
Debt securities issued by states of the U.S.
and political subdivisions of the states 83,387 5,890 21 89,256
Corporate securities 1,769,188 85,277 8,969 1,845,496
Mortgage-backed securities 997,094 27,687 5,972 1,018,809
---------- ---------- ---------- ----------
Total debt securities $2,871,123 $ 119,328 $ 14,979 $2,975,472
---------- ---------- ---------- ----------
Equity securities $ 89,728 $ 10,217 $ 1,330 $ 98,615
========== ========== ========== ==========
</TABLE>
12
<PAGE>
Western-Southern Life Assurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of The Western and Southern Life Insurance Company)
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
The amortized cost and estimated fair value of debt securities at December
31, 1998, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
Total
--------------------------
Amortized Estimated
Cost Fair Value
---------- ----------
Due in one year or less $ 46,904 $ 46,650
Due after one year through five years 777,695 802,501
Due after five years through ten years 750,870 787,105
Due after ten years 457,752 477,393
---------- ----------
2,033,221 2,113,649
Mortgage-backed securities 1,094,929 1,120,977
---------- ----------
Total $3,128,150 $3,234,626
---------- ----------
Net investment income consisted of the following for the years ended December
31,:
1998 1997 1996
-------- -------- --------
Debt securities $220,568 $202,957 $172,331
Equity securities 6,132 8,895 3,391
Mortgage loans 11,115 7,388 10,195
Rental income from real estate 1,557 2,280 2,604
Policy loans 3,602 3,668 3,743
Other invested assets 625 647 1,694
Short-term investments 7,235 4,590 5,121
-------- -------- --------
Gross investment income 250,834 230,425 199,079
Investment expense 3,326 3,378 3,932
-------- -------- --------
Net investment income $247,508 $227,047 $195,147
-------- -------- --------
13
<PAGE>
Western-Southern Life Assurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of The Western and Southern Life Insurance Company)
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
Proceeds from sales and maturities of investments in debt securities
during 1998, 1997 and 1996 were $1,253,769, $1,075,974 and $1,003,920,
respectively. Gross gains of $24,034, $16,837 and $14,494 and gross losses
of $6,483, $3,361 and $8,135 were realized on those sales in 1998, 1997
and 1996, respectively.
Proceeds from sales of investments in equity securities during 1998, 1997
and 1996 were $57,008, $44,121 and $31,317, respectively. Gross gains of
$7,148, $7,575 and $4,936 and gross losses of $1,537, $4,139 and $1,407
were realized on those sales in 1998, 1997 and 1996, respectively.
3. Mortgage Loans:
The Company maintains a diversified mortgage loan portfolio, consisting
principally of commercial real estate loans, and exercises internal limits
on concentrations of loans by geographic area, industry, use and
individual mortgagor. Mortgage loans on various properties in Ohio account
for approximately 50% of the total amortized cost of the Company's
mortgage loans. The remaining mortgage loans relate to properties located
throughout the United States.
Activity in the allowance for loan losses is summarized as follows:
Years Ended December 31,
1998 1997 1996
------- ------- -------
Balance, beginning of year $ 2,977 $ 4,532 $ 5,684
Provisions charged to operations 2,712 2,178 --
Chargeoffs, net of recoveries -- (3,733) (1,152)
------- ------- -------
$ 5,689 $ 2,977 $ 4,532
======= ======= =======
The fair value for mortgage loans, consisting principally of commercial
real estate loans, are estimated using discounted cash flow analyses,
using interest rates currently being offered for similar loans
collateralized by properties with similar investment risk. The fair values
for mortgage loans in default are established at the lower of the fair
market value of the related underlying collateral or carrying value of the
loan.
14
<PAGE>
Western-Southern Life Assurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of The Western and Southern Life Insurance Company)
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
4. Fair Values of Financial Instruments:
The following sets forth the fair values of the Company's financial
instruments;
<TABLE>
<CAPTION>
1998 1997
------------------------------------ -------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
----------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Assets
Debt securities $ 3,234,636 $ 3,234,636 $ 2,975,472 $ 2,975,472
Equity securities 93,036 93,036 98,615 98,615
Mortgage loans, net 149,172 162,000 114,553 117,838
Short-term investments 79,920 79,920 60,357 60,357
Cash and cash equivalents 653 653 281 281
-------------- -------------- -------------- --------------
Total assets $ 3,557,417 $ 3,570,245 $ 3,249,278 $ 3,252,563
-------------- -------------- -------------- --------------
Liabilities
Investment-type contract reserves $ 3,223,860 $ 3,126,940 $ 2,957,121 $ 2,854,827
-------------- -------------- -------------- --------------
Total liabilities $ 3,223,860 $ 3,126,940 $ 2,957,121 $ 2,854,827
============== ============== ============== ==============
</TABLE>
Fair values for debt, equity and short-term investment securities are
based on quoted market prices.
The fair values for mortgage loans, consisting principally of commercial
real estate loans, are estimated using discounted cash flow analyses,
using interest rates currently being offered for similar loans
collateralized by properties with similar investment risk. The fair values
for mortgage loans in default are established at the lower of the fair
market value of the related underlying collateral or carrying value of the
loan.
15
<PAGE>
Western-Southern Life Assurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of The Western and Southern Life Insurance Company)
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
The fair value for the Company's liability under investment type contracts
is disclosed using two methods. For investment contracts without defined
maturities, fair value is the amount payable on demand. For investment
contracts with known or determined maturities, fair value is estimated
using discounted cash flow analysis. Interest rates used are similar to
currently offered contracts with maturities consistent with those
remaining for the contracts being valued.
Interest changes may have temporary effects on the sale and profitability
of annuity products offered by the Company. Although the rates offered by
the companies are adjustable in the long-term, in the short-term they may
be subject to contractual and competitive restrictions which may prevent
timely adjustment. The Company's management monitors interest rates with
respect to a spectrum of duration and sells annuities that permit flexible
responses to interest rate changes as part of the Company's management of
interest spreads. However, adverse changes in investment yields on
invested assets will affect the earnings on those products with a
guaranteed return.
The Company believes it is not practicable to estimate the fair value of
policy loans. These assets are carried at their aggregate unpaid principal
balances. Estimation of the fair value is not practicable as the loans
have no stated maturity and are an integral part of the related insurance
contracts.
5. Related Party Transactions:
The Company has three modified coinsurance agreements under which it cedes
all of its universal life insurance business to its parent. The Company
also has a coinsurance agreement under which it assumes all of its
parent's flexible premium annuity business. These contracts are accounted
for as financing arrangements as the contracts do not provide for adequate
transfer of risk. Under the agreements, the Company holds as a deposit
liability $144,861 and $146,104 at December 31, 1998 and 1997,
respectively, and has recorded interest expense of $9,305, $9,190 and
$9,426 for the years ended December 31, 1998, 1997 and 1996, respectively,
in its Statement of Operations as charges relating to this arrangement.
The Company has no employees of its own and reimburses its parent for
management services and rent. Management services provided by the parent
amounted to $41,232, $38,935 and $37,798 in 1998, 1997 and 1996,
respectively. Rent expense was $4,155, $4,579 and $4,253 in 1998, 1997 and
1996, respectively.
During 1998, the Company's parent made capital contributions of $24,941 to
the Company.
At December 31, 1998 and 1997, the Company had $43,537 and $42,298,
respectively, invested in the Touchstone Funds, mutual funds administered
by a subsidiary of the Company.
16
<PAGE>
Western-Southern Life Assurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of The Western and Southern Life Insurance Company)
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
6. Federal Income Taxes:
A reconciliation of the income tax attributable to continuing operations
computed at the U.S. federal statutory tax rates to the income tax expense
included in the consolidated statement of operations follows.
1998 1997 1996
-------- -------- --------
Income tax computed at statutory tax rate $ 18,595 $ 12,947 $ 11,834
Dividends received deduction (316) (231) (178)
Other, net (50) (14) 20
-------- -------- --------
$ 18,229 $ 12,702 $ 11,676
-------- -------- --------
1998 1997
-------- --------
Deferred income tax (asset) liability:
Deferred policy acquisition costs $ 79,883 $ 78,015
Investments 35,269 38,859
Future policy and contract benefits (56,592) (56,099)
Other 1,594 1,383
-------- --------
Deferred income tax (asset) liability $ 60,154 $ 62,158
======== ========
Federal income taxes paid under the Company's tax-sharing agreement with
its parent were $11,282, $17,058 and $11,735 in 1998, 1997 and 1996,
respectively.
17
<PAGE>
Western-Southern Life Assurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of The Western and Southern Life Insurance Company)
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
7. Regulatory Matters:
The Company, which is domiciled in Ohio, prepares statutory financial
statements in accordance with accounting principles and practices
prescribed or permitted by the State of Ohio Department of Insurance
(SAP). Prescribed statutory accounting practices include state laws,
regulations, and general administrative rules, as well as a variety of
publications of the National Association of Insurance Commissioners
(NAIC). Permitted statutory accounting practices encompass all accounting
practices that are not prescribed; such practices differ from
state-to-state, may differ from company-to-company within a state, and may
change in the future.
A reconciliation of SAP shareholder's equity to GAAP shareholder's equity
at December 31, follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
SAP shareholder's equity $ 207,888 $ 178,079 $ 170,603
Deferred policy acquisition costs 254,417 248,586 284,308
Policy reserves (33,373) (48,372) (63,340)
Asset valuation and interest maintenance reserves 68,231 61,448 47,463
Deferred income taxes (61,744) (62,907) (55,375)
Unrealized gain (loss) on available-for-sale securities 107,006 103,177 49,688
Reinsurance (149,043) (149,692) (144,372)
Other, net (5,623) (2,045) (2,427)
--------- --------- ---------
Total GAAP shareholder's equity $ 387,759 $ 328,274 $ 286,548
--------- --------- ---------
A reconciliation of SAP net income to GAAP income at December 31, follows:
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
SAP net income $ 22,196 $ 17,755 $ 13,673
Deferred policy acquisition costs (1,689) (4,747) 2,023
Policy reserves 12,429 14,968 13,576
Income taxes 3,027 2,793 (4,964)
Interest maintenance reserve 6,924 4,632 1,362
Other, net (7,988) (11,111) (3,536)
--------- --------- ---------
Total GAAP net income $ 34,899 $ 24,290 $ 22,134
--------- --------- ---------
</TABLE>
18
<PAGE>
Western-Southern Life Assurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of The Western and Southern Life Insurance Company)
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
The Company is required by statutory regulations to meet minimum
risked-based capital standards. Risk-based capital is a method of
measuring the minimum amount of capital appropriate for an insurance
company to support its overall business operations in consideration of its
size and risk profile. At December 31, 1998 and 1997, the Company
substantially exceeded all levels of risk-based capital required.
State regulatory authorities have powers relating to granting and revoking
licenses to transact business, the licensing of agents, the regulation of
premium rates and trade practices, the form and content of insurance
policies and the content of advertising material.
Under Ohio law, the Company is subject to certain statutory restrictions
on dividends it may pay to its Parent. Dividends paid from other than
"earned surplus" also require prior regulatory approval. During 1998 and
1997, the Company paid dividends of $4,941 and $4,546, respectively, to
its Parent. This distribution represents a portion of amounts remitted to
the Parent under the tax sharing agreement between the Company and its
Parent.
For statutory accounting purposes, the Company received written approval
from the State of Ohio Department of Insurance to record guaranty fund
assessments as billed and defer the amount on the balance sheet to the
extent that they are recoverable through premium tax credits. When the tax
credits are realized, the deferred tax assessment is removed from the
balance sheet as a charge to premium tax expense. There is no prescribed
statutory accounting treatment for these transactions.
The Company also received written approval to record all taxes, including
interest, assessments, settlements and corrections through the Summary of
Operations, rather than as a direct charge to shareholder's equity. There
is no prescribed accounting treatment for these transactions.
8. Contingencies:
The Company is currently a defendant in various lawsuits, which allege
improper sales practices by the Company. Recently, a nationwide class was
certified in one of these cases. The terms of the class are still
uncertain; however, the Company intends to vigorously appeal the
certification. At this point in time, management is unable to estimate the
potential outcome of the lawsuits.
19
<PAGE>
Western-Southern Life Assurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of The Western and Southern Life Insurance Company)
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
9. New Accounting Pronouncements:
In December 1997, the American Institute of Certified Public Accountants
issued Statement of Position 97-3 "Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments." This statement provides
guidance on accounting for insurance related assessments and required
disclosure information. This statement is effective for fiscal years
beginning after December 15, 1998. The Company is in the process of
assessing the impact of this pronouncement.
In March, 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1 "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." This statement provides
guidance on accounting for the costs of computer software developed or
obtained for internal use. This statement is effective for fiscal years
beginning after December 15, 1998. The Company is in the process of
assessing the impact of this pronouncement.
In June 1998, the Financial Accounting Standards Board Issued Statement of
Financial Accounting Standard 133, "Accounting for Derivative Instruments
and Hedging Activities". This Statement establishes accounting and
reporting standards for derivative instrument, including certain
derivative instruments embedded in other contracts and for hedging
activities and is effective January 1, 2000 for the Company. The Company
is in the process of assessing the impact of this pronouncement.
20
<PAGE>
PART C
ITEM 24 -- FINANCIAL STATEMENTS AND EXHIBITS
(a) No financial statements are included in Part A.
The following financial statements are incorporated by reference into
Part B:
WESTERN-SOUTHERN LIFE ASSURANCE COMPANY SEPARATE ACCOUNT 2
(1) Report of PricewaterhouseCoopers LLP.
(2) Statement of Net Assets as of December 31, 1998.
(3) Statement of Operations and Changes in Net Assets for the years
ended December 31, 1998 and 1997.
(4) Notes to Financial Statements.
WESTERN-SOUTHERN LIFE ASSURANCE COMPANY
(1) Report of PricewaterhouseCoopers LLP.
(2) Consolidated Balance Sheets as of December 31, 1998 and 1997.
(3) Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996.
(4) Consolidated Statements of Comprehensive Income for the years
ended December 31, 1998, 1997 and 1996.
(5) Consolidated Statements of Changes in Shareholder's Equity for
the years ended December 31, 1998, 1997 and 1996.
(6) Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996.
(7) Notes to Financial Statements.
(b) Exhibits:
(1) Resolutions of the Executive Committee of the Board of Directors of
Western-Southern Life Assurance Company (the "Company") establishing
Western-Southern Life Assurance Company Separate Account 2. (7)
(2) Not Applicable.
(3) (a) Distributor Agreement between the Company (on behalf of Separate
Account 2) and Touchstone Securities, Inc. (3)
1
<PAGE>
(b) Commission Schedule. (3)
(c) Specimen General Agency Agreement between Touchstone Securities,
Inc. and its dealers. (6)
(4) (a) Specimen Touchstone Advisor Variable Annuity Contract
9408-5570-WSA. (7)
(b) Specimen Endorsement for SIMPLE IRA 9801-5600 WSA END. (6)
(c) Specimen Endorsement for IRA 9801-5606 WSA END. (6)
(d) Specimen Endorsement for SEP-IRA 9801-5614 WSA END. (6)
(e) Specimen Tax Sheltered Annuity Endorsement 9801-5620 WSA END. (7)
(f) Specimen Endorsement for Roth IRA 9801-5607 WSA END. (6)
(g) Specimen 401 Plan Endorsement 9801-5611 WSA END. (6)
(5) Specimen Application Form for Touchstone Advisor Variable Annuity
Contract DO-11-IFS-VARII-9805. (7)
(6) (a) Amended Articles of Incorporation of the Company. (1)
(b) Amended Code of Regulations of the Company. (1)
(7) Not Applicable.
(8) (a) Administration Agreement between Investors Bank & Trust Company
and Select Advisors Variable Insurance Trust ("VIT"). (2)
(b) Fund Accounting Agreement between Investors Bank & Trust Company
and VIT. (2)
(c) Custodian Agreement between Investors Bank & Trust Company and
VIT. (5)
(d) (i) Sponsor Agreement between Touchstone Advisors, Inc. and VIT.
(4)
(ii) Form of Amendment No. 1 to Sponsor Agreement between
Touchstone Advisors, Inc. and VIT. (4)
(e) (i) Fund Participation Agreement between Western-Southern Life
Assurance Company and VIT. (4).
(ii) Form of Amendment No. 1 to Fund Participation Agreement
between Western-Southern Life Assurance Company and VIT. (4)
2
<PAGE>
(9) Opinion and Consent of Donald J. Wuebbling, Esq. (7)
(10) Consent of PricewaterhouseCoopers LLP.
(11) Not Applicable.
(12) Not Applicable.
(13) Schedule for Computation of Performance Quotations provided in
Registration Statement in response to Item 21. (3)
(14) Not Applicable.
(99) Powers of Attorney -- Directors of the Company.
- --------------------------------------------------------------------------------
(1) Incorporated herein by reference to Post-Effective Amendment No.
2 to the Registration Statement filed with the Securities and
Exchange Commission (the "SEC") on April 29, 1996 (File No.
33-79906)
(2) Incorporated herein by reference to Post-Effective Amendment No.
3 to the Registration Statement of VIT filed with the SEC on
February 28, 1997 (File Nos. 033-76566 and 811-08416)
(3) Incorporated herein by reference to Post-Effective Amendment No.
6 to the Registration Statement filed with the SEC on April 30,
1998 (File Nos. 033-79906 and 811-8550)
(4) Incorporated herein by reference to Post-Effective Amendment No.
7 to the Registration Statement filed with the SEC on May 1, 1998
(File Nos. 033-76582 and 811-08420)
(5) Incorporated herein by reference to Post-Effective Amendment No.
8 to the Registration Statement of VIT filed with the SEC on July
30, 1998 (File Nos. 033-76566 and 811-08416)
(6) Incorporated herein by reference to Post-Effective Amendment No.
9 to the Registration Statement filed with the SEC on November 5,
1998 (File Nos. 033-76582 and 811-8420)
(7) Incorporated herein by reference to Post-Effective Amendment No.
8 to the Registration Statement filed with the SEC on November 5,
1998 (File Nos. 033-79906 and 811-8550)
ITEM 25. -- DIRECTORS AND OFFICERS OF THE DEPOSITOR
The directors and officers of the Company are listed below. Unless
otherwise noted, the principal business address of all persons listed in
Item 25 is 400 Broadway, Cincinnati, Ohio 45202.
William J. Williams Chairman of the Board and Director
3
<PAGE>
John F. Barrett Director, Chief Executive Officer and President
James N. Clark Director, Executive Vice President, Secretary
and Treasurer
Dr. J. Harold Kotte Director
Dr. Lawrence C. Hawkins Director
Omni-Man, Inc.
3909 Reading Road
Cincinnati, Ohio 45229
Eugene P. Ruehlmann Director
Vorys, Sater, Seymour and Pease
Suite 2100 Atrium Two
221 East Fourth Street
Cincinnati, Ohio 45202
Thomas L. Williams Director
North American Properties
212 East Third Street
Suite 300
Cincinnati, Ohio 45202
Donald A. Bliss Director
10892 East Fanfol Lane
Scottsdale, Arizona 85259
George H. Walker III Director
Stifel, Nicolaus & Co.
500 North Broadway
St. Louis, Missouri 63102
Rev. James E. Hoff, S.J. Director
President
Xavier University
3800 Victory Parkway
Cincinnati, Ohio 45207
Herbert R. Brown Vice President
James W. Carpenter Vice President and Senior Counsel
Keith T. Clark Vice President and Medical Director
Bryan C. Dunn Senior Vice President and Chief
Marketing Officer
David G. Ennis Vice President and Auditor
Noreen J. Hayes Vice President
4
<PAGE>
Edward S. Heenan Vice President and Comptroller
Dale P. Hennie Senior Vice President
Carroll R. Hutchinson Senior Vice President
Donald W. Kaplan Vice President and Actuary
William F. Ledwin Senior Vice President and Chief
Investment Officer
Harold V. Lyons Vice President and Actuary
Nora E. Moushey Senior Vice President and Chief
Actuary
Jill T. McGruder Senior Vice President
J. J. Miller Senior Vice President
Kenneth A. Palmer Senior Vice President
Mario J. San Marco Vice President
Thomas M. Stapleton Vice President
Robert H. Starnes Vice President
Richard K. Taulbee Vice President
Donald J. Wuebbling Vice President and General Counsel
G. H. Schellpeper Vice President
8901 Indian Hills Drive
Omaha, Nebraska 68144
James J. Vance Treasurer
ITEM 26. -- PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
WITH THE DEPOSITOR OR REGISTRANT
The Western and Southern Life Insurance Company ("WSLIC"); Ohio corporation
Western-Southern Life Assurance Company ("WSLAC"); Ohio
corporation; 100% owned by WSLIC
Courtyard Nursing Care, Inc.; Ohio corporation; 100%
owned by WSLAC; ownership and operation of real estate.
5
<PAGE>
IFS Financial Services, Inc. ("IFS"); Ohio corporation;
100% owned by WSLAC; development and marketing of
financial products for distribution through financial
institutions.
IFS Systems, Inc.; Delaware corporation;
100% owned by IFS; development, marketing
and support of software systems.
IFS Insurance Agency, Inc.; Ohio
corporation; 99% owned by IFS, 1% owned by
William F. Ledwin; general insurance agency.
Touchstone Securities, Inc.; Nebraska
corporation; 100% owned by IFS; securities
broker-dealer.
Touchstone Advisors, Inc.; Ohio corporation;
100% owned by IFS; registered investment
adviser.
IFS Agency Services, Inc.; Pennsylvania
corporation; 100% owned by IFS; general
insurance agency.
IFS Agency, Inc.; Texas corporation; 100%
owned by an individual; general insurance
agency.
IFS General Agency, Inc.; Pennsylvania
corporation; 100% owned by William F.
Ledwin; general insurance agency.
Seasons Congregate Living, Inc.; Ohio corporation; 100% owned by
WSLIC; ownership and operation of real estate.
Latitudes at the Moors, Inc.; Florida corporation; 100% owned by
WSLIC; ownership and operation of real estate.
WestAd Inc.; Ohio corporation; 100% owned by WSLIC, general
advertising, book-selling and publishing.
Fort Washington Investment Advisors, Inc.; Ohio corporation;
100% owned by WSLIC; registered investment adviser.
Todd Investment Advisors, Inc.; Kentucky corporation,
100% owned by Fort Washington Investment Advisors,
Inc.; registered investment adviser.
Columbus Life Insurance Company; Ohio corporation; 100% owned by
WSLIC; insurance.
Colmain Properties, Inc.; Ohio corporation; 100% owned
by Columbus Life Insurance Company; acquiring, owning,
managing, leasing, selling real estate.
6
<PAGE>
Colpick, Inc.; Ohio corporation; 100% owned
by Colmain Properties, Inc.; acquiring,
owning, managing, leasing and selling real
estate.
CAI Holding Company, Inc.; Ohio corporation; 100% owned
by Columbus Life Insurance Company; holding company.
Capital Analysts Incorporated; Delaware
corporation; 100% owned by CAI Holding
Company; securities broker-dealer and
registered investment advisor.
Capital Analysts Agency, Inc.; Ohio
corporation; 99% owned by Capital Analysts
Incorporated, 1% owned by William F. Ledwin;
general insurance agency.
Capital Analysts Agency, Inc.; Texas
corporation; 100% owned by an individual who
is a resident of Texas, but under
contractual association with Capital
Analysts Incorporated; general insurance
agency.
Capital Analysts Insurance Agency, Inc.;
Massachusetts corporation; 100% owned by
Capital Analysts Incorporated; general
insurance agency.
CLIC Company I; Delaware corporation; 100% owned by
Columbus Life Insurance Company; holding company.
CLIC Company II; Delaware corporation; 100% owned by
Columbus Life Insurance Company; holding company.
Eagle Properties, Inc.; Ohio corporation; 100% owned by WSLIC;
ownership, development and management of real estate.
Seasons Management Company; Ohio corporation; 100 %
owned by Eagle Properties, Inc.; management of real
estate.
Waslic Company II; Delaware corporation; 100% owned by WSLIC;
holding company.
WestTax, Inc.; Ohio corporation, 100% owned by WSLIC;
preparation and electronic filing of tax returns.
Florida Outlet Marts, Inc.; Florida corporation; 100% owned by
WSLIC; ownership and operation of real estate.
AM Concepts Inc.; Delaware corporation, 100% owned by WSLIC;
venture capital investment in companies engaged in alternative
marketing of financial products.
7
<PAGE>
Western-Southern Agency, Inc.; Ohio corporation; 99% owned by
WSLIC; 1% owned by William F. Ledwin; general insurance agency.
Western-Southern Agency Services, Inc.; Pennsylvania
corporation; 100% owned by WSLIC; general insurance agency.
W-S Agency of Texas, Inc.; Texas corporation; 100% owned by an
individual; general insurance agency.
ITEM 27. -- NUMBER OF CONTRACT OWNERS
As of March 31, 1999, there were 13 owners of Qualified
Contracts and 25 owners of Non-Qualified Contracts offered pursuant to
this Registration Statement.
ITEM 28. -- INDEMNIFICATION
The Amended Code of Regulations of the Company provides that, to the
fullest extent not prohibited by applicable law, the Company shall
indemnify each director, officer and employee against any and all costs
and expenses (including attorney fees, judgments, fines, penalties,
amounts paid in settlement, and other disbursements) actually and
reasonably incurred by or imposed upon such director, officer or
employee in connection with any action, suit, investigation or
proceedings (or any claim or other matter therein), whether civil,
criminal, administrative or otherwise in nature, including any
settlements thereof of any appeals therein, with respect to which such
director, officer or employee is named or otherwise becomes or is
threatened to be made a party by reason of being or at any time having
been a director, officer or employee of the Company, or, at the
direction or request of the Company, a director, trustee, officer,
administrator, manager, employee, adviser or other agent of or fiduciary
for any other corporation, partnership, trust, venture or other entity
or enterprise including any employee benefit plan; provided, however,
that no person shall be indemnified to the extent, if any, that the
directors of the Company, acting at a meeting at which a quorum of
directors who are not parties to or threatened with any such action,
suit, investigation or proceeding, determine that such indemnification
is contrary to applicable law.
Any director of the Company who is a party to or threatened with any
such action, suit, investigation or proceeding shall not be qualified to
vote; and if for this reason a quorum of directors, who are not
disqualified from voting by reason of being parties to or threatened
with such action, suit, investigation or proceeding, cannot be obtained,
such determination shall be made by three attorneys at law, who have not
theretofore represented the Company in any matter and who shall be
selected by all of the officers and directors of the Company who are not
parties to or threatened with any such action, suit, investigation or
proceeding. If there are no officers or directors who are qualified to
make such selection, the selection shall be made by a Judge of the Court
of Common Pleas of Hamilton County, Ohio. Such indemnification shall not
be deemed exclusive of any other right to which such director, officer
or employee may be entitled under the Company's articles of
incorporation, code of regulations, any agreement, any insurance
purchased by the Company, vote of shareholders or otherwise.
8
<PAGE>
The Board of Directors of the Company also may, in its discretion,
secure and maintain insurance policies against any liability asserted
against and incurred by any of the Company's directors, officers or
employees.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant 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 the Registrant of expenses incurred or paid
by a trustee, director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted
by such trustee, director, officer or controlling person in connection
with the securities being registered, the Registrant 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
whether such indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication of such
issues.
ITEM 29. -- PRINCIPAL UNDERWRITERS
(a) Touchstone Securities, Inc. ("Touchstone") acts as distributor
for Contracts issued under Western-Southern Life Assurance
Company Separate Accounts 1 and 2 and as distributor for the
shares of several series (Funds) of Touchstone Series Trust
(formerly Select Advisors Trust A), each of which is affiliated
with the Depositor.
(b) Set forth below are the names, principal business addresses and
positions of each director and officer of Touchstone Securities.
NAME POSITION/OFFICE WITH
TOUCHSTONE SECURITIES
James N. Clark Director
400 Broadway
Cincinnati, Ohio 45202
Jill T. McGruder Director, Chief Executive
311 Pike Street Officer and President
Cincinnati, Ohio 45202
Edward S. Heenan Director and Controller
400 Broadway
Cincinnati, Ohio 45202
William F. Ledwin Director
400 Broadway
Cincinnati, Ohio 45202
Donald J. Wuebbling Director
400 Broadway
Cincinnati, Ohio 45202
9
<PAGE>
Richard K. Taulbee Vice President
400 Broadway
Cincinnati, Ohio 45202
Carl A. Ramsey Vice President
8901 Indian Hills Drive
Omaha, Nebraska 68114
E. Duane Clay Vice President
8901 Indian Hills Drive
Omaha, Nebraska 68114
Robert F. Morand Secretary
400 Broadway
Cincinnati, Ohio 45202
Patricia Wilson Chief Compliance Officer
311 Pike Street
Cincinnati, Ohio 45202
(c) The following table sets forth information about all commissions
and compensation received by the principal underwriter,
Touchstone Securities, Inc.
<TABLE>
<CAPTION>
Net Underwriting Discounts and Compensation on Brokerage Commissions Compensation
Commissions Redemptions
--------------------------------- --------------------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
$1,437,628 $ -0- $ -0- $ -0-
</TABLE>
ITEM 30. -- LOCATION OF ACCOUNTS AND RECORDS
Accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules
promulgated thereunder are maintained by the Company at 400 Broadway,
Cincinnati, Ohio 45202.
ITEM 31. -- MANAGEMENT SERVICES
Not Applicable.
ITEM 32. -- UNDERTAKINGS
Registrant undertakes to:
(a) file a post-effective amendment to this 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
Contracts may be accepted;
(b) include either (1) 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
(2) a postcard or similar written communication affixed to or
10
<PAGE>
included in the Prospectus that the applicant can remove to
send for a Statement of Additional Information; and
(c) deliver any Statement of Additional Information and any
financial statements required to be made available under this
Form promptly upon written or oral request directed to the
address or telephone number contained in the Prospectus.
Registrant represents that it is relying upon a "no-action" letter
issued to the American Council of Life Insurance concerning that
conflict between the redeemability requirements of sections 22(e),
27(c)(1) and 27(d) of the Investment Company Act of 1940 and the limits
on the redeemability of variable annuities imposed by Section
403(b)(11) of the Internal Revenue Code. The Registrant has included
disclosure concerning the 403(b)(11) restrictions in its prospectus and
sales literature, and established a procedure whereby each plan
participant will sign a statement acknowledging these restrictions
before a Contract is issued. Sales representatives have been instructed
to bring the restrictions to the attention of potential plan
participants.
Registrant represents that it is relying upon Rule 6c-7 promulgated
under the Investment Company Act of 1940, as amended, with respect to
offering variable annuity contracts to participants in the Texas
Optional Retirement Program ("Program") and that it has complied with
or will comply with the provisions of paragraphs (a)-(d) of Rule 6c-7.
Registrant has included appropriate disclosure regarding the
restrictions on redemption imposed by the Program in each registration
statement, including the prospectus, used in connection with the
Program. Registrant will (1) include appropriate disclosure regarding
the restrictions on redemption imposed by the Program in any sales
literature used in connection with the offer of annuity contracts to
Program participants, (2) instruct sales representatives who solicit
Program participants to purchase annuity contracts specifically to
bring the restrictions on redemption imposed by the Program to the
attention of potential Program participants, and (3) obtain from each
Program participant who purchases an annuity contract in connection
with the Program, prior to or at the time of such purchase, a signed
statement acknowledging the restrictions on redemption imposed by the
Program.
Pursuant to Section 26(e) of the Investment Company Act of 1940, as
amended, Western-Southern Life Assurance Company represents that, with
respect to the Contracts registered with the Commission by this
Registration Statement, as it may be amended, and offered by the
Prospectus included in this Registration Statement, all fees and
charges imposed for any purpose and in any manner and 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 the Western-Southern Life Assurance Company.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Depositor, on behalf of itself and the
Registrant, certifies that the Registrant meets the requirements of Securities
Act Rule 485(b) for effectiveness of this Post-Effective Amendment to
Registrant's Registration Statement and has duly caused this Post-Effective
Amendment No. 9 to Registrant's Registration Statement under the Securities Act
of 1933 (Touchstone Advisor Variable Annuity Contract) and Amendment No. 10 to
Registrant's Registration Statement under the Investment Company Act of 1940 to
be signed on its behalf, in the City of Cincinnati and State of Ohio on the
27th day of April, 1999.
WESTERN-SOUTHERN LIFE ASSURANCE
COMPANY SEPARATE ACCOUNT 2
By WESTERN-SOUTHERN LIFE
ASSURANCE COMPANY
By /S/ EDWARD S. HEENAN
Edward S. Heenan,
Vice President and Controller
As required by the Securities Act of 1933, this Registration Statement
has been signed below by the following persons in the capacities and on the
date(s) indicated below.
PRINCIPAL EXECUTIVE OFFICER:
/S/ JOHN F. BARRET April 27th, 1999
- ------------------
John F. Barrett,
President, Director and
Chief Executive Officer
PRINCIPAL FINANCIAL OFFICER:
JAMES J. VANCE April 27th, 1999
James J. Vance,
Treasurer
DIRECTORS:
DONALD A. BLISS
JAMES N. CLARK
LAWRENCE C. HAWKINS
JAMES E. HOFF, S.J. By /s/ Edward S. Heenan
J. HAROLD KOTTE Edward S. Heenan
EUGENE P. RUEHLMANN as attorney-in fact gor each Director
GEORGE H. WALKER
THOMAS L. WILLIAMS April 27th, 1999
WILLIAM J. WILLIAMS
<PAGE>
EXHIBIT DESCRIPTION PAGE
10 Consent of PricewaterhouseCoopers LLP 110
99 Powers of Attorney - Directors of the Company 111
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form N-4 (File
No. 033-7-9906) of our reports, dated April 26, 1999 and January 22, 1999,
respectively, on our audits of the financial statements of Western-Southern Life
Assurance Company and Western-Southern Life Assurance Company Seperate
Account 2, which appear in such Registration Statement. We consent to the
reference to us under the heading "Experts" in such Registratio Statement.
/s/ PricewaterhouseCoppers LLP
Cincinnati, Ohio
April 28, 1999
POWER OF ATTORNEY
WHEREAS, WESTERN-SOUTHERN LIFE ASSURANCE COMPANY, an Ohio corporation
(the "Company"), proposes to file with the Securities and Exchange Commission on
or before May 1, 1999, pursuant to the provisions of the Securities Act of 1933,
as amended, and the rules and regulations thereunder, and the Investment Company
Act of 1940, as amended, and the rules and regulations thereunder,
post-effective amendments to the registration statements of the Company's
Separate Account 1 and post-effective amendments to the registration statement
of the Company's Separate Account 2 (collectively, the "Post-Effective
Amendments"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Edward
S. Heenan and Robert L. Walker his attorneys in fact, for him and in his name,
place and stead and in his office and capacity with the Company, to execute and
file the Post-Effective Amendments, including the prospectuses, statements of
additional information and exhibits included therein, and thereafter to execute
and file any additional amended post-effective amendment or amendments, amended
prospectus or prospectuses, amended statement or statements of additional
information, amended exhibits or any supplements to any of the foregoing
(collectively, the "Amended Documents"), hereby giving and granting to said
attorneys full power and authority to do and perform each and every act and
thing whatsoever requisite and necessary to be done in and about the premises as
fully to all intents and purposes as he might or could do if personally present
at the doing thereof, hereby ratifying and confirming all that said attorneys
may or shall lawfully do or cause to be done by virtue hereof.
This authority hereby granted is limited to the execution and delivery
of the Post-Effective Amendments and Amended Documents and included documents
and, unless earlier revoked by me or expressly extended by me in writing, shall
remain in force and effective only until such Post-Effective Amendments shall
have become effective under the federal securities laws and in any event no
later than June 30, 1999.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
19th day of April, 1999.
/s/ John F. Barrett
John F. Barrett
<PAGE>
POWER OF ATTORNEY
WHEREAS, WESTERN-SOUTHERN LIFE ASSURANCE COMPANY, an Ohio corporation
(the "Company"), proposes to file with the Securities and Exchange Commission on
or before May 1, 1999, pursuant to the provisions of the Securities Act of 1933,
as amended, and the rules and regulations thereunder, and the Investment Company
Act of 1940, as amended, and the rules and regulations thereunder,
post-effective amendments to the registration statements of the Company's
Separate Account 1 and post-effective amendments to the registration statement
of the Company's Separate Account 2 (collectively, the "Post-Effective
Amendments"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints John F.
Barrett, Edward S. Heenan and Robert L. Walker, and each of them individually,
his attorney in fact, for him and in his name, place and stead and in his office
and capacity with the Company, to execute and file the Post-Effective
Amendments, including the prospectuses, statements of additional information and
exhibits included therein, and thereafter to execute and file any additional
amended post-effective amendment or amendments, amended prospectus or
prospectuses, amended statement or statements of additional information, amended
exhibits or any supplements to any of the foregoing (collectively, the "Amended
Documents"), hereby giving and granting to said attorneys full power and
authority to do and perform each and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully do
or cause to be done by virtue hereof.
This authority hereby granted is limited to the execution and delivery
of the Post-Effective Amendments and Amended Documents and included documents
and, unless earlier revoked by me or expressly extended by me in writing, shall
remain in force and effective only until such Post-Effective Amendments shall
have become effective under the federal securities laws and in any event no
later than June 30, 1999.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
23rd day of April, 1999.
/s/ Donald A. Bliss
Donald A. Bliss
<PAGE>
POWER OF ATTORNEY
WHEREAS, WESTERN-SOUTHERN LIFE ASSURANCE COMPANY, an Ohio corporation
(the "Company"), proposes to file with the Securities and Exchange Commission on
or before May 1, 1999, pursuant to the provisions of the Securities Act of 1933,
as amended, and the rules and regulations thereunder, and the Investment Company
Act of 1940, as amended, and the rules and regulations thereunder,
post-effective amendments to the registration statements of the Company's
Separate Account 1 and post-effective amendments to the registration statement
of the Company's Separate Account 2 (collectively, the "Post-Effective
Amendments"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints John F.
Barrett, Edward S. Heenan and Robert L. Walker, and each of them individually,
his attorney in fact, for him and in his name, place and stead and in his office
and capacity with the Company, to execute and file the Post-Effective
Amendments, including the prospectuses, statements of additional information and
exhibits included therein, and thereafter to execute and file any additional
amended post-effective amendment or amendments, amended prospectus or
prospectuses, amended statement or statements of additional information, amended
exhibits or any supplements to any of the foregoing (collectively, the "Amended
Documents"), hereby giving and granting to said attorneys full power and
authority to do and perform each and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully do
or cause to be done by virtue hereof.
This authority hereby granted is limited to the execution and delivery
of the Post-Effective Amendments and Amended Documents and included documents
and, unless earlier revoked by me or expressly extended by me in writing, shall
remain in force and effective only until such Post-Effective Amendments shall
have become effective under the federal securities laws and in any event no
later than June 30, 1999.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
16th day of April, 1999.
/s/ James N. Clark
James N. Clark
<PAGE>
POWER OF ATTORNEY
WHEREAS, WESTERN-SOUTHERN LIFE ASSURANCE COMPANY, an Ohio corporation
(the "Company"), proposes to file with the Securities and Exchange Commission on
or before May 1, 1999, pursuant to the provisions of the Securities Act of 1933,
as amended, and the rules and regulations thereunder, and the Investment Company
Act of 1940, as amended, and the rules and regulations thereunder,
post-effective amendments to the registration statements of the Company's
Separate Account 1 and post-effective amendments to the registration statement
of the Company's Separate Account 2 (collectively, the "Post-Effective
Amendments"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints John F.
Barrett, Edward S. Heenan and Robert L. Walker, and each of them individually,
his attorney in fact, for him and in his name, place and stead and in his office
and capacity with the Company, to execute and file the Post-Effective
Amendments, including the prospectuses, statements of additional information and
exhibits included therein, and thereafter to execute and file any additional
amended post-effective amendment or amendments, amended prospectus or
prospectuses, amended statement or statements of additional information, amended
exhibits or any supplements to any of the foregoing (collectively, the "Amended
Documents"), hereby giving and granting to said attorneys full power and
authority to do and perform each and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully do
or cause to be done by virtue hereof.
This authority hereby granted is limited to the execution and delivery
of the Post-Effective Amendments and Amended Documents and included documents
and, unless earlier revoked by me or expressly extended by me in writing, shall
remain in force and effective only until such Post-Effective Amendments shall
have become effective under the federal securities laws and in any event no
later than June 30, 1999.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of April, 1999.
/s/ Dr. Lawrence C. Hawkins
Dr. Lawrence C. Hawkins
<PAGE>
POWER OF ATTORNEY
WHEREAS, WESTERN-SOUTHERN LIFE ASSURANCE COMPANY, an Ohio corporation
(the "Company"), proposes to file with the Securities and Exchange Commission on
or before May 1, 1999, pursuant to the provisions of the Securities Act of 1933,
as amended, and the rules and regulations thereunder, and the Investment Company
Act of 1940, as amended, and the rules and regulations thereunder,
post-effective amendments to the registration statements of the Company's
Separate Account 1 and post-effective amendments to the registration statement
of the Company's Separate Account 2 (collectively, the "Post-Effective
Amendments"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints John F.
Barrett, Edward S. Heenan and Robert L. Walker, and each of them individually,
his attorney in fact, for him and in his name, place and stead and in his office
and capacity with the Company, to execute and file the Post-Effective
Amendments, including the prospectuses, statements of additional information and
exhibits included therein, and thereafter to execute and file any additional
amended post-effective amendment or amendments, amended prospectus or
prospectuses, amended statement or statements of additional information, amended
exhibits or any supplements to any of the foregoing (collectively, the "Amended
Documents"), hereby giving and granting to said attorneys full power and
authority to do and perform each and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully do
or cause to be done by virtue hereof.
This authority hereby granted is limited to the execution and delivery
of the Post-Effective Amendments and Amended Documents and included documents
and, unless earlier revoked by me or expressly extended by me in writing, shall
remain in force and effective only until such Post-Effective Amendments shall
have become effective under the federal securities laws and in any event no
later than June 30, 1999.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of April, 1999.
/s/ Dr. J. Harold Kotte
Dr. J. Harold Kotte
<PAGE>
POWER OF ATTORNEY
WHEREAS, WESTERN-SOUTHERN LIFE ASSURANCE COMPANY, an Ohio corporation
(the "Company"), proposes to file with the Securities and Exchange Commission on
or before May 1, 1999, pursuant to the provisions of the Securities Act of 1933,
as amended, and the rules and regulations thereunder, and the Investment Company
Act of 1940, as amended, and the rules and regulations thereunder,
post-effective amendments to the registration statements of the Company's
Separate Account 1 and post-effective amendments to the registration statement
of the Company's Separate Account 2 (collectively, the "Post-Effective
Amendments"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints John F.
Barrett, Edward S. Heenan and Robert L. Walker, and each of them individually,
his attorney in fact, for him and in his name, place and stead and in his office
and capacity with the Company, to execute and file the Post-Effective
Amendments, including the prospectuses, statements of additional information and
exhibits included therein, and thereafter to execute and file any additional
amended post-effective amendment or amendments, amended prospectus or
prospectuses, amended statement or statements of additional information, amended
exhibits or any supplements to any of the foregoing (collectively, the "Amended
Documents"), hereby giving and granting to said attorneys full power and
authority to do and perform each and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully do
or cause to be done by virtue hereof.
This authority hereby granted is limited to the execution and delivery
of the Post-Effective Amendments and Amended Documents and included documents
and, unless earlier revoked by me or expressly extended by me in writing, shall
remain in force and effective only until such Post-Effective Amendments shall
have become effective under the federal securities laws and in any event no
later than June 30, 1999.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of April, 1999.
/s/ Eugene P. Ruehlmann
Eugene P. Ruehlmann
<PAGE>
POWER OF ATTORNEY
WHEREAS, WESTERN-SOUTHERN LIFE ASSURANCE COMPANY, an Ohio corporation
(the "Company"), proposes to file with the Securities and Exchange Commission on
or before May 1, 1999, pursuant to the provisions of the Securities Act of 1933,
as amended, and the rules and regulations thereunder, and the Investment Company
Act of 1940, as amended, and the rules and regulations thereunder,
post-effective amendments to the registration statements of the Company's
Separate Account 1 and post-effective amendments to the registration statement
of the Company's Separate Account 2 (collectively, the "Post-Effective
Amendments"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints John F.
Barrett, Edward S. Heenan and Robert L. Walker, and each of them individually,
his attorney in fact, for him and in his name, place and stead and in his office
and capacity with the Company, to execute and file the Post-Effective
Amendments, including the prospectuses, statements of additional information and
exhibits included therein, and thereafter to execute and file any additional
amended post-effective amendment or amendments, amended prospectus or
prospectuses, amended statement or statements of additional information, amended
exhibits or any supplements to any of the foregoing (collectively, the "Amended
Documents"), hereby giving and granting to said attorneys full power and
authority to do and perform each and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully do
or cause to be done by virtue hereof.
This authority hereby granted is limited to the execution and delivery
of the Post-Effective Amendments and Amended Documents and included documents
and, unless earlier revoked by me or expressly extended by me in writing, shall
remain in force and effective only until such Post-Effective Amendments shall
have become effective under the federal securities laws and in any event no
later than June 30, 1999.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of April, 1999.
/s/ Thomas L. Williams
Thomas L. Williams
<PAGE>
POWER OF ATTORNEY
WHEREAS, WESTERN-SOUTHERN LIFE ASSURANCE COMPANY, an Ohio corporation
(the "Company"), proposes to file with the Securities and Exchange Commission on
or before May 1, 1999, pursuant to the provisions of the Securities Act of 1933,
as amended, and the rules and regulations thereunder, and the Investment Company
Act of 1940, as amended, and the rules and regulations thereunder,
post-effective amendments to the registration statements of the Company's
Separate Account 1 and post-effective amendments to the registration statement
of the Company's Separate Account 2 (collectively, the "Post-Effective
Amendments"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints John F.
Barrett, Edward S. Heenan and Robert L. Walker, and each of them individually,
his attorney in fact, for him and in his name, place and stead and in his office
and capacity with the Company, to execute and file the Post-Effective
Amendments, including the prospectuses, statements of additional information and
exhibits included therein, and thereafter to execute and file any additional
amended post-effective amendment or amendments, amended prospectus or
prospectuses, amended statement or statements of additional information, amended
exhibits or any supplements to any of the foregoing (collectively, the "Amended
Documents"), hereby giving and granting to said attorneys full power and
authority to do and perform each and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully do
or cause to be done by virtue hereof.
This authority hereby granted is limited to the execution and delivery
of the Post-Effective Amendments and Amended Documents and included documents
and, unless earlier revoked by me or expressly extended by me in writing, shall
remain in force and effective only until such Post-Effective Amendments shall
have become effective under the federal securities laws and in any event no
later than June 30, 1999.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
16th day of April, 1999.
/s/ William J. Williams
William J. Williams
<PAGE>
POWER OF ATTORNEY
WHEREAS, WESTERN-SOUTHERN LIFE ASSURANCE COMPANY, an Ohio corporation
(the "Company"), proposes to file with the Securities and Exchange Commission on
or before May 1, 1999, pursuant to the provisions of the Securities Act of 1933,
as amended, and the rules and regulations thereunder, and the Investment Company
Act of 1940, as amended, and the rules and regulations thereunder,
post-effective amendments to the registration statements of the Company's
Separate Account 1 and post-effective amendments to the registration statement
of the Company's Separate Account 2 (collectively, the "Post-Effective
Amendments"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints John F.
Barrett, Edward S. Heenan and Robert L. Walker, and each of them individually,
his attorney in fact, for him and in his name, place and stead and in his office
and capacity with the Company, to execute and file the Post-Effective
Amendments, including the prospectuses, statements of additional information and
exhibits included therein, and thereafter to execute and file any additional
amended post-effective amendment or amendments, amended prospectus or
prospectuses, amended statement or statements of additional information, amended
exhibits or any supplements to any of the foregoing (collectively, the "Amended
Documents"), hereby giving and granting to said attorneys full power and
authority to do and perform each and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully do
or cause to be done by virtue hereof.
This authority hereby granted is limited to the execution and delivery
of the Post-Effective Amendments and Amended Documents and included documents
and, unless earlier revoked by me or expressly extended by me in writing, shall
remain in force and effective only until such Post-Effective Amendments shall
have become effective under the federal securities laws and in any event no
later than June 30, 1999.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of April, 1999.
/s/ George H. Walker
George H. Walker
<PAGE>
POWER OF ATTORNEY
WHEREAS, WESTERN-SOUTHERN LIFE ASSURANCE COMPANY, an Ohio corporation
(the "Company"), proposes to file with the Securities and Exchange Commission on
or before May 1, 1999, pursuant to the provisions of the Securities Act of 1933,
as amended, and the rules and regulations thereunder, and the Investment Company
Act of 1940, as amended, and the rules and regulations thereunder,
post-effective amendments to the registration statements of the Company's
Separate Account 1 and post-effective amendments to the registration statement
of the Company's Separate Account 2 (collectively, the "Post-Effective
Amendments"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints John F.
Barrett, Edward S. Heenan and Robert L. Walker, and each of them individually,
his attorney in fact, for him and in his name, place and stead and in his office
and capacity with the Company, to execute and file the Post-Effective
Amendments, including the prospectuses, statements of additional information and
exhibits included therein, and thereafter to execute and file any additional
amended post-effective amendment or amendments, amended prospectus or
prospectuses, amended statement or statements of additional information, amended
exhibits or any supplements to any of the foregoing (collectively, the "Amended
Documents"), hereby giving and granting to said attorneys full power and
authority to do and perform each and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully do
or cause to be done by virtue hereof.
This authority hereby granted is limited to the execution and delivery
of the Post-Effective Amendments and Amended Documents and included documents
and, unless earlier revoked by me or expressly extended by me in writing, shall
remain in force and effective only until such Post-Effective Amendments shall
have become effective under the federal securities laws and in any event no
later than June 30, 1999.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of April, 1999.
/s/ Rev. James E. Hoff, S.J.
Rev. James E. Hoff, S.J.
