As filed with the Securities and Exchange Commission on April 28, 2000
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. 10 [ X ]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 11 [ 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)
___ immediately upon filing pursuant to paragraph (b) of rule 485
XX on May 1, 2000 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
<PAGE>
<TABLE>
<CAPTION>
WESTERN-SOUTHERN LIFE ASSURANCE COMPANY SEPARATE ACCOUNT 2
TOUCHSTONE ADVISOR VARIABLE ANNUITY CONTRACT
CROSS-REFERENCE SHEET REQUIRED BY RULE 495(A)
FORM N-4 PART A ITEM NO. HEADING IN PROSPECTUS
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<S> <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
1
<PAGE>
<CAPTION>
FORM N-4 PART A ITEM NO. HEADING IN PROSPECTUS
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<S> <C>
(b) Allocations, transfers
and exchanges Purchasing Your Contract, Transferring Your Money
(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 contract value 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
2
<PAGE>
<CAPTION>
FORM N-4 PART A ITEM NO. HEADING IN PROSPECTUS
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<S> <C>
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 Information Table of Contents of Statement of Additional Information
<CAPTION>
FORM N-4 PART B ITEM NO. HEADING IN SAI OR PROSPECTUS
- --------------------------------------------- --------------------------------------------------
<S> <C>
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 accountant 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
3
<PAGE>
<CAPTION>
FORM N-4 PART B ITEM NO. HEADING IN SAI OR PROSPECTUS
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<S> <C>
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>
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.
<PAGE>
TOUCHSTONE ADVISOR VARIABLE ANNUITY
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PROSPECTUS
May 1, 2000
Western-Southern Life Assurance Company
Separate Account 2
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:
o AIM V.I. GROWTH o TOUCHSTONE EMERGING GROWTH
o AIM V.I. GOVERNMENT SECURITIES o TOUCHSTONE INTERNATIONAL EQUITY
o ALGER AMERICAN SMALL CAPITALIZATION o TOUCHSTONE HIGH YIELD
o ALGER AMERICAN GROWTH o TOUCHSTONE VALUE PLUS
o DEUTSCHE VIT EQUITY 500 INDEX o TOUCHSTONE GROWTH & INCOME
o MFS VIT EMERGING GROWTH o TOUCHSTONE ENHANCED 30
o MFS VIT GROWTH WITH INCOME o TOUCHSTONE BALANCED
o PIMCO LONG-TERM U.S. GOVERNMENT BOND o TOUCHSTONE BOND
o TOUCHSTONE SMALL CAP VALUE o TOUCHSTONE STANDBY INCOME
Each Sub-Account invests in a separately managed Fund.
The Statement of Additional Information dated May 1, 2000 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 48 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. The description of the Contract in
this Prospectus is subject to the specific terms of your Contract as it contains
specific contractual provisions and conditions. If the terms of your Contract
differ from the description of the Contract in the Prospectus, you should rely
on the terms in your Contract.
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
TABLE OF CONTENTS
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PAGE
Cover Page................................................................... 1
Table Of Contents............................................................ 3
Glossary..................................................................... 4
Fee And Expense Tables....................................................... 5
Summary...................................................................... 8
Purchasing Your Contract..................................................... 11
Transferring Your Money...................................................... 13
Accessing Your Money......................................................... 15
Charges...................................................................... 17
Information About The Investment Options..................................... 19
Valuation Of Your Investments................................................ 21
Performance Information...................................................... 22
Annuity Income Payment Options............................................... 23
Guaranteed Death Benefit..................................................... 26
WSLAC And Separate Account 2................................................. 27
Underwriter.................................................................. 28
Voting Rights................................................................ 29
Other Information About Your Contract........................................ 30
Federal Income Tax Information............................................... 32
Supplement A: Accumulation Unit Values...................................... 38
Supplement B: Section 401 Plans and Section 403(b) Plans.................... 40
Supplement C: State of Texas Optional Retirement Program................... 45
Table Of Contents For Statement Of Additional Information.................... 48
3
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
GLOSSARY
GLOSSARY
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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.
YOU AND YOUR
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The owner of the Contract.
4
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
FEE AND EXPENSE TABLES
FEE 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 17 and 18.
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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<TABLE>
<CAPTION>
=========================================================
== Fund Average ==
== (as a percentage of average daily net assets ==
== and after expense reimbursement)*** ==
== ==
== Advisor Fee Other Expenses Total Expenses ==
=========================================================
<S> <C> <C> <C>
AIM V.I. GROWTH 0.63% 0.10% 0.73%
- --------------------------------------------------------------------------------------------
AIM V.I. GOVERNMENT SECURITIES 0.50% 0.40% 0.90%
- --------------------------------------------------------------------------------------------
ALGER AMERICAN
SMALL CAPITALIZATION 0.85% 0.05% 0.90%
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ALGER AMERICAN GROWTH 0.75% 0.04% 0.79%
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DEUTSCHE VIT EQUITY 500 INDEX 0.20% 0.10% 0.30%
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MFS VIT EMERGING GROWTH 0.75% 0.09% 0.84%
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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 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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</TABLE>
* In certain states and for certain retirement plans, we can waive, reduce or
eliminate the annual contract maintenance charge.
* * Since the Touchstone Small Cap Value, High Yield and Enhanced 30 Funds
commenced operations in 1999, expenses for these Funds in this table and the
following table are based on estimates.
5
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
FEE AND EXPENSE TABLES
- --------------------------------------------------------------------------------
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 Bankers Trust Company has agreed to waive its advisory fee and to
reimburse the Deutsche VIT Equity 500 Index Fund so that the Fund's
total operating expenses will not exceed 0.30%.
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 each Fund's expenses do
not exceed the percentage listed for that Fund in this table. The
agreement will remain in place until at least December 31, 2000.
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" column in the preceding table.
================================
== Total Expenses ==
== (Before reimbursement) ==
================================
AIM V.I. GROWTH 0.73%
- --------------------------------------------------------------------------------
AIM V.I. GOVERNMENT SECURITIES 0.90%
- --------------------------------------------------------------------------------
ALGER AMERICAN SMALL CAPITALIZATION 0.90%
- --------------------------------------------------------------------------------
ALGER AMERICAN GROWTH 0.79%
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DEUTSCHE VIT EQUITY 500 INDEX 0.43%
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MFS VIT EMERGING GROWTH 0.84%
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MFS VIT GROWTH WITH INCOME 0.88%
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PIMCO LONG-TERM U.S. GOVERNMENT BOND 0.71%
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TOUCHSTONE SMALL CAP VALUE 2.03%*
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TOUCHSTONE EMERGING GROWTH 1.42%
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TOUCHSTONE INTERNATIONAL EQUITY 1.84%
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TOUCHSTONE HIGH YIELD 1.53%*
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TOUCHSTONE VALUE PLUS 2.37%
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TOUCHSTONE GROWTH & INCOME 1.28%
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TOUCHSTONE ENHANCED 30 1.77%*
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TOUCHSTONE BALANCED 1.35%
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TOUCHSTONE BOND 1.07%
- --------------------------------------------------------------------------------
TOUCHSTONE STANDBY INCOME 0.87%
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* Ratios are annualized.
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 on
the previous page in the column entitled "Total Expenses" in the "Fund Expenses"
table. Your actual costs may be higher or lower than the costs shown in the
examples.
6
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
FEE AND EXPENSE TABLES
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<TABLE>
<CAPTION>
===========================================================================================
== Example 1 This example assumes that you surrender your Contract at the end of the ==
== applicable time period. ==
===========================================================================================
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
AIM V.I. Growth $19 $59 $101 $219
AIM V.I. Government Securities $21 $64 $110 $238
Alger American Small Capitalization $21 $64 $110 $238
Alger American Growth $20 $61 $105 $228
Deutsche VIT Equity 500 Index $15 $46 $ 79 $172
MFS VIT Emerging Growth $20 $62 $107 $231
MFS VIT Growth with Income $21 $64 $109 $236
PIMCO Long-Term U.S. Government Bond $18 $57 $ 97 $211
Touchstone Small Cap Value $22 $68 * *
Touchstone Emerging Growth $23 $72 $124 $264
Touchstone International Equity $24 $75 $129 $275
Touchstone High Yield $20 $61 * *
Touchstone Value Plus $23 $72 $124 $264
Touchstone Growth & Income $20 $63 $108 $232
Touchstone Enhanced 30 $19 $60 * *
Touchstone Balanced $21 $64 $110 $238
Touchstone Bond $19 $60 $102 $222
Touchstone Standby Income $17 $52 $ 89 $194
</TABLE>
<TABLE>
<CAPTION>
===========================================================================================
== 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. ==
===========================================================================================
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
AIM V.I. Growth $19 $59 $101 $219
AIM V.I. Government Securities $21 $64 $110 $238
Alger American Small Capitalization $21 $64 $110 $238
Alger American Growth $20 $61 $105 $228
Deutsche VIT Equity 500 Index $15 $46 $ 79 $172
MFS VIT Emerging Growth $20 $62 $107 $231
MFS VIT Growth with Income $21 $64 $109 $236
PIMCO Long-Term U.S. Government Bond $18 $57 $ 97 $211
Touchstone Small Cap Value $22 $68 * *
Touchstone Emerging Growth $23 $72 $124 $264
Touchstone International Equity $24 $75 $129 $275
Touchstone High Yield $20 $61 * *
Touchstone Value Plus $23 $72 $124 $264
Touchstone Growth & Income $20 $63 $108 $232
Touchstone Enhanced 30 $19 $60 * *
Touchstone Balanced $21 $64 $110 $238
Touchstone Bond $19 $60 $102 $222
Touchstone Standby Income $17 $52 $ 89 $194
</TABLE>
<TABLE>
<CAPTION>
===========================================================================================
== Example 3 This example assumes that you do not surrender your Contract. ==
===========================================================================================
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
AIM V.I. Growth $19 $59 $101 $219
AIM V.I. Government Securities $21 $64 $110 $238
Alger American Small Capitalization $21 $64 $110 $238
Alger American Growth $20 $61 $105 $228
Deutsche VIT Equity 500 Index $15 $46 $ 79 $172
MFS VIT Emerging Growth $20 $62 $107 $231
MFS VIT Growth with Income $21 $64 $109 $236
PIMCO Long-Term U.S. Government Bond $18 $57 $ 97 $211
Touchstone Small Cap Value $22 $68 * *
Touchstone Emerging Growth $23 $72 $124 $264
Touchstone International Equity $24 $75 $129 $275
Touchstone High Yield $20 $61 * *
Touchstone Value Plus $23 $72 $124 $264
Touchstone Growth & Income $20 $63 $108 $232
Touchstone Enhanced 30 $19 $60 * *
Touchstone Balanced $21 $64 $110 $238
Touchstone Bond $19 $60 $102 $222
Touchstone Standby Income $17 $52 $ 89 $194
</TABLE>
* Information is shown for Funds with 10 months of operations.
7
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
SUMMARY
SUMMARY
- --------------------------------------------------------------------------------
This summary highlights some basic information about the Touchstone Advisor
Variable Annuity Contract. More information about the Contract is located on
pages 11 through 31 of this Prospectus. If the terms of your Contract differ
from the description of the Contract in this Prospectus, you should rely on the
terms of your Contract.
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.
8
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
SUMMARY
- --------------------------------------------------------------------------------
SUB-ACCOUNTS
Depending on market conditions, you can make or lose money in any Sub-Account.
o AIM V.I. Growth o Touchstone Emerging Growth
o AIM V.I.Government Securities o Touchstone International Equity
o Alger American Small Capitalization o Touchstone High Yield
o Alger American Growth o Touchstone Value Plus
o Deutsche VIT Equity 500 Index o Touchstone Growth & Income
o MFS VIT Emerging Growth o Touchstone Enhanced 30
o MFS VIT Growth with Income o Touchstone Balanced
o PIMCO Long-Term U.S. Government Bond o Touchstone Bond
o Touchstone Small Cap Value o 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.
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 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.
9
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
SUMMARY
- --------------------------------------------------------------------------------
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 that commenced operations
before January 1, 2000 are shown in Supplement A on pages 38 and 39.
10
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
PURCHASING YOUR CONTRACT
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
o You can purchase a Contract for $5,000 or more.
o A purchase of over $500,000 may be made with prior approval from
Touchstone.
o 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.
o 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.
o AIM V.I. Growth o Touchstone Emerging Growth
o AIM V.I.Government Securities o Touchstone International Equity
o Alger American Small Capitalization o Touchstone High Yield
o Alger American Growth o Touchstone Value Plus
o Deutsche VIT Equity 500 Index o Touchstone Growth & Income
o MFS VIT Emerging Growth o Touchstone Enhanced 30
o MFS VIT Growth with Income o Touchstone Balanced
o PIMCO Long-Term U.S. Government Bond o Touchstone Bond
o Touchstone Small Cap Value o 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.
11
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
PURCHASING YOUR CONTRACT
- --------------------------------------------------------------------------------
The following guidelines apply to the allocation of your purchase payments:
o Allocate at least 1% of your initial purchase payment to each
investment option you choose.
o Use whole percentages. For example, you can allocate 33% or 34%
to an investment option, not 33 1/3%.
o 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:
o Your Social Security number
o Your Contract number or other precise information that identifies
your Contract
o Your allocation instructions
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:
o Your Contract number or other precise information that identifies
your Contract
o Your allocation instructions
[SIDEBAR]: ***You should review your selected investment options and allocations
periodically to determine if they are appropriate considering
market conditions and your financial objectives.
12
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
TRANSFERRING YOUR MONEY
TRANSFERRING YOUR MONEY
- --------------------------------------------------------------------------------
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:
o Each transfer must be at least $250.
o The allocation to each investment option must be at least 1% of
the total transfer amount.
o 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 transfer your money.
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:
o Your Social Security number
o Your Contract number or other precise information that identifies
your Contract
o 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:
o Your Contract number or other precise information that identifies
your Contract
o Your transfer instructions
THIRD PARTY AUTHORIZATION
You can authorize a third party to transfer money for you. To do so, you must
complete the telephone access authorization section of the application or a
Telephone Authorization Form. Contact us at the Touchstone Variable Annuity
Service Center at 800.669.2796 (press 2) for additional information.
13
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
TRANSFERRING YOUR MONEY
- --------------------------------------------------------------------------------
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:
o A specific dollar amount
o A specific percentage of your money in the Touchstone Standby
Income Sub-Account
o 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:
o Your Contract Value must be at least $10,000.
o Dollar cost averaging transfers must continue for at least 12
months.
o Each transfer must be at least $200.
o The allocation to each Sub-Account must be at least 1% of the
transfer amount.
To set up dollar cost averaging transfers, sign and complete the dollar cost
averaging section of the application or the Dollar Cost Averaging Form. These
forms can be obtained from 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.
[SIDEBAR] ***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.
14
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
ACCESSING YOUR MONEY
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:
o Include your Contract number or other information that identifies
your Contract and the amount to be withdrawn in your
instructions.
o Each withdrawal must be at least $250.
o 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.
15
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
ACCESSING YOUR MONEY
- --------------------------------------------------------------------------------
PENALTY TAXES
If you withdraw money from your Contract or cancel your Contract before you or
the Annuitant (as applicable) reach age 59 1/2, 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 page 34.
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, if you have
25% of your money in the Touchstone International Equity 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 International Equity
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:
o The New York Stock Exchange is closed on a day that it normally
would be open.
o Trading on the New York Stock Exchange is restricted.
o 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.
o The SEC permits us to postpone payments from the Sub-Accounts for
your protection.
16
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
CHARGES
CHARGES
- --------------------------------------------------------------------------------
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.
<TABLE>
<CAPTION>
===================================================================
== Contract Maintenance Contract Administration ==
== Charge Charge ==
===================================================================
<S> <C> <C>
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
WHEN CHARGED? surrender your Contract.
--------------------------------------------------------------------------------
o $35 each year o The effective annual rate
HOW MUCH CHARGED? of the charge is 0.10%.
------------------------------------------------------------------------------------
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.
HOW CHARGED? is reduced.
-------------------------------------------------------------------------------
</TABLE>
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.
17
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
CHARGES
- --------------------------------------------------------------------------------
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:
o We pay the premium tax.
o You surrender or withdraw money from your Contract.
o The death benefit is paid.
o Annuity payments begin.
18
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
INFORMATION ABOUT THE INVESTMENT OPTIONS
INFORMATION ABOUT THE INVESTMENT OPTIONS
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 ==
=============================================================================================
<S> <C> <C>
AIM V.I. Growth The Fund seeks to provide growth of capital. AIM Advisors, Inc.
--------------------------------------------------------------------------------------------------------------
AIM V.I. The Fund seeks to achieve a high level of
Government current income consistent with reasonable
Securities concern for safety of principal. AIM Advisors, Inc.
---------------------------------------------------------------------------------------------------------
Alger American The Fund seeks to provide long-term
Small Capitalization capital appreciation. Fred Alger Management, Inc.
-------------------------------------------------------------------------------------------------------------------
Alger The Fund seeks to provide long-term
American Growth capital appreciation. Fred Alger Management, Inc.
--------------------------------------------------------------------------------------------------------------
Deutsche VIT The Fund seeks to match the
Equity 500 Index performance of the S&P 500. Bankers Trust Company
---------------------------------------------------------------------------------------------------------------
MFS VIT The Fund seeks to provide long-term Massachusetts Financial
Emerging Growth growth of capital. Services Company
--------------------------------------------------------------------------------------------------------------
The Fund seeks to provide reasonable
MFS VIT Growth current income and long-term Massachusetts Financial
with Income capital and income growth. Services Company
-------------------------------------------------------------------------------------------------------------
The Fund seeks to maximize total
PIMCO Long-Term return, consistent with the
U.S. Government preservation of capital and Pacific Investment
Bond prudent investment management. Management Company
--------------------------------------------------------------------------------------------------------------
Touchstone The Fund seeks long-term growth
Small Cap Value of capital. Todd Investment Advisors, Inc.*
--------------------------------------------------------------------------------------------------------------
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
International Equity its shares over the long-term. Credit Suisse Asset Management*
-------------------------------------------------------------------------------------------------------------------
</TABLE>
*Sub-Advisors to Touchstone Advisors, Inc.
19
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
INFORMATION ABOUT THE INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
=============================================================================================
== Investment Objective Advisors/Sub-Advisors ==
=============================================================================================
<S> <C> <C>
The Fund seeks to achieve a high level
TOUCHSTONE of current income as its main goal with Fort Washington Investment
HIGH YIELD capital appreciation as a secondary goal. Advisors, Inc.*
---------------------------------------------------------------------------------------------------------
TOUCHSTONE The Fund seeks to increase the value FortWashington Investment
VALUE PLUS of its shares over the long-term. Advisors, Inc.*
---------------------------------------------------------------------------------------------------------
The Fund seeks to increase the value
TOUCHSTONE of its shares over the long-term,
GROWTH & INCOME while receiving dividend income. Scudder Kemper Investments, Inc.*
--------------------------------------------------------------------------------------------------------------
The Fund seeks to achieve a total
TOUCHSTONE return that is higher than that of the
ENHANCED 30 Dow Jones Industrial Average (DJIA). Todd Investment Advisors, Inc.*
----------------------------------------------------------------------------------------------------------
TOUCHSTONE The Fund seeks to achieve an increase
BALANCED in value and current income. OpCap Advisors, Inc.*
---------------------------------------------------------------------------------------------------------
The Fund seeks to provide a high level Fort Washington Investment
TOUCHSTONE BOND of dividends and distributions. Advisors, Inc.*
--------------------------------------------------------------------------------------------------------------
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.
TOUCHSTONE The Fund does not try to keep a constant $1.00 FortWashington Investment
STANDBY INCOME per share net asset value. Advisors, Inc.*
-------------------------------------------------------------------------------------------------------------
</TABLE>
*Sub-Advisors to Touchstone Advisors, Inc.
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.
20
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
VALUATION OF YOUR INVESTMENTS
VALUATION OF YOUR INVESTMENTS
- --------------------------------------------------------------------------------
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:
o The investment performance of the Sub-Account, which is based on
the investment performance of the corresponding Fund
o Any dividend or distributions paid by the corresponding Fund
o Any charges or credits for taxes that we determined were the
result of the investment operations of the Sub-Account
o The mortality and expense risk charge
o 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.
[SIDEBAR]: ***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.
[SIDEBAR]: ***ACCUMULATION UNIT VALUE
------------------------------------------------------------
The dollar value of an Accumulation Unit in a Sub-Account.
21
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
PERFORMANCE INFORMATION
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.
22
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
ANNUITY INCOME PAYMENT OPTIONS
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, unless you have selected another date, 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 any remaining annuity income payments unless you select another
payee.
DETERMINING THE PAYMENT AMOUNT
Annuity income payment amounts are based on the your Contract Value 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.
23
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
ANNUITY INCOME PAYMENT OPTIONS
- --------------------------------------------------------------------------------
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.
================================================
== Overview of Annuity Income Payment Options ==
================================================
INSTALLMENT INCOME OPTION 1A Fixed Period -- you select the number of years.
- --------------------------------------------------------------------------------
Fixed Amount -- you select the amount of the
INSTALLMENT INCOME OPTION 1B monthly payment.
- --------------------------------------------------------------------------------
One Life -- we make payments as long as the
LIFE INCOME OPTION 2A Annuitant lives.
-------------------------------------------------------------------------
Joint and Survivor -- we make payments as long
as either the Annuitant or another designated
LIFE INCOME OPTION 2B person lives.
-------------------------------------------------------------------------
24
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
ANNUITY INCOME PAYMENT OPTIONS
- --------------------------------------------------------------------------------
<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 the life
INSTALLMENT INCOME 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 the life
INSTALLMENT INCOME 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
LIFE INCOME expectancy of the Annuitant.
OPTION 2A OPTION TO REQUEST LUMP SUM PAYMENT: Not available after he first payment 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
LIFE INCOME expectancy of the Annuitant or the joint life expectancies of the Annuitants.
OPTION 2B OPTION TO REQUEST LUMP SUM PAYMENT: Not available after the first payment is made.
----------------------------------------------------------------------------------------------------------
</TABLE>
25
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
GUARANTEED DEATH BENEFIT
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. You can find
additional information about designating a beneficiary and payment instructions
in your Contract.
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 after annuity income payments begin. =
================================================================================
Any remaining benefits will be paid based on the annuity income payment
option in effect.
26
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
WSLAC AND SEPARATE ACCOUNT 2
WSLAC AND SEPARATE ACCOUNT 2
- --------------------------------------------------------------------------------
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 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 currently offers 18 Sub-Account options to purchasers of the Contracts. 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.
27
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
UNDERWRITER
UNDERWRITER
- --------------------------------------------------------------------------------
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.
28
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
VOTING RIGHTS
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.
29
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
OTHER INFORMATION ABOUT YOUR CONTRACT
OTHER INFORMATION ABOUT YOUR CONTRACT
- --------------------------------------------------------------------------------
RELY ON YOUR CONTRACT
The description of the Contract in this Prospectus is subject to the specific
terms of your Contract as it contains specific contractual provisions and
conditions. If the terms of your Contract differ from the description of the
Contract in the Prospectus, you should rely on the terms in your Contract.
CONFIRMATIONS AND STATEMENTS
We will send you a confirmation of each purchase payment and other financial
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 the underlying Fund of that Sub-Account. 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 transactions, 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.
30
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
OTHER INFORMATION ABOUT YOUR CONTRACT
- --------------------------------------------------------------------------------
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.
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 48. For a free copy, call the Touchstone Variable Annuity Service Center at
800.669.2796 (press 2).
31
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
FEDERAL INCOME TAX INFORMATION
FEDERAL INCOME TAX INFORMATION
- --------------------------------------------------------------------------------
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:
o WSLAC's tax status
o The tax status of the Contract
o Your tax status
o The tax status of your beneficiary
o 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 generally not
discussed in this summary.
The following discussion assumes "you" are the owner of a Contract, or, when
the Contract is purchased in connection with a retirement plan that is described
below as a Qualified Plan, "you" are the plan participant for whose benefit the
Contract is purchased.
TAX STATUS OF WSLAC
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.
32
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
FEDERAL INCOME TAX INFORMATION
- --------------------------------------------------------------------------------
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 the
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.
[SIDEBAR]: ***The cost basisof your Non-Qualified Contract is generally
the sum of your purchase payments for the Contract.
33
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
FEDERAL INCOME TAX INFORMATION
- --------------------------------------------------------------------------------
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, however, 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 annuity payments are made under your Non-Qualified Contract, a fixed portion
of each payment is generally excludable from your income for federal income tax
purposes as a tax-free recovery of your cost basis in the Contract and the
balance is included in your 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 the 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:
o A distribution that is made on or after the date you reach age 59
1/2
o A distribution that is made on or after your death
o A distribution that is made when you are totally disabled (as
defined in Section 72(m) of the Code)
34
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
FEDERAL INCOME TAX INFORMATION
- --------------------------------------------------------------------------------
o 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
o A part of a distribution that is attributable to your investment
in the Contract prior to August 14, 1982
o A distribution that is paid as an immediate annuity within the
meaning of Section 72(u)(4) of the Code, which generally refers
to an annuity contract that has been purchased with a single
premium or annuity consideration, under which payments begin no
later than one year from the purchase of the contract and which
provides for a series of substantially equal periodic payments to
be made at least annually during the annuity period
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 designated 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.
35
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
FEDERAL INCOME TAX INFORMATION
- --------------------------------------------------------------------------------
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
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:
o Traditional IRAs (individual retirement annuities under Section
408 of the Code)
o Roth IRAs (individual retirement annuities under Section 408A of
the Code)
o 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)
o Section 403(b) plans (tax sheltered annuities under Section
403(b) of the Code)
o Section 457 Deferred Compensation plans (deferred compensation
plans under Section 457 of the Code)
o SEPs (simplified Employee Pension Plans under Section 408(k) of
the Code)
o SIMPLE IRAs (Savings Incentive Match Plans for Employees under
Section 408(p) of the Code)
o 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.
36
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
FEDERAL INCOME TAX INFORMATION
- --------------------------------------------------------------------------------
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:
o Amounts of allowable contributions
o Form, manner and timing of distributions
o Vesting and nonforfeitability of interests
o Nondiscrimination in eligibility, participation, contributions
and benefits
o Tax treatment of distributions, withdrawals and surrenders
o Withdrawal from the plan, such as while the plan participant is
still employed by the employer of the plan
o 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 regarding
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, SEP or a SIMPLE IRA
plan.
[SIDEBAR]: ***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.
37
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
SUPPLEMENT A
SUPPLEMENT A
- --------------------------------------------------------------------------------
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 an Accumulation
Unit Value is calculated is located on page 21 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>
AIM V.I. GROWTH 1999* 10.000000 12.428992 1,333
--------------------------------------------------------------------------------------------
AIM V.I. GOVERNMENT
SECURITIES 1999* 10.000000 9.961900 10
-------------------------------------------------------------------------------------------------
ALGER AMERICAN
SMALL CAPITALIZATION 1999* 10.000000 13.691747 122
-------------------------------------------------------------------------------------------------
ALGER AMERICAN
GROWTH 1999* 10.000000 12.091425 2,196
-------------------------------------------------------------------------------------------
MFS VIT
EMERGING GROWTH 1999* 10.000000 16.464071 2,424
--------------------------------------------------------------------------------------------
MFS VIT GROWTH
WITH INCOME 1999* 10.000000 10.333414 1,656
-------------------------------------------------------------------------------------------
PIMCO LONG-TERM
U.S. GOVERNMENT
BOND 1999* 10.000000 9.674687 410
--------------------------------------------------------------------------------------------
TOUCHSTONE
SMALL CAP VALUE 1999* 10.000000 11.524077 1,398
--------------------------------------------------------------------------------------------
1995** 10.000000 11.741102 2,008
1996 11.741102 12.947664 4,066
1997 12.947664 17.169847 15,058
TOUCHSTONE 1998 17.169847 17.592298 9,749
EMERGING GROWTH 1999 17.592298 25.612124 5,913
--------------------------------------------------------------------------------------------
1995** 10.000000 11.282669 2,158
1996 11.282669 12.475967 4,538
1997 12.475967 14.203413 10,507
TOUCHSTONE 1998 14.203413 16.937997 9,524
INTERNATIONAL EQUITY 1999 16.937997 22.932973 6,524
-------------------------------------------------------------------------------------------------
</TABLE>
[SIDEBAR]: ***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.
[SIDEBAR]: ***ACCUMULATION UNIT VALUE
-----------------------------------------------------------------
The dollar value of an Accumulation Unit in a Sub-Account.
38
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
SUPPLEMENT A
- --------------------------------------------------------------------------------
<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>
Touchstone
High Yield 1999* 10.000000 9.217403 626
---------------------------------------------------------------------------------------
Touchstone 1998*** 10.000000 10.156803 10
Value Plus 1999 10.156803 11.589395 1,646
---------------------------------------------------------------------------------------
1995** 10.000000 12.533949 2.623
1996 12.533949 14.291347 4,690
1997 14.291347 16.995828 15,766
Touchstone 1998 16.995828 18.117147 13,132
Growth & Income 1999 18.117147 18.420552 10,897
--------------------------------------------------------------------------------------------
Touchstone
Enhanced 30 1999* 10.000000 10.685289 1,466
----------------------------------------------------------------------------------------
1995** 10.000000 12.018023 1,771
1996 12.018023 13.922266 3,958
1997 13.922266 16.382306 10,276
Touchstone 1998 16.382306 17.135699 10,009
Balanced 1999 17.135699 18.634709 6,555
---------------------------------------------------------------------------------------
1995** 10.000000 11.309517 1,615
1996 11.309517 11.505592 2,904
1997 11.505592 12.322051 7,005
1998 12.322051 13.227693 8,263
Touchstone Bond 1999 13.227693 12.954294 5,330
--------------------------------------------------------------------------------------------
1995** 10.000000 10.364840 1,059
1996 10.364840 10.819908 19,762
1997 10.819908 11.314893 11,233
Touchstone 1998 11.314893 11.867636 39,354
Standby Income 1999 11.867636 12.345235 6,967
-------------------------------------------------------------------------------------------
</TABLE>
* Sub-account operations began on May 17, 1999
** Sub-Account operations began on February 23, 1995
*** Sub-Account operations began on May 1, 1998
39
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
SUPPLEMENT B
SUPPLEMENT B
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 your (or, if applicable, your beneficiary's)
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 if the distribution qualifies as
a lump sum distribution under the Code and if you were born before January 1,
1936, 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.
[SIDEBAR]: ***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.
40
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
SUPPLEMENT B
Special Rules for Distributions That Are Rolled Over. In addition, special rules
apply to a distribution from a Qualified Contract to you (or your surviving
spouse in the event he or she is your beneficiary with respect to the
distribution) 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:
o 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)
o 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)
o 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:
o It represents the return of your "after-tax" contributions or is
not otherwise includable in income
o 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
o It is made from a Section 401 plan by reason of a hardship and is
not permitted to be made by a Section 401 plan other than because
of the hardship.
o It is a required minimum distribution under Section 401(a)(9) of
the Code as described below
Required minimum distributions under Code Section 401(a)(9) of the Code include
the following required payments:
o Except as noted below, minimum payments are required for the
calendar year in which you reach age 70 1/2 or any later calendar
year
o 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, minimum distributions are
required 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.
Special Rules for 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.
41
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
SUPPLEMENT B
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, however, if the distribution meets certain
conditions. Some of the distributions that are excepted from the 10% penalty are
listed below:
o A distribution that is made on or after the date you reach age 59
1/2
o A distribution that is properly rolled over to a Traditional IRA
or to another eligible employer plan or account
o 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)
o 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
o A distribution that is made to you by reason of your separation
from service with the employer of the applicable plan when such
separation occurs during or after the calendar year in which you
reach age 55
o 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)
o 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)
42
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
SUPPLEMENT B
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:
o Except as noted below, required distributions to you generally
must start by April 1 of the calendar year following the calendar
year in which you reach age 70 1/2.
o 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 to you 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 70 1/2 or the calendar year
in which you terminate employment with the employer.
o When distributions are required to be made to you under the Code,
they must generally be made over your life (or a period not
extending beyond the joint life expectancies) of you and a
designated beneficiary under the plan. In general, at least 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:
o The amount of each loan must generally be at least $1,000.
o The interest rate on each loan must be comparable to the rate
charged by commercial lenders for similar loans.
o The loan must be repaid in substantially equal payments made at
least quarterly.
o Generally, you cannot surrender or annuitize the Contract while a
loan is outstanding.
o There may also be restrictions on the maximum time for repaying
the loan. The maximum term of any such loan is normally 5 years,
except that a longer period may be able to apply to a loan used
to purchase your principal residence.
43
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
SUPPLEMENT B
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 pre-tax 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 59 1/2, when you separate from service with
the employer of the plan, when you become totally disabled or die or in the case
of your hardship (that meets certain rules described in the Code). Withdrawals
for hardship do not include earnings allocated for you under the plan after
1988.
In the case of a Section 401 plan, distributions may also be permitted in the
event of the plan's termination or when the plan employer sells substantially
all of the assets used in a trade or business of the employer or all of the
employer's interest is a subsidiary and you continue service with the purchaser
of such assets or interest, provided that certain conditions are met.
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.
44
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
SUPPLEMENT C
SUPPLEMENT C
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" is 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 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 70 1/2.
Distributions from an ORP Contract are considered to have begun if:
o Distributions are made due to your reaching your required
beginning date
o 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
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.
45
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
SUPPLEMENT C
The specific rules related to ORP Contracts and Texas ORP Plans discussed in the
previous section, 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 this 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, however, if the distribution meets certain
conditions. Some of the distributions that are excepted from the 10% penalty are
listed below:
o A distribution that is made on or after the date you reach age 59
1/2
o A distribution that is properly rolled over to a Traditional IRA
or to another eligible employer plan or account
o A distribution that is made on or after your death
o A distribution that is made when you are totally disabled (as
defined in Section 72(m) of the Code)
o 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
46
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
SUPPLEMENT C
o A distribution that is made to you by reason of your separation
from service with the employer of the applicable plan when such
separation occurs during or after the calendar year in which you
reach age 55
o 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)
o 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:
o Except as noted below, required distributions generally must
start by April 1 of the calendar year following the calendar year
in which you reach age 70 1/2.
o 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 70 1/2 or the calendar year in which
you terminate employment with the employer.
o 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 59
1/2, when you separate from service with the employer of the plan, when you
become totally disabled or die or in the case of your financial hardship (that
meets certain rules described in the Code). 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.
47
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION
PAGE
General 3
Safekeeping Of Assets. 3
Distribution Of The Contracts 3
Sub-Account Performance 3
Sub-Account Accumulation Unit Value 5
Fixed Annuity Income Payments 6
Qualification As An "Annuity Contract" 6
Independent Accountants 8
Financial Statements 9
48
Touchstone Advisor Variable Annuity Prospectus
<PAGE>
<PAGE>
TOUCHSTONE ADVISOR VARIABLE ANNUITY
SUPPLEMENTAL PROSPECTUS
MAY 1, 2000
Western-Southern Life Assurance Company
Separate Account 2
Western-Southern Life Assurance Company (WSLAC) is providing you with this
Supplemental Prospectus that supplements and should be read with the prospectus
for the Touchstone Advisor Variable Annuity dated May 1, 2000 (Advisor
Prospectus). The Advisor Prospectus contains details regarding your Contract.
Please read the Advisor Prospectus and this Supplemental Prospectus carefully
and keep them for future reference.
This Supplemental Prospectus describes the Touchstone Income Opportunity
Sub-Account, an additional investment option of the Contract available only to
Contract owners who were
o Actively participating in an automatic investment program or an
automatic asset allocation program on April 30, 2000 and
o Allocating payments to the Touchstone Income Opportunity Sub-Account
through that automatic investment program or automatic asset
allocation program.
This additional investment option will be available to you only through your
previously established automatic investment program or automatic asset
allocation program. This investment option will terminate when you no longer
have money in the Income Opportunity Sub-Account.
The Touchstone Advisor Variable Annuity Contract is issued by 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.
The Statement of Additional Information dated May 1, 2000 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 48 of the Advisor 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.
You should rely only on the information contained in the Contract, the Advisor
<PAGE>
Prospectus, this Supplemental Prospectus, the Statement of Additional
Information or our approved sales literature. The description of the Contract in
the Advisor Prospectus is subject to the specific terms of your Contract as it
contains specific contractual provisions and conditions. If the terms of your
Contract differ from those in the Advisor Prospectus, you should rely on the
terms in your Contract.
No one is authorized to give any information or make any representation other
than those contained in the Contract, the Advisor Prospectus, this Supplemental
Prospectus, the Statement of Additional Information or our approved sales
literature.
<PAGE>
TABLE OF CONTENTS
PAGE
Cover Page. 1
Table Of Contents 2
Glossary 3
Fee And Expense Tables 4
Information About The Investment Option 6
<PAGE>
3
GLOSSARY
ACCUMULATION UNIT
- --------------------------------------------------------------------------------
A unit of measure used to calculate a Contract owner's share of a Sub-Account.
ACCUMULATION UNIT VALUE
- --------------------------------------------------------------------------------
The dollar value of an Accumulation Unit in a Sub-Account.
CONTRACT
- --------------------------------------------------------------------------------
The Touchstone Advisor Variable Annuity Contract, including the application
and any amendments, riders or endorsements.
CONTRACT DATE
- --------------------------------------------------------------------------------
The effective date of a Contract. The Contract Date is shown on page 3 of your
Contract.
CONTRACT VALUE
- --------------------------------------------------------------------------------
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 and the
value of your investments in the Fixed Account.
CONTRACT YEAR
- --------------------------------------------------------------------------------
A year that starts on your Contract Date or the anniversary of your Contract
Date.
FUND
- --------------------------------------------------------------------------------
Each Sub-Account invests in a Fund that has the same investment objective as
the Sub-Account.
SUB-ACCOUNT
- --------------------------------------------------------------------------------
Each Sub-Account invests in a Fund, which has the same investment objective as
the Sub-Account.
SURRENDER CHARGE
- --------------------------------------------------------------------------------
Each Sub-Account invests in a Fund, which has the same investment objective as
the Sub-Account.
WSLAC, WE, OUR AND US
- --------------------------------------------------------------------------------
Western-Southern Life Assurance Company.
YOU AND YOUR
- --------------------------------------------------------------------------------
The owner of the Contract.
<PAGE>
4
FEE 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 "Charges" section of the Advisor Prospectus
on pages 17 through 18.
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%
CONTRACT ADMINISTRATION CHARGE 0.10%
TOTAL 0.80%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Touchstone Income Opportunity Fund Expenses
(as a percentage of average daily net assets
and after expense reimbursement)
- --------------------------------------------------------------------------------
ADVISOR FEE 0.65%
OTHER EXPENSES 0.20%
TOTAL EXPENSES 0.85%**
- --------------------------------------------------------------------------------
* In certain states and for certain retirement plans, we can waive, reduce or
eliminate the annual contract maintenance charge.
** Touchstone Advisors, Inc. has agreed to waive certain fees or reimburse the
Fund so that the Fund's expenses do not exceed the percentage listed in
this table. The agreement will remain in place until at least December 31,
2000. If the waiver and reimbursement had not been in place, the total
expenses of the Fund would have been 1.29%.
<PAGE>
5
Examples
These examples should help you compare the cost of investing in the Touchstone
Income Opportunity Sub-Account with the cost of investing in other Sub-Accounts
available under the Contract.
The examples assume that you invest $1,000 in the Touchstone Income Opportunity
Sub-Account, your investment has a 5% return each year and the Touchstone Income
Opportunity Fund's total expenses are the same as shown in the table on the
previous page in the row entitled "Total Expenses (after Reimbursement)". Your
actual costs may be higher or lower than the costs shown in the examples.
- --------------------------------------------------------------------------------
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
Touchstone Income Opportunity $ 20 $ 63 $ 108 $ 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
Touchstone Income Opportunity $ 20 $ 63 $ 108 $ 232
- --------------------------------------------------------------------------------
Example 3 This example assumes that you do not surrender your Contract.
1 Year 3 Years 5 Years 10 Years
Touchstone Income Opportunity $ 20 $ 63 $ 108 $ 232
<PAGE>
6
INFORMATION ABOUT THE INVESTMENT OPTION
The Sub-Account and the Fund
The Touchstone Income Opportunity Sub-Account invests in the Touchstone Income
Opportunity Fund. This table contains information about the investment
objective, Advisor and Sub-Advisor of the Fund:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment Objective Advisors/Sub-Advisors
- ----------------------------------------------------------------------------------------------------------------------
The Fund seeks to achieve a high level of Alliance Capital Management L.P.*
TOUCHSTONE current income as its main goal. The Fund
INCOME OPPORTUNITY may also seek to increase the value of
its Shares, if consistent with its main goal.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Sub-Advisor to Touchstone Advisors, Inc.
More complete information about the Fund, including information about its
expenses, is included in its prospectus, which is attached to this Supplemental
Prospectus. Please read the Fund's prospectus carefully.
Changes in the Sub-Accounts and the Funds
As described in the Advisor Prospectus, we may 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.
WE ARE CURRENTLY SEEKING APPROVAL FROM THE SEC TO SUBSTITUTE SHARES OF
THE TOUCHSTONE HIGH YIELD FUND DESCRIBED IN THE ADVISOR PROSPECTUS FOR
SHARES OF THE TOUCHSTONE INCOME OPPORTUNITY FUND. AFTER WE RECEIVE THE
APPROVAL FROM THE SEC, WE WILL AUTOMATICALLY REDEEM THE SHARES OF THE
TOUCHSTONE INCOME OPPORTUNITY FUND HELD BY THE TOUCHSTONE INCOME
OPPORTUNITY SUB-ACCOUNT AND USE THE REDEMPTION PROCEEDS TO BUY SHARES
OF THE TOUCHSTONE HIGH YIELD FUND.
Accumulation Unit Values
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 21 in the Advisor Prospectus.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Years Ended Unit Value at Unit Value at Number of Units
Sub-Account December 31 Beginning of Year End of Year at End of Year
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995* 10.000000 12.572866 2,048
1996 12.572866 15.886632 3,590
TOUCHSTONE 1997 15.886632 17.673231 58,064
INCOME OPPORTUNITY 1998 17.673231 15.367598 11,424
1999 15.367598 15.663341 7,560
- ---------------------------------------------------------------------------------------------
</TABLE>
* Sub-Account operations began on February 23, 1995.
<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, 2000
----------------------------
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, 2000 (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 7135-0005
<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-Account 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 in part to the Touchstone Advisor
Variable Annuity 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
For the year ended December 31, 1999 $4,963,651 $601,693
</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, 1999.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
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*
- ------------------------- ---------------------- ------------------------ -----------------------------------------------
AIM V.I. Growth** 20.79% 20.79% 24.29% 24.49%
AIM V.I. Government Securities** -3.88% -3.88% -0.38% -0.38%
Alger American Small Capitalization** 33.42% 33.42% 36.92% 36.92%
Alger American Growth** 17.41% 17.41% 20.91% 20.91%
MFS VIT Emerging Growth** 61.14% 61.14% 64.64% 64.64%
MFS VIT Growth with Income** -0.17% -0.17% 3.33% 3.33%
PIMCO Long-Term U.S. Government Bond** -6.75% -6.75% -3.25% -3.25%
Touchstone Small Cap Value** 11.74% 11.74% 15.24% 15.24%
Touchstone Emerging Growth*** 42.09% 19.00% 45.59% 156.12%
Touchstone International Equity*** 31.89% 16.20% 35.39% 129.33%
Touchstone High Yield** -11.33% -11.33% -7.83% -7.83%
Touchstone Value Plus**** 10.60% 4.35% 14.10% 15.89%
Touchstone Growth & Income*** -1.83% 10.76% 1.67% 84.21%
Touchstone Enhanced 30** 3.35% 3.35% 6.85% 6.85%
Touchstone Balanced*** 5.25% 11.04% 8.75% 86.35%
Touchstone Bond*** -5.57% 2.30% -2.07% 29.54%
Touchstone Standby Income*** 0.52% 1.16% 4.02% 23.45%
Touchstone Income Opportunity** -1.58% 6.83% 1.92% 56.63%
</TABLE>
* 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.
** Average annual total return since inception based on a period beginning May
17, 1999.
*** Average annual total return since inception based on a period beginning
February 28, 1995.
**** Average annual total return since inception based on a period beginning May
1, 1998.
While average annual total returns are a 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 or if the same total
amount of money were put into the Contract all at one point in time. 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 as 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. 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
Ernst & Young LLP, independent auditors, have audited the financial
statements of Western-Southern Life Assurance Company Separate Account 2 and
Western-Southern Life Assurance Company at December 31, 1999 and for the period
then ended, as set forth in their reports. We have included our financial
statements in the statement of additional information and elsewhere in the
registration statement in reliance on Ernst & Young LLP's reports, given on
their authority as experts in accounting and auditing.
The financial statement for the year ended December 31, 1998 for
Western-Southern Life Assurance Company Separate Account 2 and the financial
statements as of December 31, 1998 and for the year then ended for
Western-Southern Life Assurance Company included in this Registration Statement
have been so included in reliance on the reports 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 Ernst & Young LLP.
2. Report of PricewaterhouseCoopers LLP.
3. Statement of Net Assets as of December 31, 1999.
4. Statement of Operations and Changes in Net Assets for the
periods ended December 31, 1999 and 1998.
5. Notes to Financial Statements.
6. Supplementary Information - Selected Per Unit Data and Ratios
for the period ended December 31, 1999.
The following statutory-basis financial statements for Western-Southern
Life Assurance Company at and for the fiscal periods indicated are
attached hereto:
1. Report of Ernst & Young LLP.
2. Report of PricewaterhouseCoopers LLP.
3. Statutory-basis Balance Sheets as of December 31, 1999 and
1998.
4. Statutory-basis Statements of Income for the years ended
December 31, 1999 and 1998.
5. Statutory-basis Statements of Changes in Capital and Surplus
for the years ended December 31, 1999 and 1998.
6. Statutory-basis Statements of Cash Flows for the years ended
December 31, 1999and 1998.
7. Notes to Statutory-basis Financial Statements.
8. Supplemental Schedule of Selected Statutory-Basis Financial
Data for the year ended December 31, 1999.
9
<PAGE>
Financial Statements
Western-Southern Life Assurance Company Separate Account 2
Period ended December 31, 1999
with Report of Independent Auditors
<PAGE>
Western-Southern Life Assurance Company
Separate Account 2
Financial Statements
Period ended December 31, 1999
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
Report of Ernst & Young LLP.................................................................................1
Report of PricewaterhouseCoopers LLP........................................................................2
Audited Financial Statements
Statement of Net Assets.....................................................................................3
Statement of Operations and Changes in Net Assets for the Period ended December 31, 1999....................4
Statement of Operations and Changes in Net Assets for the Period ended December 31, 1998....................6
Notes to Financial Statements...............................................................................7
Supplementary Information-Selected Per Unit Data and Ratios................................................11
</TABLE>
<PAGE>
Report of Independent Auditors
Contractholders of Western-Southern Life Assurance Company Separate Account 2
and Board of Directors of Western-Southern Life Assurance Company
We have audited the accompanying statement of net assets of Western-Southern
Life Assurance Company Separate Account 2 (comprising, respectively, the AIM
V.I. Growth Fund, AIM V.I. Government Securities Fund, Alger American Small
Capitalization Portfolio, Alger American Growth Portfolio, MFS Emerging Growth
Series, MFS Growth with Income Series, PIMCO Long-Term U.S. Government Bond
Portfolio, Touchstone Small Cap Value Fund, Touchstone Emerging Growth Fund,
Touchstone International Equity Fund, Touchstone Income Opportunity Fund,
Touchstone High Yield Bond Fund, Touchstone Value Plus Fund, Touchstone Growth &
Income Fund, Touchstone Enhanced 30 Fund, Touchstone Balanced Fund, Touchstone
Bond Fund, and Touchstone Standby Income Fund) as of December 31, 1999, and the
related statement of operations and changes in net assets and selected per unit
data and ratios for the periods indicated therein. These financial statements
and per unit data and ratios are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
per unit data and ratios based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and per
unit data and ratios are free from material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1999, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and selected per unit data and ratios
referred to above present fairly, in all material respects, the financial
position of each of the respective sub-accounts constituting the
Western-Southern Life Assurance Company Separate Account 2 at December 31, 1999,
and the results of their operations and changes in their net assets and the
selected per unit data and ratios for each of the periods indicated therein, in
conformity with accounting principles generally accepted in the United States.
/s/Ernst & Young LLP
Cincinnati, Ohio
April 18, 2000
<PAGE>
Report of Independent Accountants
To the Contractholders and Board of Directors of
Western-Southern Life Assurance Company
In our opinion, the accompanying statement of operations and changes in net
assets presents fairly, in all material respects, the results of operations and
changes in net assets of Western-Southern Life Assurance Company Separate
Account 2 for the year ended December 31, 1998 in conformity with accounting
principles generally accepted in the United States. This financial statement is
the responsibility of the Company's management; our responsibility is to express
an opinion on this financial statement based on our audit. We conducted our
audit of this statement in accordance with auditing standards generally accepted
in the United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is 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
audit provides a reasonable basis for the opinion expressed above. We have not
audited the financial statements of Western-Southern Life Assurance Company
Separate Account 2 for any period subsequent to December 31, 1998.
/s/Pricewaterhouse Coopers LLP
January 22, 1999
Cincinnati, Ohio
<PAGE>
Western-Southern Life Assurance Company Separate Account 2
Statement of Net Assets
December 31, 1999
<TABLE>
<CAPTION>
Assets
Investments at current market value:
AIM Variable Insurance Funds, Inc.
<S> <C>
AIM V.I. Growth Fund (514 shares, cost $14,252) $ 16,573
AIM V.I. Government Securities Fund (9 shares, cost $103) 100
The Alger American Fund
Alger American Small Capitalization Portfolio (30 shares, cost $1,303) 1,677
Alger American Growth Portfolio (412 shares, cost $21,679) 26,554
MFS Variable Insurance Trust
MFS Emerging Growth Series (1,052 shares, cost $36,843) 39,909
MFS Growth with Income Series (803 shares, cost $16,273) 17,115
PIMCO Variable Insurance Trust
PIMCO Long-Term U.S. Government Bond Portfolio (430 shares, cost $4,120) 3,968
Touchstone Variable Series Trust
Touchstone Small Cap Value Fund (1,366 shares, cost $15,837) 16,109
Touchstone Emerging Growth Fund (7,876 shares, cost $121,192) 151,462
Touchstone International Equity Fund (8,530 shares, cost $120,953) 149,621
Touchstone Income Opportunity Fund (15,379 shares, cost $130,795) 118,416
Touchstone High Yield Bond Fund 670 shares, cost $6,140) 5,767
Touchstone Value Plus Fund (1,700 shares, cost $19,346) 19,075
Touchstone Growth & Income Fund (18,742 shares, cost $199,268) 200,729
Touchstone Enhanced 30 Fund (1,484 shares, cost $14,651) 15,660
Touchstone Balanced Fund (8,853 shares, cost $124,242) 122,165
Touchstone Bond Fund (6,918 shares, cost $69,884) 69,047
Touchstone Standby Income Fund (8,677 shares, cost $86,750) 86,075
------------
Total assets 1,060,022
Liabilities
Accounts payable 148
------------
Total net assets $ 1,059,874
============
Net Assets
Variable annuity contracts $ 1,057,332
Retained in the variable account by Western-Southern Life Assurance Company 2,542
------------
Total net assets $ 1,059,874
============
</TABLE>
See accompanying notes
3
<PAGE>
Western-Southern Life Assurance Company Separate Account 2
Statement of Operations and Changes in Net Assets
Period Ended December 31, 1999
<TABLE>
<CAPTION>
AIM V.I. Alger American
AIM V.I. Government Small Alger American
Growth Securities Capitalization Growth
Total Sub-Account* Sub-Account* Sub-Account* Sub-Account*
-----------------------------------------------------------------------------------------------
Income:
<S> <C> <C> <C> <C> <C>
Dividends and capital gains $ 74,945 $ 574 $ 4 $ - $ -
Miscellaneous income (loss) 248 71 - (1) 415
Expenses:
Mortality and expense risk, and
administrative charge 8,310 35 - 2 90
-----------------------------------------------------------------------------------------------
Net investment income (loss) 66,883 610 4 (3) 325
-----------------------------------------------------------------------------------------------
Net change in unrealized
appreciation (depreciation) on
investments 66,823 2,321 (4) 373 4,875
Realized gain (loss) on investments (4,771) 4 - 1 6
-----------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 62,052 2,325 (4) 374 4,881
-----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 128,935 2,935 - 371 5,206
-----------------------------------------------------------------------------------------------
Contract owners activity:
Payments received from contract
owners 221,977 100 100 162 12,883
Net transfers between subaccounts - 13,537 - 1,142 8,464
Withdrawals and surrenders (784,138) - - - -
Contract maintenance charge (1,155) - - - -
-----------------------------------------------------------------------------------------------
Net increase (decrease) from contract
activity (563,316) 13,637 100 1,304 21,347
-----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (434,381) 16,572 100 1,675 26,553
-----------------------------------------------------------------------------------------------
Net assets, at beginning of period 1,494,255 - - - -
-----------------------------------------------------------------------------------------------
Net assets, at end of period $1,059,874 $ 16,572 $ 100 $ 1,675 $ 26,553
===============================================================================================
</TABLE>
See accompanying notes
* For the period May 17, 1999 (commencement of operations) to December 31, 1999.
<TABLE>
<CAPTION>
MFS VIT MFS VIT PIMCO Long-term
Emerging Growth with U.S. Government Touchstone
Growth Income Bond Small Cap Value
Sub-Account* Sub-Account* Sub-Account* Sub-Account*
----------------------------------------------------------------------------
Income:
<S> <C> <C> <C> <C>
Dividends and capital gains $ - $ - $ 38 $ -
Miscellaneous income (loss) 4 (16) (1) -
Expenses:
Mortality and expense risk, and
administrative charge 10 35 5 5
----------------------------------------------------------------------------
Net investment income (loss) (6) (51) 32 (5)
----------------------------------------------------------------------------
Net change in unrealized
appreciation (depreciation) on
investments 3,066 842 (152) 272
Realized gain (loss) on investments 4 - - 1
----------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 3,070 842 (152) 273
----------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 3,064 791 (120) 268
----------------------------------------------------------------------------
Contract owners activity:
Payments received from contract
owners 35,100 5,281 100 15,100
Net transfers between subaccounts 1,745 11,043 3,987 741
Withdrawals and surrenders - - - -
Contract maintenance charge - - - -
----------------------------------------------------------------------------
Net increase (decrease) from contract
activity 36,845 16,324 4,087 15,841
----------------------------------------------------------------------------
Net increase (decrease) in net assets 39,909 17,115 3,967 16,109
----------------------------------------------------------------------------
Net assets, at beginning of period - - - -
Net assets, at end of period $ 39,909 $ 17,115 $ 3,967 $ 16,109
============================================================================
</TABLE>
See accompanying notes
* For the period May 17, 1999 (commencement of operations) to December 31, 1999.
<PAGE>
Western-Southern Life Assurance Company Separate Account 2
Statement of Operations and Changes in Net Assets (continued)
Period Ended December 31, 1999
<TABLE>
<CAPTION>
Touchstone Touchstone Touchstone
Emerging International Income Touchstone Touchstone
Growth Equity Opportunity High Yield Value Plus
Sub-Account Sub-Account Sub-Account Sub-Account* Sub-Account
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income:
Dividends and capital gains $ 21,803 $ 11,627 $ 17,082 $ 364 $ 788
Miscellaneous income (loss) (1,227) 322 (355) (1) -
Expenses:
Mortality and expense risk,
and administrative charge 1,100 1,102 1,085 8 15
---------------------------------------------------------------------------------------
Net investment income (loss) 19,476 10,847 15,642 355 773
---------------------------------------------------------------------------------------
Net change in unrealized
appreciation (depreciation)
on investments 25,722 19,934 8,190 (373) (277)
Realized gain (loss) on
investments 5,390 10,314 (22,071) (163) 2
---------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 31,112 30,248 (13,881) (536) (275)
---------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 50,588 41,095 1,761 (181) 498
---------------------------------------------------------------------------------------
Contract owners activity:
Payments received from contract
owners 1,119 13,147 (6,593) 5,280 15,508
Net transfers between subaccounts (5,836) 3,383 (56) 667 2,966
Withdrawals and surrenders (65,767) (69,154) (52,079) - -
Contract maintenance charge (179) (169) (177) - -
---------------------------------------------------------------------------------------
Net increase (decrease) from contract
activity (70,663) (52,793) (58,905) 5,947 18,474
---------------------------------------------------------------------------------------
Net increase (decrease) in net assets (20,075) (11,698) (57,144) 5,766 18,972
---------------------------------------------------------------------------------------
Net assets, at beginning of period 171,524 161,311 175,552 - 102
---------------------------------------------------------------------------------------
Net assets, at end of period $ 151,449 $ 149,613 $ 118,408 $ 5,766 $ 19,074
=======================================================================================
</TABLE>
See accompanying notes
* For the period May 17, 1999 (commencement of operations) to December 31, 1999.
<TABLE>
<CAPTION>
Touchstone Touchstone
Growth and Touchstone Touchstone Touchstone Standby
Income Enhanced 30 Balanced Bond Income
Sub-Account Sub-Account* Sub-Account Sub-Account Sub-Account
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income:
Dividends and capital gains $ - $ 73 $ 12,028 $ 817 $ 9,747
Miscellaneous income (loss) 620 277 105 127 (92)
Expenses:
Mortality and expense risk,
and administrative charge 1,562 66 1,144 678 1,368
---------------------------------------------------------------------------------------
Net investment income (loss) (942) 284 10,989 266 8,287
---------------------------------------------------------------------------------------
Net change in unrealized
appreciation (depreciation)
on investments 1,461 1,009 1,076 (837) (675)
Realized gain (loss) on
investments 3,880 1 72 (1,253) (959)
---------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 5,341 1,010 1,148 (2,090) (1,634)
---------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 4,399 1,294 12,137 (1,824) 6,653
---------------------------------------------------------------------------------------
Contract owners activity:
Payments received from contract
owners 43,177 12,883 21,863 (2,498) 49,265
Net transfers between subaccounts (11,640) 1,483 (6,606) (5,958) (19,062)
Withdrawals and surrenders (72,834) - (76,569) (29,892) (417,843)
Contract maintenance charge (283) - (187) (82) (78)
---------------------------------------------------------------------------------------
Net increase (decrease) from contract
activity (41,580) 14,366 (61,499) (38,430) (387,718)
---------------------------------------------------------------------------------------
Net increase (decrease) in net assets (37,181) 15,660 (49,362) (40,254) (381,065)
---------------------------------------------------------------------------------------
Net assets, at beginning of period 237,910 - 171,518 109,301 467,037
---------------------------------------------------------------------------------------
Net assets, at end of period $ 200,729 $ 15,660 $ 122,156 $ 69,047 $85,972
=======================================================================================
</TABLE>
See accompanying notes
* For the period May 17, 1999 (commencement of operations) to December 31, 1999.
<PAGE>
Western-Southern Life Assurance Company Separate Account 2
Statement of Operations and Changes in Net Assets
Year Ended December 31, 1998
<TABLE>
<CAPTION>
Touchstone Touchstone Touchstone
Emerging International Income Touchstone
Growth Equity Opportunity Value Plus
Total Sub-Account Sub-Account Sub-Account Sub-Account
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income:
Dividends and capital gains $ 90,346 $ 5,973 $ 5,347 $ 63,278 $ -
Miscellaneous income (loss) (4,698) 188 (1,300) (2,054) 5
Expenses:
Mortality and expense risk, and
administrative charge 13,748 1,845 1,312 5,436 5
---------------------------------------------------------------------------------------
Net investment income (loss) 71,900 4,316 2,735 55,788 -
---------------------------------------------------------------------------------------
Net change in unrealized
appreciation (depreciation)
on investments 29,707 (12,141) 6,483 23,279 5
Realized gain (loss) on investments (60,160) 5,778 19,119 (95,409) 230
---------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments (30,453) (6,363) 25,602 (72,130) 235
---------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 41,447 (2,047) 28,337 (16,342) 235
---------------------------------------------------------------------------------------
Contract owners activity:
Payments received from contract
owners 1,109,428 59,053 60,324 127,683 100
Net transfers between subaccounts - 103,499 13,119 (830,696) (233)
Withdrawals and surrenders (1,739,080) (247,322) (89,500) (131,066) -
Contract maintenance charge (1,224) (200) (207) (211) -
---------------------------------------------------------------------------------------
Net increase (decrease) from contract
activity (630,876) (84,970) (16,264) (834,290) (133)
---------------------------------------------------------------------------------------
Net increase (decrease) in net assets (589,429) (87,017) 12,073 (850,632) 102
---------------------------------------------------------------------------------------
Net assets, at beginning of period 2,083,684 258,541 149,238 1,026,184 -
---------------------------------------------------------------------------------------
Net assets, at end of period $ 1,494,255 $ 171,524 $ 161,311 $ 175,552 $ 102
=======================================================================================
</TABLE>
See accompanying notes
<TABLE>
<CAPTION>
Touchstone Touchstone
Growth and Touchstone Touchstone Standby
Income Balanced Bond Income
Sub-Account Sub-Account Sub-Account Sub-Account
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income:
Dividends and capital gains $ - $ 9,305 $ - $ 6,443
Miscellaneous income (loss) (50) (1,800) (75) 388
Expenses:
Mortality and expense risk, and
administrative charge 2,156 1,432 634 928
----------------------------------------------------------------------
Net investment income (loss) (2,206) 6,073 (709) 5,903
----------------------------------------------------------------------
Net change in unrealized
appreciation (depreciation)
on investments 13,754 (8,062) 6,346 43
Realized gain (loss) on investments - 10,103 - 19
----------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 13,754 2,041 6,346 62
----------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 11,548 8,114 5,637 5,965
----------------------------------------------------------------------
Contract owners activity:
Payments received from contract
owners 99,943 32,031 88,324 641,970
Net transfers between subaccounts 90,949 24,334 (18,106) 617,134
Withdrawals and surrenders (232,204) (61,060) (52,836) (925,092)
Contract maintenance charge (285) (238) (40) (43)
----------------------------------------------------------------------
Net increase (decrease) from contract
activity (41,597) (4,933) 17,342 333,969
----------------------------------------------------------------------
Net increase (decrease) in net assets (30,049) 3,181 22,979 339,934
----------------------------------------------------------------------
Net assets, at beginning of period 267,959 168,337 86,322 127,103
----------------------------------------------------------------------
Net assets, at end of period $ 237,910 $ 171,518 $ 109,301 $ 467,037
======================================================================
</TABLE>
See accompanying notes
<PAGE>
Western-Southern Life Assurance Company Separate Account 2
Notes to Financial Statements
December 31, 1999
1. ORGANIZATION AND NATURE OF BUSINESS
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. 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 eighteen investment sub-accounts, each of which invests in the
corresponding portfolio (a "Portfolio") of AIM Variable Insurance Funds, Inc.,
The Alger American Fund, MFS Variable Insurance Trust, PIMCO Variable Insurance
Trust or Touchstone Variable Series Trust, each of which is an open-ended
diversified management investment company. Each 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 understanding of the annuity
contracts.
3. CONTRACT CHARGES
Certain deductions for administrative and risk charges are deducted pro rata
from the Accumulation Unit Values of each Sub-Account, 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.
7
<PAGE>
Western-Southern Life Assurance Company Separate Account 2
Notes to Financial Statements
4. USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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.
8
<PAGE>
Western-Southern Life Assurance Company Separate Account 2
Notes to Financial Statements
6. PURCHASES AND SALES OF INVESTMENTS
The following table shows aggregate cost of shares of the portfolios purchased
and proceeds from shares of the portfolios sold by the corresponding
sub-accounts for the period ended December 31, 1999.
PURCHASES SALES
------------------------
AIM Variable Insurance Funds, Inc.
AIM V.I. Growth Fund* $ 14,283 $ 35
AIM V.I. Government Securities Fund* 104 0
The Alger American Fund
Alger American Small Capitalization Portfolio* 1,304 2
Alger American Growth Portfolio* 21,753 81
The MFS Variable Insurance Trust
MFS VIT Emerging Growth Series* 39,294 2,455
MFS VIT Growth with Income Series* 16,308 35
PIMCO Variable Insurance Trust
PIMCO Long-Term U.S. Government Bond Portfolio* 4,125 5
Touchstone Variable Series Trust
Touchstone Small Cap Value Fund* 15,841 5
Touchstone Emerging Growth Fund 60,895 112,074
Touchstone International Equity Fund 34,000 75,942
Touchstone Income Opportunity Fund 36,944 80,202
Touchstone High Yield Bond Fund* 8,844 2,541
Touchstone Value Plus Fund 19,262 15
Touchstone Growth & Income Fund 319,171 361,694
Touchstone Enhanced 30 Fund* 14,707 57
Touchstone Balanced Fund 39,508 90,013
Touchstone Bond Fund 152,935 191,099
Touchstone Standby Income Fund 62,401 441,745
------------------------
Total $ 861,679 $1,357,999
========================
* For the period May 17, 1999 (commencement of operations) to December 31, 1999.
9
<PAGE>
Western-Southern Life Assurance Company Separate Account 2
Notes to Financial Statements
7. UNIT VALUES
The following table shows a summary of units outstanding for variable annuity
contracts for the period January 1, 1999 to December 31, 1999.
<TABLE>
<CAPTION>
Transfers
Beginning Units Units between Sub- Ending Unit Ending
Units Purchased Redeemed accounts Units Value Value
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
AIM V.I. Growth* - 10 - 1,323 1,333 12.428992 $ 16,572
AIM V.I. Government Securities* - 10 - - 10 9.961900 100
Alger American Small Capitalization* - 15 - 107 122 13.691747 1,675
Alger American Growth* - 1,347 - 849 2,196 12.091425 26,553
MFS VIT Emerging Growth* - 2,261 - 163 2,424 16.464071 39,909
MFS VIT Growth with Income* - 531 - 1,125 1,656 10.333414 17,115
PIMCO Long-Term U.S. Government Bond* - 10 - 400 410 9.674687 3,967
Touchstone Small Cap Value* - 1,323 - 75 1,398 11.524077 16,109
Touchstone Emerging Growth 9,749 (28) (3,504) (304) 5,913 25.612124 151,449
Touchstone International Equity 9,524 781 (3,974) 193 6,524 22.932973 149,613
Touchstone Income Opportunity 11,424 (462) (3,398) (4) 7,560 15.663341 118,408
Touchstone High Yield Bond* - 570 - 56 626 9.217403 5,766
Touchstone Value Plus 10 1,361 - 275 1,646 11.589395 19,074
Touchstone Growth & Income 13,132 2,320 (3,964) (591) 10,897 18.420552 200,729
Touchstone Enhanced 30* - 1,317 - 149 1,466 10.685289 15,660
Touchstone Balanced 10,009 1,249 (4,329) (374) 6,555 18.634709 122,156
Touchstone Bond 8,263 (170) (2,296) (467) 5,330 12.954294 69,047
Touchstone Standby Income 39,354 4,120 (34,941) (1,569) 6,964 12.345235 85,972
-------------
Total - Touchstone Advisor Variable Annuity $ 1,059,874
=============
</TABLE>
* Calculation of the AIM V.I. Growth, AIM V.I. Government Securities, Alger
American Small Capitalization, Alger American Growth, MFS Emerging Growth, MFS
Growth with Income, PIMCO Long-Term U. S. Government Bond, Touchstone Small
Cap Value, Touchstone High Yield, and Touchstone Enhanced 30 Unit Values began
May 17, 1999 when those sub-accounts commenced operations.
10
<PAGE>
Western-Southern Life Assurance Company Separate Account 2
Supplementary Information-Selected Per Unit Data and Ratios
(Selected data for an accumulation unit outstanding throughout each year)
Period Ended December 31, 1999
<TABLE>
<CAPTION>
Alger
AIM V.I. American Alger MFS VIT
AIM V.I. Government Small American Emerging
Growth Securities Capitalization Growth Growth
Sub-Account* Sub-Account* Sub-Account* Sub-Account* Sub-Account*
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per unit data
Investment income $ 0.441028 $ 0.365561 $ - $ - $ -
Expenses 0.052333 0.049540 0.053896 0.052042 0.056039
---------------------------------------------------------------------------------------
Net investment income (loss) 0.388695 0.316021 (0.053896) (0.052042) (0.056039)
Net realized and
unrealized gain (loss)
on investments 2.040297 (0.354121) 3.745643 2.143467 6.520110
---------------------------------------------------------------------------------------
Net increase (decrease)
in net asset value 2.428992 (0.038100) 3.691747 2.091425 6.464071
Beginning of period 10.000000 10.000000 10.000000 10.000000 10.000000
---------------------------------------------------------------------------------------
End of period $ 12.428992 $ 9.961900 $ 13.691747 $ 12.091425 $ 16.464071
=======================================================================================
Ratios
Ratio of operating
expense to average
net assets (%) 0.42% 0.00% 0.24% 0.68% 0.05%
Ratio of net investment
income (loss) to
average net assets (%) 7.36% 8.00% -0.36% 2.45% -0.03%
</TABLE>
* Calculation of the AIM V.I. Growth, AIM V.I. Government Securities, Alger
American Small Capitalization, Alger American Growth, MFS VIT Emerging Growth,
MFS VIT Growth with Income, PIMCO Long-Term U.S. Government Bond, Touchstone
Small Cap Value, Touchstone High Yield, and Touchstone Enhanced 30 Unit Values
began May 17, 1999, when those sub-accounts commenced operations.
<TABLE>
<CAPTION>
PIMCO
Long-term
MFS VIT U.S. Touchstone Touchstone
Growth Government Small Cap Emerging
with Income Bond Value Growth
Sub-Account* Sub-Account* Sub-Account* Sub-Account
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per unit data
Investment income $ - $ 0.343124 $ - $ 3.622734
Expenses 0.049321 0.049095 0.051366 0.155539
----------------------------------------------------------------------
Net investment income (loss) (0.049321) 0.294029 (0.051366) 3.467195
Net realized and
unrealized gain (loss)
on investments 0.382735 (0.619342) 1.575443 4.552631
----------------------------------------------------------------------
Net increase (decrease)
in net asset value 0.333414 (0.325313) 1.524077 8.019826
Beginning of period 10.000000 10.000000 10.000000 17.592298
----------------------------------------------------------------------
End of period $ 10.333414 $ 9.674687 $ 11.524077 $ 25.612124
======================================================================
Ratios
Ratio of operating
expense to average
net assets (%) 0.41% 0.25% 0.06% 0.68%
Ratio of net investment
income (loss) to
average net assets (%) -0.60% 1.61% -0.06% 12.06%
</TABLE>
* Calculation of the AIM V.I. Growth, AIM V.I. Government Securities, Alger
American Small Capitalization, Alger American Growth, MFS VIT Emerging Growth,
MFS VIT Growth with Income, PIMCO Long-Term U.S. Government Bond, Touchstone
Small Cap Value, Touchstone High Yield, and Touchstone Enhanced 30 Unit Values
began May 17, 1999, when those sub-accounts commenced operations.
<PAGE>
Western-Southern Life Assurance Company Separate Account 2
Supplementary Information-Selected Per Unit Data and Ratios (continued)
(Selected data for an accumulation unit outstanding throughout each year)
Period Ended December 31, 1999
<TABLE>
<CAPTION>
Touchstone Touchstone Touchstone Touchstone
International Income High Touchstone Growth and
Equity Opportunity Yield Value Plus Income
Sub-Account Sub-Account Sub-Account* Sub-Account Sub-Account
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per unit data
Investment income $ 1.781647 $ 2.176310 $ - $ 0.478614 $ -
Expenses 0.141549 0.122805 0.047211 0.085925 0.149635
---------------------------------------------------------------------------------------
Net investment income (loss) 1.640098 2.053505 (0.047211) 0.392689 (0.149635)
Net realized and
unrealized gain (loss)
on investments 4.354878 (1.757762) (0.735386) 1.039903 0.453040
---------------------------------------------------------------------------------------
Net increase (decrease)
in net asset value 5.994976 0.295743 (0.782597) 1.432592 0.303405
Beginning of period 16.937997 15.367598 10.000000 10.156803 18.117147
---------------------------------------------------------------------------------------
End of period $22.932973 $ 15.663341 $ 9.217403 $ 11.589395 $ 18.420552
=======================================================================================
Ratios
Ratio of operating
expense to average
net assets (%) 0.71% 0.74% 0.28% 0.16% 0.71%
Ratio of net investment
income (loss) to
average net assets (%) 6.98% 10.64% 12.31% 8.06% -0.43%
</TABLE>
* Calculation of the AIM V.I. Growth, AIM V.I. Government Securities, Alger
American Small Capitalization, Alger American Growth, MFS VIT Emerging Growth,
MFS VIT Growth with Income, PIMCO Long-Term U.S. Government Bond, Touchstone
Small Cap Value, Touchstone High Yield and Touchstone Enhanced 30 Unit Values
began May 17, 1999, when those sub-accounts commenced operations.
<TABLE>
<CAPTION>
Touchstone
Touchstone Touchstone Touchstone Standby
Enhanced 30 Balanced Bond Income
Sub-Account* Sub-Account Sub-Account Sub-Account
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per unit data
Investment income $ 0.049504 $ 1.806077 $ 0.116865 $ 0.682826
Expenses 0.050448 0.141852 0.104043 0.096394
----------------------------------------------------------------------
Net investment income (loss) (0.000944) 1.664225 0.012822 0.586432
Net realized and
unrealized gain (loss)
on investments 0.686233 (0.165215) (0.286221) (0.108833)
----------------------------------------------------------------------
Net increase (decrease)
in net asset value 0.685289 1.499010 (0.273399) 0.477599
Beginning of period 10.000000 17.135699 13.227693 11.867636
----------------------------------------------------------------------
End of period $ 10.685289 $ 18.634709 $ 12.954294 $ 12.345235
======================================================================
Ratios
Ratio of operating
expense to average
net assets (%) 0.78% 0.84% 0.76% 0.49%
Ratio of net investment
income (loss) to
average net assets (%) 7.48% 3.63% 0.30% 3.00%
</TABLE>
* Calculation of the AIM V.I. Growth, AIM V.I. Government Securities, Alger
American Small Capitalization, Alger American Growth, MFS VIT Emerging Growth,
MFS VIT Growth with Income, PIMCO Long-Term U.S. Government Bond, Touchstone
Small Cap Value, Touchstone High Yield and Touchstone Enhanced 30 Unit Values
began May 17, 1999, when those sub-accounts commenced operations.
<PAGE>
Statutory-Basis Financial Statements
and Supplemental Schedule
Western-Southern Life Assurance Company
Years ended December 31, 1999 and 1998
with Reports of Independent Auditors
<PAGE>
Western-Southern Life Assurance Company
Statutory-Basis Financial Statements
Years ended December 31, 1999 and 1998
CONTENTS
Report of Ernst & Young, LLP...................................................1
Report of PricewaterhouseCoopers LLP...........................................2
Financial Statements
Balance Sheets - Statutory-Basis...............................................3
Statements of Income - Statutory-Basis.........................................4
Statements of Changes in Capital and Surplus - Statutory-Basis.................5
Statements of Cash Flows - Statutory-Basis ....................................6
Notes to Statutory-Basis Financial Statements..................................7
Supplemental Data:
Report on Supplemental Schedule of Selected Statutory-Basis Financial Data....24
Supplemental Schedule of Selected Statutory-Basis Financial Data..............25
<PAGE>
Report of Independent Auditors
Board of Directors
Western-Southern Life Assurance Company
We have audited the accompanying statutory-basis balance sheet of Western-
Southern Life Assurance Company as of December 31, 1999, and the related
statutory-basis statements of income, changes in capital and surplus, and cash
flows for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
As described in Note 2 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Ohio Insurance Department, which practices differ from
generally accepted accounting principles. The variances between such practices
and generally accepted accounting principles and the effects on the accompanying
financial statements are described in Note 2.
In our opinion, because of the effects of the matter described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of Western-Southern Life Assurance Company at December 31, 1999, or the results
of its operations or its cash flows for the year then ended.
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Western-Southern
Life Assurance Company at December 31, 1999, and the results of its operations
and its cash flows for the year then ended in conformity with accounting
practices prescribed or permitted by the Ohio Insurance Department.
/s/ ERNST & YOUNG LLP
April 18, 2000
1
<PAGE>
Report of Independent Accountants
To the Board of Directors
Western-Southern Life Assurance Company
We have audited the accompanying statutory statements of admitted assets,
liabilities and surplus of Western-Southern Life Assurance Company (the
"Company") as of December 31, 1998, and the related statutory statements of
income and changes in surplus, and cash flows for the year then ended. 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 audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
As described in Note 2 to the financial statements, the Company prepared these
financial statements using accounting practices prescribed or permitted by the
Insurance Department of the State of Ohio, which practices differ from
accounting principles generally accepted in the United States. The effects on
the financial statements of the variances between the statutory basis of
accounting and generally accepted accounting principles are material; they are
described in Note 2.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of the Company as of December 31, 1998, or the results of its operations or its
cash flows for the year then ended.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the admitted assets, liabilities and surplus of the
Company as of December 31, 1998, and the results of its operations and its cash
flows for the year then ended, on the basis of accounting described in Note 2.
We have not audited the financial statements of Western-Southern Life Assurance
Company for any period subsequent to December 31, 1998.
/s/PricewaterhouseCoopers LLP
April 26, 1999
Cincinnati, Ohio
<PAGE>
Western-Southern Life Assurance Company
Balance Sheets - Statutory-Basis
as of December 31, 1999 and 1998
1999 1998
---------------------------------
ADMITTED ASSETS (IN THOUSANDS)
Bonds $ 3,515,462 $ 3,131,311
Preferred and common stocks 107,636 92,174
Mortgage loans 204,451 154,593
Policy loans 50,261 50,767
Cash, cash equivalents and short-term
investments 64,497 78,050
Other invested assets 28,386 21,402
--------------- ---------------
Total cash and invested assets 3,970,693 3,528,297
Investment income due and accrued 48,099 43,360
Reinsurance due, held by parent 32,135 32,826
Other assets 1,957 2,754
Separate account assets 273,195 224,275
--------------- ---------------
Total admitted assets $ 4,326,079 $ 3,831,512
=============== ===============
LIABILITIES AND CAPITAL AND SURPLUS
Policy reserves $ 3,674,385 $ 3,222,016
Policy claims in process of settlement 7,566 7,335
Federal income taxes payable 29,745 21,680
Amounts due to parent:
Reinsurance premiums 27,545 27,643
General expenses 3,148 1,020
Liability for temporary investments held
for affiliates 4,625 35,018
Other liabilities 35,339 16,407
Interest maintenance reserve 19,577 26,672
Asset valuation reserves 47,524 41,558
Separate account liabilities 273,195 224,275
--------------- ---------------
Total liabilities $ 4,122,649 $ 3,623,624
--------------- ---------------
CAPITAL AND SURPLUS
Common stock, $1 par value, authorized
10,000,000 shares, issued and
outstanding 2,500,000 and 1,500,000,
respectively 2,500 1,500
Paid-in surplus 239,000 240,000
Unassigned deficit (38,070) (33,612)
--------------- ---------------
Total capital and surplus 203,430 207,888
--------------- ---------------
Total liabilities and capital and surplus $ 4,326,079 $ 3,831,512
=============== ===============
See accompanying notes.
3
<PAGE>
Western-Southern Life Assurance Company
Statements of Income - Statutory-Basis
for the years ended December 31, 1999 and 1998
1999 1998
---------------------------------
(IN THOUSANDS)
Revenue:
Premiums $ 791,153 $ 603,400
Net investment income 274,079 254,103
Other 192 321
--------------- ---------------
1,065,424 857,824
Policy benefits and expenses:
Death benefits 128,577 110,269
Annuity benefits 279,714 179,939
Surrender benefits 32,595 32,600
Other benefits 7,994 6,821
Increase in policy reserves 452,368 287,977
Net transfers to separate account 13,309 97,429
Commissions on premiums 55,225 49,724
General expenses 61,764 67,341
--------------- ---------------
1,031,546 832,100
--------------- ---------------
Gain from operations before federal
income tax expense and net realized
capital gains (losses) 33,878 25,724
Federal income tax expense 17,761 6,388
--------------- ---------------
Net gain from operations before net
realized capital gains (losses) 16,117 19,336
Net realized capital gains (losses), less
federal income tax expense (benefit) of
$(355) in 1999 and $2,310 in 1998 and
transfers to (from) the Interest
Maintenance Reserve of $(1,172) in 1999
and $13,390 in 1998 (5,774) 2,860
--------------- ---------------
Net income $ 10,343 $ 22,196
=============== ===============
See accompanying notes.
4
<PAGE>
Western-Southern Life Assurance Company
Statements of Changes in Capital and Surplus - Statutory-Basis
for the years ended December 31, 1999 and 1998
1999 1998
---------------------------------
(IN THOUSANDS)
Capital and surplus, beginning of year $ 207,888 $ 178,079
Net income 10,343 22,196
Change in net unrealized gains (losses):
Unaffiliated common stock 4,963 (7,541)
Subsidiaries (8,726) (5,090)
Other invested assets 3,334 70
(Increase) decrease in asset valuation reserve (5,964) 142
Capital contributions - 20,000
Other (8,408) 32
--------------- ---------------
Capital and surplus, end of year $ 203,430 $ 207,888
=============== ===============
See accompanying notes.
5
<PAGE>
Western-Southern Life Assurance Company
Statements of Cash Flows - Statutory-Basis
for the years ended December 31, 1999 and 1998
1999 1998
---------------------------------
(IN THOUSANDS)
OPERATING ACTIVITIES:
Premium and annuity considerations $ 788,385 $ 600,439
Net investment income received 261,345 240,628
Surrender and annuity benefits paid (311,604) (212,766)
Death and other benefits to policyholders (144,258) (123,480)
Commissions, other expenses and taxes paid (105,850) (105,880)
Net transfers to separate accounts (13,309) (97,429)
Federal income taxes paid to parent (9,419) (11,282)
Other revenues less expenses (18,043) (19,600)
--------------- ---------------
Net cash provided by operations 447,247 270,630
INVESTMENT ACTIVITIES:
Proceeds from investments sold, matured
or repaid:
Bonds 1,148,425 1,230,984
Stocks 8,245 79,793
Mortgage loans 23,627 10,548
Other invested assets 5,761 8,008
--------------- ---------------
Total investment proceeds 1,186,058 1,329,333
Cost of investments acquired:
Bonds (1,537,444) (1,488,085)
Stocks (27,470) (60,477)
Mortgage loans (73,540) (47,827)
Other invested assets (8,910) (5,596)
--------------- ---------------
Total investments acquired (1,647,364) (1,601,985)
Net change in policy and other loans 506 464
--------------- ---------------
Net cash used by investment activities (460,800) (272,188)
FINANCING ACTIVITIES:
Other cash provided:
Capital contributions - 20,000
--------------- ---------------
Net cash provided by financing activities - 20,000
--------------- ---------------
Net change in cash, cash equivalents and
short-term investments (13,553) 18,442
Cash, cash equivalents and short-term
investments:
Beginning of year 78,050 59,608
--------------- ---------------
End of year $ 64,497 $ 78,050
=============== ===============
See accompanying notes.
6
<PAGE>
Western-Southern Life Assurance Company
Notes to Statutory-Basis Financial Statements
December 31, 1999 and 1998
1. ORGANIZATION AND NATURE OF BUSINESS
Western-Southern Life Assurance Company (the Company) is a wholly owned
subsidiary of The Western and Southern Life Insurance Company (Western and
Southern), a mutual life insurance Company. The Company is domiciled in Ohio.
The Company offers individual annuities and interest-sensitive life insurance
products through Western and Southern's agents and various financial
institutions. The Company is licensed in forty-four states and the District of
Columbia, actively selling in twenty-one states, and 94% of its field force is
located in twelve midwest and south-central states.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Company is subject to regulation by the Department of Insurance of the State
of Ohio (the Department) and other states in which the Company operates. The
Company files financial statements with these departments using statutory
accounting practices (SAP) prescribed or permitted by the Department and used in
the preparation of the accompanying statutory-basis financial statements.
Prescribed statutory accounting practices include a variety of publications of
the National Association of Insurance Commissioners (NAIC), as well as state
laws, regulations and general administrative rules. Permitted statutory
accounting practices encompass all accounting practices not so prescribed; such
practices differ from state-to-state, may differ from company-to-company within
a state and may change in the future. These practices differ in some respects
from generally accepted accounting principles (GAAP). The more significant
differences are:
o Certain assets are excluded from the statement of admitted assets,
liabilities and capital and surplus as "nonadmitted assets" (principally
furniture and equipment) for statutory reporting purposes.
o Debt securities classified as available for sale are carried at amortized
cost rather than fair value.
o Deferred federal income taxes are not provided for statutory reporting
purposes.
o The accounts and operations of the Company's subsidiaries are not
consolidated with the accounts and operations of the Company as would be
required by GAAP.
7
<PAGE>
Western-Southern Life Assurance Company
Notes to Statutory-Basis Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
o For statutory reporting purposes, the Company defers the portion of
realized capital gains and losses (using a formula prescribed by the NAIC)
on sales of fixed income investments, principally bonds and mortgage loans,
attributable to changes in the general level of interest rates. These
deferrals are amortized over the remaining period to maturity. The
deferral, net of federal income taxes, is reported in the accompanying
balance sheets as the "Interest Maintenance Reserve."
o For statutory reporting purposes, the "Asset Valuation Reserve" is
determined by a NAIC prescribed formula and is reported as a liability.
o For statutory reporting purposes, revenues for universal life policies and
annuity contracts consist of the entire premium received, and benefits
represent the death benefits paid and the change in policy reserves. For
GAAP, premiums received in excess of policy charges would not be recognized
as premium revenue and benefits would represent the excess of benefits paid
over the policy account value and interest credited to the account values.
o The costs of acquiring new business, such as commissions, certain costs of
policy underwriting and issuance and certain variable agency expenses, have
not been deferred for statutory reporting purposes.
At December 31, 1999 and 1998, the Company's unaudited GAAP equity was
$330,709,000 and $387,759,000, respectively. Unaudited GAAP net income was
$13,805,000 and $34,899,000 for 1999 and 1998, respectively.
The Company received written approval from the Department 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. The Company also received approval to
record all taxes, including interest, assessments, settlements and corrections
through the Statement of Operations, rather than as a direct charge to surplus.
There is no prescribed accounting treatment for these transactions.
In March 1998, the NAIC finalized the Codification of Statutory Accounting
Principles guidance ("Codification") which will replace the current Accounting
Practices and Procedures manual as the NAIC's primary guidance on statutory
accounting. Codification provides guidance for areas where statutory accounting
has been silent and changes current statutory accounting in some areas.
Principal changes that are expected to impact the Company include the recording
of deferred taxes and changes in the mortgage loan reserve.
8
<PAGE>
Western-Southern Life Assurance Company
Notes to Statutory-Basis Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
The Department has adopted Codification, effective January 1, 2001. The Company
has not estimated the potential impact of Codification to its statutory-basis
financial statements.
Significant accounting policies are as follows:
REVENUES AND EXPENSES
Premium revenues on fixed premium policies are recognized when due over the
premium paying period of the policies. Premium revenues on flexible premium
policies are recognized when received. Commissions and other costs of acquiring
the policies are charged to expense when incurred.
VALUATION OF INVESTMENTS
o Debt securities and stock values are as prescribed by the NAIC; debt
securities principally at amortized cost, preferred stocks in good standing
at cost and all other stocks at market.
o Single class and multi-class mortgage-backed/asset-backed securities are
valued at amortized cost using the interest method, including anticipated
prepayments. Prepayment assumptions are obtained from an external source
and are based on the current interest rate and economic environment. The
retrospective adjustment method is used to value all such securities.
o The Company's subsidiaries are reported at the GAAP-basis of their net
assets. Dividends from subsidiaries are included in net investment income.
The remaining change in the subsidiaries equity is included in the change
in net unrealized capital gains or losses.
o Mortgage loans not in default are carried at outstanding indebtedness less
unamortized premium or discount. Mortgage loans in default are recorded at
the lower of the related indebtedness or fair market value.
o Property acquired in satisfaction of debt is recorded at the lower of cost
less accumulated depreciation or fair market value.
o Policy loan values are carried at outstanding indebtedness not in excess of
policy cash surrender value.
9
<PAGE>
Western-Southern Life Assurance Company
Notes to Statutory-Basis Financial Statements
2. SIGNIFICANT ACCOUNTING POLICES (continued)
o Real estate joint ventures and partnerships are accounted for under the
equity method. The equity in earnings for real estate joint ventures and
general partnerships are recorded through net investment income. The equity
in earnings for limited partnership interests is recorded to surplus.
The asset valuation reserve serves to provide a reserve, recorded through
unassigned surplus, against fluctuations in the market values of debt
securities, stocks, mortgage loans, real estate and other invested assets. The
interest maintenance reserve defers the recognition of realized capital gains
and losses resulting from changes in interest rates on fixed income investments
sold and amortizes the gains and losses into investment income over the
approximate remaining life of the investments sold. The net gain (loss) deferred
as a result of recording the interest maintenance reserve was ($1,172,000) and
$13,390,000, which is net of federal income tax expense (benefit) of ($631,000)
and $7,211,000 in 1999 and 1998, respectively.
Realized gains and losses from sales of securities are determined on the basis
of specific identification and recognized on the trade date. Realized gains and
losses, adjusted for the interest maintenance reserve, are included in the
determination of net income. Adjustments to fair market value for permanent
declines in value of mortgage loans, property acquired in satisfaction of debt
and real estate are treated as realized losses and are included in net income.
Adjustments for declines, which are not permanent, are treated as unrealized
losses. Unrealized gains and losses on all investments are reported as
adjustments to unassigned surplus.
POLICY RESERVES
Policy reserves for life insurance, annuity contracts and supplemental benefits
are developed by using accepted actuarial methods and are computed principally
on the Commissioner's Annuity Reserve Valuation Method. The following mortality
tables and interest rates are used:
<TABLE>
<CAPTION>
Percentage of
Reserves
------------------------------------
1999 1998
------------------------------------
Life insurance
1958 and 1980 Commissioners standard Ordinary,
<S> <C> <C>
31/2% -51/2% 25.3% 28.2%
Annuities
Various, 21/2 -8 1/4% 74.0 71.1
Supplemental benefits:
Various, 21/2% -81/4% 0.7 0.7
------------------------------------
100% 100%
------------------------------------
</TABLE>
10
<PAGE>
Western-Southern Life Assurance Company
Notes to Statutory-Basis Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Surrender values on policies do not exceed the corresponding benefit reserves.
Additional reserves are established when the results of cash flow testing under
various interest rate scenarios indicate the need for such reserves or the net
premiums exceed the gross premiums on any insurance in force.
For substandard table ratings, mean reserves are based on 125% to 500% of
standard mortality rates. For flat extra ratings, mean reserves are based on the
standard or substandard mortality rates increased by the cost of the additional
mortality indicated by the rating.
As of December 31, 1999, reserves of $779,000 are recorded on inforce amounts of
$15,655,000 for which gross premiums are less than the net premiums according to
the standard of valuation required by the Department.
Tabular interest, tabular less actual reserves released, and tabular cost have
been determined by formula. Tabular interest on funds not involving life
contingencies is calculated as one-hundredth of the product of such valuation
rate of interest times the mean of the amount of funds subject to such valuation
rate of interest held at the beginning and end of the year of valuation.
The liabilities related to guaranteed investment contracts and policyholder
funds left on deposit with the Company generally are equal to fund balances less
applicable surrender charges.
POLICY AND CONTRACT CLAIMS
Policy claims reserves represent the estimated ultimate net cost of all reported
and unreported claims incurred through December 31, 1999 and 1998. The reserves
for unpaid claims are estimated using individual case-basis valuations and
statistical analysis. These estimates are subject to the effects of trends in
claim severity and frequency. Although considerable variability is inherent in
such estimates, management believes that the reserves for claims are adequate.
The estimates are continually reviewed and adjusted as necessary as experience
develops or new information becomes known; such adjustments are included in
current operations.
11
<PAGE>
Western-Southern Life Assurance Company
Notes to Statutory-Basis Financial Statements
2. SIGNIFICANT ACCOUNTING POLICES (continued)
SEPARATE ACCOUNT
The Company maintains two separate accounts that hold investments related to the
Company's variable annuity products. The assets of the separate accounts consist
primarily of mutual funds, which are recorded at market value.
The activity within the separate accounts, including realized and unrealized
gains or losses on its investments, has no effect on net income or
policyholders' surplus of the Company.
CASH AND CASH EQUIVALENTS
The Company considers short-term investments with an original maturity of three
months or less to be cash equivalents.
FEDERAL INCOME TAXES
Western and Southern files a consolidated tax return with its eligible
subsidiaries, including the Company. The provision for federal income taxes is
allocated to the Company using a separate return method based upon 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.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting practices
prescribed or permitted by insurance regulatory authorities 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.
RECLASSIFICATION
Previously reported amounts for 1998 have in some instances been reclassified to
conform to the 1999 presentation.
12
<PAGE>
Western-Southern Life Assurance Company
Notes to Statutory-Basis Financial Statements
3. DEBT AND EQUITY SECURITIES
Fair values for debt securities are based on quoted market prices. The amortized
cost and estimated fair values of investments in debt securities at December 31,
1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999
--------------------------------------------------------------
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
----------- ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 37,379 $ 115 $ 1,500 $ 35,994
Debt securities issued by states of
the U.S. and political subdivisions
of the states 40,736 984 409 41,311
Corporate securities 2,190,337 16,339 86,174 2,120,502
Mortgage-backed securities 1,247,010 6,053 33,427 1,219,636
----------- ------------ ------------ ------------
Total $ 3,515,462 $ 23,491 $ 121,510 $ 3,417,443
=========== ============ ============ ============
1998
--------------------------------------------------------------
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
----------- ------------ ------------ ------------
(in thousands)
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 57,830 $ 1,721 $ 321 $ 59,230
Debt securities issued by states of
the U.S. and political subdivisions
of the states 85,647 6,582 3 92,226
Corporate securities 1,892,905 91,970 19,520 1,965,355
13
<PAGE>
Western-Southern Life Assurance Company
Notes to Statutory-Basis Financial Statements
Mortgage-backed securities 1,094,929 27,111 1,063 1,120,977
----------- ------------ ------------ ------------
Total $ 3,131,311 $ 127,384 $ 20,907 $ 3,237,788
=========== ============ ============ ============
</TABLE>
14
<PAGE>
Western-Southern Life Assurance Company
Notes to Statutory-Basis Financial Statements
3. DEBT AND EQUITY SECURITIES (continued)
The amortized cost and estimated fair value of debt securities at December 31,
1999, 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.
<TABLE>
<CAPTION>
Amortized Cost Estimated Fair
Value
---------------- -----------------
(in thousands)
<S> <C> <C>
Due in one year or less $ 56,194 $ 55,975
Due after one year through five years 911,723 898,407
Due after five years through ten years 883,964 844,669
Due after 10 years 416,571 398,756
Mortgage-backed securities 1,247,010 1,219,636
---------------- -----------------
Total $ 3,515,462 $ 3,417,443
================ =================
</TABLE>
Proceeds from sales of investments in debt securities during 1999 and 1998 were
$1,148,425,000 and $1,230,984,000, respectively. Gross gains of $13,397,000 and
$24,034,000 and gross losses of $14,950,000 and $6,483,000 were realized on
those sales in 1999 and 1998, respectively.
15
<PAGE>
Western-Southern Life Assurance Company
Notes to Statutory-Basis Financial Statements
3. DEBT AND EQUITY SECURITIES (continued)
Unrealized gains and losses on investments in common stocks and on investments
in subsidiaries are reported directly in equity and do not affect net income.
The gross unrealized gains and gross unrealized losses on, and the cost and fair
value of those investments and preferred stocks are as follows:
<TABLE>
<CAPTION>
1999
---------------------------------------------------------------
Unrealized Unrealized
Cost Gains Losses Fair Value
--------------- --------------- --------------- ---------------
(in thousands)
<S> <C> <C> <C> <C>
Preferred stocks $ 46,218 $ - $ 4,321 $ 41,897
=============== =============== =============== ===============
Common stocks $ 54,831 $ 12,502 $ 5,915 $ 61,418
Subsidiaries 38,395 - 38,395 -
--------------- --------------- --------------- ---------------
Total common stock $ 93,226 $ 12,502 $ 44,310 $ 61,418
=============== =============== =============== ===============
1998
---------------------------------------------------------------
Unrealized Unrealized
Cost Gains Losses Fair Value
--------------- --------------- --------------- ---------------
(in thousands)
Preferred stocks $ 42,421 $ 822 $ 308 $ 42,935
=============== =============== =============== ===============
Common stocks $ 48,130 $ 6,613 $ 4,990 $ 49,753
Subsidiaries 29,669 - 29,669 -
--------------- --------------- --------------- ---------------
Total common stock $ 77,779 $ 6,613 $ 34,659 $ 49,753
=============== =============== =============== ===============
</TABLE>
Proceeds from sales of investments in equity securities during 1999 and 1998
were $8,245,000 and $79,793,000, respectively. There were no realized gains for
1999 and $7,148,000 for 1998. Gross losses of $1,000 and $1,537,000 were
realized on these sales in 1999 and 1998, respectively.
16
<PAGE>
Western-Southern Life Assurance Company
Notes to Statutory-Basis Financial Statements
4. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following sets forth the fair values of the Company's financial instruments.
Fair values for debt, equity and short term investment securities are based on
quoted market prices. See footnote 3 for fair value disclosures.
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. Carrying and fair values of mortgage
loans were $204,451,000 and $202,643,000, and $154,593,000 and $161,615,000 at
December 31, 1999 and 1998, respectively.
The fair values for the Company's liabilities under investment-type insurance
contracts are estimated using discounted cash flow calculations based on
interest rates currently being offered for similar contracts with maturities
consistent with those remaining for the contracts being valued. Carrying and
fair values of investment-type contract reserves are $2,653,410,000 and
$2,615,287,000, and $2,228,960,000 and $2,201,779,000 at December 31, 1999 and
1998, respectively.
The Company believes it is not practicable to estimate the fair value of policy
loans. These assets, totaling $50,261,000 and $50,767,000 at December 31, 1999
and 1998, respectively, 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.
Certain reserves for investment-type insurance contracts do not include
mortality or morbidity risk. Fair values for insurance reserves are not required
to be disclosed. However, the estimated fair values of all insurance reserves
and investment contracts are taken into consideration in the Company's overall
management of interest rate risk.
17
<PAGE>
Western-Southern Life Assurance Company
Notes to Statutory-Basis Financial Statements
5. CONCENTRATIONS AT CREDIT RISK
Interest changes may have temporary effects on the sale and profitability of
annuity products offered by the Company. Although the rates offered by the
Company 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 constantly 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.
At December 31, 1999, the Company held unrated or less-than-investment grade
corporate bonds of $294,268,000, with an aggregate fair value of $270,421,000.
Those holdings amounted to 8.4% of the Company's investments in bonds and 6.8%
of the Company's total admitted assets. The Company performs periodic
evaluations of the relative credit standing of the issuers of these bonds. The
Company considers these evaluations in their overall investment strategy.
The Company's investments in mortgage loans principally involve commercial real
estate. At December 31, 1999, 51.8% of such mortgages ($105,799,000) involved
properties located in Ohio and Texas. Such investments consist of first mortgage
liens on completed income-producing properties; the mortgage outstanding on any
individual property does not exceed $21,500,000.
During 1999, the respective maximum and minimum lending rates for new commercial
mortgage loans issued were 8.1% and 7.5%. No other categories of mortgage loans
were issued. At the issuance of a loan, the percentage of loan to value on any
one loan does not exceed 80%. At December 31, 1999, the Company held no
mortgages with interest overdue beyond one year. At December 31, 1999, the
Company's investments in mortgage loans were not subject to prior liens. All
properties covered by mortgage loans have fire insurance at least equal to the
excess of the loan over the maximum loan that would be allowed on the land
without the building. During 1999, the Company did not reduce interest rates on
any outstanding mortgages. At December 31, 1999 the Company held no mortgage
loans that require payments of principal or interest be made based upon cash
flows generated by the property serving as collateral for the loans or that have
a diminutive payment required.
18
<PAGE>
Western-Southern Life Assurance Company
Notes to Statutory-Basis Financial Statements
6. RELATED PARTY TRANSACTIONS
The Company has three modified coinsurance agreements under which it cedes all
of its universal life insurance business to its parent. Under the terms of the
agreement, the Company retains the reserves and related assets. The Company also
records in its summaries of operations premiums less experience refunds,
commissions, adjustments to reserves as specified in the agreement, benefits
incurred and other related expenses of this business. The net effect of the
agreements on operations of the Company has been recorded as an increase in
general expenses of $8,536,000 and $6,922,000 in 1999 and 1998, respectively.
The Company also has a coinsurance agreement under which it assumes all of its
parent's flexible premium annuity business. Under the terms of this agreement,
the Company assumed reserves of $22,819,000 and $25,255,000 as of December 31,
1999 and 1998, respectively. Amounts included in the statements of income
resulting from this agreement are as follows:
1999 1998
-----------------------------------------
(in thousands)
Premiums $ 189 $ 735
Net investment income (2,248) 1,633
Benefits and expenses 4,285 3,689
Decrease in policy reserves (2,436) (1,879)
Reinsurance of risk does not discharge the primary liability of the Company, the
Company remains contingently liable with respect to any reinsurance ceded, and
this contingency would become an actual liability in the event that the assuming
company becomes unable to meet its obligation under the reinsurance agreement.
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
$34,942,000 and $41,232,000 in 1999 and 1998, respectively. Rent expense was
$4,585,000 and $4,155,000 in 1999 and 1998, respectively.
19
<PAGE>
Western-Southern Life Assurance Company
Notes to Statutory-Basis Financial Statements
6. RELATED PARTY TRANSACTIONS (continued)
During 1999 and 1998, the Company made capital contributions of $8,726,000 and
$5,090,000 respectively, to its wholly owned subsidiary IFS Financial Services
(IFS). Additionally, the Company pays commissions to IFS for sales made on
behalf of the Company. These commissions totaled $5,076,000 and $2,358,000 in
1999 and 1998, respectively.
At December 31, 1999 and 1998, the Company had $55,338,000 and $43,537,000,
respectively, invested in the Touchstone Funds, mutual funds administered by
Touchstone Advisors, Inc., a wholly owned subsidiary of IFS.
7. FEDERAL INCOME TAXES
The federal income tax provision reflects an effective tax rate different than
the prevailing federal income tax rate due in part to various exclusions and
special deductions available to life insurance companies. Following is a
reconciliation between the amount of tax computed at the federal statutory rate
of 35% and the federal income tax provision (exclusive of taxes related to
capital gains or losses) reflected in the statements of income:
<TABLE>
<CAPTION>
1999 1998
----------------------------------
(in thousands)
<S> <C> <C>
Income tax computed at statutory rate $ 11,857 $ 9,003
Increase (decrease) in taxes resulting from:
Adjustments to statutory reserves for tax purposes 6,000 296
Deferred acquisition costs recorded for tax purposes 3,214 1,193
Reclassification of capital gains to ordinary income 1,174 911
Bond discount accrual (2,930) (3,011)
Difference between book and tax income from
investments in partnerships 602 (1,450)
Amortization of IMR (2,073) (2,263)
Changes in prior period estimates (142) 1,362
Other 59 347
---------------- -----------------
Federal income taxes $ 17,761 $ 6,388
================ =================
</TABLE>
The Company made tax payments in the amount of $9,419,000 and $11,925,000 in
1999 and 1998, respectively.
20
<PAGE>
Western-Southern Life Assurance Company
Notes to Statutory-Basis Financial Statements
8. RECONCILIATION TO ANNUAL STATEMENT
Certain items on the balance sheet have been reclassified which results in a
difference between the audited total assets and total assets for the 1999 and
1998 annual statements. The reclasses had no effect on income or capital and
surplus. Reconciliation to the annual statement total assets as of December 31,
1999 and 1998 is summarized as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------------------
(in thousands)
<S> <C> <C>
Total assets per audited balance sheet $ 4,326,079 $ 3,831,512
Life insurance premium and annuity considerations
deferred and uncollected (27,545) (27,643)
Unpaid losses on reinsurance ceded (6,707) (6,870)
------------------ -----------------
Total assets per annual statement $ 4,291,827 $ 3,796,999
================== =================
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
Various lawsuits have arisen in the ordinary course of the Company's business.
In each of the matters, the Company believes its defenses are meritorious and
that the eventual outcome will not have a material effect on the Company's
financial position.
At December 31, 1999 the Company does not have any material leases for office
space or equipment.
10. REGULATORY RESTRICTIONS
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, 1999 and 1998, the Company substantially exceeded the minimum risk-based
capital standards.
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,
the content of advertising material, financial statements and the nature of
permitted practices.
21
<PAGE>
Western-Southern Life Assurance Company
Notes to Statutory-Basis Financial Statements
10. REGULATORY RESTRICTIONS (continued)
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 1999, the Company did
not pay dividends to Western and Southern.
11. ANNUITY RESERVES
At December 31, 1999, the Company's annuity reserves and deposit fund
liabilities that are subject to discretionary withdrawal (with adjustment),
subject to discretionary withdrawal (without adjustment), and not subject to
discretionary withdrawal provisions are summarized as follows:
<TABLE>
<CAPTION>
Amount Percent
---------------- ------------
(in thousands)
Subject to discretionary withdrawal:
<S> <C> <C>
At book value less current surrender charge of 5% or more $1,709,931 62.6%
Subject to discretionary withdrawal (without
adjustment) at book value with minimal or no
charge or adjustment 960,368 35.1
Not subject to discretionary withdrawal * 63,674 2.3
---------------- ------------
Total net annuity reserves and deposit fund liabilities 2,733,973 100%
================ ============
</TABLE>
* Amount is net of $32,000 of reserves ceded through a reinsurance agreement.
The net annuity reserves and deposit fund liabilities shown above are included
in "Policy reserves" in the balance sheets.
22
<PAGE>
Western-Southern Life Assurance Company
Notes to Statutory-Basis Financial Statements
12. SEPARATE ACCOUNTS
Separate accounts held by the Company represent funds, which are administered
for variable annuity contracts. The assets consist of mutual funds. The assets
are carried at market value.
The separate account assets do not have any minimum guarantees and the
investment risks associated with market value changes are borne entirely by the
policyholder.
Information regarding the separate accounts of the Company as of and for the
year ended December 31, 1999 is as follows:
<TABLE>
<CAPTION>
Nonguaranteed
Separate
Accounts
----------------------
(in thousands)
Premiums, deposits and other considerations for the year ended December 31, 1999
<S> <C>
$ 53,011
======================
Reserves for separate accounts as of December 31, 1999
(all subject to discretionary withdrawal) $273,195
======================
A reconciliation of the amounts transferred to and from the separate accounts is
presented below:
1999
----------------------
(in thousands)
Transfers as reported in the statements of income
of the separate accounts statement:
Transfers to separate accounts $ 53,011
Transfers from separate accounts 39,772
----------------------
Net transfers to separate accounts 13,239
Reconciling Adjustments:
Miscellaneous income 70
----------------------
Net transfers as reported in the statements of income $ 13,309
======================
</TABLE>
23
<PAGE>
Western-Southern Life Assurance Company
Notes to Statutory-Basis Financial Statements
13. SUBSEQUENT EVENT
On April 18, 2000, Western and Southern's Board of Directors adopted a plan of
reorganization under Ohio's law. This plan of reorganization provides for the
reorganization of Western and Southern as a stock life insurance company that is
initially a wholly owned subsidiary, and at all times must be at least
majority-controlled subsidiary, of a mutual insurance holding company in
accordance with the requirements of Sections 3913.25 to 3913.38 of the Ohio
Revised Code. To become effective, the plan of reorganization must be approved
by policyholders, and thereafter by the Superintendent of Insurance of the State
of Ohio.
24
<PAGE>
Report of Independent Auditors on Other Financial Information
To the Board of Directors of
Western-Southern Life Assurance Company
Our audit was conducted for the purpose of forming an opinion on the
statutory-basis financial statements taken as a whole. The accompanying
supplemental schedule of selected statutory-basis financial data is presented to
comply with the National Association of Insurance Commissioners' Annual
Statement Instructions and is not a required part of the statutory-basis
financial statements. Such information has been subjected to the auditing
procedures applied in our audit of the statutory-basis financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
statutory-basis financial statements taken as a whole.
This report is intended solely for the information and use of the Company and
state insurance regulatory authorities and is not intended to be and should not
be used for anyone other than these specified parties.
/s/ ERNST & YOUNG LLP
April 18, 2000
25
<PAGE>
Western-Southern Life Assurance Company
Supplemental Schedule of Selected Statutory-Basis Financial Data
for the year ended December 31, 1999
(in thousands)
Investment income earned:
Government bonds $ 23,996
Other bonds (unaffiliated) 209,441
Bonds of affiliates 883
Preferred stocks (unaffiliated) 3,819
Preferred stocks of affiliates -
Common stocks (unaffiliated) 6,830
Common stocks of affiliates -
Mortgage loans 14,308
Real estate 1,013
Premium notes, policy loans and liens 3,573
Collateral loans -
Cash on hand and on deposit 1
Short-term investment 8,162
Other invested assets 13
Derivative instruments -
Aggregate write-ins for investment income 312
---------------
Gross investment income 272,351
---------------
Real estate owned - book value less encumbrances 7,828
Mortgage loans - book value
Farm mortgages -
Residential mortgages -
Commercial mortgages 204,451
---------------
Total mortgage loans 204,451
Mortgage loans by standing - book value:
Good standing 204,451
Good standing with restructured terms -
Interest overdue more than three months, not in foreclosure -
Foreclosure in process -
Other long-term assets - statement value:
Collateral loans -
Bonds and stocks of parents, subsidiaries and affiliates -book value:
Bonds 3,930
Preferred stocks -
Common stocks 38,395
25
<PAGE>
Western-Southern Life Assurance Company
Supplemental Schedule of Selected Statutory-Basis Financial Data
for the year ended December 31, 1999
(in thousands)
Bonds and short-term investments by class and maturity:
Bonds by maturity - statement value due within one
year or less $ 180,260
Over 1 year through 5 years 1,217,029
Over 5 years through 10 years 1,219,224
Over 10 years through 20 years 367,234
Over 20 years 599,612
---------------
Total by maturity 3,583,359
Bonds by class - statement value:
Class 1 2,562,873
Class 2 726,218
Class 3 138,897
Class 4 127,167
Class 5 28,204
Class 6 -
---------------
Total by class 3,583,359
Total bonds publicly traded 3,176,254
Total bonds privately placed 407,105
Preferred stocks - statement value 46,218
Common stocks - market value 61,418
Short-term investments - book value 67,898
Financial options owned - statement value -
Financial options written and in force - statement value -
Financial future contracts open - current price -
Life insurance in force:
Industrial -
Ordinary 20,763,751
Credit life -
Group life -
Amount of accidental death insurance under ordinary policies 1,020,362
26
<PAGE>
Western-Southern Life Assurance Company
Supplemental Schedule of Selected Statutory-Basis Financial Data
for the year ended December 31, 1999
(in thousands)
Life insurance policies with disability provisions in force: $
Industrial -
Ordinary 10,971,308
Credit life -
Group life -
Supplemental contract in force:
Ordinary - not involving life contingencies
Amount on deposit 1,968
Income payable 3,865
Ordinary - involving life contingencies
Amount on deposit -
Income payable 888
Annuities:
Ordinary:
Immediate - amount of income payable 7,964
Deferred - fully paid account balance 1,552,493
Deferred - Not fully paid - account balance 1,118,942
Group:
Amount of income payable -
Fully paid account balance -
Not fully paid account balance -
Accident and health insurance - premium in force:
Ordinary -
Group -
Credit -
Deposit funds and dividend accumulations:
Deposit funds - account balance 85
Dividend accumulation - account balance -
27
<PAGE>
Western-Southern Life Assurance Company
Supplemental Schedule of Selected Statutory-Basis Financial Data
for the year ended December 31, 1999
(in thousands)
Claim payments 1999:
Group and accident and health year ended December 31, 1999 $
1999 -
1998 -
1997 -
Other accident and health
1999 -
1998 -
1997 -
Other coverages that use developmental methods to calculate
1999 -
1998 -
1997 -
28
<PAGE>
Distributor
Touchstone Securities, Inc. Sub-Accounts
311 Pike Street
Cincinnati, Ohio 45202 o AIM V.I. Growth
(800) 669-2796 (press 3) o AIM V.I. Government Securities
o Alger American Small
Capitalization
Sponsor o Alger American Growth
o Deutsche Equity 500 Index
Touchstone Advisors, Inc. o MFS VIT Emerging Growth
311 Pike Street o MFS VIT Growth with Income
Cincinnati, Ohio 45202 o PIMCO Long-Term U.S. Government
Bond
o Touchstone Small Cap Value
Touchstone Variable Annuity Service Center o Touchstone Emerging Growth
o Touchstone International Equity
Touchstone Variable Annuity Service Center o Touchstone High Yield
P.O. Box 2850 o Touchstone Value Plus
Cincinnati, Ohio 45201-2850 o Touchstone Growth & Income
(800) 669-2796 (press 2) o Touchstone Enhanced 30
o Touchstone Balanced
Transfer Agent o Touchstone Bond
o Touchstone Standby Income
State Street Bank and Trust Company o Touchstone Income Opportunity
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, 2000
Independent Accountants
Ernst & Young LLP
250 East Fifth Street
Cincinnati, Ohio 45202
Legal Counsel
Frost & Jacobs LLP
2500 PNC Center
201 East Fifth Street
Cincinnati, Ohio 45202
<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 Ernst & Young LLP.
(2) Report of PricewaterhouseCoopers LLP.
(3) Statement of Net Assets as of December 31, 1999.
(4) Statement of Operations and Changes in Net Assets for the
periods ended December 31, 1999 and 1998.
(5) Notes to Financial Statements.
(6) Supplementary Information - Selected Per Unit Data and Ratios
for the period ended December 31, 1999.
WESTERN-SOUTHERN LIFE ASSURANCE COMPANY
(1) Report of Ernst & Young LLP.
(2) Report of PricewaterhouseCoopers LLP.
(3) Statutory-basis Balance Sheets as of December 31, 1999 and
1998.
(4) Statutory-basis Statements of Income for the years ended
December 31, 1999 and 1998.
(5) Statutory-basis Statements of Changes in Capital and Surplus
for the years ended December 31, 1999 and 1998.
(6) Statutory-basis Statements of Cash Flows for the years ended
December 31, 1999 and 1998.
(7) Notes to Statutory-Basis Financial Statements.
(8) Supplemental Schedule for Selected Statutory-Basis Financial
Data for the year ended December 31, 1999.
(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)
(h) Specimen Endorsement 9912-5571 WSA END.
(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") n/k/a Touchstone Variable Series Trust ("TVST").
(2)
(b) Fund Accounting Agreement between Investors Bank &
Trust Company and VIT n/k/a TVST. (2)
(c) Amended and Restated Custodian Agreement between
Investors Bank & Trust Company and VIT n/k/a TVST. (8)
(d) Restated and Amended Sponsor Agreement between
Touchstone Advisors, Inc. and TVST. (9)
(e) (i) Fund Participation Agreement between
Western-Southern Life Assurance Company ("WSLAC")
and VIT n/k/a TVST. (9)
(ii) Amendment No. 1 to Fund Participation Agreement
between WSLAC and TVST. (9)
2
<PAGE>
(iii) Participation Agreement among The Alger American
Fund, WSLAC and Fred Alger & Company. (9)
(iv) Service Agreement between Fred Alger Management
Inc. and WSLAC. (9)
(v) Participation Agreement among AIM Variable
Insurance Funds, Inc., WSLAC and Touchstone
Securities, Inc. (9)
(vi) Participation Agreement among MFS Variable
Insurance Trust, WSLAC and Massachusetts
Financial Services Company. (9)
(vii) Participation Agreement among WSLAC, PIMCO
Variable Insurance Trust and PIMCO Funds
Distributors LLC. (9)
(viii) Service Agreement between PIMCO Funds
Distributors LLC and WSLAC. (9)
(ix) Administrative Services Agreement between WSLAC
and AIM Advisors, Inc. (9)
(9) Opinion and Consent of Donald J. Wuebbling, Esq. (7)
(10) (a) Consent of Ernst & Young LLP.
(b) 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. (9)
- ------------------------------------------------------------------------------
(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 TVST
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)
3
<PAGE>
(5) Incorporated herein by reference to Post-Effective
Amendment No. 8 to the Registration Statement of TVST
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)
(8) Incorporated herein by reference to Post-Effective
Amendment No. 11 to the Registration Statement of
Touchstone Variable Series Trust filed with the SEC
on April 30, 1999 (File Nos. 033-76566 and
811-08416).
(9) Incorporated herein by reference to Post-Effective
Amendment No. 20 to the Registration Statement of
Western-Southern Life Assurance Company Separate
Account 1 filed with the SEC on April 28, 2000 (File
Nos. 033-76582 and 811-08420)
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
John F. Barrett Director, Chief Executive Officer
and President
James N. Clark Director and Secretary
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
4
<PAGE>
Donald A. Bliss Director
10892 East Fanfol Lane
Scottsdale, Arizona 85259
George H. Walker Director
500 N. Broadway
St. Louis, Missouri 63102
Rev. James E. Hoff, S.J. Director
Xavier University
3800 Victory Parkway
Cincinnati, Ohio 45207
Herbert R. Brown Vice President
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 Senior Vice President
Edward S. Heenan Vice President and Comptroller
Dale P. Hennie Senior Vice President
Carroll R. Hutchinson Senior Vice President
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
Mario J. San Marco Vice President
Thomas M. Stapleton Vice President
Robert H. Starnes Vice President
Richard K. Taulbee Vice President
5
<PAGE>
Robert L. Walker Senior Vice President and
Chief Financial Officer
Donald J. Wuebbling Senior Vice President and General
Counsel
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.
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.
6
<PAGE>
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.
Countrywide Financial Services, Inc. ("CFS"); Ohio
corporation, 100% owned by Fort Washington Investment
Advisors, Inc.; financial services company.
Countrywide Fund Services, Inc.; Ohio corporation;
100% owned by CFS; registered transfer agent.
Countrywide Investments, Inc.; Ohio corporation;
100% owned by CFS; registered investment advisor
and registered broker-dealer.
CW Fund Distributors, Inc.; Delaware corporation;
100% owned by CFS; registered broker-dealer.
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.
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
7
<PAGE>
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.
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 December 31, 1999, there were 17 owners of Qualified Contracts and
22 owners of Non-Qualified Contracts offered pursuant to this
Registration Statement (Touchstone Advisor Variable Annuity).
8
<PAGE>
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.
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
9
<PAGE>
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), Touchstone Strategic Trust,
Touchstone Investment Trust and Touchstone Tax-Free Trust, 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
Richard K. Taulbee Vice President
400 Broadway
Cincinnati, Ohio 45202
Robert F. Morand Secretary
400 Broadway
Cincinnati, Ohio 45202
Patricia Wilson Chief Compliance Officer
311 Pike Street
Cincinnati, Ohio 45202
10
<PAGE>
<TABLE>
<CAPTION>
(c) The following table sets forth information about all commissions
and compensation received by the principal underwriter,
Touchstone Securities, Inc.
Net Underwriting Discounts and Compensation on Brokerage Commissions Compensation
Commissions Redemptions
--------------------------------- --------------------- ---------------------- ---------------------
<S> <C> <C> <C>
$601,693 $ -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
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
11
<PAGE>
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.
12
<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. 10 to Registrant's Registration Statement under the Securities Act
of 1933 (Touchstone Advisor Variable Annuity Contract) and Amendment No. 11 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
26th day of April, 2000.
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 26, 2000
- ------------------
John F. Barrett,
President, Director and
Chief Executive Officer
PRINCIPAL FINANCIAL OFFICER:
/s/ Robert L. Walker April 26, 2000
- --------------------
Robert L. Walker,
Senior Vice President and
Chief Financial Officer
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 for each Director
GEORGE H. WALKER
THOMAS L. WILLIAMS April 26, 2000
WILLIAM J. WILLIAMS
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE
4(h) Specimen Endorsement
10(a) Consent of Ernst & Young LLP
10(b) Consent of PricewaterhouseCoopers LLP
99 Powers of Attorney - Directors of the Company
WESTERN-SOUTHERN LIFE ASSURANCE COMPANY
ENDORSEMENT
The "Allocation of Purchase Payments" provision set forth in your Contract is
hereby amended in its entirety to read as follows:
ALLOCATION OF PURCHASE PAYMENTS
----------------------------------------------------------------------
You elect to have purchase payments allocated to one or more
Sub-Accounts of the Variable Account. Each allocation must be in whole
percentages. The sum of the allocation percentages must equal 100%.
The allocation of the initial purchase payment is set forth on page 3.
Additional purchase payments will be allocated in the same manner as
your initial purchase payment unless you request a change to your
allocation percentages. All purchase payments received after a change
in allocation will be invested in the same manner as your most recent
allocation unless you request another change to your allocation
percentages. Any change to your allocation percentages must be in
writing unless telephone access authorization has been received and
approved by the Company.
The "Transfers" provision set forth in your Contract is hereby amended in its
entirety to read as follows:
TRANSFERS
----------------------------------------------------------------------
You may transfer all or a portion of the Contract Value among the
Sub-Accounts. A transfer request must be in writing unless telephone
transfer authorization has been received and approved by the Company.
Transfers must be in amounts not less than $250 and may be made among
Sub-Accounts once every thirty days.
When transferring Contract Value to more than one Sub-Account, not less
than 1% of the total amount being transferred can be directed to each
such Sub-Account.
We may at any time revoke or modify the transfer provisions. Any change
will be confirmed in writing to you.
The following "Dollar Cost Averaging" provision is hereby added to your
Contract:
DOLLAR COST AVERAGING
----------------------------------------------------------------------
<PAGE>
You may request in writing, at any time prior to the Income Date, that
the Company automatically transfer specified dollar amounts, earnings
or specified percentages from the Standby Income Sub-Account to other
Sub-Accounts on the monthly or quarterly anniversary of the Contract
Date. You must select this automatic transfer, known as "Dollar Cost
Averaging," for a period of at least 12 months. The minimum Dollar Cost
Averaging transfer is $200, with a minimum allocation per Sub-Account
of 1% of the total amount transferred. Dollar Cost Averaging is
available only if the Contract Value is at least $10,000. Dollar Cost
Averaging will terminate when any of the following occurs: (1) the
number of designated transfers has been completed; (2) the portion of
the Contract Value in the Standby Income Sub-Account is insufficient to
complete the next scheduled transfer; (3) the Contract Owner requests
termination; or (4) the Contract is terminated. A request to terminate
Dollar Cost Averaging must be in writing unless telephone access
authorization has been received and approved by the Company. There is
no charge at this time for Dollar Cost Averaging, but the Company
reserves the right to charge a fee for this service. The Company also
reserves the right to terminate Dollar Cost Averaging, on a prospective
basis, upon 30 days' written notice to you. Such termination would not
affect Dollar Cost Averaging programs already in place.
9912-5571 WSA END
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the captions "Experts" and
"Financial Statements" and to the use of our reports dated April 18, 2000, with
respect to the statutory-basis financial statements of Western-Southern Life
Assurance Company, and the financial statements of Western-Southern Life
Assurance Company Separate Account 2, in Post-effective Amendment No. 10 (Form
N-4 No. 033-79906) and Post-effective Amendment No. 11 (Form N-4 No. 811-8550)
to the Registration Statements and related Statement of Additional Information
of Western-Southern Life Assurance Company Separate Account 2 dated May 1, 2000.
/s/ Ernst & Young LLP
Cincinnati, Ohio
April 26, 2000
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form N-4 (File
No. 033-79906) 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 Separate Account
2, which appear in such Registration Statement. We also consent to the reference
to us under the heading "Experts" in such Registration Statement.
/s/PricewaterhouseCoopers LLP
Cincinnati, Ohio
April 27, 2000
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, 2000, 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, 2000.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
18th day of April, 2000.
/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, 2000, 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, 2000.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
18th day of April, 2000.
/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, 2000, 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, 2000.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
18th day of April, 2000.
/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, 2000, 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, 2000.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
18th day of April, 2000.
/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, 2000, 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, 2000.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
18th day of April, 2000.
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, 2000, 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, 2000.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
18th day of April, 2000.
/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, 2000, 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, 2000.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
18th day of April, 2000.
/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, 2000, 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, 2000.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
18th day of April, 2000.
/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, 2000, 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, 2000.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
18th day of April, 2000.
/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, 2000, 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, 2000.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
18th day of April, 2000.
/s/ Rev. James E. Hoff, S.J.
----------------------------
Rev. James E. Hoff, S.J.
