-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LEbHgNf0UD02qJZ+LpEwwISFFqj5FoqPqmkAWiEO4R7zssFIojPSYaVWCvWyU+1Q MSy1sFYcpacHKHdpn6qcug== 0001016843-01-000293.txt : 20010410 0001016843-01-000293.hdr.sgml : 20010410 ACCESSION NUMBER: 0001016843-01-000293 CONFORMED SUBMISSION TYPE: S-6 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20010405 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WRL SERIES LIFE ACCOUNT CENTRAL INDEX KEY: 0000778209 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-6 SEC ACT: SEC FILE NUMBER: 333-58322 FILM NUMBER: 1596135 BUSINESS ADDRESS: STREET 1: 570 CARILLON PARKWAY CITY: ST PETERSBURG STATE: FL ZIP: 33716 BUSINESS PHONE: 2722991800 MAIL ADDRESS: STREET 1: 201 HIGHLAND AVENUE CITY: LARGO STATE: FL ZIP: 33770 S-6 1 0001.txt As filed with the Securities and Exchange Commission on April 5, 2001 Registration File Nos. _________________/811-4420 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------------------- FORM S-6 --------------------------------- FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2 --------------------------------- WRL SERIES LIFE ACCOUNT (Exact Name of Trust) WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO (Name of Depositor) 570 Carillon Parkway St. Petersburg, Florida 33716 (Complete Address of Depositor's Principal Executive Offices) Kimberly A. Scouller, Esq. Vice President and Senior Counsel Western Reserve Life Assurance Co. of Ohio 570 Carillon Parkway St. Petersburg, Florida 33716 (Name and Complete Address of Agent for Service) Copies to: Stephen E. Roth, Esq. Sutherland Asbill & Brennan LLP 1275 Pennsylvania Avenue, N.W. Washington, D.C. 20004-2415 --------------------------------- Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of the Registration Statement. Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant hereby elects to register an indefinite amount of securities being offered. -------------------------------------------------- The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. P R O S P E C T U S , 2001 --------------------------------------------------------------------- WRL FREEDOM ELITE BUILDER(SM) issued through WRL Series Life Account by Western Reserve Life Assurance Co. of Ohio 570 Carillon Parkway St. Petersburg, Florida 33716 1-800-851-9777 (727) 299-1800 --------------------------------------------------------------------- AN INDIVIDUAL FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY Consider carefully the risk factors beginning on page 11 of this prospectus. An investment in this Policy is not a bank deposit. The Policy is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Securities and Exchange it Commission has not approved If you already own a life insurance policy, or disapproved these securities may not be to your advantage to buy or passed upon the adequacy additional insurance or to replace your policy of this prospectus. Any with the Policy described in this prospectus. representation to the contrary is a crinial offense. Prospectuses for the portfolios of: AEGON/Transamerica Series Fund, Inc.; Variable Insurance Products Fund (VIP); Variable Insurance Products Fund II (VIP II); and Variable Insurance Products Fund III (VIP III) must accompany this prospectus. Certain portfolios may not be available in all states. Please read these documents before investing and save them for future reference. Table of Contents - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Glossary ................................................................. 1 Policy Summary ........................................................... 5 Risk Summary ............................................................. 11 Portfolio Annual Expense Table ........................................... 15 Western Reserve and the Fixed Account .................................... 17 Western Reserve ...................................................... 17 The Fixed Account .................................................... 17 The Separate Account and the Portfolios .................................. 18 The Separate Account ................................................. 18 The Funds ............................................................ 18 Addition, Deletion, or Substitution of Investments ................... 22 Your Right to Vote Portfolio Shares .................................. 23 The Policy ............................................................... 23 Purchasing a Policy .................................................. 23 Underwriting Standards ............................................... 24 When Insurance Coverage Takes Effect ................................. 25 Backdating a Policy .................................................. 26 Ownership Rights ..................................................... 27 Canceling a Policy ................................................... 28 Premiums ................................................................. 29 Premium Flexibility .................................................. 29 Planned Periodic Payments ............................................ 29 Minimum Monthly Guarantee Premium .................................... 29 No Lapse Period ...................................................... 30 Premium Limitations .................................................. 30 Making Premium Payments .............................................. 30 Allocating Premiums .................................................. 31 Policy Values ............................................................ 32 Cash Value ........................................................... 32 Net Surrender Value .................................................. 33 Subaccount Value ..................................................... 33 Subaccount Unit Value ................................................ 33 Fixed Account Value .................................................. 34 Transfers ................................................................ 34 General .............................................................. 34 Fixed Account Transfers .............................................. 36 Conversion Rights .................................................... 37 Dollar Cost Averaging ................................................ 37 Asset Rebalancing Program ............................................ 38 Third Party Asset Allocation Services ................................ 39 Charges and Deductions ................................................... 39 Premium Charges ...................................................... 40 Monthly Deduction .................................................... 40 Mortality and Expense Risk Charge .................................... 43 This Policy is not available in the State of New York. i Surrender Charge ...................................................... 43 Decrease Charge ....................................................... 45 Transfer Charge ....................................................... 46 Change in Net Premium Allocation Charge ............................... 46 Cash Withdrawal Charge ................................................ 46 Taxes ................................................................. 46 Portfolio Expenses .................................................... 47 Death Benefit ............................................................. 47 Death Benefit Proceeds ................................................ 47 Death Benefit ......................................................... 48 Effects of Cash Withdrawals on the Death Benefit ...................... 50 Choosing Death Benefit Options ........................................ 50 Changing the Death Benefit Option ..................................... 50 Increasing/Decreasing the Specified Amount ............................ 50 Payment Options ....................................................... 52 Surrenders and Cash Withdrawals ........................................... 52 Surrenders ............................................................ 52 Cash Withdrawals ...................................................... 52 Loans ..................................................................... 54 General ............................................................... 54 Interest Rate Charged ................................................. 55 Loan Reserve Interest Rate Credited ................................... 55 Effect of Policy Loans ................................................ 55 Policy Lapse and Reinstatement ............................................ 56 Lapse ................................................................. 56 No Lapse Period ....................................................... 56 Reinstatement ......................................................... 57 Federal Income Tax Considerations ......................................... 57 Tax Status of the Policy .............................................. 57 Tax Treatment of Policy Benefits ...................................... 58 Special Rules for 403(b) Arrangements ................................. 61 Other Policy Information .................................................. 61 Our Right to Contest the Policy ....................................... 61 Suicide Exclusion ..................................................... 62 Misstatement of Age or Gender ......................................... 62 Modifying the Policy .................................................. 62 Tax-Free "Section 1035" Exchanges ..................................... 62 Benefits at Maturity .................................................. 63 Payments We Make ...................................................... 63 Settlement Options .................................................... 64 Reports to Owners ..................................................... 65 Records ............................................................... 65 Policy Termination .................................................... 66 Supplemental Benefits (Riders) ............................................ 66 Children's Insurance Rider ............................................ 66 Accidental Death Benefit Rider ........................................ 66 Other Insured Rider ................................................... 67 Disability Waiver Rider ............................................... 67 Disability Waiver and Income Rider .................................... 67 ii Primary Insured Rider ("PIR") and Primary Insured Rider Plus ("PIR Plus") ........................................... 67 Living Benefit Rider (an Accelerated Death Benefit) .................. 68 IMSA ..................................................................... 69 Performance Data ......................................................... 69 Rates of Return ...................................................... 69 Hypothetical Illustrations Based on Subaccount Performance ........... 72 Other Performance Data in Advertising Sales Literature ............... 85 Western Reserve's Published Ratings .................................. 86 Additional Information ................................................... 86 Sale of the Policies ................................................. 86 Legal Matters ........................................................ 87 Legal Proceedings .................................................... 87 Variations in Policy Provisions ...................................... 88 Experts .............................................................. 88 Financial Statements ................................................. 88 Additional Information about Western Reserve ......................... 88 Western Reserve's Directors and Officers ............................. 89 Additional Information about the Separate Account .................... 93 Appendix A -- Illustrations .............................................. 94 Appendix B -- Wealth Indices of Investments in the U.S. Capital Market ... 98 Appendix C -- Surrender Charge Per Thousand (Based on the gender and rate class of the insured) ................................. 100 Index to Financial Statements ............................................ 102 WRL Series Life Account .............................................. 103 Western Reserve Life Assurance Co. of Ohio ........................... 140 iii Glossary - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- accounts The options to which you can allocate your money. The accounts include the fixed account and the subaccounts in the separate account. ------------------------------------------------------------- attained age The issue age of the person insured, plus the number of completed years since the Policy date (for the initial specified amount) or the date of each increase in specified amount. ------------------------------------------------------------- Base Policy The WRL Freedom Elite Builder variable life insurance policy without any supplemental riders. ------------------------------------------------------------- beneficiary(ies) The person or persons you select to receive the death benefit from this Policy. You name the primary beneficiary and contingent beneficiaries. ------------------------------------------------------------- cash value The sum of your Policy's value in the subaccounts and the fixed account. If there is a Policy loan outstanding, the cash value includes any amounts held in our fixed account to secure the Policy loan. ------------------------------------------------------------- death benefit The amount we will pay to the beneficiary(ies) on the proceeeds insured's death. We will reduce the death benefit proceeds by the amount of any outstanding loan amount, and any due and unpaid monthly deductions. ------------------------------------------------------------- decrease charge Surrender charge that may be imposed upon a decrease in specified amount during the first 15 Policy years (or during the 15 years subsequent to an increase in specified amount). ------------------------------------------------------------- fixed account An option to which you may allocate premiums and cash value. We guarantee that any amounts you allocate to the fixed account will earn interest at a declared rate. The fixed account option may not be available in all states. ------------------------------------------------------------- free-look period The period during which you may return the Policy and receive a refund as described in this prospectus. The length of the free-look period varies by state. The free-look period is listed in the Policy. ------------------------------------------------------------- funds Investment companies which are registered with the U.S. Securities and Exchange Commission. The Policy allows you to invest in the portfolios of the funds through our subaccounts. We reserve the right to add other registered investment companies to the Policy in the future. ------------------------------------------------------------- in force While coverage under the Policy is active and the insured's life remains insured. ------------------------------------------------------------- initial premium The amount you must pay before insurance coverage begins under this Policy. The initial premium is shown on the schedule page of your Policy. ------------------------------------------------------------- insured The person whose life is insured by this Policy. ------------------------------------------------------------- 1 issue age The insured's age on his or her birthday nearest to the Policy date. When you increase the Base Policy's specified amount of insurance coverage, the issue age for the new segment of specified amount coverage is the insured's age on his or her birthday nearest the date that the increase in specified amount takes effect. This age may be different from the attained age on other segments of specified amount coverage. ------------------------------------------------------------- lapse When life insurance coverage ends because you do not have enough cash value in the Policy to pay the monthly deduction, the surrender charge and any outstanding loan amount, and you have not made a sufficient payment by the end of a grace period. ------------------------------------------------------------- loan amount The total amount of all outstanding Policy loans, including both principal and interest due. ------------------------------------------------------------- loan reserve A part of the fixed account to which amounts are transferred as collateral for Policy loans. ------------------------------------------------------------- maturity date The Policy anniversary nearest the insured's 100th birthday if the insured is living and the Policy is still in force. It is the date when life insurance coverage under this Policy ends. You may continue coverage, at your option, under the Policy's extended maturity date benefit provision. ------------------------------------------------------------- minimum The amount shown on your Policy schedule page that we use monthly during the no lapse period to determine whether a grace guarantee period will begin. We will adjust the minimum monthly premium guarantee premium if you change death benefit options, increase or decrease the specified amount, or add, increase or decrease a rider. A grace period will begin whenever your net surrender value is not enough to meet monthly deductions. ------------------------------------------------------------- Monthiversary This is the day of each month when we determine Policy charges and deduct them from cash value. It is the same date each month as the Policy date. If there is no valuation date in the calendar month that coincides with the Policy date, the Monthiversary is the next valuation date. ------------------------------------------------------------- monthly The monthly Policy charge, plus the monthly cost of deduction insurance, plus the monthly charge for any riders added to your Policy, plus, if any, the decrease charge incurred as a result of a decrease in your specified amount. ------------------------------------------------------------- net premium The part of your premium that we allocate to the fixed account or the subaccounts. The net premium is equal to the premium you paid minus the premium expense charges and the premium collection charge. ------------------------------------------------------------- net surrender The amount we will pay you if you surrender the Policy while value it is in force. The net surrender value on the date you surrender is equal to: the cash value, minus any surrender charge, and minus any outstanding loan amount. ------------------------------------------------------------- no lapse date For a Policy issued to any insured ages 0-60, the no lapse date is either the anniversary on which the insured's attained age is 65 or the twentieth Policy anniversary, whichever is less. For a Policy issued to an insured ages 61-85, the no lapse date is the fifth Policy anniversary. The no lapse date is specified in your Policy. ------------------------------------------------------------- 2 no lapse period The period of time between the Policy date and the no lapse date during which the Policy will not lapse if certain conditions are met. ------------------------------------------------------------- office Our administrative office and mailing address is P.O. Box 5068, Clearwater, Florida 33758-5068. Our street address is 570 Carillon Parkway, St. Petersburg, Florida 33716. Our phone number is 1-800-851-9777, extension 6539. Our hours are Monday - Friday from 8:00 a.m. - 7:00 p.m. Eastern time. ------------------------------------------------------------- planned periodic A premium payment you make in a level amount at a fixed premium interval over a specified period of time. ------------------------------------------------------------- Policy date The date when our underwriting process is complete, full life insurance coverage goes into effect, the initial premium payment has been received, and we begin to make the monthly deductions. The Policy date is shown on the schedule page of your Policy. If you request, we may backdate a Policy by assigning a Policy date earlier than the date the Policy is issued. We measure Policy months, years, and anniversaries from the Policy date. ------------------------------------------------------------- portfolio One of the separate investment portfolios of a fund. ------------------------------------------------------------- premiums All payments you make under the Policy other than loan repayments. ------------------------------------------------------------- reallocation The fixed account. account ------------------------------------------------------------- reallocation The date we reallocate all cash value held in the date reallocation account to the fixed account and subaccounts you selected on your application. We place your premium in the reallocation account only if your state requires us to return the full premium in the event you exercise your free-look right. In those states the reallocation date is the record date, plus the number of days in your state's free-look period, plus five days. In all other states, the reallocation date is the record date. ------------------------------------------------------------- record date The date we record your Policy on our books as an in force Policy. The record date is generally the Policy date, unless the Policy is backdated. The record date is the date when, depending on the laws of the state governing your Policy (usually the state where you live), we allocate your premium either to the reallocation account or to the fixed account and the subaccounts you selected on your application. ------------------------------------------------------------- separate account The WRL Series Life Account. It is a separate investment account that is divided into subaccounts. We established the separate account to receive and invest net premiums under the Policy and other variable life insurance policies we issue. ------------------------------------------------------------- 3 specified amount The minimum death benefit we will pay under the Policy provided the Policy is in force. The initial specified amount is the amount shown on the Base Policy's schedule page that you receive when the Policy is issued. The specified amount in force is the initial specified amount, adjusted for any increases or decreases in the Base Policy's specified amount. Events such as a request to increase or decrease the specified amount, a change in death benefit option, or a cash withdrawal (if you choose Option A death benefit) may affect the specified amount in force. ------------------------------------------------------------- subaccount A subdivision of the separate account that invests exclusively in shares of one investment portfolio of a fund. ------------------------------------------------------------- surrender charge If, during the first 15 Policy years (or during the 15 year period subsequent to an increase in specified amount), you fully surrender the Policy, we will deduct a surrender charge from the cash value. ------------------------------------------------------------- termination When the insured's life is no longer insured under the Policy. ------------------------------------------------------------- valuation date Each day the New York Stock Exchange is open for trading. Western Reserve is open for business whenever the New York Stock Exchange is open. ------------------------------------------------------------- valuation period The period of time over which we determine the change in the value of the subaccounts. Each valuation period begins at the close of normal trading on the New York Stock Exchange (currently 4:00 p.m. Eastern time on each valuation date) and ends at the close of normal trading of the New York Stock Exchange on the next valuation date. ------------------------------------------------------------- we, us, our (Western Western Reserve Life Assurance Co. of Ohio Reserve) ------------------------------------------------------------- written notice The written notice you must sign and send us to request or exercise your rights as owner under the Policy. To be complete, it must: (1) be in a form we accept, (2) contain the information and documentation that we determine we need to take the action you request, and (3) be received at our office. ------------------------------------------------------------- you, your (owner or The person entitled to exercise all rights as owner under the policyowner) Policy. ------------------------------------------------------------- 4 Policy Summary WRL Freedom Elite Builder(SM) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This summary provides only a brief overview of the more important features of the Policy. More detailed information about the Policy appears later in this prospectus. PLEASE READ THE REMAINDER OF THIS PROSPECTUS CAREFULLY. THE POLICY IN GENERAL The WRL Freedom Elite Builder(SM) is an individual flexible premium variable life insurance policy. The Policy is designed to be long-term in nature in order to provide significant life insurance benefits for you. However, purchasing this Policy involves certain risks. (See Risk Summary p. 11.) You should consider the Policy in conjunction with other insurance you own. THE POLICY IS NOT SUITABLE AS A SHORT-TERM SAVINGS VEHICLE. A few of the Policy features listed below are not available in all states, may vary depending upon when your Policy was issued and may not be suitable for your particular situation. Certain states place restrictions on access to the fixed account and on other Policy features. Please consult your agent and refer to your Policy for details. PREMIUMS o You select a payment plan but are not required to pay premiums according to the plan. You can vary the frequency and amount, within limits, and can skip premium payments. o Unplanned premiums may be made, within limits. o Premium payments must be at least $50 if paid monthly and $600 if paid annually. o You increase your risk of lapse if you do not regularly pay premiums at least as large as the current minimum monthly guarantee premium. o Until the no lapse date shown on your Policy schedule page, we guarantee that your Policy will not lapse, so long as you have paid total premiums (MINUS any withdrawals, MINUS any outstanding loan amount, and MINUS any decrease charge) that equal or exceed the sum of the minimum monthly guarantee premiums in effect for each month since the Policy date up to and including the current month. If you take a withdrawal, a loan, or if you increase or decrease your specified amount, you may need to pay additional premiums in order to keep the no lapse guarantee in place. o The minimum monthly guarantee premium on the Policy date is shown on your Policy schedule page. We will adjust the minimum monthly guarantee premium if you change death benefit options, increase or decrease the specified amount, or add, increase or decrease a rider. o Under certain circumstances, extra premiums may be required to prevent lapse. o Once we deliver your Policy, the FREE-LOOK PERIOD begins. You may return the Policy during this period and receive a refund. Depending on the laws of the state governing your Policy (usually the state where you live), we will either allocate your premium to 5 the accounts you indicated on your application, or we will place your premium in the reallocation account until the reallocation date as shown on your Policy schedule page. See Reallocation Account p. 32. DEDUCTIONS FROM PREMIUM BEFORE WE PLACE IT IN A SUBACCOUNT AND/OR THE FIXED ACCOUNT o For the first ten Policy years: 6.0% premium expense charge for Policies with a specified amount in force of less than $250,000; 4.0% for Policies with a specified amount in force of $250,000 - $499,999. o After the tenth Policy year: 2.5% premium expense charge for Policies with a specified amount in force of less than $500,000. o There is no premium expense charge for Policies with a specified amount in force of $500,000 or higher. o A premium collection charge of $3.00 from each premium payment for Policies on direct pay notice. This charge does not apply to Policies under an electronic funds transfer program. INVESTMENT OPTIONS SUBACCOUNTS. You may direct the money in your Policy to a total of 12 subaccounts of the WRL Series Life Account, a separate account. For administrative reasons, we currently limit the number of subaccounts that you can invest in at any one time to 12 active subaccounts. Each subaccount invests exclusively in one investment portfolio of a fund. THE MONEY YOU PLACE IN THE SUBACCOUNTS IS NOT GUARANTEED. THE VALUE OF EACH SUBACCOUNT WILL INCREASE OR DECREASE, DEPENDING ON INVESTMENT PERFORMANCE OF THE CORRESPONDING PORTFOLIO. YOU COULD LOSE SOME OR ALL OF YOUR MONEY. The portfolios available to you are: AEGON/TRANSAMERICA SERIES FUND, INC. [ ] Munder Net50 [ ] GE U.S. Equity [ ] Van Kampen Emerging Growth [ ] Great Companies -- America(SM) [ ] T. Rowe Price Small Cap [ ] Salomon All Cap [ ] Pilgrim Baxter Mid Cap Growth [ ] C.A.S.E. Growth [ ] Alger Aggressive Growth [ ] Dreyfus Mid Cap [ ] Third Avenue Value [ ] NWQ Value Equity [ ] Value Line Aggressive Growth [ ] T. Rowe Price Dividend Growth [ ] GE International Equity [ ] Dean Asset Allocation [ ] Gabelli Global Growth [ ] LKCM Strategic Total Return [ ] Great Companies -- Global(2) [ ] J.P. Morgan Real Estate Securities [ ] Great Companies -- Technology(SM) [ ] Federated Growth & Income [ ] Janus Growth [ ] AEGON Balanced [ ] LKCM Capital Growth [ ] AEGON Bond [ ] Goldman Sachs Growth [ ] J.P. Morgan Money Market 6 VARIABLE INSURANCE PRODUCTS FUND (VIP) [ ] Fidelity VIP Equity-Income Portfolio -- Service Class 2 VARIABLE INSURANCE PRODUCTS FUND II (VIP II) [ ] Fidelity VIP II Contrafund(R) Portfolio -- Service Class 2 VARIABLE INSURANCE PRODUCTS FUND III (VIP III) [ ] Fidelity VIP III Growth Opportunities Portfolio -- Service Class 2 FIXED ACCOUNT. You may also direct the money in your Policy to the fixed account. Unless otherwise required by state law, we will restrict your allocations or transfers to the fixed account if the fixed account value following the allocation or transfer would exceed $500,000. Money you place in the fixed account is guaranteed, and will earn interest at a current interest rate declared from time to time. The annual interest rate will equal at least 3.0%. The fixed account may not be available to residents of some states. CASH VALUE o Cash value equals the sum of your Policy's value in the subaccounts and the fixed account. If there is a loan outstanding, the cash value includes any amounts held in our fixed account to secure the Policy loan. o Cash value varies from day to day, depending on the investment experience of the subaccounts you choose, the interest credited to the fixed account, the charges deducted and any other Policy transactions (such as additional premium payments, transfers, withdrawals, and Policy loans). o Cash value is the starting point for calculating important values under the Policy, such as net surrender value and the death benefit. o There is no guaranteed minimum cash value. The Policy may lapse if you do not have sufficient cash value in the Policy to pay the monthly deductions, the surrender charge and/or any outstanding loan amount(s). o The Policy will not lapse during the no lapse period so long as you have paid sufficient premiums. See Minimum Monthly Guarantee Premium p. 29. TRANSFERS o You can transfer cash value among the subaccounts and the fixed account. We charge a $25 transfer processing fee for each transfer after the first 12 transfers in a Policy year. o You may make transfers in writing, by telephone or by fax. o Policy loans reduce the amount of cash value available for transfers. o Dollar cost averaging and asset rebalancing programs are available. o You may make one transfer per Policy year from the fixed account, and we must receive your request to transfer from the fixed account within 30 days after a Policy anniversary unless you select dollar cost averaging from the fixed account. The amount of your transfer is limited to the greater of: --> 25% of your value in the fixed account; OR --> the amount you transferred from the fixed account in the preceding Policy year. CHARGES AND DEDUCTIONS o PREMIUM EXPENSE CHARGE: During the first ten Policy years, we deduct 6.0% from each premium payment on Policies with a specified amount in force of less than 7 $250,000 (4.0% on Policies with a specified amount in force of $250,000 - $499,999). After the tenth Policy year we reduce the charge to 2.5%. There is no premium expense charge for Policies with a specified amount in force of $500,000 or higher. o PREMIUM COLLECTION CHARGE: We deduct $3.00 from each premium payment to compensate us for billing and collection costs if we send you a bill. o MONTHLY POLICY CHARGE: We currently deduct $5.00 from your cash value each month. This charge is guaranteed not to exceed $7.50. o COST OF INSURANCE CHARGES: Deducted monthly from your cash value. Your charges vary each month with the insured's issue age on the Policy date, issue age at the time of any increase in specified amount, length of time from the Policy date or from the date of any increase in specified amount, specified amount band, gender, rate class, the specified amount in force, the death benefit option you choose, and the investment experience of the portfolios in which you invest. We charge lower cost of insurance rates for Policies in higher rate bands. o MORTALITY AND EXPENSE RISK CHARGE: Deducted daily from each subaccount at an annual rate of 0.90% of your average daily net assets of each subaccount. We guarantee to reduce this amount to 0.60% after the first 15 Policy years. We intend to reduce this amount to 0.30% in the 16th Policy year, but we do not guarantee that we will do so. o SURRENDER CHARGE: Deducted when a full surrender occurs during the first 15 Policy years (or during the first 15 years following each increase in specified amount). The initial specified amount has a 15 year surrender charge period starting on the Policy date and surrender charges that are based upon the insured's issue age, gender and rate class on the Policy date. Each increase in specified amount will have its own 15 year surrender charge period starting on the date of the increase and surrender charges that are based upon the insured's issue age, gender and rate class at the time of the increase. The surrender charge that will apply on a full surrender of the Policy is the total of the surrender charges calculated for the Base Policy's initial specified amount and the surrender charges calculated for each increase in specified amount. SURRENDER CHARGES MAY BE SIGNIFICANT. You may have no net surrender value if you surrender your Policy in the initial Policy years. The surrender charges that apply for 15 years after any increase in specified amount will likely significantly reduce your net surrender value. o DECREASE CHARGE: If you request a decrease in the specified amount during the first 15 Policy years or during the 15 years following any increase in specified amount, we will deduct a decrease charge. o TRANSFER FEE: We deduct $25 for each transfer in excess of 12 per Policy year. o RIDER CHARGES: We deduct charges each month for the optional insurance benefits (riders) you select. Each rider will have its own charge. o CASH WITHDRAWAL FEE: We deduct a processing fee for cash withdrawals equal to the lesser of $25 or 2% of the withdrawal. o PORTFOLIO EXPENSES: The portfolios deduct management fees and expenses from the amounts you have invested in the portfolios. You pay these fees and expenses indirectly. Some portfolios also deduct 12b-1 fees from portfolio assets. These fees and 8 expenses currently range from 0.44% to 1.20% annually, depending on the portfolio. See Portfolio Annual Expense Table p. 15. See also the fund prospectuses. LOANS o After the first Policy year (as long as your Policy is in force), you may take a loan against the Policy up to 90% of the cash value, MINUS any surrender charge and MINUS any outstanding loan amount. o We may permit a loan prior to the first anniversary for Policies issued pursuant to 1035 Exchanges. o The minimum loan amount is generally $500. o You may request a loan by calling us or by writing or faxing us written instructions. o Prior to the 10th Policy year, we currently charge 3.75% interest annually, payable in arrears, on any outstanding loan amount. This charge is guaranteed not to exceed 4.0%. o To secure the loan, we transfer a portion of your cash value to a loan reserve account. The loan reserve account is part of the fixed account. We will credit 3.0% interest annually on amounts in the loan reserve account. o After the 10th Policy year, you may borrow at preferred loan rates an amount equal to the cash value MINUS total premiums paid (reduced by any cash withdrawals) and MINUS any outstanding loan amount. We currently charge 3.0% interest on preferred loans. THIS RATE IS NOT GUARANTEED. o Federal income taxes and a penalty tax may apply to loans you take against the Policy. o There are risks involved in taking a Policy loan. See Risk Summary p. 11. o The federal tax consequences of loans with preferred rates is uncertain. DEATH BENEFIT o You must choose one of three death benefit options. We offer the following: o Option A is the greater of: --> the current specified amount, or --> a specified percentage, multiplied by the Policy's cash value on the date of the insured's death. o Option B is the greater of: --> the current specified amount, plus the Policy's cash value on the date of the insured's death, or --> a specified percentage, multiplied by the Policy's cash value on the date of the insured's death. o Option C is the greater of: --> the amount payable under Option A, or --> the current specified amount, multiplied by an age-based "factor," plus the Policy's cash value on the date of the insured's death. o So long as the Policy does not lapse, the minimum death benefit we pay under any option will be the current specified amount. o We offer 4 bands of specified amount coverage. Each band has its own minimum specified amount and cost of insurance rates. The higher the band of specified amount 9 you choose, the lower the cost of insurance rates. The minimum specified amount for band 1 for a Policy for issue ages 0-49 is $100,000. It declines to $50,000 for issue ages 50-85. We will state the minimum specified amount in your Policy. You cannot decrease the specified amount below this minimum. o We will reduce the death benefit proceeds by any outstanding loan amount, and any due and unpaid charges. o We will increase the death benefit proceeds by any additional insurance benefits you add by rider. o After the third Policy year and once each Policy year, you may make one of the following changes: change the death benefit option or increase or decrease the specified amount. A decrease in specified amount is limited to 20% of the specified amount prior to the decrease. The new specified amount cannot be less than the minimum specified amount as shown in your Policy. o Under current tax law, the death benefit should be income tax free to the beneficiary. o The death benefit is available in a lump sum or a variety of payout options. CASH WITHDRAWALS AND SURRENDERS o You may take one withdrawal of cash value per Policy year after the first Policy year. o The amount of the withdrawal must be: --> at least $500; and --> no more than 10% of the net surrender value. After the tenth Policy year, we currently intend to limit the withdrawal amount to no more than 25% of the net surrender value. o We will deduct a processing fee equal to $25 or 2% of the amount you withdraw (whichever is less) from the withdrawal, and we will pay you the balance. o There is no surrender charge assessed when you take a cash withdrawal. o A cash withdrawal will reduce the death benefit by at least the amount of the withdrawal. We will not impose a decrease charge when the specified amount is decreased as a result of taking a cash withdrawal. o If you choose death benefit Option A, we will reduce the current specified amount by the dollar amount of the withdrawal. o When a cash withdrawal reduces the specified amount in force, we will look to the reduced specified amount to determine the specified amount band, cost of insurance rates and the premium expense charge we deduct from subsequent premium payments. o Federal income taxes and a penalty tax may apply to cash withdrawals and surrenders. o You may fully surrender the Policy at any time before the insured's death or the maturity date. You will receive the net surrender value (cash value, MINUS any surrender charge, and MINUS any outstanding loan amount). The surrender charge will apply during the first 15 Policy years or during the 15 years following any increase in specified amount. 10 COMPENSATION o We will pay sales commissions to our life insurance agents who are registered representatives of broker-dealers. Other payments may be made for other services related to sale of the Policies. For a discussion of these arrangements, see Sale of the Policies. INQUIRIES If you need more information, please contact us at: Western Reserve Life P.O. Box 5068 Clearwater, Florida 33758-5068 1-800-851-9777, extension 6539 (Monday - Friday from 8:00 a.m. - 7:00 p.m. Eastern time) www.westernreserve.com Risk Summary - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INVESTMENT If you invest your cash value in one or more subaccounts, you RISK will be subject to the risk that investment performance could be unfavorable and that the cash value of your Policy would decrease. YOU COULD LOSE EVERYTHING YOU INVEST, AND YOUR POLICY COULD LAPSE. If you select the fixed account, your cash value in the fixed account is credited with a declared rate of interest, but you assume a risk that the rate may decrease, although it will never be lower than a guaranteed minimum annual effective rate of 3.0%. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- RISK OF LAPSE If your Policy fails to meet certain conditions, we will notify you that the Policy has entered a 61-day grace period and will lapse unless you make a sufficient payment during the grace period. Your Policy contains a no lapse period. Your Policy will not lapse before the no lapse date stated in your Policy, as long as you pay sufficient minimum monthly guarantee premiums. If you do not pay these premiums, you will automatically lose the no lapse guarantee and you will increase the risk that your Policy will lapse. In addition, if you take a cash withdrawal, or take a Policy loan, or if you increase or decrease your specified amount, or if you add, increase or decrease a rider, you will increase the risk of losing the no lapse guarantee. We deduct the total amount of your withdrawals, any outstanding loans and any decrease charge from your premiums paid when we determine whether your premiums are high enough to keep the no lapse period in effect. 11 If you change death benefit options, increase or decrease the specified amount, or add, increase or decrease a rider, we will change the amount of the minimum monthly guarantee premium you must pay to keep the no lapse period in effect. You will lessen the risk of Policy lapse if you keep the no lapse period in ef- fect. Before you take a cash withdrawal, loan, increase or decrease the speci- fied amount or add, increase or decrease a rider, you should consider carefully the effect it will have on the no lapse guarantee. After the no lapse period, your Policy may lapse if loans, cash withdrawals, the monthly deductions, and insufficient investment returns reduce the net surrender value to zero. The Policy will enter a grace period if on any Monthiversary the net surrender value (that is, the cash value, minus the surrender charge, and minus any outstanding loan amount) is not enough to pay the monthly deduction due. A Policy lapse will have adverse tax consequences. See Federal Income Tax Considerations p. 57 and Policy Lapse and Reinstatement p. 56. You may reinstate this Policy within five years after it has lapsed (and prior to the maturity date), if the insured meets the insurability requirements and you pay the amount we require. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TAX RISKS We expect that the Policy will generally be deemed a life (INCOME TAX insurance contract under federal tax law, so that the death AND MEC) benefit paid to the beneficiary will not be subject to federal income tax. However, due to lack of guidance, there is less certainty in this regard with respect to Policies issued on a substandard basis. Depending on the total amount of premiums you pay, the Policy may be treated as a modified endowment contract ("MEC") under federal tax laws. If a Policy is treated as a MEC, partial withdrawals, surrenders and loans will be taxable as ordinary income to the extent there are earnings in the Policy. In addition, a 10% penalty tax may be imposed on cash withdrawals, surrenders and loans taken before you reach age 591/2. If a Policy is not treated as a MEC, partial surrenders and withdrawals will not be subject to tax to the extent of your investment in the Policy. Amounts in excess of your investment in the Policy, while subject to tax as ordinary income, will not be subject to a 10% penalty tax. You should consult a qualified tax advisor for assistance in all tax matters involving your Policy. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- LIMITS ON CASH The Policy permits you to take only one cash withdrawal per WITHDRAWALS Policy year, after the first Policy year has been completed. The amount you may withdraw is limited to 10% of the net surrender value. We currently intend to limit the amount you can withdraw to 25% of the net surrender value after the tenth Policy year. 12 A cash withdrawal will reduce cash value, so it will increase the risk that the Policy will lapse. A cash withdrawal may also increase the risk that the no lapse period will not remain in effect. A cash withdrawal will reduce the death benefit. If you select death benefit Option A, a cash withdrawal will permanently reduce the specified amount of the Policy by the amount of the withdrawal. A cash withdrawal also reduces the death benefit under Options B and C because the cash value is reduced. In some circumstances, a cash withdrawal may reduce the death benefit by more than the dollar amount of the withdrawal. Federal income taxes and a penalty tax may apply to cash withdrawals and surrenders. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- LOAN RISKS A Policy loan, whether or not repaid, will affect cash value over time because we subtract the amount of the loan from the subaccounts and the fixed account and place that amount in the loan reserve as collateral. We then credit a fixed interest rate of 3.0% to the loan collateral. As a result, the loan collateral does not participate in the investment results of the subaccounts and may not continue to receive the current interest rates credited to the unloaned portion of the fixed account. The longer the loan is outstanding, the greater the effect is likely to be. Depending on the investment results of the subaccounts and the interest rates credited to the fixed account, the effect could be favorable or unfavorable. We also currently charge interest on Policy loans at a rate of 3.75%, payable in arrears. This charge will not exceed 4.0%. Interest is added to the amount of the loan to be repaid. A Policy loan affects the death benefit because a loan reduces the death benefit proceeds and net surrender value by the loan amount. A Policy loan could make it more likely that a Policy would lapse. A Policy loan will increase the risk that the no lapse period will not remain in effect. There is also a risk that if the loan, insurance charges and unfavorable investment experience reduce your net surrender value and the no lapse period is no longer in effect, then the Policy will lapse. Adverse tax consequences would result. If a loan from a Policy is outstanding when the Policy is canceled or lapses, then the amount of the outstanding indebtedness will be taxed as if it were a distribution from the Policy. Moreover, the tax treatment of loans with preferred rates is uncertain. See Federal Income Tax Considerations p. 57. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EFFECTS OF THE The surrender charges under this Policy are significant. It SURRENDER is likely you will receive no net surrender value if you CHARGE surrender your Policy in the first few Policy years. In addition, the surrender charges that apply for 15 years after any increase in specified amount will significantly reduce your net surrender value. You should purchase this Policy, and increase the specified amount, 13 only if you have the financial ability to keep it in force for a substantial period of time. Even if you do not ask to surrender your Policy, the surrender charge plays a role in determining whether your Policy will lapse. Each month we will use the cash value (reduced by the surrender charge and reduced by any outstanding loan amount) to measure whether your Policy will remain in force or will enter a grace period. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMPARISION Like fixed benefit life insurance, the Policy offers a death WITH OTHER benefit and can provide a cash value, loan privileges and a INSURANCE value on surrender. However, the Policy differs from a fixed POLICIES benefit policy because it allows you to place your premiums in investment subaccounts. The amount and duration of life insurance protection and of the Policy's cash value will vary with the investment performance of the amounts you place in the subaccounts. In addition, the cash value and net surrender value will always vary with the investment results of your selected subaccounts. As you consider purchasing this Policy, keep in mind that it may not be to your advantage to replace existing insurance with the Policy. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ILLUSTRATIONS The illustrations in this prospectus are based on hypothetical rates of return that are not guaranteed. They illustrate how the specified amount, Policy charges and hypothetical rates of return affect death benefit levels, cash value and net surrender value of the Policy. We may also illustrate Policy values based on the adjusted historical performance of the portfolios since the portfolios' inception, reduced by Policy and subaccount charges. The hypothetical and adjusted historic portfolio rates illustrated should not be considered to represent past or future performance. It is almost certain that actual rates of return may be higher or lower than those illustrated, so that the values under your Policy will be different from those in the illustrations. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 14 PORTFOLIO ANNUAL EXPENSE TABLE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This table shows the fees and expenses charged by each portfolio. More detail concerning each portfolio's fees and expenses is contained in the fund prospectuses. ANNUAL PORTFOLIO OPERATING EXPENSES(1) (As a percentage of average portfolio assets after fee waivers and expense reimbursements)
TOTAL PORTFOLIO MANAGEMENT OTHER RULE 12B-1 ANNUAL PORTFOLIO FEES EXPENSES FEES EXPENSES AEGON/TRANSAMERICA SERIES FUND, INC.(2)(7) Munder Net50 0.90% 0.10% N/A 1.00% Van Kampen Emerging Growth 0.80% 0.05% N/A 0.85% T. Rowe Price Small Cap 0.75% 0.25% N/A 1.00% Pilgrim Baxter Mid Cap Growth 0.85% 0.07% N/A 0.92% Alger Aggressive Growth 0.80% 0.06% N/A 0.86% Third Avenue Value 0.80% 0.12% N/A 0.92% Value Line Aggressive Growth(4) 0.80% 0.20% N/A 1.00% GE International Equity(3) 1.00% 0.20% N/A 1.20% Gabelli Global Growth(8) 1.00% 0.20% N/A 1.20% Great Companies -- Global2(8) 0.80% 0.20% N/A 1.00% Great Companies -- Technology(SM)(4) 0.80% 0.20% N/A 1.00% Janus Growth 0.80% 0.02% N/A 0.82% LKCM Capital Growth(9) 0.80% 0.20% N/A 1.00% Goldman Sachs Growth 0.90% 0.10% N/A 1.00% GE U.S. Equity 0.80% 0.08% N/A 0.88% Great Companies -- America(SM)(4) 0.80% 0.11% N/A 0.91% Salomon All Cap 0.90% 0.10% N/A 1.00% C.A.S.E. Growth 0.80% 0.20% N/A 1.00% Dreyfus Mid Cap 0.85% 0.15% N/A 1.00% NWQ Value Equity 0.80% 0.08% N/A 0.88% T. Rowe Price Dividend Growth 0.90% 0.10% N/A 1.00% Dean Asset Allocation 0.80% 0.07% N/A 0.87% LKCM Strategic Total Return 0.80% 0.05% N/A 0.85% J.P. Morgan Real Estate Securities 0.80% 0.20% N/A 1.00% Federated Growth & Income 0.75% 0.11% N/A 0.86% AEGON Balanced 0.80% 0.08% N/A 0.88% AEGON Bond 0.45% 0.08% N/A 0.53% J.P. Morgan Money Market 0.40% 0.04% N/A 0.44% VARIABLE INSURANCE PRODUCTS FUND (VIP) Fidelity VIP Equity-Income Portfolio -- Service Class 2(6) 0.48% 0.10% 0.25%(5) 0.83% VARIABLE INSURANCE PRODUCTS FUND II (VIP II) Fidelity VIP II Contrafund(R) Portfolio -- Service Class 2(6) 0.57% 0.10% 0.25%(5) 0.92% VARIABLE INSURANCE PRODUCTS FUND III (VIP III) Fidelity VIP III Growth Opportunities Portfolio -- Service Class 2(6) 0.58% 0.12% 0.25%(5) 0.95%
(1) The fee table information relating to the portfolios was provided to Western Reserve by the funds. Western Reserve has not verified such information. (2) Effective January 1, 1997, the Board of the AEGON/Transamerica Series Fund, Inc. ("Series Fund") authorized the Series Fund to charge each portfolio of the Series Fund an annual Rule 12b-1 fee of up to 0.15% of each portfolio's average daily net assets. However, the Series Fund will not deduct the fee from any portfolio before April 30, 2002. You will receive advance written notice if a Rule 12b-1 fee is to be deducted. See the Series Fund prospectus for more details. (3) The fee table reflects the reduction in the expense limit for this portfolio to 1.20% effective May 1, 2000. (4) Because this portfolio did not commence operations until May 1, 2000, the percentages set forth as "Other Expenses" and "Total Annual Expenses" are annualized. 15 (5) The 12b-1 fee deducted for the Variable Insurance Products Fund (VIP), Variable Insurance Products Fund II (VIP II), and Variable Insurance Products Fund III (VIP III) (the "Fidelity VIP Funds") covers certain shareholder support services provided by companies selling variable contracts investing in the Fidelity VIP Funds. The 12b-1 fees assessed against the Fidelity VIP Funds shares held for the Policies will be remitted to AFSG, the principal underwriter for the Policies. (6) Total Portfolio Annual Expenses for Service Class 2 shares were lower than those shown in the Fee Table because a portion of the brokerage commissions that the Fidelity VIP Funds paid was used to reduce each Fund's expenses, and/or because through arrangements with each Fund's custodian, credits realized as a result of uninvested cash balances were used to reduce a portion of each Fund's custodian expenses. See the accompanying Fidelity VIP Funds prospectuses. Actual expenses were: Fidelity VIP Equity-Income Portfolio -- Service Class 2 -- 0.82%; Fidelity VIP II Contrafund(R) Portfolio -- Service Class 2 -- 0.90%; and Fidelity VIP III Growth Opportunities Portfolio -- Service Class 2 -- 0.93%. (7) AEGON/Transamerica Fund Advisers, Inc. ("AEGON/Transamerica Advisers"), the Series Fund's investment adviser, has undertaken, until at least April 30, 2002, to pay expenses on behalf of the portfolios of the Series Fund to the extent normal operating expenses of a portfolio exceed a stated percentage of each portfolio's average daily net assets. The expense limit, the amount reimbursed by AEGON/Transamerica Advisers during 2000 and the expense ratio without the reimbursement are listed below for each portfolio:
EXPENSE RATIO EXPENSE REIMBURSEMENT WITHOUT LIMIT AMOUNT REIMBURSEMENT Munder Net50 1.00% N/A N/A Van Kampen Emerging Growth 1.00% N/A N/A T. Rowe Price Small Cap 1.00% 30,189 1.14% Pilgrim Baxter Mid Cap Growth 1.00% N/A N/A Alger Aggressive Growth 1.00% N/A N/A Third Avenue Value 1.00% N/A N/A Value Line Aggressive Growth 1.00% 22,530 1.86% GE International Equity 1.20% 125,321 1.66% Gabelli Global Growth 1.20% 14,606 1.99% Great Companies -- Global(2) 1.00% 20,105 3.93% Great Companies -- Technology(SM) 1.00% 5,276 1.05% Janus Growth 1.00% N/A N/A LKCM Capital Growth 1.00% N/A N/A Goldman Sachs Growth 1.00% 51,711 1.37% GE U.S. Equity 1.00% N/A N/A Great Companies -- America(SM) 1.00% N/A N/A Salomon All Cap 1.00% 85,511 1.25% C.A.S.E. Growth 1.00% N/A N/A Dreyfus Mid Cap 1.00% 68,550 1.90% NWQ Value Equity 1.00% N/A N/A T. Rowe Price Dividend Growth 1.00% 55,887 1.45% Dean Asset Allocation 1.00% N/A N/A LKCM Strategic Total Return 1.00% N/A N/A J.P. Morgan Real Estate Securities 1.00% 58,192 1.71% Federated Growth & Income 1.00% N/A N/A AEGON Balanced 1.00% N/A N/A AEGON Bond 0.70% N/A N/A J.P. Morgan Money Market 0.70% N/A N/A
(8) Because this portfolio did not commence operations until September 1, 2000, the percentages set forth as "Other Expenses" and "Total Annual Expenses" are annualized. (9) Because this portfolio did not commence operations until December 1, 2000, the percentages set forth as "Other Expenses" and "Total Annual Expenses" are annualized. The purpose of the preceding table is to help you understand the various costs and expenses that you will bear directly and indirectly. The table reflects charges and expenses of the portfolios of the funds for the fiscal year ended December 31, 2000 (except as noted in the footnotes). Expenses of the funds may be higher or lower in the future. For more information on the charges described in this table, see the fund prospectuses which accompany this prospectus. 16 WESTERN RESERVE AND THE FIXED ACCOUNT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- WESTERN RESERVE Western Reserve Life Assurance Co. of Ohio is the insurance company issuing the Policy. Western Reserve was incorporated under Ohio law on October 1, 1957. We have established the separate account to support the investment options under this Policy and under other variable life insurance policies we issue. Our general account supports the fixed account under the Policy. Western Reserve intends to sell this Policy in the District of Columbia, and all states, except New York. THE FIXED ACCOUNT The fixed account is part of Western Reserve's general account. We use general account assets to support our insurance and annuity obligations other than those funded by separate accounts. Subject to applicable law, Western Reserve has sole discretion over the investment of the fixed account's assets. Western Reserve bears the full investment risk for all amounts contributed to the fixed account. Western Reserve guarantees that the amounts allocated to the fixed account will be credited interest daily at an annual net effective interest rate of at least 3.0%. We will determine any interest rate credited in excess of the guaranteed rate at our sole discretion. Money you place in the fixed account will earn interest compounded daily at a current interest rate in effect at the time of your allocation. Unless otherwise required by state law, we will restrict your allocations and transfers to the fixed account if the fixed account value following the allocation or transfer would exceed $500,000. We may declare current interest rates from time to time. We may declare more than one interest rate for different money based upon the date of allocation or transfer to the fixed account. When we declare a higher current interest rate on amounts allocated to the fixed account, we guarantee the higher rate on those amounts for at least one year (the "guarantee period") unless those amounts are transferred to the loan reserve. At the end of the guarantee period we may declare a new current interest rate on those amounts and any accrued interest thereon. We will guarantee this new current interest rate for another guarantee period. We credit interest greater than 3.0% during any guarantee period at our sole discretion. You bear the risk that interest we credit will not exceed 3.0%. We allocate amounts from the fixed account for cash withdrawals, transfers to the subaccounts, or monthly deduction charges on a last in, first out basis ("LIFO") for the purpose of crediting interest. The fixed account may not be available in all states. This means that residents of some states may not direct or transfer any premiums or cash value to the fixed account. THE FIXED ACCOUNT HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION AND THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION HAS NOT REVIEWED THE DISCLOSURE IN THIS PROSPECTUS RELATING TO THE FIXED ACCOUNT. 17 THE SEPARATE ACCOUNT AND THE PORTFOLIOS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THE SEPARATE ACCOUNT The separate account is divided into subaccounts, each of which invests in shares of a specific portfolio of a fund. You may direct the money in your Policy to a total of 12 active subaccounts of the separate account at any one time. These subaccounts buy and sell portfolio shares at net asset value without any sales charge. Any dividends and distributions from a portfolio are reinvested at net asset value in shares of that portfolio. Income, gains, and losses credited to, or charged against, a subaccount of the separate account reflect the subaccount's own investment experience and not the investment experience of our other assets. The separate account's assets may not be used to pay any of our liabilities other than those arising from the Policies. If the separate account's assets exceed the required reserves and other liabilities, we may transfer the excess to our general account. The separate account may include other subaccounts that are not available under the Policies and are not discussed in this prospectus. We may substitute another subaccount, portfolio or insurance company separate account under the Policies if, in our judgment, investment in a subaccount or portfolio would no longer be possible or becomes inappropriate to the purposes of the Policies, or if investment in another subaccount or insurance company separate account is in the best interest of owners. No substitution shall take place without notice to owners and prior approval of the Securities and Exchange Commission ("SEC") and insurance company regulators, to the extent required by the Investment Company Act of 1940, as amended (the "1940 Act") and applicable law. THE FUNDS The separate account invests in shares of the portfolios. Each portfolio is an investment division of a fund, which is an open-end management investment company registered with the SEC. Such registration does not involve supervision of the management or investment practices or policies of the portfolios by the SEC. Each portfolio's assets are held separate from the assets of the other portfolios, and each portfolio has investment objectives and policies that are different from those of the other portfolios. Thus, each portfolio operates as a separate investment fund, and the income or losses of one portfolio has no effect on the investment performance of any other portfolio. Pending any prior approval by a state insurance regulatory authority, certain subaccounts and corresponding portfolios may not be available to residents of some states. Each portfolio's investment objective(s) and policies are summarized below. THERE IS NO ASSURANCE THAT ANY OF THE PORTFOLIOS WILL ACHIEVE ITS STATED OBJECTIVE(S). Certain portfolios may have investment objectives and policies similar to other portfolios that are managed by the same investment adviser or sub-adviser. The investment results of the portfolios, however, may be higher or lower than those of such other portfolios. We do not 18 guarantee or make any representation that the investment results of the portfolios will be comparable to any other portfolio, even those with the same investment adviser or manager. YOU CAN FIND MORE DETAILED INFORMATION ABOUT THE PORTFOLIOS, INCLUDING A DESCRIPTION OF RISKS, IN THE FUND PROSPECTUSES. YOU SHOULD READ THE FUND PROSPECTUSES CAREFULLY.
PORTFOLIO SUB-ADVISER OR ADVISER INVESTMENT OBJECTIVE - ------------------ ------------------------- ---------------------------------- Munder Net50 --> Munder Capital --> Seeks long-term capital Management appreciation. Van Kampen --> Van Kampen --> Seeks capital appreciation by Emerging Asset Management Inc investing primarily in common Growth stocks of small and medium- sized companies. T. Rowe Price --> T. Rowe Price --> Seeks long-term growth of Small Cap Associates, Inc. capital by investing primarily in common stocks of small growth companies. Pilgrim Baxter --> Pilgrim Baxter & --> Seeks capital appreciation. Mid Cap Growth Associates, Ltd. Alger Aggressive --> Fred Alger --> Seeks long-term capital Growth Management, Inc. appreciation. Third Avenue --> EQSF Advisers, Inc. --> Seeks long-term capital Value appreciation. Value Line --> Value Line, Inc. --> Seeks to realize capital growth. Aggressive Growth GE International --> GE Asset Management --> Seeks long-term growth of Equity Incorporated capital. Gabelli Global --> Gabelli Asset --> Seeks to provide investors with Growth Management Company appreciation of capital. Current income is a secondary objective. Great Companies --> Great Companies, L.L.C. --> Seeks long-term growth of - -- Global(2) capital in a manner consistent with preservation of capital. Great Companies --> Great Companies, L.L.C. --> Seeks long-term growth of - -- Technology(SM) capital. Janus Growth --> Janus Capital --> Seeks growth of capital. Corporation
19
PORTFOLIO SUB-ADVISER OR ADVISER INVESTMENT OBJECTIVE - ------------------ ------------------------- ---------------------------------- LKCM Capital --> Luther King Capital --> Seeks long-term growth of Growth Management Corporation capital through a disciplined investment approach focusing on companies with superior growth prospects. Goldman Sachs --> Goldman Sachs Asset --> Seeks long-term growth of Growth Management capital. GE U.S. Equity --> GE Asset Management --> Seeks long-term growth of Incorporated capital. Great Companies --> Great Companies, L.L.C. --> Seeks long-term growth of - -- America(SM) capital. Salomon --> Salomon Brothers Asset --> Seeks capital appreciation. All Cap Management Inc Fidelity VIP II --> Fidelity Management & --> Seeks long-term capital apprecia- Contrafund(R) Research Company tion by investing primarily in a Portfolio -- broad variety of common stocks, Service Class 2 using both growth-oriented and contrarian disciplines. C.A.S.E. Growth --> C.A.S.E. --> Seeks annual growth of capital Management, Inc. through investment in companies whose management, financial resources and fundamentals appear attractive on a scale measured against each company's present value. Dreyfus Mid Cap --> The Dreyfus --> Seeks total investment returns Corporation (including capital appreciation and income), which consistently outperform the S&P 400 Mid Cap Index. NWQ Value --> NWQ Investment --> Seeks to achieve maximum, Equity Management consistent total return with Company, Inc. minimum risk to principal. Fidelity VIP --> Fidelity Management & --> Seeks reasonable income by Equity-Income Research Company investing primarily in income- Portfolio -- producing equity securities. Service Class 2 Fidelity VIP III --> Fidelity Management & --> Seeks capital growth by investing Growth Research Company in a wide range of common Opportunities domestic and foreign stocks, and Portfolio -- securities convertible into Service Class 2 common stocks.
20
PORTFOLIO SUB-ADVISER OR ADVISER INVESTMENT OBJECTIVE - ------------------- ------------------------ ------------------------------------ T. Rowe Price --> T. Rowe Price --> Seeks to provide an increasing Dividend Growth Associates, Inc. level of dividend income, long-term capital appreciation and reasonable current income through investments primarily in dividend paying stocks. Dean Asset --> Dean Investment --> Seeks preservation of capital and Allocation Associates competitive investment returns. LKCM Strategic --> Luther King Capital --> Seeks to provide current income, Total Return Management long-term growth of income and Corporation capital appreciation. J.P. Morgan Real --> J.P. Morgan Investment --> Seeks long-term total return from Estate Securities Management Inc. investments primarily in equity securities of real estate companies. Total return will consist of realized and unrealized capital gains and losses plus income. Federated Growth --> Federated Investment --> Seeks total return by investing in & Income Counseling securities that have defensive characteristics. AEGON Balanced --> AEGON USA --> Seeks preservation of capital, Investment reduced volatility, and superior Management, Inc. long-term risk-adjusted returns. AEGON Bond --> AEGON USA --> Seeks the highest possible Investment current income within the Management, Inc. confines of the primary goal of insuring the protection of capital. J.P. Morgan --> J.P. Morgan Investment --> Seeks to obtain maximum current Money Market Management Inc. income consistent with the preservation of principal and maintenance of liquidity.
AEGON/Transamerica Advisers, located at 570 Carillon Parkway, St. Petersburg, Florida 33716, a wholly-owned subsidiary of Western Reserve, serves as investment adviser to the Series Fund and manages the Series Fund in accordance with policies and guidelines established by the Series Fund's Board of Directors. For certain portfolios, AEGON/Transamerica Advisers has engaged investment sub-advisers to provide portfolio management services. AEGON/Transamerica Advisers and each investment sub-adviser are registered investment advisers under the Investment Advisers Act of 1940, as amended. See the Series Fund prospectus for more information regarding AEGON/Transamerica Advisers and the investment sub-advisers. 21 FMR, located at 82 Devonshire Street, Boston, Massachusetts 02109, serves as investment adviser to the Fidelity VIP Funds and manages the Fidelity VIP Funds in accordance with policies and guidelines established by the Fidelity VIP Funds' Board of Trustees. For certain portfolios, FMR has engaged investment sub-advisers to provide portfolio management services with regard to foreign investments. FMR and each sub-adviser are registered investment advisers under the Investment Advisers Act of 1940, as amended. See the Fidelity VIP Funds prospectuses for more information regarding FMR and the investment sub-advisers. In addition to the separate account, shares of the portfolios are also sold to other separate accounts that we (or our affiliates) establish to support variable annuity contracts and variable life insurance policies. It is possible that, in the future, it may become disadvantageous for variable life insurance separate accounts and variable annuity separate accounts to invest in the portfolios simultaneously. Neither we nor the funds currently foresee any such disadvantages, either to variable life insurance policyowners or to variable annuity contract owners. However, each fund's Board of Directors/Trustees will monitor events in order to identify any material conflicts between the interests of such variable life insurance policyowners and variable annuity contract owners, and will determine what action, if any, it should take. Such action could include the sale of portfolio shares by one or more of the separate accounts, which could have adverse consequences. Material conflicts could result from, for example, (1) changes in state insurance laws, (2) changes in federal income tax laws, or (3) differences in voting instructions between those given by variable life insurance policyowners and those given by variable annuity contract owners. If a fund's Board of Directors/Trustees were to conclude that separate funds should be established for variable life insurance and variable annuity separate accounts, Western Reserve will bear the attendant expenses, but variable life insurance policyowners and variable annuity contract owners would no longer have the economies of scale resulting from a larger combined fund. ADDITION, DELETION, OR SUBSTITUTION OF INVESTMENTS We do not guarantee that each portfolio will always be available for investment through the Policy. We reserve the right, subject to compliance with applicable law, to add new portfolios, close existing portfolios, or substitute portfolio shares that are held by any subaccount for shares of a different portfolio. New or substitute portfolios may have different fees and expenses and their availability may be limited to certain classes of purchasers. We will only add, delete or substitute shares of another portfolio of a fund (or of another open-end, registered investment company) if the shares of a portfolio are no longer available for investment, or if in our judgement further investment in any portfolio would become inappropriate in view of the purposes of the separate account. We will not add, delete or substitute any shares attributable to your interest in a subaccount without notice to you and prior approval of the SEC, to the extent required by the 1940 Act or other applicable law. We may also decide to purchase for the separate account securities from other portfolios. We reserve the right to transfer separate account assets to another separate account that we determine to be associated with the class of contracts to which the Policy belongs. 22 We also reserve the right to establish additional subaccounts of the separate account, each of which would invest in a new portfolio of a fund, or in shares of another investment company, with specified investment objectives. We may establish new subaccounts when, in our sole discretion, marketing, tax or investment conditions warrant. We will make any new subaccounts available to existing owners on a basis we determine. We may also eliminate one or more subaccounts for the same reasons as stated above. In the event of any such substitution or change, we may make such changes in this and other policies as may be necessary or appropriate to reflect such substitution or change. If we deem it to be in the best interests of persons having voting rights under the Policies, and when permitted by law, the separate account may be (1) operated as a management company under the 1940 Act, (2) deregistered under the 1940 Act in the event such registration is no longer required, (3) managed under the direction of a committee, or (4) combined with one or more other separate accounts, or subaccounts. YOUR RIGHT TO VOTE PORTFOLIO SHARES Even though we are the legal owner of the portfolio shares held in the subaccounts, and have the right to vote on all matters submitted to shareholders of the portfolios, we will vote our shares only as policyowners instruct, so long as such action is required by law. See Tax Status of the Policy p. 57. Before a vote of a portfolio's shareholders occurs, you will receive voting materials from us. We will ask you to instruct us on how to vote and to return your proxy to us in a timely manner. You will have the right to instruct us on the number of portfolio shares that corresponds to the amount of cash value you have in that portfolio (as of a date set by the portfolio). If we do not receive voting instructions on time from some policyowners, we will vote those shares in the same proportion as the timely voting instructions we receive. Should federal securities laws, regulations and interpretations change, we may elect to vote portfolio shares in our own right. If required by state insurance officials, or if permitted under federal regulation, we may disregard certain owner voting instructions. If we ever disregard voting instructions, we will send you a summary in the next annual report to policyowners advising you of the action and the reasons we took such action. THE POLICY - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PURCHASING A POLICY To purchase a Policy, you must submit a completed application and an initial premium to us through any licensed life insurance agent who is also a registered representative of a broker-dealer having a selling agreement with AFSG Securities Corporation, the principal underwriter for the Policy. 23 Our address for applications submitted by World Marketing Alliance distribution systems is: Western Reserve P.O. Box 9009 Clearwater, Florida 33758-9009 All other agents should submit applications to: Western Reserve P.O. Box 5068 Clearwater, Florida 33758-5068 You select the specified amount of insurance coverage for your Policy within the following limits. Our current minimum specified amount for a Policy for issue ages 0-49 is generally $100,000. It declines to $50,000 for issue ages 50-85. We currently charge lower cost of insurance rates for Policies with specified amounts in higher bands of coverage. We offer the following specified amount bands of coverage: o band 1: $100,000 - $249,999 ($50,000 - $249,999 for issue ages 50 and older) o band 2: $250,000 - $499,999 o band 3: $500,000 - $999,999 o band 4: $1,000,000 and over We will generally only issue a Policy to you if you provide sufficient evidence that the insured meets our insurability standards. Your application is subject to our underwriting rules, and we may reject any application for any reason permitted by law. We will not issue a Policy to you if the insured is over age 85. The insured must be insurable and acceptable to us under our underwriting rules on the later of: o the date of your application; or o the date the insured completes all of the medical tests and examinations that we require. UNDERWRITING STANDARDS This Policy uses mortality tables that distinguish between men and women. As a result, the Policy pays different benefits to men and women of the same age. Montana prohibits our use of actuarial tables that distinguish between males and females to determine premiums and policy benefits for policies issued on the lives of its residents. Therefore, we will base the premiums and benefits in Policies that we issue in Montana, to insure residents of that state, on actuarial tables that do not differentiate on the basis of gender. Your cost of insurance charge will vary by the insured's gender, issue age on the Policy date, issue age at the time of any increase in specified amount, rate band, length of time from the Policy date or from the date of any increase in specified amount, and rate class. We currently place insureds into the following rate classes: o ultimate select (preferred) non-tobacco use; o select (non-preferred) non-tobacco use; 24 o ultimate standard (preferred) tobacco use; o standard (non-preferred) tobacco use; and o juvenile - under 18. We also place insureds in various sub-standard rate classes, which involve a higher mortality risk and higher charges. We generally charge higher rates for insureds who use tobacco. We charge lower cost of insurance rates for insureds who are in an "ultimate class." An ultimate class is only available if our underwriting guidelines require you to take a blood test because of the specified amount you have chosen. WHEN INSURANCE COVERAGE TAKES EFFECT Insurance coverage under the Policy will take effect only if the insured(s) is alive and in the same condition of health as described in the application when the Policy is delivered to the owner, and if the initial premium required under the Policy as issued is paid. CONDITIONAL INSURANCE COVERAGE. If you pay the full initial premium listed in the conditional receipt attached to the application, and we deliver the conditional receipt to you, the insured will have conditional insurance coverage under the terms of the conditional receipt. Conditional insurance coverage is void if the check or draft you gave us to pay the initial premium is not honored when we first present it for payment. The amount of o the specified amount applied for; or conditional insurance o $300,000 coverage is the lesser of: reduced by all amounts payable under all life insurance applications that the insured has pending with us. Conditional life insurance o the date of your application; or coverage begins on the o the date the insured completes all of the later of: medical tests and examinations that we require; or o the date of issue, if any, requested in the application. Conditional life insurance o the date we determine the insured has coverage terminates satisfied our underwriting requirements and automatically on the the insurance applied for earliest of: takes effect (the Policy date); or o 60 days from the date the application was completed; or o the date we determine that any person proposed for insurance in the application is not insurable according to our rules, limits and standards for the plan, amount and rate class shown in the application; or o the date we modify the plan, amount, riders and/or the premium rate class shown in the application, or any supplemental agreements; or 25 o the date we mail notice of the ending of coverage and we refund the first premium to the applicant at the address shown on the application. Special limitations of the o the conditional receipt will be void: conditional receipt: --> if not signed by an authorized agent of Western Reserve; or --> in the event the application contains any fraud or material misrepresentation; or --> if, on the date of the conditional receipt, the proposed insured is under 15 days of age or over 85 years of age. o the conditional receipt does not provide benefits for disability and accidental death benefits. o the conditional receipt does not provide benefits if any proposed insured commits suicide. In this case, Western Reserve's liability will be limited to return of the first premium paid with the application. FULL INSURANCE COVERAGE AND ALLOCATION OF INITIAL PREMIUM. Once we determine that the insured meets our underwriting requirements and you have paid the initial premium, full insurance coverage will begin and we will begin to take the monthly deductions from your net premium. This date is the Policy date. On the Policy date (or on the record date if your Policy is backdated), we will allocate your initial net premium, minus monthly deductions, to the fixed account and the subaccounts you selected on your application, provided you live in a state that does not require a refund of full premium during the free-look period. If your state requires us to return the full premium in the event you exercise your free-look right, we will place your full premium in the reallocation account until the reallocation date. While held in the reallocation account, premium(s) will be credited with interest at the current fixed account rate. See Reallocation Account p. 32. On any day we credit net premiums or transfer cash value to a subaccount, we will convert the dollar amount of the net premium (or transfer) into subaccount units at the unit value for that subaccount, determined at the end of the day on which we receive the premium or transaction request at our office. We will credit amounts to the subaccounts only on a valuation date, that is, on a date the New York Stock Exchange ("NYSE") is open for trading. See Policy Values p. 32. BACKDATING A POLICY If you request, we may backdate a Policy by assigning a Policy date earlier than the date the Policy is issued. However, in no event will we backdate a Policy earlier than the earliest date allowed by state law or by our underwriting rules. Your request must be in writing and, if we approve the request, will amend your application. 26 Cost of insurance charges are based in part on the age of the insured on the Policy date or on the date of any increase in specified amount. Generally, cost of insurance charges are lower at a younger age. We will deduct the monthly deduction, including cost of insurance charges, for the period that the Policy is backdated. THIS MEANS THAT WHILE THE MONTHLY DEDUCTION MAY BE LOWER THAN WHAT WOULD HAVE BEEN CHARGED HAD WE NOT BACKDATED THE POLICY, YOU WILL BE PAYING FOR INSURANCE DURING A PERIOD WHEN THE POLICY WAS NOT IN FORCE. OWNERSHIP RIGHTS The Policy belongs to the owner named in the application. The owner may exercise all of the rights and options described in the Policy. The owner is the insured unless the application specifies a different person as the insured. If the owner dies before the insured and no contingent owner is named, then ownership of the Policy will pass to the owner's estate. The owner may exercise certain rights described below. Changing the o Change the owner by providing written notice to us at our Owner office at any time while the insured is alive and the Policy is in force. o Change is effective as of the date that the written notice is accepted by us. o Changing the owner does not automatically change the beneficiary. o Signature of owner's spouse is required if owner is a resident of: Arizona, California, Idaho, Nevada, New Mexico, Washington or Wisconsin. o Changing the owner may have tax consequences. You should consult a tax advisor before changing the owner. o We are not liable for payments we made before we received the written notice at our office. Choosing the o The owner designates the beneficiary (the person to Beneficiary receive the death benefit when the insured dies) in the application. o If the owner designates more than one beneficiary, then each beneficiary shares equally in any death benefit proceeds unless the beneficiary designation states otherwise. o If the beneficiary dies before the insured, then any contingent beneficiary becomes the beneficiary. o If both the beneficiary and contingent beneficiary die before the insured, then the death benefit will be paid to the owner or the owner's estate upon the insured's death. 27 Changing the o The owner changes the beneficiary by providing written Beneficiary notice to us at our office. o Change is effective as of the date the owner signs the written notice. o Signature of owner's spouse is required if owner is a resident of: Arizona, California, Idaho, Nevada, New Mexico, Washington or Wisconsin. o We are not liable for any payments we made before we received the written notice at our office. Assigning the o The owner may assign Policy rights while the insured is Policy alive. o Signature of owner's spouse is required if owner is a resident of: Arizona, California, Idaho, Nevada, New Mexico, Washington or Wisconsin. o The owner retains any ownership rights that are not assigned. o Assignee may not change the owner or the beneficiary, and may not elect or change an optional method of payment. Any amount payable to the assignee will be paid in a lump sum. o Claims under any assignment are subject to proof of interest and the extent of the assignment. o We are not: --> bound by any assignment unless we receive a written notice of the assignment; --> responsible for the validity of any assignment; --> liable for any payment we made before we received written notice of the assignment; or --> bound by any assignment which results in adverse tax consequences to the owner, insured(s) or beneficiary(ies). o Assigning the Policy may have tax consequences. You should consult a tax advisor before assigning the Policy. CANCELING A POLICY You may cancel a Policy for a refund during the "free-look period" by returning it to our office, to one of our branch offices or to the agent who sold you the Policy. The free-look period expires 10 days after you receive the Policy. In some states you may have more than 10 days. If you decide to cancel the Policy during the free-look period, we will treat the Policy as if it had never been issued. We will pay the refund within seven days after we receive the returned Policy at our office. The amount of the refund will be: o any charges and taxes we deduct from your premiums; plus o any monthly deductions or other charges we deducted from amounts you allocated to the subaccounts and the fixed account; plus o your cash value in the subaccounts and the fixed account on the date we (or our agent) receive the returned Policy at our office. 28 Some states may require us to refund all of the premiums you paid for the Policy. See Reallocation Account p. 32. PREMIUMS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PREMIUM FLEXIBILITY You generally have flexibility to determine the frequency and the amount of the premiums you pay. Unlike conventional insurance policies, you do not have to pay your premiums according to a rigid and inflexible premium schedule. Before we issue the Policy to you, we may require you to pay a premium at least equal to a minimum monthly guarantee premium set forth in your Policy. Thereafter (subject to the limitations described below), you may make unscheduled premium payments at any time and in any amount over $50. Under some circumstances, you may be required to pay extra premiums to prevent a lapse. Your minimum monthly guarantee premium may change if you request a change in your Policy. If this happens, we will notify you of the new minimum monthly guarantee premium. PLANNED PERIODIC PAYMENTS You will determine a planned periodic payment schedule which allows you to pay level premiums at fixed intervals over a specified period of time. You are not required to pay premiums according to this schedule. You may change the amount, frequency, and the time period over which you make your planned periodic payments. Please be sure to notify us or your agent/registered representative of any address changes so that we may be able to keep your current address on record. Even if you make your planned periodic payments on schedule, your Policy may still lapse. The duration of your Policy depends on the Policy's net surrender value. If the net surrender value is not high enough to pay the monthly deduction when due (and your no lapse period has expired) then your Policy will lapse (unless you make the payment we specify during the 61-day grace period). See Policy Lapse and Reinstatement p. 56. MINIMUM MONTHLY GUARANTEE PREMIUM The full initial premium is the only premium you are required to pay under the Policy. However, you greatly increase your risk of lapse if you do not regularly pay premiums at least as large as the current minimum monthly guarantee premium. Until the no lapse date shown on your Policy schedule page, we guarantee that your Policy will not lapse, so long as on any Monthiversary you have paid total premiums (minus any cash withdrawals, minus any outstanding loan amount, and minus any decrease charge) that equal or exceed the sum of the minimum monthly guarantee premium in effect for each month from the Policy date up to and including the current month. If you take a cash withdrawal, a loan, or if you increase or decrease your specified amount, you may need to pay additional premiums in order to keep the no lapse guarantee in place. 29 The initial minimum monthly guarantee premium is shown on your Policy's schedule page, and depends on a number of factors, including the age, gender, and rate class of the insured, and the specified amount requested. We will adjust the minimum monthly guarantee premium if you change death benefit options, increase or decrease the specified amount, or if any of the riders are added, increased or decreased. We will notify you of the new minimum monthly guarantee premium. AFTER THE NO LAPSE PERIOD ENDS, PAYING THE CURRENT MINIMUM MONTHLY GUARANTEE PREMIUM EACH MONTH WILL NOT NECESSARILY KEEP YOUR POLICY IN FORCE. YOU MAY NEED TO PAY ADDITIONAL PREMIUMS TO KEEP THE POLICY IN FORCE. NO LAPSE PERIOD Until the no lapse date shown on your Policy schedule page, your Policy will remain in force and no grace period will begin, even if your net surrender value is too low to pay the monthly deduction, so long as: o the total amount of the premiums you paid (minus any cash withdrawals, outstanding loan amount, and any decrease charge) is equal to or exceeds: --> the sum of the minimum monthly guarantee premium in effect for each month from the Policy date up to and including the current month. PREMIUM LIMITATIONS Premium payments must be at least $50 if paid monthly and $600 if paid annually ($1,000 if by wire). We may return premiums less than $50. We will not allow you to make any premium payments that would cause the total amount of the premiums you pay to exceed the current maximum premium limitations which qualify the Policy as life insurance according to federal tax laws. This maximum is set forth in your Policy. If you make a payment that would cause your total premiums to be greater than the maximum premium limitations, we will return the excess portion of the premium payment. We will not permit you to make additional premium payments until they are allowed by the maximum premium limitations. In addition, we reserve the right to refund a premium if the premium would increase the death benefit by more than the amount of the premium. MAKING PREMIUM PAYMENTS We will consider any payments you make to be premium payments, unless you clearly mark them as loan repayments. We will deduct certain charges from your premium payments (see Premium Charges--Premium Expense Charge p. 40). We will accept premium payments by wire transfer. 30 If you wish to make payments by wire transfer, you should instruct your bank to wire federal funds as follows: All First Bank of Baltimore ABA #052000113 For credit to: Western Reserve Life Account #: 89539639 Policyowner's Name: Policy Number: Attention: General Accounting TAX-FREE EXCHANGES ("1035 Exchanges"). We will accept part or all of your initial premium money from one or more contracts insuring the same insured that qualify for tax-free exchanges under section 1035 of the Internal Revenue Code. If you contemplate such an exchange, you should consult a competent tax advisor to learn the potential tax effects of such a transaction. Subject to our underwriting requirements, we will permit you to make one additional cash payment within three business days of our receipt of the proceeds from the 1035 Exchange before we determine your Policy's specified amount. ALLOCATING PREMIUMS You must instruct us on how to allocate your net premium among the subaccounts and the fixed account. You may allocate your premium to a total of 12 active subaccounts at any one time. The fixed account may not be available in all states to direct or transfer money into. You must follow these guidelines: o allocation percentages must be in whole numbers; o if you select dollar cost averaging, you must have at least $5,000 in each subaccount from which we will make transfers and you must transfer at least a total of $100 monthly; o if you select asset rebalancing, the cash value of your Policy, if an existing Policy, or your minimum initial premium, if a new Policy, must be at least $5,000; and o unless otherwise required by state law, we will restrict your allocations to the fixed account if the fixed account value following the allocation would exceed $500,000. Currently, you may change the allocation instructions for additional premium payments without charge at any time by writing us or calling us at 1-800-851-9777, extension 6539 Monday - Friday 8:00 a.m. - 7:00 p.m. Eastern time. The change will be effective at the end of the valuation date on which we receive the change. Upon instructions from you, the registered representative/agent of record for your Policy may also change your allocation instructions for you. The minimum amount you can allocate to a particular subaccount is 1.0% of a net premium payment. We reserve the right to limit the number of premium allocation changes or to charge $25 for each change in excess of one per Policy year quarter. 31 Whenever you direct money into a subaccount, we will credit your Policy with the number of units for that subaccount that can be bought for the dollar payment. We price each subaccount unit using the unit value determined at the end of the day after the closing of the regular business session of the NYSE (usually at 4:00 p.m. Eastern time). We will credit amounts to the subaccounts only on a valuation date, that is, on a date the NYSE is open for trading. See Policy Values below. Your cash value will vary with the investment experience of the subaccounts in which you invest. YOU BEAR THE INVESTMENT RISK FOR AMOUNTS YOU ALLOCATE TO THE SUBACCOUNTS. You should periodically review how your cash value is allocated among the subaccounts and the fixed account because market conditions and your overall financial objectives may change. REALLOCATION ACCOUNT. If your state requires us to return your initial premium in the event you exercise your free-look right, we will allocate the initial premium on the record date to the reallocation account as shown on your Policy schedule page. While held in the fixed account, premium(s) will be credited with interest at the current fixed account rate and reduced by any monthly deductions due. The premium will remain in the reallocation account until the reallocation date. The reallocation date is the record date, plus the number of days in your state's free-look period, plus five days. Please contact your agent for details concerning the free-look period for your state. On the first valuation date on or after the reallocation date, we will reallocate all cash value from the reallocation account to the fixed account and the subaccounts you selected on the application. If you requested dollar cost averaging, on the reallocation date we will reallocate the cash value either to the fixed account, the WRL J.P. Morgan Money Market subaccount or the WRL AEGON Bond subaccount (depending on which account you selected on your application). For states which do not require a full refund of the initial premium, the reallocation date is the same as the record date. On the record date, we will allocate your initial premium, minus monthly deductions, to the fixed account and the subaccounts in accordance with the instructions you gave us on your application. POLICY VALUES - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CASH VALUE o varies from day to day, depending on the investment experience of the subaccounts you choose, the interest credited to the fixed account, the charges deducted and any other Policy transactions (such as additional premium payments, transfers, withdrawals and Policy loans). o serves as the starting point for calculating values under a Policy. o equals the sum of all values in each subaccount and the fixed account. o is determined on the Policy date and on each valuation date. 32 o has no guaranteed minimum amount and may be more or less than premiums paid. o includes any amounts held in the fixed account to secure any outstanding Policy loan. NET SURRENDER VALUE The net surrender value is the amount we pay when you surrender your Policy. We determine the net surrender value at the end of the valuation period when we receive your written surrender request at our office. Net surrender o the cash value as of such date; MINUS value on any o any surrender charge as of such date; MINUS valuation date o any outstanding Policy loan(s); MINUS equals: o any interest you owe on the Policy loan(s). SUBACCOUNT VALUE Each subaccount's value is the cash value in that subaccount. At the end of any valuation period, the subaccount's value is equal to the number of units that the Policy has in the subaccount, multiplied by the unit value of that subaccount. The number of o the initial units purchased at unit value on the units in any reallocation date; PLUS subaccount on o units purchased with additional net premium(s); PLUS any valuation o units purchased via transfers from another subaccount or date equals: the fixed account; MINUS o units redeemed to pay for monthly deductions; MINUS o units redeemed to pay for cash withdrawals; MINUS o units redeemed as part of a transfer to another subaccount or the fixed account; MINUS o units redeemed to pay partial surrender charges, decrease charges and transfer charges. Every time you allocate, transfer or withdraw money to or from a subaccount, we convert that dollar amount into units. We determine the number of units we credit to, or subtract from, your Policy by dividing the dollar amount of the allocation, transfer or cash withdrawal by the unit value for that subaccount next determined at the end of the valuation period on which the premium, transfer request or cash withdrawal request is received at our office. SUBACCOUNT UNIT VALUE The value (or price) of each subaccount unit will reflect the investment performance of the portfolio in which the subaccount invests. Unit values will vary among subaccounts. The 33 unit value of each subaccount was originally established at $10 per unit. The unit value may increase or decrease from one valuation period to the next. The unit value o the total value of the portfolio shares held in the of any subaccount, determined by multiplying the number of subaccount at portfolio shares owned by the subaccount by the the end of a portfolio's net asset value per share determined at valuation the end of the valuation period; minus period o a charge equal to the daily net assets of the is calculated as: subaccount multiplied by the daily equivalent of the daily charge; MINUS o the accrued amount of reserve for any taxes or other economic burden resulting from applying tax laws that we determine to be properly attributable to the subaccount; AND THE RESULT DIVIDED BY o the number of outstanding units in the subaccount. The portfolio in which any subaccount invests will determine its net asset value per share once daily, as of the close of the regular business session of the NYSE (usually 4:00 p.m. Eastern time), which coincides with the end of each valuation period. FIXED ACCOUNT VALUE On the reallocation date, the fixed account value is equal to the cash value allocated to the fixed account. The fixed account o the sum of net premium(s) allocated to the fixed value at the end of account; PLUS any valuation o any amounts transferred from a subaccount to the period is equal to: fixed account; PLUS o total interest credited to the fixed account; MINUS o amounts charged to pay for monthly deductions; MINUS o amounts withdrawn or surrendered from the fixed account; MINUS o amounts transferred from the fixed account to a subaccount. The fixed account may not be available to residents of all states. TRANSFERS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- GENERAL You or your agent/registered representative of record may make transfers among a total of 12 active subaccounts or from the subaccounts to the fixed account. We determine the 34 amount you have available for transfers at the end of the valuation period when we receive your transfer request at our office. WE MAY MODIFY OR REVOKE THE TRANSFER PRIVILEGE AT ANY TIME. The following features apply to transfers under the Policy: /checkmark/ You may make an unlimited number of "non-substantive" transfers in a Policy year among the subaccounts, although we do limit "substantive" transfers, as discussed below. /check mark/ You may make one transfer from the fixed account in a Policy year (unless you choose dollar cost averaging from the fixed account). /check mark/ Unless otherwise required by state law, we will restrict transfers to the fixed account, if the fixed account value following the transfer would exceed $500,000. /check mark/ You may request transfers in writing (in a form we accept), by fax or by telephone. /check mark/ There is no minimum amount that must be transferred. /check mark/ There is no minimum amount that must remain in a subaccount after a transfer. /check mark/ We deduct a $25 charge from the amount transferred for each transfer in excess of 12 transfers in a Policy year. /check mark/ We consider all transfers made in any one day to be a single transfer. /check mark/ Transfers resulting from loans, conversion rights, reallocation of cash value immediately after the reallocation date, and transfers from the fixed account are NOT treated as transfers for the purpose of the transfer charge. /check mark/ Transfers under dollar cost averaging and asset rebalancing are treated as transfers for purposes of the transfer charge. The Policy's transfer privilege is not intended to afford policyowners a way to speculate on short-term movements in the market. Excessive use of the transfer privilege can disrupt the management of the portfolios and increase transaction costs. Accordingly, we have established a policy of limiting excessive transfer activity. We will limit transfer activity to two substantive transfers (at least 30 days apart) from each portfolio, except from J.P. Morgan Money Market, during any 12-month period. We interpret "substantive" to mean either a dollar amount large enough to have a negative impact on a portfolio's operations or a series of movements between portfolios. We currently do not limit non-substantive transfers. The Policy you are purchasing was not designed for professional market timing organizations or other persons that use programmed, large, or frequent transfers. The use of such transfers may be disruptive to the underlying portfolio and increase transaction costs. We reserve the right to reject any premium payment or transfer request from any person if, in our judgment, the payment or transfer or series of transfers would have a negative impact on a portfolio's operations or if a portfolio would reject our purchase order. We may impose other restrictions on transfers or even prohibit them for any owner who, in our view, has abused, or appears likely to abuse, the transfer privilege. Your Policy, as applied for and issued, will automatically receive telephone transfer privileges unless you provide other instructions. The telephone transfer privileges allow you 35 to give authority to the registered representative or agent of record for your Policy to make telephone transfers and to change the allocation of future payments among the subaccounts and the fixed account on your behalf according to your instructions. To make a telephone transfer, you may call us at 1-800-851-9777, extension 6539 Monday - Friday 8:00 a.m. - 7:00 p.m. Eastern time, or fax your instructions to 727-299-1648. Please note the following regarding telephone or fax transfers: --> We will employ reasonable procedures to confirm that telephone instructions are genuine. --> If we follow these procedures, we are not liable for any loss, damage, cost or expense from complying with telephone instructions we reasonably believe to be authentic. You bear the risk of any such loss. --> If we do not employ reasonable confirmation procedures, we may be liable for losses due to unauthorized or fraudulent instructions. --> Such procedures may include requiring forms of personal identification prior to acting upon telephone instructions, providing written confirmation of transactions to owners, and/or tape recording telephone instructions received from owners. --> We may also require written confirmation of your order. --> If you do not want the ability to make telephone transfers, you should notify us in writing. --> Telephone or fax orders must be received at our office before 4:00 p.m. Eastern time to assure same-day pricing of the transaction. --> WE WILL NOT BE RESPONSIBLE FOR SAME-DAY PROCESSING OF TRANSFERS IF FAXED TO A NUMBER OTHER THAN 727-299-1648. --> We will not be responsible for any transmittal problems when you fax us your order unless you report it to us within five business days and send us proof of your fax transmittal. --> We may discontinue this option at any time. We cannot guarantee that telephone and faxed transactions will always be available. For example, our offices may be closed during severe weather emergencies or there may be interruptions in telephone or fax service beyond our control. If the volume of calls is unusually high, we might not have someone immediately available to receive your order. Although we have taken precautions to help our systems handle heavy use, we cannot promise complete reliability under all circumstances. We will process any transfer order we receive at our office before the NYSE closes (usually 4:00 p.m Eastern time) using the subaccount unit value determined at the end of that session of the NYSE. If we receive the transfer order after the NYSE closes, we will process the order using the subaccount unit value determined at the close of the next regular business session of the NYSE. FIXED ACCOUNT TRANSFERS You may make one transfer per Policy year from the fixed account unless you select dollar cost averaging from the fixed account. We reserve the right to require that you make 36 the transfer request in writing. We must receive the transfer request no later than 30 days after a Policy anniversary. We will make the transfer at the end of the valuation date on which we receive the written request. The maximum amount you may transfer is limited to the greater of: --> 25% of the amount in the fixed account, or --> the amount you transferred from the fixed account in the immediately prior Policy year. The fixed account may not be available to residents of some states. This means that residents of some states may not direct or transfer any money to the fixed account. CONVERSION RIGHTS If, within 24 months of your Policy date, you transfer all of your subaccount values to the fixed account, then we will not charge you a transfer fee, even if applicable. You must make your request in writing. DOLLAR COST AVERAGING Dollar cost averaging is an investment strategy designed to reduce the average purchase price per unit. The strategy spreads the allocation of your premium into the subaccounts over a period of time. This potentially allows you to reduce the risk of investing most of your premium into the subaccounts at a time when prices are high. The success of this strategy is not assured and depends on market trends. You should consider carefully your financial ability to continue the program over a long enough period of time to purchase units when their value is low as well as when it is high. We make no guarantee that dollar cost averaging will result in a profit or protect you against loss. Under dollar cost averaging, we automatically transfer a set dollar amount from the WRL J.P. Morgan Money Market subaccount, the WRL AEGON Bond subaccount or the fixed account to a subaccount that you choose. We will make the transfers monthly as of the end of the valuation date after the first Monthiversary after the reallocation date. We will make the first transfer in the month after we receive your request at our office, provided that we receive the form by the 25th day of the month. To start dollar cost --> you must submit a completed form to us at our averaging: office requesting dollar cost averaging; --> you must have at least $5,000 in each account from which we will make transfers; --> your total transfers each month under dollar cost averaging must be at least $100; and --> each month, you may not transfer more than one-tenth of the amount that was in your fixed account at the beginning of dollar cost averaging. You may request dollar cost averaging at any time. There is no charge for dollar cost averaging. However, each transfer under dollar cost averaging counts towards your 12 free transfers each year. 37 Dollar --> we receive your request to cancel your cost averaging participation; will terminate if: --> the value in the accounts from which we make the transfers is depleted; --> you elect to participate in the asset rebalancing program; or --> you elect to participate in any asset allocation services provided by a third party. We may modify, suspend, or discontinue dollar cost averaging at any time. ASSET REBALANCING PROGRAM We also offer an asset rebalancing program under which you may transfer amounts periodically to maintain a particular percentage allocation among the subaccounts you have selected. You cannot have more than 12 active subaccounts at any one time. Cash value allocated to each subaccount will grow or decline in value at different rates. The asset rebalancing program automatically reallocates the cash value in the subaccounts at the end of each period to match your Policy's currently effective premium allocation schedule. Cash value in the fixed account and the dollar cost averaging program is not available for this program. This program does not guarantee gains. A subaccount may still have losses. You may elect asset rebalancing to occur on each quarterly, semi-annual or annual anniversary of the Policy date. Once we receive the asset rebalancing request form, we will effect the initial rebalancing of cash value on the next such anniversary, in accordance with the Policy's current premium allocation schedule. You may modify your allocations quarterly. We will credit the amounts transferred at the unit value next determined on the dates the transfers are made. If a day on which rebalancing would ordinarily occur falls on a day on which the NYSE is closed, rebalancing will occur on the next day the NYSE is open. To start --> you must submit a completed asset rebalancing asset rebalancing: request form to us at our office before the maturity date; and --> you must have a minimum cash value of $5,000 or make a $5,000 initial premium payment. There is no charge for the asset rebalancing program. However, each reallocation we make under the program counts towards your 12 free transfers each year. Asset rebalancing --> you elect to participate in the dollar cost will cease if: averaging program; --> we receive your request to discontinue participation; --> you make any transfer to or from any subaccount other than under a scheduled rebalancing; or --> you elect to participate in any asset allocation services provided by a third party. You may start and stop participation in the asset rebalancing program at any time; but we restrict your right to re-enter the program to once each Policy year. If you wish to 38 resume the asset rebalancing program, you must complete a new request form. We may modify, suspend, or discontinue the asset rebalancing program at any time. THIRD PARTY ASSET ALLOCATION SERVICES We may provide administrative or other support services to independent third parties you authorize to conduct transfers on your behalf, or who provide recommendations as to how your subaccount values should be allocated. This includes, but is not limited to, transferring subaccount values among subaccounts in accordance with various investment allocation strategies that these third parties employ. These independent third parties may or may not be appointed Western Reserve agents for the sale of Policies. WESTERN RESERVE DOES NOT ENGAGE ANY THIRD PARTIES TO OFFER INVESTMENT ALLOCATION SERVICES OF ANY TYPE, SO THAT PERSONS OR FIRMS OFFERING SUCH SERVICES DO SO INDEPENDENT FROM ANY AGENCY RELATIONSHIP THEY MAY HAVE WITH WESTERN RESERVE FOR THE SALE OF POLICIES. WESTERN RESERVE THEREFORE TAKES NO RESPONSIBILITY FOR THE INVESTMENT ALLOCATIONS AND TRANSFERS TRANSACTED ON YOUR BEHALF BY SUCH THIRD PARTIES OR ANY INVESTMENT ALLOCATION RECOMMENDATIONS MADE BY SUCH PARTIES. Western Reserve does not currently charge you any additional fees for providing these support services. Western Reserve reserves the right to discontinue providing administrative and support services to owners utilizing independent third parties who provide investment allocation and transfer recommendations. CHARGES AND DEDUCTIONS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This section describes the charges and deductions that we make under the Policy to compensate for: (1) the services and benefits we provide; (2) the costs and expenses we incur; and (3) the risks we assume. Services and benefits we o the death benefit, cash and loan benefits; provide under the Policy: o investment options, including premium allocations; o administration of elective options; and o the distribution of reports to owners. Costs and expenses o costs associated with processing and we incur: underwriting applications; o expenses of issuing and administering the Policy (including any Policy riders); o overhead and other expenses for providing services and benefits and sales and marketing expenses including compensation paid in connection with the sale of the Policies; and o other costs of doing business, such as collecting premiums, maintaining records, processing claims, effecting transactions, and paying federal, state and local premium and other taxes and fees. 39 Risks we assume: o that the charges we may deduct may be insufficient to meet our actual claims because insureds die sooner than we estimate; and o that the costs of providing the services and benefits under the Policies may exceed the charges we are allowed to deduct. PREMIUM CHARGES Before we allocate the net premiums you make, we will deduct the following charges. Premium expense charge o This charge equals: --> 6.0% of premiums during the first ten Policy years on Policies with a specified amount in force of less than $250,000 and 4.0% on Policies with a specified amount in force of $250,000 - $499,999; and --> 2.5% of premiums thereafter on Policies with a specified amount less than $500,000. o There is no premium expense charge for Policies with a specified amount of $500,000 or higher. o Because certain events (such as increases or decreases in the specified amount, a change in death benefit option, or a cash withdrawal if you choose the Option A death benefit) may affect the specified amount in force, premium expense charges will be based on the specified amount in force for the Base Policy at the time we receive the premium. Premium collection o For Policies issued with direct pay notice, this charge charge equals $3.00 per premium payment. o This charge compensates us for premium billing and collection costs. o We will not increase this charge. MONTHLY DEDUCTION We take a monthly deduction from the cash value on the Policy date and on each Monthiversary. We deduct this charge on a pro rata basis from all accounts (i.e., in the same proportion that the value in each subaccount and the fixed account bears to the total cash value on the Monthiversary). Because portions of the monthly deduction (such as cost of insurance) can vary monthly, the monthly deduction will also vary. 40 The monthly deduction is o the monthly Policy charge; PLUS equal to: o the monthly cost of insurance charge for the Policy; PLUS o the monthly charge for any benefits provided by riders attached to the Policy; PLUS o the decrease charge (if applicable) incurred as a result of a decrease in the specified amount. MONTHLY POLICY CHARGE: o This charge currently equals $5.00 each Policy month. o We guarantee this charge will never be more than $7.50 per month. o We may waive this charge at issue on additional policies (not on the original Policy) purchased naming the same owner and insured. COST OF INSURANCE CHARGE: o We deduct this charge each month. It varies each month and is determined as follows: 1. DIVIDE the death benefit on the Monthiversary by 1.0024663 (this factor reduces the net amount at risk, for purposes of computing the cost of insurance, by taking into account assumed monthly earnings at an annual rate of 3.0%); 2. SUBTRACT the cash value on the Monthiversary after it has been allocated among the segments of specified amount in force in the following order: first, initial specified amount, then, each increase in specified amount starting with the oldest increase, then the next oldest, successively, until all cash value has been allocated; 3. MULTIPLY each segment provided under 2. by the appropriate monthly cost of insurance rate for that segment; and ADD the results together. o Your monthly cost of insurance rate depends, in part, on your specified amount band. The specified amount bands available are: --> Band 1: $100,000 - $249,999 ($50,000 - $249,999 for issue ages 50 and older) --> Band 2: $250,000 - $499,999 --> Band 3: $500,000 - $999,999 --> Band 4: $1,000,000 and over 41 o Generally, the higher the specified amount band you choose, the lower the cost of insurance rates. o We determine your specified amount band by referring to the specified amount in force for the Base Policy (that is, the initial specified amount on the Policy date, plus any increases, and minus any decreases). Riders are not included in determining the Policy's specified amount band. OPTIONAL INSURANCE RIDERS: o The monthly deduction will include charges for any optional insurance benefits you add to your Policy by rider (see Supplemental Benefits (Riders) p. 66). The cost of insurance rates vary by the insured's issue age on the Policy date, issue age at the time of any increase in specified amount, specified amount band, gender, rate class, and the length of time from the Policy date or from the date of any increase in specified amount. If you increase the specified amount, different monthly cost of insurance rates may apply to that segment of specified amount, based on the insured's attained age and rate class at the time of the increase, gender, and the length of time since the increase. Increases in specified amount may move the Policy into a higher specified amount band. Decreases in specified amount may cause the Policy to drop into a lower band of specified amount and may result in an increase in cost of insurance rates and premium expense charge rates. Decreases in specified amount will be applied on a last-in, first-out basis to the specified amount in force, and will first reduce the specified amount provided by the most recent increase in specified amount in force, then reduce the next most recent increases, successively, and then reduce the initial specified amount. The actual monthly cost of insurance rates are primarily based on our expectations as to future mortality experience and expenses. The rates will never be greater than the guaranteed amount stated in your Policy. These guaranteed rates are based on the 1980 Commissioners Standard Ordinary (C.S.O.) Mortality Tables and the insured's attained age, gender, and rate class. For standard rate classes, these guaranteed rates will never be greater than the rates in the C.S.O. tables. We may also guarantee a rate for a specific period of time (e.g., one year). For a listing of rate classes, see Underwriting Standards p. 24. We may issue certain Policies on a simplified or expedited basis. The cost of insurance rates for Policies we issue on this basis will be no higher than the guaranteed rates for select, non-tobacco use or standard, tobacco use categories. However, these rates may be higher or lower than current rates charged under otherwise identical Policies that are using standard underwriting criteria. 42 MORTALITY AND EXPENSE RISK CHARGE We deduct a daily charge from your cash value in each subaccount to compensate us for certain mortality and expense risks we assume. This charge is equal to: o your Policy's cash value in each subaccount MULTIPLIED BY o the daily pro rata portion of the annual mortality and expense risk charge rate of 0.90%. The annual rate is equal to 0.90% of the average daily net assets of each subaccount. We guarantee to reduce this charge to 0.60% after the first 15 Policy years. We intend to reduce this amount to 0.30% in the 16th Policy year, but we do not guarantee that we will do so, and we reserve the right to maintain this charge at the 0.60% level after the 15th Policy year. The mortality risk is that an insured will live for a shorter time than we project. The expense risk is that the expenses that we incur will exceed the administrative charge limits we set in the Policy. SURRENDER CHARGE If you surrender your Policy completely during the first 15 years (or during the 15 year period following an increase in specified amount), we deduct a surrender charge from your cash value and pay the remaining cash value (less any outstanding loan amount) to you. The surrender charge is a charge for each $1,000 of specified amount of the initial specified amount of your Base Policy and of each increase in specified amount. The surrender charge that will apply on a full surrender of the Policy is the total of the surrender charge calculated for the initial specified amount and the surrender charges calculated for each increase in specified amount unless there has been a reduction in specified amount for which a decrease charge was applied. The initial specified amount has a 15 year surrender charge period starting on the Policy date and surrender charges that are based upon the insured's issue age, gender and rate class on the Policy date. Each increase in specified amount has its own 15 year surrender charge period and surrender charges that are based upon the insured's issue age, gender and rate class at the time of the increase. Decreases in specified amount will be applied to the specified amount in force on a last-in, first-out basis and will first reduce the surrender charge on the most recent increase in specified amount in force, then, if still applicable, reduce the surrender charge on the next most recent increases, successfully, and then reduce the surrender charge on the initial specified amount. 43 EXAMPLE: January 1, 2001 Policy issued for $300,000 January 1, 2004 Policy increased by $200,000 January 1, 2005 Policy decreased by $100,000 If the surrender charge on January 1, 2005 (before the decrease) is: COVERAGE LAYER SURRENDER CHARGE -------------- ---------------- $300,000 $4,656 $200,000 $3,624 The $200,000 layer is reduced to $100,000 on January 1, 2005 and a surrender charge of $1,812 is applied. 100 x $3,624 = $1,812 --- 200 There is no surrender charge if you wait until the 15th Policy anniversary to surrender your Policy and you have not increased your specified amount during the first 15 Policy years. The payment you receive is called the net surrender value. The formula we use reduces the surrender charge at older ages in compliance with state laws. THE SURRENDER CHARGE MAY BE SIGNIFICANT. YOU SHOULD EVALUATE THIS CHARGE CAREFULLY BEFORE YOU CONSIDER A SURRENDER. Under some circumstances the level of surrender charges might result in no net surrender value available if you surrender your Policy in the early Policy years. This will depend on a number of factors, but is more likely if: o you pay premiums equal to or not much higher than the minimum monthly guarantee premium shown in your Policy; and/or o investment performance is too low. In addition, surrender charges that apply for 15 years after any increase in specified amount will likely significantly reduce your net surrender value. The surrender charge for o the SURRENDER CHARGE PER THOUSAND (varies by each segment of specified issue age, gender and rate class on the Policy amount is calculated as: date or date of specified amount increase); multiplied by o the SURRENDER CHARGE FACTOR. The SURRENDER CHARGE PER THOUSAND is calculated separately for initial specified amount and for each increase in specified amount, using the rates found in Appendix C. The SURRENDER CHARGE FACTOR is also calculated separately for the initial specified amount and for each increase in specified amount in force. The surrender charge factor varies by insured's issue age (on the Policy date or date of specified amount increase) and number of years since the Policy date or date of specified amount increase. For insureds issue ages 0-39, the surrender charge factor is equal to 1.00 during years 1-5. It decreases by 0.10 each year until the 15th year when it is zero. If you are older than 39 on the Policy date or on the date of specified amount increase, the factor is less than 1.00 at the end of 44 the first year and decreases to zero at the 15th year. We always determine the surrender charge factor from the Policy date or date of specified amount increase to the surrender date, regardless of whether there were any prior lapses and reinstatements. SURRENDER CHARGE FACTORS ISSUE AGES 0 - 39 END OF YEAR* FACTOR ------------ ------- At Issue ......... 1.00 1-5 .............. 1.00 6 ................ .90 7 ................ .80 8 ................ .70 9 ................ .60 10 ............... .50 11 ............... .40 12 ............... .30 13 ............... .20 14 ............... .10 15 ............... 0 16+ .............. 0 * The factor on any date other than a Policy anniversary or anniversary of an increase in specified amount will be determined proportionately using the factor at the end of the year prior to surrender and the factor at the end of the year of surrender. o SURRENDER CHARGE EXAMPLE: Assume a male tobacco user purchases the Policy at Issue Age 35 with a specified amount of $100,000. The Policy is surrendered in Policy year 5. The surrender charge per thousand is $16.48. This is multiplied by the surrender charge factor of 1.00 The surrender charge = the surrender charge per thousand ($16.48) X the number of thousands of initial specified amount (100) X the surrender charge factor (1.0) = $1,648. The surrender charge helps us recover distribution expenses that we incur in connection with the Policy, including agent sales commissions and printing and advertising costs. DECREASE CHARGE If you decrease the specified amount during the first 15 Policy years (or during the 15 year period following an increase in specified amount), we will deduct a decrease charge from your cash value. Decreases in specified amount will be applied on a last-in, first-out basis to the current specified amount in force. The decrease charge will first be calculated based on the current surrender charge applicable to the most recent increase in specified amount still in force. If the amount of the decrease in specified amount is greater than the most recent increase in specified amount, then the charge will also be calculated based on the surrender charges applicable to the next most recent increases, successively, and then will also be calculated based on any remaining surrender charge on the initial specified amount, up to the amount of the requested decrease. 45 The decrease charge is o the surrender charge as of the date of the equal to: decrease applicable to that portion of the segment(s) of the specified amount that is decreased. See Surrender Charges. We will not deduct the decrease charge from the cash value when a specified amount decrease results from: o a change in the death benefit option; or o a cash withdrawal (when you select death benefit Option A). We will determine the decrease charge using the above formula, regardless of whether your Policy has lapsed and been reinstated, or you have previously decreased your specified amount. We will not allow a decrease in specified amount if the decrease charge will cause the Policy to go into a grace period. A decrease in specified amount will generally decrease the insurance protection of the Policy. TRANSFER CHARGE o We currently allow you to make 12 transfers each year free from charge. o We charge $25 for each additional transfer. o For purposes of assessing the transfer charge, all transfers made in one day, regardless of the number of subaccounts affected by the transfer, is considered a single transfer. o We deduct the transfer charge from the amount being transferred. o Transfers due to loans, exercise of conversion rights, or from the fixed account do not count as transfers for the purpose of assessing this charge. o Transfers under dollar cost averaging and asset rebalancing are transfers for purposes of this charge. o We will not increase this charge. CHANGE IN NET PREMIUM ALLOCATION CHARGE We currently do not charge you if you change your net premium allocation. However, in the future we may decide to charge you $25 if you make more than one change every three months in your allocation schedule. We will notify you if we decide to impose this charge. CASH WITHDRAWAL CHARGE o After the first Policy year, you may take one cash withdrawal per Policy year. o When you make a cash withdrawal, we charge a processing fee of $25 or 2% of the amount you withdraw, whichever is less. o We deduct this amount from the withdrawal, and we pay you the balance. o We will not increase this charge. TAXES We currently do not make any deductions for taxes from the separate account. We may do so in the future if such taxes are imposed by federal or state agencies. 46 PORTFOLIO EXPENSES The portfolios deduct management fees and expenses from the amounts you have invested in the portfolios. You pay these fees and expenses indirectly. Some portfolios also deduct 12b-1 fees from portfolio assets. These fees and expenses currently range from 0.44% to 1.20%. See the Portfolio Annual Expense Table on p. 13 in this prospectus, and the fund prospectuses. Our affiliate, AFSG, the principal underwriter for the Policies, will receive the 12b-1 fees deducted from portfolio assets for providing shareholder support services to the portfolios. We and our affiliates, including the principal underwriter for the Policies, may receive compensation from the investment advisers, administrators, and/or distributors (and an affiliate thereof) of the portfolios in connection with administrative or other services and cost savings experienced by the investment advisers, administrators or distributors. It is anticipated that such compensation will be based on assets of the particular portfolios attributable to the Policy and may be significant. Some advisers, administrators, distributors or portfolios may pay us (and our affiliates) more than others. DEATH BENEFIT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DEATH BENEFIT PROCEEDS As long as the Policy is in force, we will pay the death benefit proceeds on an individual Policy once we receive satisfactory proof of the insured's death. We may require return of the Policy. We will pay the death benefit proceeds to the primary beneficiary(ies), if living, or to a contingent beneficiary. If each beneficiary dies before the insured and there is no contingent beneficiary, we will pay the death benefit proceeds to the owner or the owner's estate. We will pay the death benefit proceeds in a lump sum or under a payment option. See Payment Options p. 52. Death benefit o the death benefit (described below); MINUS proceeds equal: o any monthly deductions due during the grace period (if applicable); MINUS o any outstanding loan amount; PLUS o any additional insurance in force provided by rider. We may further adjust the amount of the death benefit proceeds if we contest the Policy or if you misstate the insured's age or gender. See Our Right to Contest the Policy p. 61; and Misstatement of Age or Gender p. 62. 47 DEATH BENEFIT The Policy provides a death benefit. The death benefit is determined at the end of the valuation period in which the insured dies. You must select one of the three death benefit options we offer in your application. No matter which death benefit option you choose, we guarantee that, so long as the Policy does not lapse, the death benefit will never be less than the specified amount on the date of the insured's death. Death benefit o the current specified amount; or Option A equals the o a specified percentage called the "limitation greater of: percentage," multiplied by --> the cash value on the insured's date of death. Under Option A, your death benefit remains level unless the limitation percentage multiplied by the cash value is greater than the specified amount; then the death benefit will vary as the cash value varies. The limitation percentage is the minimum percentage of cash value we must pay as the death benefit under federal tax requirements. It is based on the attained age of the insured at the beginning of each Policy year. The following table indicates the limitation percentages for different ages: ATTAINED AGE LIMITATION PERCENTAGE ------------ --------------------- 40 and under 250% 41 to 45 250% of cash value minus 7% for each age over age 40 46 to 50 215% of cash value minus 6% for each age over age 45 51 to 55 185% of cash value minus 7% for each age over age 50 56 to 60 150% of cash value minus 4% for each age over age 55 61 to 65 130% of cash value minus 2% for each age over age 60 66 to 70 120% of cash value minus 1% for each age over age 65 71 to 75 115% of cash value minus 2% for each age over age 70 76 to 90 105% 91 to 95 105% of cash value minus 1% for each age over age 90 96 and older 100% If the federal tax code requires us to determine the death benefit by reference to these limitation percentages, the Policy is described as "in the corridor." An increase in the cash value will increase our risk, and we will increase the cost of insurance we deduct from the cash value. OPTION A ILLUSTRATION. Assume that the insured's attained age is under 40, there have been no withdrawals or decreases in specified amount, and that there is no outstanding indebtedness. Under Option A, a Policy with a $100,000 specified amount will generally pay $100,000 in death benefits. However, because the death benefit must be equal to or be greater than 250% of cash value, any time the cash value of the Policy exceeds $40,000, the death benefit will exceed the $100,000 specified amount. Each additional dollar added to the cash value above $40,000 will increase the death benefit by $2.50. Similarly, so long as the cash value exceeds $40,000, each dollar taken out of the cash value will reduce the death benefit by $2.50. If at any time the cash value multiplied 48 by the limitation percentage is less than the specified amount, the death benefit will equal the specified amount of the Policy reduced by the dollar value of any cash withdrawals. Death benefit o the current specified amount; PLUS Option B equals the --> the cash value on the insured's date of death; greater of: OR o the limitation percentage, MULTIPLIED BY --> the cash value on the insured's date of death. Under Option B, the death benefit always varies as the cash value varies. OPTION B ILLUSTRATION. Assume that the insured's attained age is under 40 and that there is no outstanding indebtedness. Under Option B, a Policy with a specified amount of $100,000 will generally pay a death benefit of $100,000 plus cash value. Thus, a Policy with a cash value of $10,000 will have a death benefit of $110,000 ($100,000 + $10,000). The death benefit, however, must be at least 250% of cash value. As a result, if the cash value of the Policy exceeds $66,667, the death benefit will be greater than the specified amount plus cash value. Each additional dollar of cash value above $66,667 will increase the death benefit by $2.50. Similarly, any time cash value exceeds $66,667, each dollar taken out of cash value will reduce the death benefit by $2.50. If at any time, cash value multiplied by the limitation percentage is less than the specified amount plus the cash value, then the death benefit will be the specified amount plus the cash value of the Policy. Death benefit o death benefit Option A; or Option C equals the o the current specified amount, multiplied by greater of: --> an age-based "factor" equal to the lesser of: o 1.0 or o 0.04 times (95 minus insured's attained age at death) (the "factor" will never be less than zero); plus --> the cash value on the insured's date of death. Under Option C, the death benefit varies with the cash value and the insured's attained age. OPTION C -- THREE ILLUSTRATIONS. 1. Assume that the insured is under age 40 and that there is no outstanding indebtedness. Under Option C, a Policy with a specified amount of $100,000 and with a cash value of $10,000 will have a death benefit of $110,000 ($100,000 x the minimum of (1.0 and (0.04 x (95 - 40))) + $10,000). Until the insured attains age 71, this benefit is the same as the Option B benefit. 2. Assume that the insured is attained age 75 and that there is no outstanding indebtedness. Under Option C, a Policy with a specified amount of $100,000 and with a cash value of $22,000 will have a death benefit of $102,000 ($100,000 x the minimum of (1.0 and (0.04 x (95 - 75))) + $22,000). 49 3. Assume that the insured is attained age 75 and that there is no outstanding indebtedness. Under Option C, a Policy with a specified amount of $100,000 and with a cash value of $9,000 will have a death benefit equal to the specified amount of $100,000, since the calculation of $100,000 times the minimum of (1.0 and (0.04 x (95 - 75))) plus $9,000 is less than the specified amount. EFFECTS OF CASH WITHDRAWALS ON THE DEATH BENEFIT If you choose Option A, a cash withdrawal will reduce the specified amount by an amount equal to the amount of the cash withdrawal. We will not impose a decrease charge when the specified amount is decreased as a result of taking a cash withdrawal. Regardless of the death benefit option you choose, a cash withdrawal will reduce the death benefit by at least the amount of the withdrawal. CHOOSING DEATH BENEFIT OPTIONS You must choose one death benefit option on your application. This is an important decision. The death benefit option you choose will have an impact on the dollar value of the death benefit, on your cash value, and on the amount of cost of insurance charges you pay. You may find Option A more suitable for you if your goal is to increase your cash value through positive investment experience. You may find Option B more suitable if your goal is to increase your total death benefit. You may find Option C more suitable if your goal is to increase your total death benefit before you reach attained age 70, and to increase your cash value through positive investment experience thereafter. CHANGING THE DEATH BENEFIT OPTION After the third Policy year, you may change your death benefit option once each Policy year if you have not increased or decreased the specified amount that year. We will notify you of the new specified amount. o You must make your request in writing. o The effective date of the change will be the Monthiversary on or following the date when we receive your request for a change at our office. o You may not make a change that would decrease the specified amount below the minimum specified amount under band 1 shown on your Policy schedule page. o There may be adverse federal tax consequences. You should consult a tax advisor before changing your Policy's death benefit option. INCREASING/DECREASING THE SPECIFIED AMOUNT After the Policy has been in force for three years, you may increase or decrease the specified amount once each Policy year if you have not changed the death benefit option that year. An increase or decrease in the specified amount will affect your cost of insurance charge and your minimum monthly guarantee premium, and may have adverse federal tax consequences. 50 In addition, an increase or decrease in specified amount may move the Policy into a different specified amount band, so that your overall cost of insurance rate and premium expense charge rate will change. An increase in specified amount will be treated as an additional layer of coverage with its own cost of insurance rates, surrender charges and surrender charge period. If you increase your specified amount, you will receive a new Policy schedule page showing your new minimum monthly guarantee premium and surrender charge schedule. You should consult a tax advisor before increasing or decreasing your Policy's specified amount. Conditions for o you must make your request in writing; decreasing the specified o you may not change your death benefit option or amount: increase your specified amount in the same Policy year that you decrease your specified amount; o you may not decrease your specified amount lower than the minimum specified amount under band 1 shown on your Policy schedule page; o you may not decrease your specified amount if it would disqualify your Policy as life insurance under the Internal Revenue Code; o we may limit the amount of the decrease to no more than 20% of the specified amount; o a decrease in specified amount will take effect on the Monthiversary on or after we receive your written request; and o we will assess a decrease charge against the cash value if you request a decrease in your specified amount within the first 15 Policy years (or during the 15 year period subsequent to an increase in specified amount). Conditions for o your request must be applied for on a increasing the specified supplemental application and must include amount: evidence of insurability satisfactory to us; o an increase in specified amount requires our approval and will take effect on the Monthiversary on or after we approve your request; o we may require your increase in specified amount to be at least $50,000; and o you may not change your death benefit option or decrease your specified amount in the same Policy year that you increase your specified amount. If an increase or decrease to your Policy's specified amount causes your specified amount band to change, then we will apply the new premium expense charge and cost of insurance rates to the amounts in the new band as of the effective date of the increase or decrease in specified amount. The new minimum monthly guarantee premium is effective on the date of increase or decrease. In addition, each increase in specified amount will have its 51 own surrender charges that apply for 15 years after any increase. This charge may significantly reduce your net surrender value. PAYMENT OPTIONS There are several ways of receiving proceeds under the death benefit and surrender provisions of the Policy, other than in a lump sum. See Settlement Options p. 62 for information concerning these settlement options. SURRENDERS AND CASH WITHDRAWALS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SURRENDERS You must make a written request containing an original signature to surrender your Policy for its net surrender value as calculated at the end of the valuation date on which we receive your request at our office. The insured must be alive, the Policy must be in force, and it must be before the maturity date when you make your written request. A surrender is effective as of the date when we receive your written request. The signature of the owner's spouse is required if the owner is a resident of: Arizona, California, Idaho, Nevada, New Mexico, Washington or Wisconsin. You will incur a surrender charge if you surrender the Policy during the first 15 Policy years (or during the 15 year period subsequent to an increase in specified amount) (see Charges and Deductions -- Surrender Charge p. 43). Once you surrender your Policy, all coverage and other benefits under it cease and cannot be reinstated. We will normally pay you the net surrender value in a lump sum within seven days or under a settlement option. A surrender may have tax consequences. See Federal Income Tax Considerations p. 57. CASH WITHDRAWALS After the first Policy year, you may request a cash withdrawal of a portion of your cash value subject to certain conditions. Cash o You must make your cash withdrawal request to us in withdrawal writing and must contain an original signature. conditions: o Signature of owner's spouse is required if owner is a resident of: Arizona, California, Idaho, Nevada, New Mexico, Washington or Wisconsin. o We only allow one cash withdrawal per Policy year. 52 o We may limit the amount you can withdraw to at least $500, and to no more than 10% of the net surrender value. We currently intend to limit the amount you can withdraw to 25% of the net surrender value after the 10th Policy year. o The remaining net surrender value after the cash withdrawal must be at least $500. o You may not take a cash withdrawal if it will reduce the specified amount below the minimum specified amount set forth in the Policy. o You may specify the subaccount(s) and the fixed account from which to make the withdrawal. If you do not specify an account, we will take the withdrawal from each account in accordance with your current premium allocation instructions. o We generally will pay a cash withdrawal request within seven days following the valuation date we receive the request. o We will deduct a processing fee equal to $25 or 2% of the amount you withdraw, whichever is less. We deduct this amount from the withdrawal, and we pay you the balance. o You may not take a cash withdrawal that would disqualify your Policy as life insurance under the Internal Revenue Code. o A cash withdrawal may have tax consequences (see Federal Income Tax Considerations p. 57). A cash withdrawal will reduce the cash value by the amount of the cash withdrawal, and will reduce the death benefit by at least the amount of the cash withdrawal. When death benefit Option A is in effect, a cash withdrawal will reduce the specified amount by an amount equal to the amount of the cash withdrawal. This decrease in specified amount may cause your Policy to be in a lower specified amount band, so that your cost of insurance rates would be higher. (See Monthly Deduction p. 40.) You also may have to pay higher minimum monthly guarantee premiums and premium expense charges. We will not impose a decrease charge when the specified amount is decreased as a result of taking a cash withdrawal. When we incur extraordinary expenses, such as overnight mail expenses or wire service fees, for expediting delivery of your partial withdrawal or complete surrender payment, we will deduct that charge from the payment. We charge $20 for an overnight delivery ($30 for Saturday delivery) and $25 for wire service. 53 LOANS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- GENERAL After the first Policy year (as long as the Policy is in force) you may borrow money from us using the Policy as the only security for the loan. We may permit a loan prior to the first anniversary for Policies issued pursuant to 1035 Exchanges. A loan that is taken from, or secured by, a Policy may have tax consequences. See Federal Income Tax Considerations p. 57. Policy loans are o we may require you to borrow at least $500; subject to certain o the maximum amount you may borrow is 90% of the cash conditions: value, minus any surrender charge and minus any outstanding loan amount; and o signature of owner's spouse is required if owner is a resident of: Arizona, California, Idaho, Nevada, New Mexico, Washington or Wisconsin. When you take a loan, we will withdraw an amount equal to the requested loan from each of the subaccounts and the fixed account based on your current premium allocation instructions (unless you specify otherwise). We will transfer that amount to the loan reserve. The loan reserve is the portion of the fixed account used as collateral for a Policy loan. We normally pay the amount of the loan within seven days after we receive a proper loan request. We may postpone payment of loans under certain conditions. See Payments We Make p. 63. You may request a loan by telephone by calling us at 1-800-851-9777, extension 6539 Monday - Friday 8:00 a.m - 7:00 p.m Eastern time. If the loan amount you request exceeds $50,000 or if the address of record has been changed within the past 10 days, we may reject your request. If you do not want the ability to request a loan by telephone, you should notify us in writing. You will be required to provide certain information for identification purposes when you request a loan by telephone. We may ask you to provide us with written confirmation of your request. We will not be liable for processing a loan request if we believe the request is genuine. You may also fax your loan request to us at 727-299-1667. We will not be responsible for any transmittal problems when you fax your request unless you report it to us within five business days and send us proof of your fax transmittal. You can repay a loan at any time while the Policy is in force. WE WILL CONSIDER ANY PAYMENTS YOU MAKE ON THE POLICY TO BE PREMIUM PAYMENTS UNLESS THE PAYMENTS ARE CLEARLY SPECIFIED AS LOAN REPAYMENTS. At each Policy anniversary, we will compare the amount of the outstanding loan to the amount in the loan reserve. We will also make this comparison any time you repay all 54 or part of the loan, or make a request to borrow an additional amount. At each such time, if the amount of the outstanding loan exceeds the amount in the loan reserve, we will withdraw the difference from the subaccounts and the fixed account and transfer it to the loan reserve, in the same manner as when a loan is made. If the amount in the loan reserve exceeds the amount of the outstanding loan, we will withdraw the difference from the loan reserve and transfer it to the subaccounts and the fixed account in the same manner as current premiums are allocated. No charge will be imposed for these transfers, and these transfers are not treated as transfers in calculating the transfer charge. We reserve the right to require a transfer to the fixed account if the loans were originally transferred from the fixed account. INTEREST RATE CHARGED We currently charge you an annual interest rate on a Policy loan that is equal to 3.75% (4.0% guaranteed) and is payable in arrears on each Policy anniversary. Loan interest that is unpaid when due will be added to the amount of the loan on each Policy anniversary and will bear interest at the same rate. After the 10th Policy year, you may borrow at preferred loan rates an amount equal to the cash value minus total premiums paid (reduced by any cash withdrawals) and minus any outstanding loan amount. This preferred loan rate is currently 3.0% and is not guaranteed. The tax consequences of preferred loans are uncertain. See Federal Income Tax Considerations p. 57. LOAN RESERVE INTEREST RATE CREDITED We will credit the amount in the loan reserve with interest at an effective annual rate of 3.0%. EFFECT OF POLICY LOANS A Policy loan reduces the death benefit proceeds and net surrender value by the amount of any outstanding loan amount. Repaying the loan causes the death benefit proceeds and net surrender value to increase by the amount of the repayment. As long as a loan is outstanding, we hold an amount equal to the loan as of the last Policy anniversary plus any accrued interest net of any loan payments. This amount is not affected by the separate account's investment performance and may not be credited with the interest rates accruing on the unloaned portion of the fixed account. Amounts transferred from the separate account to the loan reserve will affect the value in the separate account because we credit such amounts with an interest rate declared by us rather than a rate of return reflecting the investment results of the separate account. There are risks involved in taking a Policy loan, a few of which include the potential for a Policy to lapse if projected earnings, taking into account outstanding loans, are not achieved. A Policy loan may also have possible adverse tax consequences (see Federal Income Tax Considerations p. 57). You should consult a tax advisor before taking out a Policy loan. We will notify you (and any assignee of record) if the sum of your loan amount is more than the net surrender value. If you do not submit a sufficient payment within 61 days from the date of the notice, your Policy may lapse. 55 POLICY LAPSE AND REINSTATEMENT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- LAPSE Your Policy may not necessarily lapse (terminate without value) if you fail to make a planned periodic payment. However, even if you make all your planned periodic payments, there is no guarantee that your Policy will not lapse. This Policy provides a no lapse period. See below. Once your no lapse period ends, your Policy may lapse (terminate without value) if the net surrender value on any Monthiversary is less than the monthly deductions due on that day. Such lapse might occur if unfavorable investment experience, loans and cash withdrawals cause a decrease in the net surrender value, or you have not paid sufficient premiums as discussed below to offset the monthly deductions. If the net surrender value is not enough to pay the monthly deductions, we will mail a notice to your last known address and any assignee of record. The notice will specify the minimum payment you must pay and the final date by which we must receive the payment to prevent a lapse. We generally require that you make the payment within 61 days after the date of the notice. This 61-day period is called the grace period. If we do not receive the specified minimum payment by the end of the grace period, all coverage under the Policy will terminate without value. NO LAPSE PERIOD This Policy provides a no lapse period. As long as you keep the no lapse period in effect, your Policy will not lapse and no grace period will begin. Even if your net surrender value is not enough to pay your monthly deduction, the Policy will not lapse so long as the no lapse period is in effect. The no lapse period will not extend beyond the no lapse date stated in your Policy. Each month we determine whether the no lapse period is still in effect. No lapse date o For a Policy issued to any insured ages 0-60, the no lapse date is either the number of years to attained age 65 or the twentieth Policy anniversary, whichever is less. o For a Policy issued to an insured ages 61-85, the no lapse date is the fifth Policy anniversary. o The no lapse date is specified in your Policy. Early termination of the o The no lapse period coverage will end no lapse period immediately if you do not pay sufficient minimum monthly guarantee premiums. o You must pay total premiums (minus withdrawals, outstanding loans, and any decrease charge) that equal at least: --> the sum of the minimum monthly guarantee premiums in effect for each month from the Policy date up to and including the current month. 56 You will lessen the risk of Policy lapse if you keep the no lapse period in effect. Before you take a cash withdrawal or a loan or decrease the specified amount you should consider carefully the effect it will have on the no lapse period guarantee. See Minimum Monthly Guarantee Premium p. 29. In addition, if you change death benefit options, increase or decrease the specified amount, or add, increase or decrease a rider, we will adjust the minimum monthly guarantee premium. See Minimum Monthly Guarantee Premium p. 29 for a discussion of how the minimum monthly guarantee premium is calculated and can change. REINSTATEMENT We will reinstate a lapsed Policy within five years after the lapse (and prior to the maturity date). To reinstate the Policy you must: o submit a written application for reinstatement; o provide evidence of insurability satisfactory to us; o make a minimum premium payment sufficient to provide a net premium that is large enough to cover: --> three monthly deductions; and --> any surrender charge calculated from the Policy date to the date of reinstatement. (Although we do not currently assess this charge, we reserve the right to do so in the future.) We will not reinstate any indebtedness. The cash value of the loan reserve on the reinstatement date will be zero. Your net surrender value on the reinstatement date will equal the net premiums you pay at reinstatement, minus one monthly deduction and any surrender charge. The reinstatement date for your Policy will be the Monthiversary on or following the day we approve your application for reinstatement. We may decline a request for reinstatement. FEDERAL INCOME TAX CONSIDERATIONS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The following summarizes some of the basic federal income tax considerations associated with a Policy and does not purport to be complete or to cover all situations. This discussion is not intended as tax advice. Please consult counsel or other qualified tax advisors for more complete information. We base this discussion on our understanding of the present federal income tax laws as they are currently interpreted by the Internal Revenue Service (the "IRS"). Federal income tax laws and the current interpretations by the IRS may change. TAX STATUS OF THE POLICY A Policy must satisfy certain requirements set forth in the Internal Revenue Code (the "Code") in order to qualify as a life insurance policy for federal income tax purposes and 57 to receive the tax treatment normally accorded life insurance policies under federal tax law. Guidance as to how these requirements are to be applied is limited. Nevertheless, we believe that a Policy issued on the basis of a standard rate class should generally satisfy the applicable Code requirements. Because of the absence of pertinent interpretations of the Code requirements, there is, however, less certainty about the application of such requirements to a Policy issued on a substandard basis. If it is subsequently determined that a Policy does not satisfy the applicable requirements, we may take appropriate steps to bring the Policy into compliance with such requirements and we reserve the right to restrict Policy transactions in order to do so. In certain circumstances, owners of variable life insurance policies have been considered for federal income tax purposes to be the owners of the assets of the separate account supporting their policies due to their ability to exercise investment control over those assets. Where this is the case, the policyowners have been currently taxed on income and gains attributable to the separate account assets. There is little guidance in this area, and some features of the Policies, such as your flexibility to allocate premiums and cash values, have not been explicitly addressed in published rulings. While we believe that the Policy does not give you investment control over separate account assets, we reserve the right to modify the Policy as necessary to prevent you from being treated as the owner of the separate account assets supporting the Policy. In addition, the Code requires that the investments of the separate account be "adequately diversified" in order to treat the Policy as a life insurance policy for federal income tax purposes. We intend that the separate account, through the portfolios, will satisfy these diversification requirements. The following discussion assumes that the Policy will qualify as a life insurance policy for federal income tax purposes. TAX TREATMENT OF POLICY BENEFITS IN GENERAL. We believe that the death benefit under a Policy should be excludible from the beneficiary's gross income. Federal, state and local transfer, and other tax consequences of ownership or receipt of Policy proceeds depend on your circumstances and the beneficiary's circumstances. A tax advisor should be consulted on these consequences. Generally, you will not be deemed to be in constructive receipt of the cash value until there is a distribution. When distributions from a Policy occur, or when loans are taken out from or secured by a Policy (e.g., by assignment), the tax consequences depend on whether the Policy is classified as a "Modified Endowment Contract" ("MEC"). MODIFIED ENDOWMENT CONTRACTS. Under the Code, certain life insurance policies are classified as MECs and receive less favorable tax treatment than other life insurance policies. The rules are too complex to summarize here, but generally depend on the amount of premiums paid during the first seven Policy years. Certain changes in the Policy after it is issued could also cause the Policy to be classified as a MEC. Due to the Policy's flexibility, 58 each Policy's circumstances will determine whether the Policy is classified as a MEC. Among other things, a reduction in benefits could in certain circumstances cause a Policy to become a MEC. If you do not want your Policy to be classified as a MEC, you should consult a tax advisor to determine the circumstances, if any, under which your Policy would or would not be classified as a MEC. Upon issue of your Policy, we will notify you as to whether or not your Policy is classified as a MEC based on the initial premium we receive. If your Policy is not a MEC at issue, then you will also be notified of the maximum amount of additional premiums you can pay without causing your Policy to be classified as a MEC. If a payment would cause your Policy to become a MEC, you and your agent will be notified immediately. At that time, you will need to notify us if you want to continue your Policy as a MEC. If you notify us that you do not want to continue your Policy as a MEC, we will refund the dollar amount of the excess premium that caused the Policy to become a MEC as of the date we receive the notice. If investment earnings on the excess premium are positive, we will refund the excess premium, plus the variable earnings; if investment earnings on the excess premium are negative, we will refund the full amount of the excess premium out of the Policy's cash value. Distributions (other than Death Benefits) from Modified Endowment Contracts. Policies classified as MECs are subject to the following tax rules: o All distributions other than death benefits from a MEC, including distributions upon surrender and cash withdrawals, will be treated first as distributions of gain taxable as ordinary income. They will be treated as tax-free recovery of the owner's investment in the Policy only after all gain has been distributed. Your investment in the Policy is generally your total premium payments. When a distribution is taken from the Policy, your investment in the Policy is reduced by the amount of the distribution that is tax-free. o Loans taken from or secured by (e.g., by assignment) such a Policy are treated as distributions and taxed accordingly. o A 10% additional federal income tax is imposed on the amount included in income except where the distribution or loan is made when you have attained age 591/2 or are disabled, or where the distribution is part of a series of substantially equal periodic payments for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and the beneficiary. o If a Policy becomes a MEC, distributions that occur during the Policy year will be taxed as distributions from a MEC. In addition, distributions from a Policy within two years before it becomes a MEC will be taxed in this manner. This means that a distribution from a Policy that is not a MEC at the time when the distribution is made could later become taxable as a distribution from a MEC. Distributions (other than Death Benefits) from Policies that are not Modified Endowment Contracts. Distributions from a Policy that is not a MEC are generally treated 59 first as a recovery of your investment in the Policy, and as taxable income after the recovery of all investment in the Policy. However, certain distributions which must be made in order to enable the Policy to continue to qualify as a life insurance policy for federal income tax purposes if Policy benefits are reduced during the first 15 Policy years may be treated in whole or in part as ordinary income subject to tax. Loans from or secured by a Policy that is not a MEC are generally not treated as distributions. Instead, such loans are treated as indebtedness. However, the tax consequences associated with Policy loans outstanding after the first 10 Policy years are less clear and a tax advisor should be consulted about such loans. Finally, neither distributions from nor loans from or secured by a Policy that is not a MEC are subject to the 10% additional tax. Multiple Policies. All MECs that we issue (or that our affiliates issue) to the same owner during any calendar year are treated as one MEC for purposes of determining the amount includible in the owner's income when a taxable distribution occurs. INVESTMENT IN THE POLICY. Your investment in the Policy is generally the sum of the premium payments you made. When a distribution from the Policy occurs, your investment in the Policy is reduced by the amount of the distribution that is tax-free. POLICY LOANS. If a loan from a Policy is outstanding when the Policy is canceled or lapses, then the amount of the outstanding indebtedness will be taxed as if it were a distribution. DEDUCTIBILITY OF POLICY LOAN INTEREST. In general, interest you pay on a loan from a Policy will not be deductible. Before taking out a Policy loan, you should consult a tax advisor as to the tax consequences. BUSINESS USES OF THE POLICY. The Policy may be used in various arrangements, including nonqualified deferred compensation or salary continuance plans, split dollar insurance plans, executive bonus plans, retiree medical benefit plans and others. The tax consequences of such plans and business uses of the Policy may vary depending on the particular facts and circumstances of each individual arrangement and business uses of the Policy. Therefore, if you are contemplating using the Policy in any arrangement the value of which depends in part on its tax consequences, you should be sure to consult a tax advisor as to tax attributes of the arrangement. In recent years, moreover, Congress has adopted new rules relating to life insurance owned by businesses. Any business contemplating the purchase of a new Policy or a change in an existing Policy should consult a tax advisor. LIVING BENEFIT RIDER (AN ACCELERATED DEATH BENEFIT). We believe that the single-sum payment we make under this rider should be fully excludible from the gross income of the beneficiary, as long as the beneficiary is an insured under the Policy. You should consult a tax advisor about the consequences of adding this rider to your Policy, or requesting a single-sum payment. OTHER TAX CONSIDERATIONS. The transfer of the Policy or designation of a beneficiary may have federal, state, and/or local transfer and inheritance tax consequences, including the 60 imposition of gift, estate, and generation-skipping transfer taxes. The individual situation of each owner or beneficiary will determine the extent, if any, to which federal, state, and local transfer and inheritance taxes may be imposed and how ownership or receipt of Policy proceeds will be treated for purposes of federal, state and local estate, inheritance, generation-skipping and other taxes. POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative changes is uncertain, there is always a possibility that the tax treatment of the Policies could change by legislation or otherwise. You should consult a tax advisor with respect to legal developments and their effect on the Policy. SPECIAL RULES FOR 403(B) ARRANGEMENTS If this Policy is purchased by public school systems and certain tax-exempt organizations for their employees, then the federal, state and estate tax consequences could differ from those stated in the prospectus. A competent tax advisor should be consulted in connection with such purchase. Certain restrictions apply. The Policy must be purchased in connection with a tax-sheltered annuity described in section 403(b) of the Code. Premiums, distributions, and other transactions in connection with the Policy must be administered in coordination with the section 403(b) annuity. The amount of life insurance that may be purchased on behalf of a participant in a 403(b) plan is limited. The current cost of insurance for the net amount at risk is treated under the Code as a "current fringe benefit" and must be included annually in the plan participant's gross income. This cost (generally referred to as the "P.S. 58" cost) is reported to the participant annually. If the plan participant dies while covered by the 403(b) plan and the Policy proceeds are paid to the participant's beneficiary, then the excess of the death benefit over the cash value will generally not be taxable. However, the cash value will generally be taxable to the extent it exceeds the participant's cost basis in the Policy. Policies owned under these types of plans may be subject to the Employee Retirement Income Security Act of 1974 ("ERISA"), which may impose additional requirements of Policy loans and other Policy provisions. Plan loans must also satisfy tax requirements in order to be treated as non-taxable. Plan loan requirements and provisions may differ from the Policy loan provisions stated in the prospectus. You should consult a qualified advisor regarding ERISA. OTHER POLICY INFORMATION - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- OUR RIGHT TO CONTEST THE POLICY In issuing this Policy, we rely on all statements made by or for the insured in the application or in a supplemental application. Therefore, if you make any material 61 misrepresentation of a fact in the application (or any supplemental application), then we may contest the Policy's validity or may resist a claim under the Policy. A new two year contestability period shall apply to each increase in specified amount beginning on the effective date of each increase and will apply only to statements made in the application for the increase. In the absence of fraud, we cannot bring any legal action to contest the validity of the Policy after the Policy has been in force during the insured's lifetime for two years from the Policy date, or if reinstated, for two years from the date of reinstatement. SUICIDE EXCLUSION If the insured commits suicide, while sane or insane, within two years of the Policy date (or two years from the reinstatement date; if the Policy lapses and is reinstated), the Policy will terminate and our liability is limited to an amount equal to the premiums paid, less any outstanding loan amount, and less any cash withdrawals. We will pay this amount to the beneficiary in one sum. If the insured commits suicide, while sane or insane, within two years from the effective date of any increase in specified amount, our liability with respect to such increase will be its cost of insurance. MISSTATEMENT OF AGE OR GENDER If the age or gender of the insured was stated incorrectly in the application or any supplemental application, then the death benefit will be adjusted based on what the cost of insurance charge for the most recent monthly deduction would have purchased based on the insured's correct age and gender. MODIFYING THE POLICY Only our President or Secretary may modify this Policy or waive any of our rights or requirements under this Policy. Any modification or waiver must be in writing. No agent may bind us by making any promise not contained in this Policy. If we modify the Policy, we will provide you notice and we will make appropriate endorsements to the Policy. TAX-FREE "SECTION 1035" EXCHANGES You can generally exchange one life insurance policy for another in a "tax-free exchange" under Section 1035 of the Internal Revenue Code. Before making an exchange, you should compare both life insurance policies carefully. Remember that if you exchange another life insurance policy for the one described in this prospectus, you might have to pay a surrender charge on your old policy, there will be a new surrender charge period for this Policy, and other charges may be higher (or lower) and the benefits may be different. If the 62 exchange does not qualify for Section 1035 treatment, you may also have to pay federal income tax on the exchange. You should not exchange another life insurance policy for this one unless you determine, after knowing all the facts, that the exchange is in your best interest and not just better for the person selling you the Policy (that person will generally earn a commission if you buy this Policy through an exchange or otherwise). BENEFITS AT MATURITY If the insured is living and the Policy is in force, the Policy will mature on the Policy anniversary nearest the insured's 100th birthday. This is the maturity date. On the maturity date we will pay you the net surrender value of your Policy. If requested in writing, we will extend the maturity date if your Policy is still in force on the maturity date. Any riders in force on the scheduled maturity date will terminate on that date and will not be extended. Interest on any outstanding Policy loans will continue to accrue during the period for which the maturity date is extended. You must submit a written request for the extension between 90 and 180 days prior to the maturity date and elect one of the following: 1. If you had previously selected death benefit Option B or C, we will change the death benefit to Option A. On each valuation date, we will adjust the specified amount to equal the cash value, and the limitation percentage will be 100%. We will not permit you to make additional premium payments unless it is required to prevent the Policy from lapsing. We will waive all future monthly deductions; or 2. We will automatically extend the maturity date until the next Policy anniversary. You must submit a written request, between 90 and 180 days before each subsequent Policy anniversary, stating that you wish to extend the maturity date for another Policy year. All benefits and charges will continue as set forth in your Policy. We will charge the then current cost of insurance rates. If you choose 2 above, you may change your election to 1 above at any time. However, if you choose 1 above, then you may not change your election to 2 above. The tax consequences of extending the maturity date beyond the 100th birthday of the insured are uncertain. You should consult a tax advisor as to those consequences. PAYMENTS WE MAKE We usually pay the amounts of any surrender, cash withdrawal, death benefit proceeds, or settlement options within seven business days after we receive all applicable written notices and/or due proofs of death at our office. However, we can postpone such payments if: o the NYSE is closed, other than customary weekend and holiday closing, or trading on the NYSE is restricted as determined by the SEC; or o the SEC permits, by an order, the postponement for the protection of policyowners; or 63 o the SEC determines that an emergency exists that would make the disposal of securities held in the separate account or the determination of their value not reasonably practicable. If you have submitted a recent check or draft, we have the right to defer payment of surrenders, cash withdrawals, death benefit proceeds, or payments under a settlement option until such check or draft has been honored. We also reserve the right to defer payment of transfers, cash withdrawals, death benefit proceeds, or surrenders from the fixed account for up to six months. SETTLEMENT OPTIONS If you surrender the Policy, you may elect to receive the net surrender value in either a lump sum or as a series of regular income payments under one of the three settlement options described below. In either event, life insurance coverage ends. Also, when the insured dies, the beneficiary may apply the lump sum death benefit proceeds to one of the same settlement options. If the regular payment under a settlement option would be less than $100, we will instead pay the proceeds in one lump sum. We may make other settlement options available in the future. Once we begin making payments under a settlement option, you or the beneficiary will no longer have any value in the subaccounts or the fixed account. Instead, the only entitlement will be the amount of the regular payment for the period selected under the terms of the settlement option chosen. Depending upon the circumstances, the effective date of a settlement option is the surrender date or the insured's date of death. Under any settlement option, the dollar amount of each payment will depend on four things: o the amount of the surrender or death benefit proceeds on the surrender date or insured's date of death; o the interest rate we credit on those amounts (we guarantee a minimum annual interest rate of 3.0%); o the mortality tables we use; and o the specific payment option(s) you choose. Option 1 - Equal o We will pay the proceeds, plus interest, in equal Monthly Installments monthly installments for a fixed period of your for a Fixed Period choice, but not longer than 240 months. o We will stop making payments once we have made all the payments for the period selected. 64 Option 2 - Equal At your or the beneficiary's direction, we will make Monthly Installments equal monthly installments: for Life (Life Income) o only for the life of the payee, at the end of which payments will end; or o for the longer of the payee's life, or for 10 years if the payee dies before the end of the first 10 years of payments; or o until the total amount of all payments we have made equals the proceeds that were applied to the settlement option. Option 3 - Equal o We will make equal monthly payments during the Monthly Installments for joint lifetime of two persons, first to a the Life of the Payee and chosen payee, and then to a co-payee, if then to a Designated living, upon the death of the payee. Survivor (Joint and o Payments to the co-payee, if living, upon the Survivor) payee's death will equal either: --> the full amount made to the payee before the payee's death; or --> two-thirds of the amount paid to the payee before the payee's death. All payments will cease upon the death of the co-payee. REPORTS TO OWNERS At least once each year, or more often as required by law, we will mail to policyowners at their last known address a report showing the following information as of the end of the report period: /check mark/ the current cash value /check mark/ any activity since the last report /check mark/ the current net surrender value /check mark/ projected values /check mark/ the current death benefit /check mark/ investment experience of each subaccount /check mark/ any outstanding loans /check mark/ any other information required by law
You may request additional copies of reports, but we may charge a fee for such additional copies. In addition, we will send written confirmations of any premium payments and other financial transactions you request including: premium payments, changes in specified amount, changes in death benefit option, transfers, partial withdrawals, increases in loan amount, loan interest payments, loan repayments, lapses and reinstatements. We also will send copies of the annual and semi-annual report to shareholders for each portfolio in which you are indirectly invested. RECORDS We will maintain all records relating to the separate account and the fixed account. 65 POLICY TERMINATION Your Policy will terminate on the earliest of: o the maturity date; o the end of the grace period; or o the date the insured dies; o the date the Policy is surrendered. SUPPLEMENTAL BENEFITS (RIDERS) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The following supplemental benefits (riders) are available and may be added to a Policy. Monthly charges for these riders are deducted from cash value as part of the monthly deduction. The riders available with the Policies provide fixed benefits that do not vary with the investment experience of the separate account. For purposes of the riders, the primary insured is the person insured under the Policy, and the face amount is the level term insurance amount we pay at death. These riders may not be available in all states. Adding these supplemental benefits to an existing Policy or canceling them may have tax consequences and you should consult a tax advisor before doing so. CHILDREN'S INSURANCE RIDER This rider provides a face amount on the primary insured's children. Our current minimum face amount for this rider for issue ages 15 days - 18 years of age is $5,000. The maximum face amount is $20,000. At the age of 25 or upon the death of the primary insured, whichever happens first, this rider may be converted to a new policy with a maximum face amount of up to five times the face amount of the rider. We will pay a death benefit once we receive proof that the insured child died while both the rider and coverage were in force for that child. If the primary insured dies while the rider is in force, we will terminate the rider 31 days after the death, and we will offer a separate life insurance policy to each insured child. ACCIDENTAL DEATH BENEFIT RIDER Our current minimum face amount for this rider for issue ages 15-59 is $10,000. The maximum face amount available for this rider is $150,000 (up to 150% of specified amount). Subject to certain limitations, we will pay a face amount if the primary insured's death results solely from accidental bodily injury where: o the death is caused by external, violent, and accidental means; o the death occurs within 90 days of the accident; and o the death occurs while the rider is in force. 66 The rider will terminate on the earliest of: o the Policy anniversary nearest the primary insured's 70th birthday; o the date the Policy terminates; or o the Monthiversary when the rider terminates at the owner's request. OTHER INSURED RIDER This rider insures the spouse or life partner and/or dependent children of the primary insured. We will pay the rider's face amount when we receive proof of the other insured's death. On any Monthiversary while the rider is in force, you may replace it with a new policy on the other insured's life (without evidence of insurability). Conditions to o your request must be in writing; replace the o the rider has not reached the anniversary nearest to the rider: other insured's 70th birthday; o the new policy is any permanent insurance plan that we currently offer; o subject to the minimum specified amount required for the new policy, the amount of the insurance under the new policy will equal the face amount in force under the rider as long as it meets the minimum face amount requirements of the original Policy; and o we will base your premium on the other insured's rate class under the rider. DISABILITY WAIVER RIDER Subject to certain conditions, we will waive the Policy's monthly deductions while you are disabled. This rider may be purchased if your issue age is 15-55 years of age. We must receive proof that: o you are totally disabled; o the rider was in force when you became disabled; o you became disabled before the anniversary nearest your 60th birthday; and o you are continuously disabled for at least six months. We will not waive any deduction which becomes due more than one year before we receive written notice of your claim. DISABILITY WAIVER AND INCOME RIDER This rider has the same benefits as the Disability Waiver Rider, but adds a monthly income benefit for up to 120 months. This rider may be purchased if your issue age is 15-55 years of age. The minimum income amount for this rider is $10. The maximum income amount is the lesser of 0.2% of your specified amount or $300 per month. PRIMARY INSURED RIDER ("PIR") AND PRIMARY INSURED RIDER PLUS ("PIR PLUS") Under the PIR and the PIR Plus, we provide term insurance coverage on a different basis from the coverage in your Policy. 67 Features of o the rider increases the Policy's death benefit by the PIR and PIR rider's face amount; Plus: o the PIR may be purchased from issue ages 0-85; o the PIR Plus may be purchased from issue ages 18-85; o the PIR terminates when the insured turns 95, and the PIR Plus terminates when the insured turns 90; o the minimum purchase amount for the PIR and PIR Plus is $25,000. There is no maximum purchase amount; o we do not assess any additional surrender charge for PIR and PIR Plus; o generally PIR and PIR Plus coverage costs less than the insurance coverage under the Policy, but has no cash value; o you may cancel or reduce your rider coverage without decreasing your Policy's specified amount; and o you may generally decrease your specified amount without reducing your rider coverage. It may cost you less to reduce your PIR or PIR Plus coverage than to decrease your Policy's specified amount, because we do not deduct a surrender charge in connection with your PIR or PIR Plus. It may cost you more to keep a higher specified amount, because the specified amount may have a cost of insurance that is higher than the cost of the same amount of coverage under your PIR or PIR Plus. You should consult your registered representative to determine if you would benefit from PIR or PIR Plus. We may discontinue offering PIR or PIR Plus at any time. We may also modify the terms of these riders for new policies. LIVING BENEFIT RIDER (AN ACCELERATED DEATH BENEFIT) This rider allows us to pay all or a portion of the death benefit once we receive satisfactory proof that the insured is ill and has a life expectancy of one year or less. A doctor must certify the insured's life expectancy. We will pay a "single-sum benefit" equal to: o the death benefit on the date we pay the single-sum benefit; multiplied by o the election percentage of the death benefit you elect to receive; divided by o 1 + i ("i" equals the current yield on 90-day Treasury bills or the Policy loan interest rate, whichever is greater); minus o any indebtedness at the time we pay the single-sum benefit, multiplied by the election percentage. The maximum terminal illness death benefit used to determine the single-sum benefit as defined above is equal to: o the death benefit available under the Policy once we receive satisfactory proof that the insured is ill; plus 68 o the benefit available under any PIR or PIR Plus in force. o a single-sum benefit may not be greater than $500,000. The election percentage is a percentage that you select. It may not be greater than 100% of your Policy's death benefit under the rider. We will not pay a benefit under the rider if the insured's terminal condition results from self-inflicted injuries which occur during the period specified in your Policy's suicide provision. The rider terminates at the earliest of: o the date the Policy terminates; o the date a settlement option takes effect; o the date we pay a single-sum benefit; or o the date you terminate the rider. We do not charge for this rider. This rider may not be available in all states, or its terms may vary depending on a state's insurance law requirements. The tax consequences of adding this rider to an existing Policy or requesting payment under the rider are uncertain and you should consult a tax advisor before doing so. IMSA - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- We are a member of the Insurance Marketplace Standards Association ("IMSA"). IMSA is an independent, voluntary organization of life insurance companies. It promotes high ethical standards in the sales and advertising of individual life insurance and annuity products. Companies must undergo a rigorous self and independent assessment of their practices to become a member of IMSA. The IMSA logo in our sales literature shows our ongoing commitment to these standards. PERFORMANCE DATA - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- RATES OF RETURN The rates of return in Table 1 reflect each subaccount's actual investment performance. The Table shows the historical investment experience of the subaccounts based on the subaccounts' historical investment experience. This information does not represent or project future investment performance. Some portfolios began operation before their corresponding subaccount. For these portfolios, we have included in Table 2 below adjusted portfolio performance from the portfolio's inception date. The adjusted portfolio performance is designed to show the performance that would have resulted if the subaccount had been in operation during the time the portfolio was in operation. 69 We deduct the annual mortality and expense risk charge, investment management fees and direct fund expenses. These rates of return do not reflect other charges that are deducted under the Policy or from the separate account (such as the premium expense charge, monthly deduction or the surrender charge). If these charges were deducted, performance would be significantly lower. These rates of return are not estimates, projections or guarantees of future performance. We also show below comparable figures for the unmanaged Standard & Poor's Index of 500 Common Stocks ("S&P 500"), a widely used measure of stock market performance. The S&P 500 does not reflect any deduction for the expenses of operating and managing an investment portfolio. 70 TABLE 1 AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED ON DECEMBER 31, 2000
10 YEARS SUBACCOUNT OR INCEPTION SUBACCOUNT 1 YEAR 3 YEARS 5 YEARS INCEPTION DATE - -------------------------------------------- ------------- ----------- ----------- ------------- ----------- WRL Van Kampen Emerging Growth ................. (12.70)% 34.18% 27.93% 24.80% 03/01/93 WRL T. Rowe Price Small Cap .................... (9.27)% N/A N/A 6.87% 07/01/99 WRL Pilgrim Baxter Mid Cap Growth .............. (15.16)% N/A N/A 22.46% 07/01/99 WRL Alger Aggressive Growth .................... (31.94)% 18.88% 17.76% 17.67% 03/01/94 WRL Third Avenue Value ......................... 34.26% N/A N/A 12.47% 01/02/98 WRL Value Line Aggressive Growth(1) ............ N/A N/A N/A (10.24)% 05/01/00 WRL GE International Equity .................... (15.75)% 5.28% N/A 5.60% 01/02/97 WRL Great Companies -- Technology(SM)(1) ......... N/A N/A N/A (33.01)% 05/01/00 WRL Janus Growth(+) ............................ (29.58)% 22.02% 19.86% 18.43% 10/02/86 WRL Goldman Sachs Growth ....................... (8.84)% N/A N/A 1.94% 07/01/99 WRL GE U.S. Equity ............................. (1.67)% 12.01% N/A 15.35% 01/02/97 WRL Great Companies -- America(SM)(1) ............ N/A N/A N/A 13.12% 05/01/00 WRL Salomon All Cap ............................ 17.24% N/A N/A 16.32% 07/01/99 WRL C.A.S.E. Growth ............................ (21.42)% 1.91% N/A 5.86% 05/01/96 WRL Dreyfus Mid Cap ............................ 11.91% N/A N/A 7.93% 07/01/99 WRL NWQ Value Equity ........................... 14.17% 4.85% N/A 10.70% 05/01/96 WRL T. Rowe Price Dividend Growth .............. 8.89% N/A N/A (0.14)% 07/01/99 WRL Dean Asset Allocation ...................... 16.16% 5.26% 8.85% 10.50% 01/03/95 WRL LKCM Strategic Total Return ................ (4.62)% 4.80% 9.64% 10.44% 03/01/93 WRL J.P. Morgan Real Estate Securities ......... 28.46% N/A N/A 1.33% 05/01/98 WRL Federated Growth & Income .................. 28.01% 7.38% 11.09% 10.61% 03/01/94 WRL AEGON Balanced ............................. 4.88% 4.31% 7.65% 7.20% 03/01/94 WRL AEGON Bond(+) .............................. 9.90% 4.63% 4.22% 6.85% 10/02/86 WRL J.P. Morgan Money Market(2)(+) ............. 5.17% 4.48% 4.40% 3.71% 10/02/86 Fidelity VIP Equity-Income Portfolio -- Service Class 2(1) ........................ N/A N/A N/A 9.91% 05/01/00 Fidelity VIP II Contrafund(R) Portfolio -- Service Class 2(1) ........................ N/A N/A N/A (6.16)% 05/01/00 Fidelity VIP III Growth Opportunities Portfolio -- Service Class 2(1) ........... N/A N/A N/A (14.36)% 05/01/00 S&P 500(+) ................................. (9.10)% 12.25% 18.31% 17.44% 12/31/90
(+) Shows ten year performance. (1) Not annualized. (2) Yield more closely reflects the current earnings than its total return. An investment in this subaccount is not insured or guaranteed by the FDIC. While this subaccount seeks to preserve its value at $1.00 per share, it is possible to lose money by investing in this subaccount. 71 TABLE 2 ADJUSTED HISTORICAL PORTFOLIO AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED ON DECEMBER 31, 2000
10 YEARS PORTFOLIO OR INCEPTION PORTFOLIO 1 YEAR 3 YEARS 5 YEARS INCEPTION DATE - ------------------------------------------------ ------------- ----------- ----------- ------------- ---------- Van Kampen Emerging Growth ................. (12.70)% 34.18% 27.93% 24.80% 03/01/93 T. Rowe Price Small Cap .................... (9.27)% N/A N/A 14.30% 05/03/99 Pilgrim Baxter Mid Cap Growth .............. (15.16)% N/A N/A 27.66% 05/03/99 Alger Aggressive Growth .................... (31.94)% 18.88% 17.76% 17.67% 03/01/94 Third Avenue Value ......................... 34.26% N/A N/A 12.47% 01/02/98 Value Line Aggressive Growth(2) ............ N/A N/A N/A (10.24)% 05/01/00 GE International Equity .................... (15.75)% 5.28% N/A 5.60% 01/02/97 Great Companies -- Technology(SM)(2) ....... N/A N/A N/A (33.01)% 05/01/00 Janus Growth(+) ............................ (29.58)% 22.02% 19.86% 18.43% 10/02/86 Goldman Sachs Growth ....................... (8.84)% N/A N/A 3.84% 05/03/99 GE U.S. Equity ............................. (1.67)% 12.01% N/A 15.35% 01/02/97 Great Companies -- America(SM)(2) ............ N/A N/A N/A 13.12% 05/01/00 Salomon All Cap ............................ 17.24% N/A N/A 19.60% 05/03/99 C.A.S.E. Growth ............................ (21.43)% 1.91% 7.03% 9.64% 05/01/95 Dreyfus Mid Cap ............................ 11.91% N/A N/A 11.16% 05/03/99 NWQ Value Equity ........................... 14.17% 4.85% N/A 10.70% 05/01/96 T. Rowe Price Dividend Growth .............. 8.89% N/A N/A 0.13% 05/03/99 Dean Asset Allocation ...................... 16.16% 5.26% 8.85% 10.50% 01/03/95 LKCM Strategic Total Return ................ (4.62)% 4.80% 9.64% 10.44% 03/01/93 J.P. Morgan Real Estate Securities ......... 28.46% N/A N/A 1.33% 05/01/98 Federated Growth & Income .................. 28.01% 7.38% 11.09% 10.61% 03/01/94 AEGON Balanced ............................. 4.88% 4.31% 7.65% 7.20% 03/01/94 AEGON Bond(+) .............................. 9.90% 4.63% 4.22% 6.85% 10/02/86 J.P. Morgan Money Market(1)(+) ............. 5.17% 4.48% 4.40% 3.71% 10/02/86 Fidelity VIP Equity-Income Portfolio -- Service Class 2(+) ....................... 7.16% 7.64% 12.38% 16.24% 10/09/86 Fidelity VIP II Contrafund(R) Portfolio -- Service Class 2 ......................... (7.67)% 13.51% 16.66% 20.05% 01/03/95 Fidelity VIP III Growth Opportunities Portfolio -- Service Class 2 ............ (18.02)% 1.46% 9.53% 12.90% 01/03/95 S&P 500(+) ............................... (9.10)% 12.25% 18.31% 17.44% 12/31/90
(+) Shows ten year performance. (1) Yield more closely reflects the current earnings than its total return. An investment in this subaccount is not insured ot guaranteed by the FDIC. While this subaccount seeks to preserve its value at $1.00 per share, it is possible to lose money by investing in this subaccount. (2) Not annualized. Because the WRL Gabelli Global Growth and WRL Great Companies -- Global(2) subaccounts commenced operations on September 1, 2000 (and have less than six months performance) and WRL LKCM Capital Growth subaccount commenced operations on February 5, 2001, and the WRL Munder Net50 subaccount will commence operations on May 29, 2001, the above Tables do not reflect rates of return for these subaccounts. 72 The annualized yield for the WRL J.P. Morgan Money Market subaccount for the seven days ended December 31, 2000 was 5.34%. Additional information regarding the investment performance of the portfolios appears in the fund prospectuses, which accompany this prospectus. HYPOTHETICAL ILLUSTRATIONS BASED ON SUBACCOUNT PERFORMANCE This section contains hypothetical illustrations of Policy values based on the historical experience of the subaccounts. We started selling the Policies in 1997. The separate account and the Series Fund commenced operations on October 2, 1986. The rates of return below show the actual investment experience of each subaccount for the periods shown. The illustrations of cash value and net surrender value below depict these Policy values as if you had purchased the Policy on the last valuation date prior to January 1 of the year after the subaccount began operations and had elected death benefit Option A. The illustrations are based on the historical investment experience of the subaccount indicated as of the last valuation date prior to January 1 of the year after the subaccount began operations. We assumed the rate of return for each subaccount in each calendar year to be uniformly earned throughout the year; however, the subaccount's actual performance did and will vary throughout the year. In order to demonstrate how the actual investment experience of the subaccounts could have affected the Option A death benefit, cash value and net surrender value of the Policy, we provide hypothetical illustrations for a hypothetical insured. These hypothetical illustrations are designed to show the performance that could have resulted if the hypothetical insured had held the Policy during the period illustrated. These illustrations do not represent what may happen in the future. The amounts we show for death benefits, cash values, and net surrender values take into account all charges and deductions from the Policy, the separate account, and the subaccounts. For each subaccount, we base one illustration on the guaranteed cost of insurance rates and one on the current cost of insurance rates for a hypothetical male insured age 35. The insured's age, gender and rate class, amount and timing of premium payments, cash withdrawals, and loans would affect individual Policy benefits. For each subaccount, the illustrations below assume death benefit Option A was selected based on an annual premium of $5,500 and a specified amount of $500,000 for a male age 35, non-tobacco use, ultimate select rate class. 73 The following example shows how the hypothetical net return of the WRL Janus Growth subaccount would have affected benefits for a Policy dated on the last valuation date prior to January 1, 1987. This example assumes that net premiums and cash values were in the subaccount for the entire period and that the values were determined on each Policy anniversary thereafter. WRL JANUS GROWTH Male Issue Age 35, $5,500 Annual Premium ($500,000 Specified Amount, Non-Tobacco Use, Ultimate Select Class) Death Benefit Option A Both Current and Guaranteed Cost of Insurance Rates
CASH VALUE NET SURRENDER VALUE ------------------------- ------------------------ LAST VALUATION DATE PRIOR TO JANUARY 1*: CURRENT GUARANTEED CURRENT GUARANTEED - ------------------------------------------ ---------- ------------ ---------- ----------- 1988 ..................................... $ 5,206 $ 5,206 $ 0 $ 0 1989 ..................................... 11,714 11,587 3,954 3,827 1990 ..................................... 24,098 23,742 16,338 15,982 1991 ..................................... 28,442 27,920 20,682 20,160 1992 ..................................... 52,632 51,576 44,872 43,816 1993 ..................................... 58,054 56,798 51,070 49,814 1994 ..................................... 64,520 63,045 58,332 56,837 1995 ..................................... 62,695 61,135 57,263 55,703 1996 ..................................... 98,087 95,598 93,431 90,942 1997 ..................................... 119,897 116,817 116,017 112,937 1998 ..................................... 144,818 141,101 141,714 137,997 1999 ..................................... 243,607 237,390 241,279 235,062 2000 ..................................... 392,722 382,762 391,170 381,210 2001 ..................................... 279,362 272,258 278,586 271,482
* For each year shown, benefits and values reflect only premiums paid during previous Policy years. 74 The following example shows how the hypothetical net return of the WRL AEGON Bond subaccount would have affected benefits for a Policy dated on the last valuation date prior to January 1, 1987. This example assumes that net premiums and cash values were in the subaccount for the entire period and that the values were determined on each Policy anniversary thereafter. WRL AEGON BOND Male Issue Age 35, $5,500 Annual Premium ($500,000 Specified Amount, Non-Tobacco Use, Ultimate Select Class) Death Benefit Option A Both Current and Guaranteed Cost of Insurance Rates
CASH VALUE NET SURRENDER VALUE ------------------------- ------------------------ LAST VALUATION DATE PRIOR TO JANUARY 1*: CURRENT GUARANTEED CURRENT GUARANTEED - ------------------------------------------ ---------- ------------ ---------- ----------- 1988 ..................................... $ 4,430 $ 4,430 $ 0 $ 0 1989 ..................................... 9,762 9,641 2,002 1,881 1990 ..................................... 16,520 16,232 8,760 8,472 1991 ..................................... 22,293 21,812 14,533 14,052 1992 ..................................... 31,724 30,959 23,964 23,199 1993 ..................................... 38,523 37,515 31,539 30,531 1994 ..................................... 48,438 47,087 42,230 40,879 1995 ..................................... 48,758 47,302 43,326 41,870 1996 ..................................... 64,858 62,881 60,202 58,225 1997 ..................................... 68,618 66,487 64,738 62,607 1998 ..................................... 78,780 76,338 75,676 73,234 1999 ..................................... 89,840 87,042 87,512 84,714 2000 ..................................... 90,260 87,402 88,708 85,850 2001 ..................................... 103,596 100,257 102,820 99,481
* For each year shown, benefits and values reflect only premiums paid during previous Policy years. 75 The following example shows how the hypothetical net return of the WRL J.P. Morgan Money Market subaccount would have affected benefits for a Policy dated on the last valuation date prior to January 1, 1987. This example assumes that net premiums and cash values were in the subaccount for the entire period and that the values were determined on each Policy anniversary thereafter. WRL J.P. MORGAN MONEY MARKET Male Issue Age 35, $5,500 Annual Premium ($500,000 Specified Amount, Non-Tobacco Use, Ultimate Select Class) Death Benefit Option A Both Current and Guaranteed Cost of Insurance Rates
CASH VALUE NET SURRENDER VALUE ------------------------ ----------------------- LAST VALUATION DATE PRIOR TO JANUARY 1*: CURRENT GUARANTEED CURRENT GUARANTEED - ------------------------------------------ --------- ------------ --------- ----------- 1988 ..................................... $ 4,963 $ 4,963 $ 0 $ 0 1989 ..................................... 10,182 10,063 2,422 2,303 1990 ..................................... 15,946 15,673 8,186 7,913 1991 ..................................... 21,955 21,485 14,195 13,725 1992 ..................................... 27,736 27,059 19,976 19,299 1993 ..................................... 33,031 32,143 26,047 25,159 1994 ..................................... 38,113 37,003 31,905 30,795 1995 ..................................... 43,674 42,309 38,242 36,877 1996 ..................................... 50,186 48,571 45,530 43,915 1997 ..................................... 56,727 54,867 52,847 50,987 1998 ..................................... 63,531 61,452 60,427 58,348 1999 ..................................... 70,545 68,222 68,217 65,894 2000 ..................................... 77,458 74,866 75,906 73,314 2001 ..................................... 85,584 82,659 84,808 81,883
* For each year shown, benefits and values reflect only premiums paid during previous Policy years. The following example shows how the hypothetical net return of the WRL Van Kampen Emerging Growth subaccount would have affected benefits for a Policy dated on the last valuation date prior to January 1, 1994. This example assumes that net premiums and cash values were in the subaccount for the entire period and that the values were determined on each Policy anniversary thereafter. WRL VAN KAMPEN EMERGING GROWTH Male Issue Age 35, $5,500 Annual Premium ($500,000 Specified Amount, Non-Tobacco Use, Ultimate Select Class) Death Benefit Option A Both Current and Guaranteed Cost of Insurance Rates
CASH VALUE NET SURRENDER VALUE ------------------------- ------------------------ LAST VALUATION DATE PRIOR TO JANUARY 1*: CURRENT GUARANTEED CURRENT GUARANTEED - ------------------------------------------ ---------- ------------ ---------- ----------- 1995 ..................................... $ 4,285 $ 4,285 $ 0 $ 0 1996 ..................................... 13,237 13,095 5,477 5,335 1997 ..................................... 21,173 20,853 13,413 13,093 1998 ..................................... 31,184 30,609 23,424 22,849 1999 ..................................... 48,903 47,911 41,143 40,151 2000 ..................................... 109,323 107,038 102,339 100,054 2001 ..................................... 99,445 97,283 93,237 91,075
* For each year shown, benefits and values reflect only premiums paid during previous Policy years. 76 The following example shows how the hypothetical net return of the WRL LKCM Strategic Total Return subaccount would have affected benefits for a Policy dated on the last valuation date prior to January 1, 1994. This example assumes that net premiums and cash values were in the subaccount for the entire period and that the values were determined on each Policy anniversary thereafter. WRL LKCM STRATEGIC TOTAL RETURN Male Issue Age 35, $5,500 Annual Premium ($500,000 Specified Amount, Non-Tobacco Use, Ultimate Select Class) Death Benefit Option A Both Current and Guaranteed Cost of Insurance Rates
CASH VALUE NET SURRENDER VALUE ------------------------ ----------------------- LAST VALUATION DATE PRIOR TO JANUARY 1*: CURRENT GUARANTEED CURRENT GUARANTEED - ------------------------------------------ --------- ------------ --------- ----------- 1995 ..................................... $ 4,627 $ 4,627 $ 0 $ 0 1996 ..................................... 11,601 11,471 3,841 3,711 1997 ..................................... 18,600 18,302 10,840 10,542 1998 ..................................... 28,176 27,625 20,416 19,865 1999 ..................................... 35,674 34,887 27,914 27,127 2000 ..................................... 44,757 43,683 37,773 36,699 2001 ..................................... 46,986 45,763 40,778 39,555
* For each year shown, benefits and values reflect only premiums paid during previous Policy years. The following example shows how the hypothetical net return of the WRL Alger Aggressive Growth subaccount would have affected benefits for a Policy dated on the last valuation date prior to January 1, 1995. This example assumes that net premiums and cash values were in the subaccount for the entire period and that the values were determined on each Policy anniversary thereafter. WRL ALGER AGGRESSIVE GROWTH Male Issue Age 35, $5,500 Annual Premium ($500,000 Specified Amount, Non-Tobacco Use, Ultimate Select Class) Death Benefit Option A Both Current and Guaranteed Cost of Insurance Rates
CASH VALUE NET SURRENDER VALUE ------------------------ ----------------------- LAST VALUATION DATE PRIOR TO JANUARY 1*: CURRENT GUARANTEED CURRENT GUARANTEED - ------------------------------------------ --------- ------------ --------- ----------- 1996 ..................................... $ 6,572 $ 6,572 $ 0 $ 0 1997 ..................................... 12,364 12,243 4,604 4,483 1998 ..................................... 21,071 20,766 13,311 13,006 1999 ..................................... 38,125 37,464 30,365 29,704 2000 ..................................... 71,953 70,614 64,193 62,854 2001 ..................................... 51,996 50,937 45,012 43,953
* For each year shown, benefits and values reflect only premiums paid during previous Policy years. 77 The following example shows how the hypothetical net return of the WRL Dean Asset Allocation subaccount would have affected benefits for a Policy dated on the last valuation date prior to January 1, 1995. This example assumes that net premiums and cash values were in the subaccount for the entire period and that the values were determined on each Policy anniversary thereafter. WRL DEAN ASSET ALLOCATION Male Issue Age 35, $5,500 Annual Premium ($500,000 Specified Amount, Non-Tobacco Use, Ultimate Select Class) Death Benefit Option A Both Current and Guaranteed Cost of Insurance Rates
CASH VALUE NET SURRENDER VALUE ------------------------ ----------------------- LAST VALUATION DATE PRIOR TO JANUARY 1*: CURRENT GUARANTEED CURRENT GUARANTEED - ------------------------------------------ --------- ------------ --------- ----------- 1996 ..................................... $ 5,666 $ 5,666 $ 0 $ 0 1997 ..................................... 11,795 11,671 4,035 3,911 1998 ..................................... 19,088 18,794 11,328 11,034 1999 ..................................... 25,525 25,030 17,765 17,270 2000 ..................................... 28,160 27,522 20,400 19,762 2001 ..................................... 38,086 37,136 31,102 30,152
* For each year shown, benefits and values reflect only premiums paid during previous Policy years. The following example shows how the hypothetical net return of the WRL Federated Growth & Income subaccount would have affected benefits for a Policy dated on the last valuation date prior to January 1, 1995. This example assumes that net premiums and cash values were in the subaccount for the entire period and that the values were determined on each Policy anniversary thereafter. WRL FEDERATED GROWTH & INCOME Male Issue Age 35, $5,500 Annual Premium ($500,000 Specified Amount, Non-Tobacco Use, Ultimate Select Class) Death Benefit Option A Both Current and Guaranteed Cost of Insurance Rates
CASH VALUE NET SURRENDER VALUE ------------------------ ----------------------- LAST VALUATION DATE PRIOR TO JANUARY 1*: CURRENT GUARANTEED CURRENT GUARANTEED - ------------------------------------------ --------- ------------ --------- ----------- 1996 ..................................... $ 5,926 $ 5,926 $ 0 $ 0 1997 ..................................... 11,786 11,664 4,026 3,904 1998 ..................................... 20,426 20,119 12,666 12,359 1999 ..................................... 25,631 25,143 17,871 17,383 2000 ..................................... 28,618 27,980 20,858 20,220 2001 ..................................... 42,609 41,573 35,625 34,589
* For each year shown, benefits and values reflect only premiums paid during previous Policy years. 78 The following example shows how the hypothetical net return of the WRL AEGON Balanced subaccount would have affected benefits for a Policy dated on the last valuation date prior to January 1, 1995. This example assumes that net premiums and cash values were in the subaccount for the entire period and that the values were determined on each Policy anniversary thereafter. WRL AEGON BALANCED Male Issue Age 35, $5,500 Annual Premium ($500,000 Specified Amount, Non-Tobacco Use, Ultimate Select Class) Death Benefit Option A Both Current and Guaranteed Cost of Insurance Rates
CASH VALUE NET SURRENDER VALUE ------------------------ ----------------------- LAST VALUATION DATE PRIOR TO JANUARY 1*: CURRENT GUARANTEED CURRENT GUARANTEED - ------------------------------------------ --------- ------------ --------- ----------- 1996 ..................................... $ 5,651 $ 5,651 $ 0 $ 0 1997 ..................................... 11,383 11,262 3,623 3,502 1998 ..................................... 18,696 18,403 10,936 10,643 1999 ..................................... 24,775 24,288 17,015 16,528 2000 ..................................... 30,019 29,337 22,259 21,577 2001 ..................................... 36,295 35,383 29,311 28,3899
* For each year shown, benefits and values reflect only premiums paid during previous Policy years. The following example shows how the hypothetical net return of the WRL C.A.S.E. Growth subaccount would have affected benefits for a Policy dated on the last valuation date prior to January 1, 1996. This example assumes that net premiums and cash values were in the subaccount for the entire period and that the values were determined on each Policy anniversary thereafter. WRL C.A.S.E. GROWTH Male Issue Age 35, $5,500 Annual Premium ($500,000 Specified Amount, Non-Tobacco Use, Ultimate Select Class) Death Benefit Option A Both Current and Guaranteed Cost of Insurance Rates
CASH VALUE NET SURRENDER VALUE ------------------------ ----------------------- LAST VALUATION DATE PRIOR TO JANUARY 1*: CURRENT GUARANTEED CURRENT GUARANTEED - ------------------------------------------ --------- ------------ --------- ----------- 1997 ..................................... $ 5,534 $ 5,534 $ 0 $ 0 1998 ..................................... 11,709 11,584 3,949 3,824 1999 ..................................... 16,639 16,372 8,879 8,612 2000 ..................................... 28,383 27,827 20,623 20,067 2001 ..................................... 25,843 25,246 18,083 17,486
* For each year shown, benefits and values reflect only premiums paid during previous Policy years. 79 The following example shows how the hypothetical net return of the WRL GE U.S. Equity subaccount would have affected benefits for a Policy dated on the last valuation date prior to January 1, 1997. This example assumes that net premiums and cash values were in the subaccount for the entire period and that the values were determined on each Policy anniversary thereafter. WRL GE U.S. EQUITY Male Issue Age 35, $5,500 Annual Premium ($500,000 Specified Amount, Non-Tobacco Use, Ultimate Select Class) Death Benefit Option A Both Current and Guaranteed Cost of Insurance Rates
CASH VALUE NET SURRENDER VALUE ------------------------ ----------------------- LAST VALUATION DATE PRIOR TO JANUARY 1*: CURRENT GUARANTEED CURRENT GUARANTEED - ------------------------------------------ --------- ------------ --------- ----------- 1998 ..................................... $ 6,016 $ 6,016 $ 0 $ 0 1999 ..................................... 13,122 12,993 5,362 5,233 2000 ..................................... 20,952 20,649 13,192 12,889 2001 ..................................... 25,180 24,712 17,420 16,952
* For each year shown, benefits and values reflect only premiums paid during previous Policy years. The following example shows how the hypothetical net return of the WRL NWQ Value Equity subaccount would have affected benefits for a Policy dated on the last valuation date prior to January 1, 1997. This example assumes that net premiums and cash values were in the subaccount for the entire period and that the values were determined on each Policy anniversary thereafter. WRL NWQ VALUE EQUITY Male Issue Age 35, $5,500 Annual Premium ($500,000 Specified Amount, Non-Tobacco Use, Ultimate Select Class) Death Benefit Option A Both Current and Guaranteed Cost of Insurance Rates
CASH VALUE NET SURRENDER VALUE ------------------------ ----------------------- LAST VALUATION DATE PRIOR TO JANUARY 1*: CURRENT GUARANTEED CURRENT GUARANTEED - ------------------------------------------ --------- ------------ --------- ----------- 1998 ..................................... $ 5,916 $ 5,916 $ 0 $ 0 1999 ..................................... 9,987 9,875 2,227 2,115 2000 ..................................... 15,705 15,440 7,945 7,680 2001 ..................................... 23,302 22,813 15,542 15,053
* For each year shown, benefits and values reflect only premiums paid during previous Policy years. 80 The following example shows how the hypothetical net return of the WRL GE International Equity subaccount would have affected benefits for a Policy dated on the last valuation date prior to January 1, 1997. This example assumes that net premiums and cash values were in the subaccount for the entire period and that the values were determined on each Policy anniversary thereafter. WRL GE INTERNATIONAL EQUITY Male Issue Age 35, $5,500 Annual Premium ($500,000 Specified Amount, Non-Tobacco Use, Ultimate Select Class) Death Benefit Option A Both Current and Guaranteed Cost of Insurance Rates
CASH VALUE NET SURRENDER VALUE ------------------------ ----------------------- LAST VALUATION DATE PRIOR TO JANUARY 1*: CURRENT GUARANTEED CURRENT GUARANTEED - ------------------------------------------ --------- ------------ --------- ----------- 1998 ..................................... $ 5,031 $ 5,031 $ 0 $ 0 1999 ..................................... 10,916 10,792 3,156 3,032 2000 ..................................... 19,397 19,087 11,637 11,327 2001 ..................................... 20,206 19,788 12,446 12,028
* For each year shown, benefits and values reflect only premiums paid during previous Policy years. The following example shows how the hypothetical net return of the WRL Third Avenue Value subaccount would have affected benefits for a Policy dated on the last valuation date prior to January 1, 1998. This example assumes that net premiums and cash values were in the subaccount for the entire period and that the values were determined on each Policy anniversary thereafter. WRL THIRD AVENUE VALUE Male Issue Age 35, $5,500 Annual Premium ($500,000 Specified Amount, Non-Tobacco Use, Ultimate Select Class) Death Benefit Option A Both Current and Guaranteed Cost of Insurance Rates
CASH VALUE NET SURRENDER VALUE ------------------------ ----------------------- LAST VALUATION DATE PRIOR TO JANUARY 1*: CURRENT GUARANTEED CURRENT GUARANTEED - ------------------------------------------ --------- ------------ --------- ----------- 1999 ..................................... $ 4,311 $ 4,311 $ 0 $ 0 2000 ..................................... 10,376 10,251 2,616 2,491 2001 ..................................... 20,339 20,007 12,579 12,247
* For each year shown, benefits and values reflect only premiums paid during previous Policy years. 81 The following example shows how the hypothetical net return of the WRL J.P. Morgan Real Estate Securities subaccount would have affected benefits for a Policy dated on the last valuation date prior to January 1, 1999. This example assumes that net premiums and cash values were in the subaccount for the entire period and that the values were determined on each Policy anniversary thereafter. WRL J.P. MORGAN REAL ESTATE SECURITIES Male Issue Age 35, $5,500 Annual Premium ($500,000 Specified Amount, Non-Tobacco Use, Ultimate Select Class) Death Benefit Option A Both Current and Guaranteed Cost of Insurance Rates
CASH VALUE NET SURRENDER VALUE ------------------------ ----------------------- AST VALUATION DATE PRIOR TO JANUARY 1*: CURRENT GUARANTEED CURRENT GUARANTEED - ----------------------------------------- --------- ------------ --------- ----------- 2000 .................................... $ 4,465 $ 4,465 $ 0 $ 0 2001 .................................... 11,869 11,736 4,109 3,976
* For each year shown, benefits and values reflect only premiums paid during previous Policy years. The following example shows how the hypothetical net return of WRL Goldman Sachs Growth subaccount would have affected benefits for a Policy dated on the last valuation date prior to January 1, 2000. This example assumes that premiums and cash values were in the subaccount for the entire period and that the values were determined on each Policy anniversary thereafter. WRL GOLDMAN SACHS GROWTH Male Issue Age 35, $5,500 Annual Premium ($500,000 Specified Amount, Non-Tobacco Use, Ultimate Select Class) Death Benefit Option A Both Current and Guaranteed Cost of Insurance Rates
CASH VALUE NET SURRENDER VALUE ------------------------ ----------------------- LAST VALUATION DATE PRIOR TO JANUARY 1*: CURRENT GUARANTEED CURRENT GUARANTEED - ------------------------------------------ --------- ------------ --------- ----------- 2001 ..................................... $4,252 $4,252 $0 $0
* For each year shown, benefits and values reflect only premiums paid during previous Policy years. 82 The following example shows how the hypothetical net return of the WRL T. Rowe Price Dividend Growth subaccount would have affected benefits for a Policy dated on the last valuation date prior to January 1, 2000. This example assumes that premiums and cash values were in the subaccount for the entire period and that the values were determined on each Policy anniversary thereafter. WRL T. ROWE PRICE DIVIDEND GROWTH Male Issue Age 35, $5,500 Annual Premium ($500,000 Specified Amount, Non-Tobacco Use, Ultimate Select Class) Death Benefit Option A Both Current and Guaranteed Cost of Insurance Rates
CASH VALUE NET SURRENDER VALUE ------------------------ ----------------------- LAST VALUATION DATE PRIOR TO JANUARY 1*: CURRENT GUARANTEED CURRENT GUARANTEED - ------------------------------------------ --------- ------------ --------- ----------- 2001 ..................................... $4,249 $4,249 $0 $0
* For each year shown, benefits and values reflect only premiums paid during previous Policy years. The following example shows how the hypothetical net return of the WRL T. Rowe Price Small Cap subaccount would have affected benefits for a Policy dated on the last valuation date prior to January 1, 2000. This example assumes that premiums and cash values were in the subaccount for the entire period and that the values were determined on each Policy anniversary thereafter. WRL T. ROWE PRICE SMALL CAP Male Issue Age 35, $5,500 Annual Premium ($500,000 Specified Amount, Non-Tobacco Use, Ultimate Select Class) Death Benefit Option A Both Current and Guaranteed Cost of Insurance Rates
CASH VALUE NET SURRENDER VALUE ------------------------ ----------------------- LAST VALUATION DATE PRIOR TO JANUARY 1*: CURRENT GUARANTEED CURRENT GUARANTEED - ------------------------------------------ --------- ------------ --------- ----------- 2001 ..................................... $4,230 $4,230 $0 $0
* For each year shown, benefits and values reflect only premiums paid during previous Policy years. 83 The following example shows how the hypothetical net return of the WRL Salomon All Cap subaccount would have affected benefits for a Policy dated on the last valuation date prior to January 1, 2000. This example assumes that premiums and cash values were in the subaccount for the entire period and that the values were determined on each Policy anniversary thereafter. WRL SALOMON ALL CAP Male Issue Age 35, $5,500 Annual Premium ($500,000 Specified Amount, Non-Tobacco Use, Ultimate Select Class) Death Benefit Option A Both Current and Guaranteed Cost of Insurance Rates
CASH VALUE NET SURRENDER VALUE ------------------------ ----------------------- LAST VALUATION DATE PRIOR TO JANUARY 1*: CURRENT GUARANTEED CURRENT GUARANTEED - ------------------------------------------ --------- ------------ --------- ----------- 2001 ..................................... $5,575 $5,575 $0 $0
* For each year shown, benefits and values reflect only premiums paid during previous Policy years. The following example shows how the hypothetical net return of the WRL Pilgrim Baxter Mid Cap Growth subaccount would have affected benefits for a Policy dated on the last valuation date prior to January 1, 2000. This example assumes that premiums and cash values were in the subaccount for the entire period and that the values were determined on each Policy anniversary thereafter. WRL PILGRIM BAXTER MID CAP GROWTH Male Issue Age 35, $5,500 Annual Premium ($500,000 Specified Amount, Non-Tobacco Use, Ultimate Select Class) Death Benefit Option A Both Current and Guaranteed Cost of Insurance Rates
CASH VALUE NET SURRENDER VALUE ------------------------ ----------------------- LAST VALUATION DATE PRIOR TO JANUARY 1*: CURRENT GUARANTEED CURRENT GUARANTEED - ------------------------------------------ --------- ------------ --------- ----------- 2001 ..................................... $3,933 $3,933 $0 $0
* For each year shown, benefits and values reflect only premiums paid during previous Policy years. 84 The following example shows how the hypothetical net return of the WRL Dreyfus Mid Cap subaccount would have affected benefits for a Policy dated on the last valuation date prior to January 1, 2000. This example assumes that premiums and cash values were in the subaccount for the entire period and that the values were determined on each Policy anniversary thereafter. WRL DREYFUS MID CAP Male Issue Age 35, $5,500 Annual Premium ($500,000 Specified Amount, Non-Tobacco Use, Ultimate Select Class) Death Benefit Option A Both Current and Guaranteed Cost of Insurance Rates
CASH VALUE NET SURRENDER VALUE ------------------------ ----------------------- LAST VALUATION DATE PRIOR TO JANUARY 1*: CURRENT GUARANTEED CURRENT GUARANTEED - ------------------------------------------ --------- ------------ --------- ----------- 2001 ..................................... $5,304 $5,304 $0 $0
* For each year shown, benefits and values reflect only premiums paid during previous Policy years. Because the Fidelity VIP Equity-Income Portfolio -- Service Class 2, Fidelity VIP II Contrafund(R) Portfolio -- Service Class 2 and Fidelity VIP III Growth Opportunities Portfolio -- Service Class 2, WRL Great Companies -- America(SM), WRL Great Companies -- Technology(SM), and WRL Value Line Aggressive Growth subaccounts did not commence operations until May 1, 2000, the WRL Great Companies -- Global(2) and WRL Gabelli Global Growth subaccounts did not commence operations until September 1, 2000, the WRL LKCM Capital Growth subaccount did not commence operations until February 5, 2001, and the WRL Munder Net50 will not commence operations until May 29, 2001, there are no hypothetical illustrations for these subaccounts. OTHER PERFORMANCE DATA IN ADVERTISING SALES LITERATURE We may compare each subaccount's performance to the performance of: o other variable life issuers in general; o variable life insurance policies which invest in mutual funds with similar investment objectives and policies, as reported by Lipper Analytical Services, Inc. ("Lipper") and Morningstar, Inc. ("Morningstar"); and other services, companies, individuals, or industry or financial publications (e.g., Forbes, Money, The Wall Street Journal, Business Week, Barron's, Kiplinger's Personal Finance, and Fortune); --> Lipper and Morningstar rank variable annuity contracts and variable life policies. Their performance analysis ranks such policies and contracts on the basis of total return, and assumes reinvestment of distributions; but it does not show sales charges, redemption fees or certain expense deductions at the separate account level. o the Standard & Poor's Index of 500 Common Stocks, or other widely recognized indices; --> unmanaged indices may assume the reinvestment of dividends, but usually do not reflect deductions for the expenses of operating or managing an investment portfolio; or 85 o other types of investments, such as: --> certificates of deposit; --> savings accounts and U.S. Treasuries; --> certain interest rate and inflation indices (e.g., the Consumer Price Index); or --> indices measuring the performance of a defined group of securities recognized by investors as representing a particular segment of the securities markets (e.g., Donoghue Money Market Institutional Average, Lehman Brothers Corporate Bond Index, or Lehman Brothers Government Bond Index). WESTERN RESERVE'S PUBLISHED RATINGS We may publish in advertisements, sales literature, or reports we send to you the ratings and other information that an independent ratings organization assigns to us. These organizations include: A.M. Best Company, Moody's Investors Service, Inc., Standard & Poor's Insurance Rating Services, and Duff & Phelps Credit Rating Co. These ratings are opinions regarding an operating insurance company's financial capacity to meet the obligations of its insurance policies in accordance with their terms. These ratings do not apply to the separate account, the subaccounts, the funds or their portfolios, or to their performance. ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SALE OF THE POLICIES The Policy will be sold by individuals who are licensed as our life insurance agents and who are also registered representatives of broker-dealers having written sales agreements for the Policy with AFSG Securities Corporation ("AFSG"), the principal underwriter of the Policy. AFSG is located at 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499. AFSG is registered with the SEC under the Securities Exchange Act of 1934 as a broker-dealer, and is a member of the National Association of Securities Dealers, Inc. ("NASD"). The sales commission payable to Western Reserve agents or other registered representatives may vary with the sales agreement, but it is not expected to be greater than: o 65% of all premiums you make during the first Policy year, plus o 2.50% of all premiums you make during Policy years 2 through 10. We will pay an additional sales commission of up to 0.15% of the Policy's cash value on the fifth Policy anniversary and each anniversary thereafter where the cash value (minus amounts attributable to loans) equals at least $5,000. Sales commissions may also be payable on premiums paid as a result of an increase in specified amount. The sales commission payable to Western Reserve agents or other registered representatives may vary with the sales agreement, but it is not expected to be greater than 65% of all premiums you make during the year subsequent to an increase. In addition, certain production, persistency and managerial bonuses may be paid. 86 To the extent permitted by NASD rules, promotional incentives or payments may also be provided to broker-dealers based on sales volumes, the assumption of wholesaling functions or other sales-related criteria. Other payments may be made for other services that do not directly involve the sale of the Policies. These services may include the recruitment and training of personnel, production of promotional literatures, and similar services. We intend to recoup commissions and other sales expenses through: the premium expense charge, the surrender charge, the cost of insurance charge, the mortality and expense risk charge, and earnings on amounts allocated under the Policies to the fixed account and the loan account. Commissions paid on sales of the Policies, including other sales incentives, are not directly charged to Policyowners. AFSG will receive the 12b-1 fees assessed against the Fidelity VIP Funds shares held for the Policies as compensation for providing certain shareholder support services. AFSG will also receive an additional fee based on the value of shares of the Fidelity VIP Funds held for the Policies as compensation for providing certain recordkeeping services. LEGAL MATTERS Sutherland Asbill & Brennan LLP of Washington, D.C. has provided advice on certain matters relating to the federal securities laws. All matters of Ohio law pertaining to the Policy have been passed upon by Kimberly A. Scouller, Vice President and Senior General Counsel of Western Reserve. LEGAL PROCEEDINGS Western Reserve, like other life insurance companies, is involved in lawsuits, including class action lawsuits. In some lawsuits involving insurers, substantial damages have been sought and/or material settlement payments have been made. Although the outcome of any litigation cannot be predicted with certainty, at the present time, it appears that there are no pending or threatened lawsuits that are likely to have a material adverse impact on the separate account, on AFSG's ability to perform under its principal underwriting agreement, or on Western Reserve's ability to meet its obligations under the Policy. VARIATIONS IN POLICY PROVISIONS Certain provisions of the Policy may vary from the descriptions in this prospectus, depending on when and where the Policy was issued, in order to comply with different state laws. These variations may include restrictions on use of the fixed account and different interest rates charged and credited on Policy loans. Please refer to your Policy, since any variations will be included in your Policy or in riders or endorsements attached to your Policy. EXPERTS The financial statements and financial highlights of WRL Series Life Account as of December 31, 2000 and for the year then ended, appearing in this prospectus and registration 87 statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein which, as to the statutory-basis balance sheet at December 31, 1999, is based in part on the report of PricewaterhouseCoopers LLP, independent auditors. The financial statements and schedules referred to above are included in reliance upon such reports given on the authority of such firms as experts in accounting and auditing. The statutory-basis financial statements and schedules of Western Reserve at December 31, 2000 and 1999 and for each of the three years in the period ended December 31, 2000, appearing in this prospectus and registration statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing. The statement of changes in net assets of the WRL Series Life Account for the year ended December 31, 1999, included in this prospectus and registration statement, have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent certified public accountants, given on the authority of said firm as experts in auditing and accounting. Actuarial matters included in this prospectus have been examined by Alan Yaeger as stated in the opinion filed as an exhibit to the registration statement. FINANCIAL STATEMENTS Western Reserve's financial statements appear on the following pages. These financial statements should be distinguished from the separate account's financial statements and you should consider these financial statements only as bearing upon Western Reserve's ability to meet our obligations under the Policies. Western Reserve's financial statements at December 31, 2000 and 1999 and for each of the three years in the period ended December 31, 2000, have been prepared on the basis of statutory accounting principles rather than accounting principles generally accepted in the United States. ADDITIONAL INFORMATION ABOUT WESTERN RESERVE Western Reserve is a stock life insurance company that is wholly-owned by First AUSA Life Insurance Company, which, in turn, is wholly-owned indirectly by AEGON USA, Inc. Western Reserve's office is located at 570 Carillon Parkway, St. Petersburg, Florida 33716-1202 and the mailing address is P.O. Box 5068, Clearwater, Florida 33758-5068. Western Reserve was incorporated in 1957 under the laws of Ohio and is subject to regulation by the Insurance Department of the State of Ohio, as well as by the insurance departments of all other states and jurisdictions in which it does business. Western Reserve is licensed to sell insurance in all states (except New York), Puerto Rico, Guam, and in the District of Columbia. Western Reserve submits annual statements on its operations and finances to insurance officials in all states and jurisdictions in which it does business. The 88 Policy described in this prospectus has been filed with, and where required, approved by, insurance officials in those jurisdictions in which it is sold. WESTERN RESERVE'S DIRECTORS AND OFFICERS We are governed by a board of directors. The following table sets forth the name, address and principal occupation during the past five years of each of our directors. BOARD OF DIRECTORS
PRINCIPAL OCCUPATION NAME AND ADDRESS POSITION WITH WESTERN RESERVE DURING PAST 5 YEARS John R. Kenney Chairman of the Board and President (December 1992 - 570 Carillon Parkway Chief Executive Officer December 1999), Director (July St. Petersburg, Florida 33716 1973 - present) of Western Reserve; Chairman of the Board (March 1993 - present), President (March 1993 - June 2000) of AEGON/Transamerica Series Fund, Inc.; Chairman of the Board (1990 - present) of IDEX Mutual Funds; Chairman of the Board (September 1996 - present), President (September 1997 - present) of AEGON/ Transamerica Fund Advisers, Inc.; Chairman of the Board (September 1996 - present), President (September 1997 - present) of AEGON/ Transamerica Services, Inc.; Chairman of the Board, Director and Co-CEO (March 2000 - present) of Great Companies, L.L.C. (investment adviser).
89
PRINCIPAL OCCUPATION NAME AND ADDRESS POSITION WITH WESTERN RESERVE DURING PAST 5 YEARS Jerome C. Vahl Director and President Executive Vice President (June 570 Carillon Parkway 1998 - December 1999), Vice St. Petersburg, Florida 33716 President (December 1995 - June 1998), Assistant Vice President (1994 - 1995) of Western Reserve; Executive Vice President (September 2000 - present) of IDEX Mutual Funds (mutual fund); Director (March 2000 - present) of Great Companies, L.L.C. (investment adviser); Director (November 1999 - present) of AEGON/ Transamerica Services, Inc. (transfer agent), and AEGON/ Transamerica Fund Advisers, Inc. (investment adviser). Jack E. Zimmerman Director Trustee, IDEX Mutual Funds 507 St. Michel Circle (1987 - present); retired from Kettering, Ohio 45429 Martin Marietta (1993). James R. Walker Director Self-employed, Public 3320 Office Park Dr. Accountant (1996 - present); Dayton, Ohio 45439 Partner, Walker-Davis C.P.A.'s, Dayton, Ohio (1990 - 1995).
The following table gives the name, address and principal occupation during the past five years of the principal officers of Western Reserve (other than officers listed above as directors). PRINCIPAL OFFICERS
PRINCIPAL OCCUPATION NAME AND ADDRESS POSITION WITH WESTERN RESERVE DURING PAST 5 YEARS Alan M. Yaeger* Executive Vice President, Executive Vice President of AEGON/ Actuary and Chief Transamerica Series Fund, Inc. (1993 Financial Officer - present); Director (September 1996 - present) of AEGON/Transamerica Fund Advisers, Inc. (investment adviser); Director (September 1996 - present) of AEGON/Transamerica, Services, Inc. (transfer agent).
* Located at 570 Carillon Parkway, St. Petersburg, Florida 33716-1202. 90
PRINCIPAL OCCUPATION NAME AND ADDRESS POSITION WITH WESTERN RESERVE DURING PAST 5 YEARS Herb T. Collins* Executive Vice President Executive Vice President (1996 - present), Chief Administrative Officer (1996 - July 2000) of Western Reserve; Vice President, Administra- tion (1986 - 1996) of Monumental Life Insurance Company. William H. Geiger* Senior Vice President, Secretary, Senior Vice President, Secretary, Corporate Counsel and Group Vice Corporate Counsel, and Group Vice President -- Compliance President-Compliance (1998 - present); Senior Vice President, Secretary, General Counsel and Group Vice President-Compliance (1996 - 1998), Senior Vice President, Secretary, and General Counsel (1990 - 1996) of Western Reserve; Group Vice President-Compliance and Corporate Counsel (1996 - present) of AUSA Life Insurance Company, Inc., Bankers United Life Assurance Company, Life Investors Insurance Company of America, Monumental Life Insurance Company and Transamerica Life Insurance Company (formerly, PFL Life Insurance Company), subsidiaries of AEGON USA, Inc. Allan J. Hamilton* Vice President, Treasurer Vice President and Controller and Controller (August 1987 - present) Treasurer (February 1997 - present) of Western Reserve; Treasurer and Chief Financial Officer (February 1997 - present) of AEGON/Transamerica Series Fund, Inc.; Vice President and Controller (March 1999 - present) of AEGON/Transamerica Fund Advis- ers, Inc. (investment adviser). Terry L. Garvin* Senior Vice President and Senior Vice President and Chief Chief Marketing Officer Marketing Officer (September 2000 - present), Vice President and Chief Marketing Officer (December 1995- September 2000) of Western Reserve.
* Located at 570 Carillon Parkway, St. Petersburg, Florida 33716-1202. 91
PRINCIPAL OCCUPATION NAME AND ADDRESS POSITION WITH WESTERN RESERVE DURING PAST 5 YEARS Carolyn M. Johnson* Senior Vice President and Senior Vice President and Chief Chief Operations Officer Operations Officer (September 2000 - present), Vice President (March 1998 - September 2000) of Western Reserve; Vice President (August 1998 - present) of Life Investors Insurance Company of America; Vice President (June 1998 - present) of Peoples Benefit Life Insurance Company; Vice President (November 1997 - present) of Transamerica Life Insurance Company (formerly, PFL Life Insurance Company); Vice President (February 2000 - present) of Transamerica Occidental Life Insurance Company; Vice President (February 2000 - present) of Transamerica Life Insurance and Annuity Company; Vice President (December 1997 - present), Responsible Officer (September 1999 - present), Illustration Actuary (September 1999 - November 2000) of Monumental Life Insurance Company. Thomas R. Moriarty* Senior Vice President Vice President (June 1993 - December 1999) of Western Reserve; Director, President and Chief Executive Officer (November 1999 - present) of AEGON Asset Manage- ment Services, Inc.; Executive Vice President, Treasurer and Principal Financial Officer (September 2000 - present) of IDEX Mutual Funds (mutual fund); Vice President (June 1999 - present) of AFSG Securities Corporation (principal underwriter); Chairman of the Board, Chief Executive Officer and President (July 1999 - present), Senior Vice President (June 1991 - July 1999) of InterSecurities, Inc. (broker-dealer).
* Located at 570 Carillon Parkway, St. Petersburg, Florida 33716-1202. 92
PRINCIPAL OCCUPATION NAME AND ADDRESS POSITION WITH WESTERN RESERVE DURING PAST 5 YEARS Thomas E. Pierpan* Senior Vice President, General Senior Vice President and General Counsel and Assistant Secretary Counsel (December 1999 - present), Vice President (December 1993 - December 1999), Counsel (April 1995 - January 1997), Associate General Counsel (January 1997 - December 1999), Assistant Vice President (November 1992 - December 1993) of Western Reserve; Vice President (March 1995 - present), Assistant Secretary (March 1995 - December 1997 and December 1999 - present), Associate General Counsel and Secretary (December 1997 - December 1999) of AEGON/Transamerica Series Fund, Inc. (investment company). Tim Stonehocker* Senior Vice President Senior Vice President, WMA Business Unit (2000 - present); President (1997 - 2000) of Academy Life Insurance Company; Vice President (1997 - present) of Life Investors Insurance Company of America; Vice President (1997 - present) of Bankers United Life Assurance Company; Vice President (1997 - present) of Transamerica Life Insurance Company (formerly, PFL Life Insurance Company, Inc.).
* Located at 570 Carillon Parkway, St. Petersburg, Florida 33716-1202. Western Reserve holds the assets of the separate account physically segregated and apart from the general account. Western Reserve maintains records of all purchases and sales of portfolio shares by each of the subaccounts. A blanket bond was issued to AEGON USA, Inc. ("AEGON USA") in the aggregate amount of $12 million, covering all of the employees of AEGON USA and its affiliates, including Western Reserve. A Stockbrokers Blanket Bond, issued to AEGON U.S.A. Securities, Inc. providing fidelity coverage, covers the activities of registered representatives of AFSG to a limit of $10 million. ADDITIONAL INFORMATION ABOUT THE SEPARATE ACCOUNT Western Reserve established the separate account as a separate investment account under Ohio law in 1985. We own the assets in the separate account and are obligated to pay all benefits under the Policies. The separate account is used to support other life insurance policies of Western Reserve, as well as for other purposes permitted by law. The separate account is registered with the SEC as a unit investment trust under the 1940 Act and qualifies as a "separate account" within the meaning of the federal securities laws. 93 APPENDIX A ILLUSTRATIONS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The following illustrations show how certain values under a sample Policy would change with different rates of fictional investment performance over an extended period of time. In particular, the illustrations show how the death benefit, cash value, and net surrender value under a Policy issued to an insured of a given age, would change over time if the premiums indicated were paid and the return on the assets in the subaccounts were a uniform gross annual rate (before any expenses) of 0%, 6% or 12%. The tables illustrate Policy values that would result based on assumptions that you pay the premiums indicated, you do not change your specified amount, and you do not take any cash withdrawals or Policy loans. The values under the Policy will be different from those shown even if the returns averaged 0%, 6% or 12%, but fluctuated over and under those averages throughout the years shown. We based the illustration on page 96 on a Policy for an insured who is a 35 year old male in the Ultimate Select, non-tobacco use rate class, annual premiums of $5,500, a $500,000 specified amount and death benefit Option A. The illustration on that page also assumes cost of insurance charges based on our current cost of insurance rates. The illustration on page 97 is based on the same factors as those on page 96, except that cost of insurance rates are based on the guaranteed cost of insurance rates (based on the 1980 Commissioners Standard Ordinary Mortality Table). The amounts we show for the death benefits, cash values and net surrender values take into account (1) the daily charge for assuming mortality and expense risks assessed against each subaccount. This charge is equivalent to an annual charge of 0.90% of the average net assets of the subaccounts during the first 15 Policy years (we guarantee to reduce this charge to 0.60% after the first 15 Policy years). We intend to reduce this charge to 0.30% in the 16th Policy year but we do not guarantee that we will do so, and we reserve the right to maintain this charge at the 0.60% level after the 15th Policy year. The following illustrations use 0.30% after the 15th Policy year; (2) estimated daily expenses equivalent to an effective average annual expense level of 0.92% of the portfolios' average daily net assets; and (3) all applicable premium expense charges and cash value charges using the current monthly Policy charge. The 0.92% average portfolio expense level assumes an equal allocation of amounts among the 31 subaccounts. We used annualized actual audited expenses incurred during 2000 as shown in the Portfolio Annual Expense Table for the portfolios to calculate the average annual expense level. Taking into account the assumed charges of 1.82%, the gross annual investment return rates of 0%, 6% and 12% are equivalent to net annual investment return rates of -1.82%, 4.18%, and 10.18% during the first 15 Policy years and -1.22%, 4.78% and 10.78% thereafter. During 2000, AEGON/Transamerica Advisers undertook to pay normal operating expenses of certain Series Fund portfolios that exceeded a certain stated percentage of those 94 portfolios' average daily net assets. AEGON/Transamerica Advisers has undertaken until at least April 30, 2002 to pay expenses to the extent normal operating expenses of certain portfolios of the Series Fund exceed a stated percentage of the portfolio's average daily net assets. For details on these expense limits, the amounts reimbursed by AEGON/Transamerica Advisers during 2000, and the expense ratios without the reimbursements, see the Portfolio Annual Expense Table on page 15 of this prospectus. WITHOUT THESE WAIVERS AND REIMBURSEMENTS, TOTAL ANNUAL EXPENSES FOR THE PORTFOLIOS WOULD HAVE BEEN GREATER, AND THE ILLUSTRATIONS WOULD HAVE ASSUMED THAT THE ASSETS IN THE PORTFOLIOS WERE SUBJECT TO AN AVERAGE ANNUAL EXPENSE LEVEL OF 1.22%. THE HYPOTHETICAL RETURNS SHOWN IN THE TABLES ARE PROVIDED ONLY TO ILLUSTRATE THE MECHANICS OF A HYPOTHETICAL POLICY AND DO NOT REPRESENT PAST OR FUTURE INVESTMENT RATES OF RETURN. Tax charges that may be attributable to the separate account are not reflected, because we are not currently making such charges. In order to produce after tax returns of 0%, 6% or 12% if such charges are made in the future, the separate account would have to earn a sufficient amount in excess of 0%, 6% or 12% to cover any tax charges. The "Premium Accumulated at 5%" column of each table shows the amount which would accumulate if you invested an amount equal to the premium to earn interest at 5% per year, compounded annually. We will furnish, upon request, a comparable illustration reflecting the proposed insured's age, gender, risk classification and desired Policy features. 95 WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE HYPOTHETICAL ILLUSTRATIONS MALE ISSUE AGE 35 Specified Amount $500,000 Ultimate Select Class Annual Premium $5,500 Option Type A Using Current Cost of Insurance Rates
END OF PREMIUMS DEATH BENEFIT POLICY ACCUMULATED ASSUMING HYPOTHETICAL GROSS AND NET YEAR AT 5% ANNUAL INVESTMENT RETURN OF 0% (GROSS) 6% (GROSS) 12% (GROSS) -1.82% (NET) YEARS 1-15 4.18% (NET) YEARS 1-15 10.18% (NET) YEARS 1-15 -1.22% (NET) YEARS 16+ 4.78% (NET) YEARS 16+ 10.78% (NET) YEARS 16+ 1 5,775 500,000 500,000 500,000 2 11,839 500,000 500,000 500,000 3 18,206 500,000 500,000 500,000 4 24,891 500,000 500,000 500,000 5 31,911 500,000 500,000 500,000 6 39,281 500,000 500,000 500,000 7 47,020 500,000 500,000 500,000 8 55,146 500,000 500,000 500,000 9 63,678 500,000 500,000 500,000 10 72,637 500,000 500,000 500,000 15 124,616 500,000 500,000 500,000 20 190,956 500,000 500,000 500,000 30 (AGE 65) 383,684 500,000 500,000 1,110,503 40 (AGE 75) 697,619 500,000 512,834 2,771,261 50 (AGE 85) 1,208,985 500,000 866,604 7,579,495 60 (AGE 95) 2,041,946 500,000 1,374,867 20,002,384 END OF CASH VALUE NET SURRENDER VALUE POLICY ASSUMING HYPOTHETICAL GROSS AND NET ASSUMING HYPOTHETICAL GROSS AND NET YEAR ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF 0% (GROSS) 6% (GROSS) 12% (GROSS) 0% (GROSS) 6% (GROSS) 12% (GROSS) -1.82% (NET) 4.18% (NET) 10.18% (NET) -1.82% (NET) 4.18% (NET) 10.18% (NET) YEARS 1-15 YEARS 1-15 YEARS 1-15 YEARS 1-15 YEARS 1-15 YEARS 1-15 -1.22% (NET) 4.78% (NET) 10.78% (NET) -1.22% (NET) 4.78% (NET) 10.78% (NET) YEARS 16+ YEARS 16+ YEARS 16+ YEARS 16+ YEARS 16+ YEARS 16+ 1 4,607 4,911 5,216 0 0 0 2 9,119 10,016 10,952 1,359 2,256 3,192 3 13,527 15,314 17,252 5,767 7,554 9,492 4 17,839 20,819 24,180 10,079 13,059 16,420 5 22,025 26,507 31,769 14,265 18,747 24,009 6 26,083 32,384 40,084 19,099 25,400 33,100 7 30,008 38,450 49,194 23,800 32,242 42,986 8 33,803 44,714 59,184 28,371 39,282 53,752 9 37,405 51,122 70,084 32,749 46,466 65,428 10 40,845 57,710 82,020 36,965 53,830 78,140 15 55,472 93,449 161,417 55,472 93,449 161,417 20 67,786 138,636 297,715 67,786 138,636 297,715 30 (AGE 65) 85,666 268,722 910,248 85,666 268,722 910,248 40 (AGE 75) 77,539 479,284 2,589,963 77,539 479,284 2,589,963 50 (AGE 85) 6,610 825,338 7,218,566 6,610 825,338 7,218,566 60 (AGE 95) * 1,361,255 19,804,340 * 1,361,255 19,804,340
* In the absence of an additional payment, the Policy would lapse. The hypothetical investment rates of return shown above and elsewhere in this prospectus are illustrative only and should not be deemed a representation of past or future investment rates of return. Actual investment rates of return may be more or less than those shown and will depend on a number of factors, including the investment allocations by an owner and the different investment rates for the funds. The death benefit, cash value and net surrender value for a Policy would be different from those shown if the actual investment rates of return averaged 0%, 6% and 12% over a period of years, but fluctuated above or below that average for individual Policy years. No representation can be made by Western Reserve or the funds that these hypothetical investment rates of return can be achieved for any one year or sustained over any period of time. This illustration must be preceded or accompanied by current fund prospectuses. 96 WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE HYPOTHETICAL ILLUSTRATIONS MALE ISSUE AGE 35 Specified Amount $500,000 Ultimate Select Class Annual Premium $5,500 Option Type A Using Guaranteed Cost of Insurance Rates
END OF PREMIUMS DEATH BENEFIT POLICY ACCUMULATED ASSUMING HYPOTHETICAL GROSS AND NET YEAR AT 5% ANNUAL INVESTMENT RETURN OF 0% (GROSS) 6% (GROSS) 12% (GROSS) -1.82% (NET) YEARS 1-15 4.18% (NET) YEARS 1-15 10.18% (NET) YEARS 1-15 -1.22 (NET) YEARS 16+ 4.78% (NET) YEARS 16+ 10.78% (NET) YEARS 16+ 1 5,775 500,000 500,000 500,000 2 11,839 500,000 500,000 500,000 3 18,206 500,000 500,000 500,000 4 24,891 500,000 500,000 500,000 5 31,911 500,000 500,000 500,000 6 39,281 500,000 500,000 500,000 7 47,020 500,000 500,000 500,000 8 55,146 500,000 500,000 500,000 9 63,678 500,000 500,000 500,000 10 72,637 500,000 500,000 500,000 15 124,616 500,000 500,000 500,000 20 190,956 500,000 500,000 500,000 30 (AGE 65) 383,684 500,000 500,000 1,056,811 40 (AGE 75) 697,619 500,000 500,000 2,569,910 50 (AGE 85) 1,208,985 500,000 611,581 6,819,155 60 (AGE 95) 2,041,946 500,000 939,192 17,033,001 END OF CASH VALUE NET SURRENDER VALUE POLICY ASSUMING HYPOTHETICAL GROSS AND NET ASSUMING HYPOTHETICAL GROSS AND NET YEAR ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF 0% (GROSS) 6% (GROSS) 12% (GROSS) 0% (GROSS) 6% (GROSS) 12% (GROSS) -1.82% (NET) 4.18% (NET) 10.18% (NET) -1.82% (NET) 4.18% (NET) 10.18% (NET) YEARS 1-15 YEARS 1-15 YEARS 1-15 YEARS 1-15 YEARS 1-15 YEARS 1-15 -1.22% (NET) 4.78% (NET) 10.78% (NET) -1.22% (NET) 4.78% (NET) 10.78% (NET) YEARS 16+ YEARS 16+ YEARS 16+ YEARS 16+ YEARS 16+ YEARS 16+ 1 4,607 4,911 5,216 0 0 0 2 9,004 9,898 10,830 1,244 2,138 3,070 3 13,275 15,047 16,970 5,515 7,287 9,210 4 17,419 20,364 23,687 9,659 12,604 15,927 5 21,430 25,846 31,034 13,670 18,086 23,274 6 25,306 31,497 39,074 18,322 24,513 32,090 7 29,036 37,313 47,866 22,828 31,105 41,658 8 32,625 43,303 57,493 27,193 37,871 52,061 9 36,062 49,464 68,031 31,406 44,808 63,375 10 39,350 55,805 79,583 35,470 51,925 75,703 15 53,244 90,162 156,452 53,244 90,162 156,452 20 63,709 132,466 287,672 63,709 132,466 287,672 30 (AGE 65) 55,449 234,139 866,238 55,449 234,139 866,238 40 (AGE 75) * 360,929 2,401,785 * 360,929 2,401,785 50 (AGE 85) * 582,458 6,494,434 * 582,458 6,494,434 60 (AGE 95) * 929,893 16,864,357 * 929,893 16,864,357
* In the absence of an additional payment, the Policy would lapse. The hypothetical investment rates of return shown above and elsewhere in this prospectus are illustrative only and should not be deemed a representation of past or future rates of return. Actual investment rates of return may be more or less than those shown and will depend on a number of factors, including the investment allocations by an owner and the different investment rates of return for the funds. The death benefit, cash value and net surrender value for a Policy would be different from those shown if the actual investment rates of return averaged 0%, 6% and 12% over a period of years, but fluctuated above or below that average for individual Policy years. No representation can be made by Western Reserve or the funds that these hypothetical investment rates of return can be achieved for any one year or sustained over any period of time. This illustration must be preceded or accompanied by current fund prospectuses. 97 APPENDIX B WEALTH INDICES OF INVESTMENTS IN THE U.S. CAPITAL MARKET - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The information below graphically depicts the growth of $1.00 invested in large company stocks, small company stocks, long-term government bonds, Treasury bills, and hypothetical asset returning the inflation rate over the period from the end of 1925 to the end of 2000. All results assume reinvestment of dividends on stocks or coupons on bonds and no taxes. Transaction costs are not included, except in the small stock index starting in 1982. Each of the cumulative index values is initialized at $1.00 at year-end 1925. The graph illustrates that large company stocks and small company stocks have the best performance over the entire 75-year period: investments of $1.00 in these assets would have grown to $2,586.52 and $6,402.23, respectively, by year-end 2000. This higher growth was earned by investments involving substantial risk. In contrast, long-term government bonds (with an approximate 20-year maturity), which exposed the holder to much less risk, grew to only $48.86. The lowest-risk strategy over the past 75 years (for those with short-term time horizons) was to buy U.S. Treasury bills. Since U.S. Treasury bills tended to track inflation, the resulting real (inflation-adjusted) returns were near zero for the entire 1925 - 2000 period. 98 [GRAPH OMITTED] COMPOUND ANNUAL RATES OF RETURN BY DECADE
1920s* 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000** Large Company ............ 19.2% -0.1% 9.2% 19.4% 7.8% 5.9% 17.5% 18.2% -9.1% Small Company ............ -4.5 1.4 20.7 16.9 15.5 11.5 15.8 15.1 -3.6 Long-Term Corp. .......... 5.2 6.9 2.7 1.0 1.7 6.2 13.0 8.3 12.9 Long-Term Govt. .......... 5.0 4.9 3.2 -0.1 1.4 5.5 12.6 9.0 21.5 Inter-Term Govt. ......... 4.2 4.6 1.8 1.3 3.5 7.0 11.9 7.2 12.6 Treasury Bills ........... 3.7 0.6 0.4 1.9 3.9 6.3 8.9 4.9 5.9 Inflation ................ -1.1 -2.0 5.4 2.2 2.5 7.4 5.1 2.9 3.4
- ---------------- * Based on the period 1926-1929. ** Based on calendar year 2000 only. Used with permission. (c)2001 Ibbotson Associates, Inc. All rights reserved. [Certain portions of this work were derived from copyrighted works of Roger G. Ibbotson and Rex Sinquefield.] 99 APPENDIX C SURRENDER CHARGE PER THOUSAND (BASED ON THE GENDER AND RATE CLASS OF THE INSURED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
MALE MALE FEMALE FEMALE ISSUE ULTIMATE SELECT/ ULTIMATE STANDARD/ ULTIMATE SELECT/ ULTIMATE STANDARD/ AGE SELECT STANDARD SELECT STANDARD 0 N/A 11.76 N/A 11.76 1 N/A 8.16 N/A 8.16 2 N/A 8.16 N/A 8.16 3 N/A 7.92 N/A 7.92 4 N/A 7.68 N/A 7.68 5 N/A 7.68 N/A 7.68 6 N/A 7.68 N/A 7.68 7 N/A 7.68 N/A 7.68 8 N/A 7.68 N/A 7.68 9 N/A 7.68 N/A 7.68 10 N/A 7.68 N/A 7.68 11 N/A 7.68 N/A 7.68 12 N/A 7.68 N/A 7.68 13 N/A 7.92 N/A 7.92 14 N/A 8.16 N/A 8.16 15 N/A 8.40 N/A 8.40 16 N/A 8.52 N/A 8.52 17 N/A 8.88 N/A 8.88 18 8.72 9.20 8.72 9.20 19 8.84 9.32 8.84 9.32 20 8.96 9.44 8.96 9.44 21 9.16 9.88 9.16 9.64 22 9.32 10.04 9.32 9.80 23 9.52 10.24 9.52 10.00 24 9.68 10.40 9.68 10.40 25 9.88 10.84 9.88 10.60 26 10.56 11.28 10.32 11.04 27 11.00 11.72 10.76 11.48 28 11.40 12.12 11.16 12.12 29 12.08 12.80 11.84 12.56 30 12.52 13.24 12.28 13.00 31 13.04 14.00 12.80 13.52 32 13.76 14.48 13.52 14.24 33 14.28 15.24 14.04 14.76 34 14.76 15.96 14.52 15.48 35 15.52 16.48 15.28 16.00
100 APPENDIX C -- (CONTINUED) SURRENDER CHARGE PER THOUSAND (BASED ON THE GENDER AND RATE CLASS OF THE INSURED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
MALE MALE FEMALE FEMALE ISSUE ULTIMATE SELECT/ ULTIMATE STANDARD/ ULTIMATE SELECT/ ULTIMATE STANDARD/ AGE SELECT STANDARD SELECT STANDARD 36 16.20 17.40 15.96 16.92 37 17.20 18.40 16.72 17.92 38 18.12 19.56 17.64 18.60 39 19.08 20.76 18.36 19.56 40 20.28 21.96 19.32 20.52 41 21.64 23.56 20.68 22.12 42 23.08 25.24 22.12 23.80 43 24.44 27.08 23.15 25.40 44 26.04 29.16 23.86 26.96 45 27.44 31.04 24.59 27.83 46 28.72 32.80 25.38 28.76 47 29.84 34.56 26.22 29.73 48 31.00 36.32 27.11 30.75 49 32.24 38.32 28.04 31.84 50 33.56 40.56 29.05 32.99 51 34.98 42.56 30.11 34.20 52 36.49 45.24 31.24 35.48 53 38.10 47.68 32.45 36.84 54 39.83 50.84 33.72 38.28 55 41.68 53.28 35.09 39.79 56 43.63 55.79 36.54 41.39 57 45.74 57.00 38.08 43.06 58 47.98 57.00 39.74 44.88 59 50.38 57.00 41.54 46.85 60 52.97 57.00 43.47 48.97 61 55.74 57.00 45.57 51.26 62 57.00 57.00 47.82 53.73 63 57.00 57.00 50.26 56.41 64 57.00 57.00 52.88 57.00 65 57.00 57.00 55.68 57.00 66 and over 57.00 57.00 57.00 57.00
101 INDEX TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- WRL SERIES LIFE ACCOUNT: Report of Independent Auditors dated January 31, 2001 Report of Independent Certified Public Accountants dated February 16, 2000 Statements of Assets and Liabilities at December 31, 2000 Statements of Operations for the period ended December 31, 2000 Statements of Changes in Net Assets for the periods ended December 31, 2000 and 1999 Financial Highlights for the periods ended December 31, 2000, 1999, 1998, 1997 and 1996 Notes to the Financial Statements WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO Report of Independent Auditors dated February 15, 2001 Statutory-Basis Balance Sheets at December 31, 2000 and 1999 Statutory-Basis Statements of Operations for the years ended December 31, 2000, 1999 and 1998 Statutory-Basis Statements of Changes in Capital and Surplus for the years ended December 31, 2000, 1999 and 1998 Statutory-Basis Statements of Cash Flow for the years ended December 31, 2000, 1999 and 1998 Notes to Statutory-Basis Financial Statements Statutory-Basis Financial Statement Schedules AG08205/2001 102 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Policy Owners of the WRL Series Life Account Western Reserve Life Assurance Company of Ohio We have audited the accompanying statements of assets and liabilities of each of the subaccounts constituting the WRL Series Life Account (the "Separate Account," a separate account of Western Reserve Life Assurance Co. of Ohio) as of December 31, 2000, and the related statements of operations and changes in net assets, and financial highlights for the periods in the year ended December 31, 2000 as indicated thereon. These financial statements and financial highlights are the responsibility of the Separate Account's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The accompanying statements of changes in net assets for the periods ended December 31, 1999 as indicated thereon and the financial highlights for each of the periods in the four years ended December 31, 1999 as indicated thereon for each of the subaccounts constituting the Separate Account, were audited by other auditors whose report dated February 16, 2000, expressed an unqualified opinion on those statements and financial highlights. 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 financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of mutual fund shares owned as of December 31, 2000, by correspondence with the mutual fund's transfer agent. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the 2000 financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the respective subaccounts constituting the WRL Series Life Account at December 31, 2000, and the results of their operations and changes in net assets, and financial highlights for the periods in the year ended December 31, 2000 as indicated thereon, in conformity with accounting principles generally accepted in the United States. /s/ ERNST & YOUNG LLP ERNST & YOUNG LLP Des Moines, Iowa January 31, 2001 103 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Board of Directors and Policy Owners of the WRL Series Life Account Western Reserve Life Assurance Company of Ohio In our opinion, the accompanying statements of changes in net assets and the related financial highlights present fairly, in all material respects, the changes in net assets of each of the Sub-Accounts constituting the WRL Series Life Account (a separate account of Western Reserve Life Assurance Co. of Ohio ("WRL")) for the year ended December 31, 1999, and the financial highlights for each of the periods presented through December 31, 1999, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of WRL's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /s/ PRICEWATERHOUSECOOPERS LLP PricewaterhouseCoopers LLP Tampa, Florida February 16, 2000 104 WRL SERIES LIFE ACCOUNT STATEMENTS OF ASSETS AND LIABILITIES AT DECEMBER 31, 2000 ALL AMOUNTS (EXCEPT PER UNIT AMOUNTS) IN THOUSANDS
WRL WRL WRL WRL WRL LKCM J.P. MORGAN AEGON JANUS JANUS STRATEGIC MONEY MARKET BOND GROWTH GLOBAL TOTAL RETURN SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT Assets: Investment in securities: Number of shares ................................... 60,145 2,326 20,304 17,111 6,610 ======== ======== ========= ========= ======== Cost ............................................... $ 60,145 $ 26,612 $ 964,237 $ 416,105 $ 97,229 ======== ======== ========= ========= ======== Investment, at net asset value ...................... $ 60,145 $ 25,908 $ 961,173 $ 410,156 $ 98,483 Dividend receivable ................................. 277 0 0 0 0 Transfers receivable from depositor ................. 0 27 0 0 0 -------- -------- --------- --------- -------- Total assets ....................................... 60,422 25,935 961,173 410,156 98,483 -------- -------- --------- --------- -------- Liabilities: Accrued expenses .................................... 0 0 0 0 0 Transfers payable to depositor ...................... 143 0 158 47 17 -------- -------- --------- --------- -------- Total liabilities .................................. 143 0 158 47 17 -------- -------- --------- --------- -------- Net assets ......................................... $ 60,279 $ 25,935 $ 961,015 $ 410,109 $ 98,466 ======== ======== ========= ========= ======== Net Assets Consists of: Policy owners' equity ............................... $ 60,279 $ 25,935 $ 961,015 $ 410,109 $ 98,466 Depositor's equity .................................. 0 0 0 0 0 -------- -------- --------- --------- -------- Net assets applicable to units outstanding ......... $ 60,279 $ 25,935 $ 961,015 $ 410,109 $ 98,466 ======== ======== ========= ========= ======== Policy owners' units ................................ 3,278 1,072 9,366 12,899 4,523 Depositor's units ................................... 0 0 0 0 0 -------- -------- --------- --------- -------- Units outstanding .................................. 3,278 1,072 9,366 12,899 4,523 ======== ======== ========= ========= ======== Accumulation unit value ............................ $ 18.39 $ 24.19 $ 102.61 $ 31.79 $ 21.77 ======== ======== ========= ========= ========
See Notes to the Financial Statements, which is an integral part of this report. 105 WRL SERIES LIFE ACCOUNT STATEMENTS OF ASSETS AND LIABILITIES AT DECEMBER 31, 2000 ALL AMOUNTS (EXCEPT PER UNIT AMOUNTS) IN THOUSANDS
WRL WRL WRL WRL VKAM ALGER WRL FEDERATED DEAN EMERGING AGGRESSIVE AEGON GROWTH & Asset Growth Growth Balanced Income Allocation Subaccount Subaccount Subaccount Subaccount Subaccount Assets: Investment in securities: Number of shares ................................... 19,559 14,318 1,593 2,001 2,601 ========= ========= ======== ======== ======== Cost ............................................... $ 873,187 $ 307,884 $ 19,689 $ 24,463 $ 35,227 ========= ========= ======== ======== ======== Investment, at net asset value ...................... $ 580,110 $ 280,068 $ 20,950 $ 26,869 $ 34,303 Dividend receivable ................................. 0 0 0 0 0 Transfers receivable from depositor ................. 92 104 2 14 0 --------- --------- -------- -------- -------- Total assets ....................................... 580,202 280,172 20,952 26,883 34,303 --------- --------- -------- -------- -------- Liabilities: Accrued expenses .................................... 0 0 0 0 0 Transfers payable to depositor ...................... 0 0 0 0 90 --------- --------- -------- -------- -------- Total liabilities .................................. 0 0 0 0 90 --------- --------- -------- -------- -------- Net assets ......................................... $ 580,202 $ 280,172 $ 20,952 $ 26,883 $ 34,213 ========= ========= ======== ======== ======== Net Assets Consists of: Policy owners' equity ............................... $ 580,202 $ 280,172 $ 20,952 $ 26,883 $ 34,213 Depositor's equity .................................. 0 0 0 0 0 --------- --------- -------- -------- -------- Net assets applicable to units outstanding ......... $ 580,202 $ 280,172 $ 20,952 $ 26,883 $ 34,213 ========= ========= ======== ======== ======== Policy owners' units ................................ 10,226 9,215 1,303 1,349 1,881 Depositor's units ................................... 0 0 0 0 0 --------- --------- -------- -------- -------- Units outstanding .................................. 10,226 9,215 1,303 1,349 1,881 ========= ========= ======== ======== ======== Accumulation unit value ............................ $ 56.74 $ 30.40 $ 16.08 $ 19.93 $ 18.19 ========= ========= ======== ======== ========
See Notes to the Financial Statements, which is an integral part of this report. 106 WRL SERIES LIFE ACCOUNT STATEMENTS OF ASSETS AND LIABILITIES AT DECEMBER 31, 2000 ALL AMOUNTS (EXCEPT PER UNIT AMOUNTS) IN THOUSANDS
WRL WRL WRL WRL GE WRL THIRD C.A.S.E. NWQ INTERNATIONAL GE AVENUE GROWTH VALUE EQUITY EQUITY U.S. EQUITY VALUE SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT Assets: Investment in securities: Number of shares ................................... 2,169 2,009 768 1,985 1,204 ======== ======== ======= ======== ======== Cost ............................................... $ 30,724 $ 27,288 $ 9,683 $ 29,863 $ 15,436 ======== ======== ======= ======== ======== Investment, at net asset value ...................... $ 22,336 $ 28,863 $ 7,942 $ 29,734 $ 16,503 Dividend receivable ................................. 0 0 0 0 0 Transfers receivable from depositor ................. 8 25 2 37 232 -------- -------- ------- -------- -------- Total assets ....................................... 22,344 28,888 7,944 29,771 16,735 -------- -------- ------- -------- -------- Liabilities: Accrued expenses .................................... 0 0 0 0 0 Transfers payable to depositor ...................... 0 0 0 0 0 -------- -------- ------- -------- -------- Total liabilities .................................. 0 0 0 0 0 -------- -------- ------- -------- -------- Net assets ......................................... $ 22,344 $ 28,888 $ 7,944 $ 29,771 $ 16,735 ======== ======== ======= ======== ======== Net Assets Consists of: Policy owners' equity ............................... $ 22,344 $ 28,888 $ 7,944 $ 29,771 $ 16,735 Depositor's equity .................................. 0 0 0 0 0 -------- -------- ------- -------- -------- Net assets applicable to units outstanding ......... $ 22,344 $ 28,888 $ 7,944 $ 29,771 $ 16,735 ======== ======== ======= ======== ======== Policy owners' units ................................ 1,713 1,797 639 1,683 1,177 Depositor's units ................................... 0 0 0 0 0 -------- -------- ------- -------- -------- Units outstanding .................................. 1,713 1,797 639 1,683 1,177 ======== ======== ======= ======== ======== Accumulation unit value ............................ $ 13.04 $ 16.07 $ 12.43 $ 17.69 $ 14.22 ======== ======== ======= ======== ========
See Notes to the Financial Statements, which is an integral part of this report. 107 WRL SERIES LIFE ACCOUNT STATEMENTS OF ASSETS AND LIABILITIES AT DECEMBER 31, 2000 ALL AMOUNTS (EXCEPT PER UNIT AMOUNTS) IN THOUSANDS
WRL WRL WRL WRL WRL J.P. MORGAN GOLDMAN GOLDMAN T. ROWE T. ROWE REAL ESTATE SACHS SACHS PRICE PRICE SECURITIES GROWTH SMALL CAP DIVIDEND GROWTH SMALL CAP SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT Assets: Investment in securities: Number of shares ................................... 239 150 76 97 209 ======= ======= ======= ====== ======= Cost ............................................... $ 2,364 $ 1,706 $ 861 $ 895 $ 2,897 ======= ======= ======= ====== ======= Investment, at net asset value ...................... $ 2,464 $ 1,600 $ 831 $ 985 $ 2,541 Dividend receivable ................................. 0 0 0 0 0 Transfers receivable from depositor ................. 12 27 31 0 27 ------- ------- ------- ------ ------- Total assets ....................................... 2,476 1,627 862 985 2,568 ------- ------- ------- ------ ------- Liabilities: Accrued expenses .................................... 0 0 0 0 0 Transfers payable to depositor ...................... 0 0 0 0 0 ------- ------- ------- ------ ------- Total liabilities .................................. 0 0 0 0 0 ------- ------- ------- ------ ------- Net assets ......................................... $ 2,476 $ 1,627 $ 862 $ 985 $ 2,568 ======= ======= ======= ====== ======= Net Assets Consists of: Policy owners' equity ............................... $ 2,476 $ 1,627 $ 862 $ 985 $ 2,568 Depositor's equity .................................. 0 0 0 0 0 ------- ------- ------- ------ ------- Net assets applicable to units outstanding ......... $ 2,476 $ 1,627 $ 862 $ 985 $ 2,568 ======= ======= ======= ====== ======= Policy owners' units ................................ 239 158 80 99 230 Depositor's units ................................... 0 0 0 0 0 ------- ------- ------- ------ ------- Units outstanding .................................. 239 158 80 99 230 ======= ======= ======= ====== ======= Accumulation unit value ............................ $ 10.36 $ 10.29 $ 10.80 $ 9.98 $ 11.17 ======= ======= ======= ====== =======
See Notes to the Financial Statements, which is an integral part of this report. 108 WRL SERIES LIFE ACCOUNT STATEMENTS OF ASSETS AND LIABILITIES AT DECEMBER 31, 2000 ALL AMOUNTS (EXCEPT PER UNIT AMOUNTS) IN THOUSANDS
WRL WRL WRL WRL WRL GREAT SALOMON PILGRIM BAXTER DREYFUS VALUE LINE COMPANIES - ALL CAP MID CAP GROWTH MID CAP AGGRESSIVE GROWTH AMERICA(SM) SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT Assets: Investment in securities: Number of shares ............................... 622 2,628 152 118 746 ======= ======== ======= ======= ======= Cost ........................................... $ 8,005 $ 56,653 $ 1,832 $ 1,250 $ 7,784 ======= ======== ======= ======= ======= Investment, at net asset value .................. $ 8,081 $ 39,577 $ 1,810 $ 1,067 $ 8,486 Dividend receivable ............................. 0 0 0 0 0 Transfers receivable from depositor ............. 0 125 1 0 5 ------- -------- ------- ------- ------- Total assets ................................... 8,081 39,702 1,811 1,067 8,491 ------- -------- ------- ------- ------- Liabilities: Accrued expenses ................................ 0 0 0 0 0 Transfers payable to depositor .................. 9 0 0 0 0 ------- -------- ------- ------- ------- Total liabilities .............................. 9 0 0 0 0 ------- -------- ------- ------- ------- Net assets ..................................... $ 8,072 $ 39,702 $ 1,811 $ 1,067 $ 8,491 ======= ======== ======= ======= ======= Net Assets Consists of: Policy owners' equity ........................... $ 8,072 $ 39,702 $ 1,811 $ 887 $ 8,265 Depositor's equity .............................. 0 0 0 180 226 ------- -------- ------- ------- ------- Net assets applicable to units outstanding ..... $ 8,072 $ 39,702 $ 1,811 $ 1,067 $ 8,491 ======= ======== ======= ======= ======= Policy owners' units ............................ 643 2,929 159 99 731 Depositor's units ............................... 0 0 0 20 20 ------- -------- ------- ------- ------- Units outstanding .............................. 643 2,929 159 119 751 ======= ======== ======= ======= ======= Accumulation unit value ........................ $ 12.55 $ 13.56 $ 11.35 $ 8.98 $ 11.31 ======= ======== ======= ======= =======
See Notes to the Financial Statements, which is an integral part of this report. 109 WRL SERIES LIFE ACCOUNT STATEMENTS OF ASSETS AND LIABILITIES AT DECEMBER 31, 2000 ALL AMOUNTS (EXCEPT PER UNIT AMOUNTS) IN THOUSANDS
WRL WRL WRL GREAT GREAT GABELLI COMPANIES - COMPANIES - GLOBAL TECHNOLOGY(SM) GLOBAL(2) GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT Assets: Investment in securities: Number of shares ................................... 413 57 106 ======= ====== ====== Cost ............................................... $ 4,089 $ 505 $ 993 ======= ====== ====== Investment, at net asset value ...................... $ 2,784 $ 490 $ 960 Dividend receivable ................................. 0 0 0 Transfers receivable from depositor ................. 4 4 11 ------- ------ ------ Total assets ....................................... 2,788 494 971 ------- ------ ------ Liabilities: Accrued expenses .................................... 0 0 0 Transfers payable to depositor ...................... 0 0 0 ------- ------ ------ Total liabilities .................................. 0 0 0 ------- ------ ------ Net assets ......................................... $ 2,788 $ 494 $ 971 ======= ====== ====== Net Assets Consists of: Policy owners' equity ............................... $ 2,654 $ 473 $ 948 Depositor's equity .................................. 134 21 23 ------- ------ ------ Net assets applicable to units outstanding ......... $ 2,788 $ 494 $ 971 ======= ====== ====== Policy owners' units ................................ 396 55 104 Depositor's units ................................... 20 3 3 ------- ------ ------ Units outstanding .................................. 416 58 107 ======= ====== ====== Accumulation unit value ............................ $ 6.70 $ 8.52 $ 9.07 ======= ====== ======
See Notes to the Financial Statements, which is an integral part of this report. 110 WRL SERIES LIFE ACCOUNT STATEMENTS OF ASSETS AND LIABILITIES AT DECEMBER 31, 2000 ALL AMOUNTS (EXCEPT PER UNIT AMOUNTS) IN THOUSANDS
FIDELITY VIP III GROWTH FIDELITY VIP II FIDELITY VIP OPPORTUNITIES CONTRAFUND(R) EQUITY-INCOME SUBACCOUNT SUBACCOUNT SUBACCOUNT Assets: Investment in securities: Number of shares ................................... 32 44 12 ====== ======= ======= Cost ............................................... $ 632 $ 1,077 $ 294 ====== ======= ======= Investment, at net asset value ...................... $ 562 $ 1,030 $ 307 Dividend receivable ................................. 0 0 0 Transfers receivable from depositor ................. 0 0 0 ------ ------- ------- Total assets ....................................... 562 1,030 307 ------ ------- ------- Liabilities: Accrued expenses .................................... 0 0 0 Transfers payable to depositor ...................... 0 0 0 ------ ------- ------- Total liabilities .................................. 0 0 0 ------ ------- ------- Net assets ......................................... $ 562 $ 1,030 $ 307 ====== ======= ======= Net Assets Consists of: Policy owners' equity ............................... $ 541 $ 1,006 $ 280 Depositor's equity .................................. 21 24 27 ------ ------- ------- Net assets applicable to units outstanding ......... $ 562 $ 1,030 $ 307 ====== ======= ======= Policy owners' units ................................ 63 107 25 Depositor's units ................................... 3 3 3 ------ ------- ------- Units outstanding .................................. 66 110 28 ====== ======= ======= Accumulation unit value ............................ $ 8.56 $ 9.38 $ 10.99 ====== ======= =======
See Notes to the Financial Statements, which is an integral part of this report. 111 WRL SERIES LIFE ACCOUNT STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000 ALL AMOUNTS IN THOUSANDS
WRL WRL WRL WRL WRL LKCM J.P. MORGAN AEGON JANUS JANUS STRATEGIC MONEY MARKET BOND GROWTH GLOBAL TOTAL RETURN SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT Investment Income: Dividend income ................................... $ 2,813 $ 1,372 $ 1,719 $ 14,506 $ 2,080 Capital gain distributions ........................ 0 0 162,879 88,526 6,230 --------- --------- ----------- ---------- --------- Total investment income .......................... 2,813 1,372 164,598 103,032 8,310 Expenses: Mortality and expense risk ........................ 424 225 11,702 4,306 895 --------- --------- ----------- ---------- --------- Net investment income (loss) ..................... 2,389 1,147 152,896 98,726 7,415 --------- --------- ----------- ---------- --------- Realized and Unrealized Gain (Loss): Net realized gain (loss) on investment securities . 0 (316) 57,356 8,214 3,008 Change in unrealized appreciation (depreciation) .. 0 1,538 (612,499) (199,548) (15,305) --------- --------- ----------- ---------- --------- Net gain (loss) on investment securities ......... 0 1,222 (555,143) (191,334) (12,297) --------- --------- ----------- ---------- --------- Net increase (decrease) in net assets resulting from operations ............................... $ 2,389 $ 2,369 $ (402,247) $ (92,608) $ (4,882) ========= ========= =========== ========== ========= WRL WRL WRL WRL VKAM ALGER WRL FEDERATED DEAN EMERGING AGGRESSIVE AEGON GROWTH & Asset Growth Growth Balanced Income Allocation Subaccount Subaccount Subaccount Subaccount Subaccount Investment Income: Dividend income ....................................... $ 5,938 $ 5,025 $ 388 $ 1,171 $ 1,367 Capital gain distributions ............................ 169,068 39,418 0 9 1,203 ---------- ----------- ---------- ---------- --------- Total investment income .............................. 175,006 44,443 388 1,180 2,570 Expenses: Mortality and expense risk ............................ 6,396 3,175 173 179 280 ---------- ----------- ---------- ---------- --------- Net investment income (loss) ......................... 168,610 41,268 215 1,001 2,290 ---------- ----------- ---------- ---------- --------- Realized and Unrealized Gain (Loss): Net realized gain (loss) on investment securities ..... 295,543 6,194 285 (440) 28 Change in unrealized appreciation (depreciation) ...... (557,231) (174,941) 457 4,670 2,465 ---------- ----------- ---------- ---------- --------- Net gain (loss) on investment securities ............. (261,688) (168,747) 742 4,230 2,493 ---------- ----------- ---------- ---------- --------- Net increase (decrease) in net assets resulting from operations ................................... $ (93,078) $ (127,479) $ 957 $ 5,231 $ 4,783 ========== =========== ========== ========== =========
See Notes to the Financial Statements, which is an integral part of this report. 112 WRL SERIES LIFE ACCOUNT STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000 ALL AMOUNTS IN THOUSANDS
WRL WRL WRL WRL GE WRL THIRD C.A.S.E. NWQ INTERNATIONAL GE AVENUE GROWTH VALUE EQUITY EQUITY U.S. EQUITY VALUE SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT Investment Income: Dividend income ....................................... $ 3,732 $ 362 $ 138 $ 214 $ 137 Capital gain distributions ............................ 826 283 1,055 1,108 372 --------- ------- --------- -------- --------- Total investment income .............................. 4,558 645 1,193 1,322 509 Expenses: Mortality and expense risk ............................ 237 233 69 251 83 --------- ------- --------- -------- --------- Net investment income (loss) ......................... 4,321 412 1,124 1,071 426 --------- ------- --------- -------- --------- Realized and Unrealized Gain (Loss): Net realized gain (loss) on investment securities ..... (82) (519) 263 520 1,022 Change in unrealized appreciation (depreciation) ...... (10,339) 3,484 (2,668) (2,166) 677 --------- ------- --------- -------- --------- Net gain (loss) on investment securities ............. (10,421) 2,965 (2,405) (1,646) 1,699 --------- ------- --------- -------- --------- Net increase (decrease) in net assets resulting from operations ................................... $ (6,100) $ 3,377 $ (1,281) $ (575) $ 2,125 ========= ======= ========= ======== ========= WRL WRL WRL WRL WRL J.P. MORGAN GOLDMAN GOLDMAN T. ROWE T. ROWE REAL ESTATE SACHS SACHS PRICE PRICE SECURITIES GROWTH SMALL CAP DIVIDEND GROWTH SMALL CAP SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT Investment Income: Dividend income .................................. $ 32 $ 12 $ 14 $ 4 $ 24 Capital gain distributions ....................... 0 8 3 0 0 -------- -------- -------- --------- --------- Total investment income ......................... 32 20 17 4 24 Expenses: Mortality and expense risk ....................... 15 13 6 8 19 -------- -------- -------- --------- --------- Net investment income (loss) .................... 17 7 11 (4) 5 -------- -------- -------- ---------- --------- Realized and Unrealized Gain (Loss): Net realized gain (loss) on investment securities 203 64 24 (17) 84 Change in unrealized appreciation (depreciation) . 142 (220) (51) 104 (496) -------- -------- -------- --------- --------- Net gain (loss) on investment securities ........ 345 (156) (27) 87 (412) -------- -------- -------- --------- --------- Net increase (decrease) in net assets resulting from operations .............................. $ 362 $ (149) $ (16) $ 83 $ (407) ======== ======== ======== ========= =========
See Notes to the Financial Statements, which is an integral part of this report. 113 WRL SERIES LIFE ACCOUNT STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000 ALL AMOUNTS IN THOUSANDS
WRL WRL WRL WRL WRL GREAT SALOMON PILGRIM BAXTER DREYFUS VALUE LINE COMPANIES - ALL CAP MID CAP GROWTH MID CAP AGGRESSIVE GROWTH AMERICA(SM) SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT(1) SUBACCOUNT(1) Investment Income: Dividend income ....................................... $ 67 $ 370 $ 28 $ 0 $ 0 Capital gain distributions ............................ 17 0 0 0 0 -------- ---------- ----- ------- ----- Total investment income .............................. 84 370 28 0 0 Expenses: Mortality and expense risk ............................ 27 289 8 4 28 -------- ---------- ----- ------- ----- Net investment income (loss) ......................... 57 81 20 (4) (28) -------- ---------- ----- -------- ----- Realized and Unrealized Gain (Loss): Net realized gain (loss) on investment securities ..... 103 1,394 86 (2) 13 Change in unrealized appreciation (depreciation) ...... 58 (18,254) (46) (183) 702 -------- ---------- ----- ------- ----- Net gain (loss) on investment securities ............. 161 (16,860) 40 (185) 715 -------- ---------- ----- ------- ----- Net increase (decrease) in net assets resulting from operations ................................... $ 218 $ (16,779) $ 60 $ (189) $ 687 ======== ========== ===== ======= ===== WRL WRL WRL GREAT GREAT GABELLI COMPANIES - COMPANIES - GLOBAL TECHNOLOGY(SM) GLOBAL(2) GROWTH SUBACCOUNT(1) SUBACCOUNT(1) SUBACCOUNT(1) Investment Income: Dividend income ................................... $ 0 $ 0 $ 0 Capital gain distributions ........................ 0 0 0 ---------- --------- ------ Total investment income .......................... 0 0 0 Expenses: Mortality and expense risk ........................ 13 1 1 ---------- --------- ------ Net investment income (loss) ..................... (13) (1) (1) ---------- ---------- ------- Realized and Unrealized Gain (Loss): Net realized gain (loss) on investment securities . (132) (1) (1) Change in unrealized appreciation (depreciation) .. (1,305) (15) (33) ---------- --------- ------ Net gain (loss) on investment securities ......... (1,437) (16) (34) ---------- --------- ------ Net increase (decrease) in net assets resulting from operations ............................... $ (1,450) $ (17) $ (35) ========== ========= ======
See Notes to the Financial Statements, which is an integral part of this report. 114 WRL SERIES LIFE ACCOUNT STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000 ALL AMOUNTS IN THOUSANDS
FIDELITY VIP III GROWTH FIDELITY VIP II FIDELITY VIP OPPORTUNITIES CONTRAFUND(R) EQUITY-INCOME SUBACCOUNT(1) SUBACCOUNT(1) SUBACCOUNT(1) Investment Income: Dividend income ....................................... $ 0 $ 0 $ 0 Capital gain distributions ............................ 0 0 0 ------ ------ ---- Total investment income .............................. 0 0 0 Expenses: Mortality and expense risk ............................ 2 3 1 ------ ------ ---- Net investment income (loss) ......................... (2) (3) (1) ------- ------- ----- Realized and Unrealized Gain (Loss): Net realized gain (loss) on investment securities ..... (3) (1) 4 Change in unrealized appreciation (depreciation) ...... (70) (47) 13 ------ ------ ---- Net gain (loss) on investment securities ............. (73) (48) 17 ------ ------ ---- Net increase (decrease) in net assets resulting from operations ................................... $ (75) $ (51) $ 16 ====== ====== ====
See Notes to the Financial Statements, which is an integral part of this report. 115 WRL SERIES LIFE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED ALL AMOUNTS IN THOUSANDS
WRL WRL J.P. MORGAN AEGON MONEY MARKET BOND SUBACCOUNT SUBACCOUNT ------------------------- ------------------------- DECEMBER 31, DECEMBER 31, ------------------------- ------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ------------ Operations: Net investment income (loss) ..................... $ 2,389 $ 1,474 $ 1,147 $ 1,329 Net gain (loss) on investment securities ......... 0 0 1,222 (2,327) --------- ---------- -------- -------- Net increase (decrease) in net assets resulting from operations ....................... 2,389 1,474 2,369 (998) --------- ---------- -------- -------- Capital Unit Transactions: Proceeds from units sold (transferred) ........... 12,540 38,977 897 7,560 --------- ---------- -------- -------- Less cost of units redeemed: Administrative charges .......................... 3,274 3,050 2,341 2,538 Policy loans .................................... 1,672 1,775 1,361 954 Surrender benefits .............................. 5,687 4,017 735 846 Death benefits .................................. 87 115 23 29 --------- ---------- -------- -------- 10,720 8,957 4,460 4,367 --------- ---------- -------- -------- Increase (decrease) in net assets from capital unit transactions ...................... 1,820 30,020 (3,563) 3,193 --------- ---------- -------- -------- Net increase (decrease) in net assets ........... 4,209 31,494 (1,194) 2,195 Depositor's equity contribution (net redemption) ................................ 0 0 0 0 Net Assets: Beginning of year ................................ 56,070 24,576 27,129 24,934 --------- ---------- -------- -------- End of year ...................................... $ 60,279 $ 56,070 $ 25,935 $ 27,129 ========= ========== ======== ======== Unit Activity: Units outstanding - beginning of year ............ 3,206 1,460 1,232 1,090 Units issued ..................................... 50,376 18,474 427 883 Units redeemed ................................... (50,304) (16,728) (587) (741) --------- ---------- -------- -------- Units outstanding - end of year .................. 3,278 3,206 1,072 1,232 ========= ========== ======== ======== WRL JANUS GROWTH SUBACCOUNT ---------------------------- DECEMBER 31, ---------------------------- 2000 1999 ------------- -------------- Operations: Net investment income (loss) ..................... $ 152,896 $ 226,095 Net gain (loss) on investment securities ......... (555,143) 262,161 ---------- ----------- Net increase (decrease) in net assets resulting from operations ....................... (402,247) 488,256 ---------- ----------- Capital Unit Transactions: Proceeds from units sold (transferred) ........... 168,047 192,993 ---------- ----------- Less cost of units redeemed: Administrative charges .......................... 69,288 57,685 Policy loans .................................... 44,968 33,172 Surrender benefits .............................. 38,262 32,554 Death benefits .................................. 6,224 1,908 ---------- ----------- 158,742 125,319 ---------- ----------- Increase (decrease) in net assets from capital unit transactions ...................... 9,305 67,674 ---------- ----------- Net increase (decrease) in net assets ........... (392,942) 555,930 Depositor's equity contribution (net redemption) ................................ 0 0 Net Assets: Beginning of year ................................ 1,353,957 798,027 ---------- ----------- End of year ...................................... $ 961,015 $ 1,353,957 ========== =========== Unit Activity: Units outstanding - beginning of year ............ 9,293 8,668 Units issued ..................................... 2,459 2,854 Units redeemed ................................... (2,386) (2,229) ---------- ----------- Units outstanding - end of year .................. 9,366 9,293 ========== ===========
See Notes to the Financial Statements, which is an integral part of this report. 116 WRL SERIES LIFE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED ALL AMOUNTS IN THOUSANDS
WRL WRL WRL LKCM VKAM JANUS STRATEGIC EMERGING GLOBAL TOTAL RETURN GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT -------------------------- -------------------------- -------------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, -------------------------- -------------------------- -------------------------- 2000 1999 2000 1999 2000 1999 ------------- ------------ ------------ ------------- ------------- ------------ Operations: Net investment income (loss) ................. $ 98,726 $ 26,538 $ 7,415 $ 8,072 $ 168,610 $ 81,707 Net gain (loss) on investment securities ..... (191,334) 153,543 (12,297) 2,825 (261,688) 217,724 ---------- --------- --------- --------- ---------- --------- Net increase (decrease) in net assets resulting from operations ................... (92,608) 180,081 (4,882) 10,897 (93,078) 299,431 ---------- --------- --------- --------- ---------- --------- Capital Unit Transactions: Proceeds from units sold (transferred) ....... 112,253 81,308 10,776 11,792 145,357 94,168 ---------- --------- --------- --------- ---------- --------- Less cost of units redeemed: Administrative charges ...................... 31,746 25,132 7,939 8,436 35,247 25,202 Policy loans ................................ 15,396 9,284 2,710 3,000 22,735 11,395 Surrender benefits .......................... 12,985 8,537 2,844 3,136 20,687 11,025 Death benefits .............................. 907 194 600 378 1,538 512 ---------- --------- --------- --------- ---------- --------- 61,034 43,147 14,093 14,950 80,207 48,134 ---------- --------- --------- --------- ---------- --------- Increase (decrease) in net assets from capital unit transactions .................. 51,219 38,161 (3,317) (3,158) 65,150 46,034 ---------- --------- --------- --------- ---------- --------- Net increase (decrease) in net assets ....... (41,389) 218,242 (8,199) 7,739 (27,928) 345,465 Depositor's equity contribution (net redemption) ............................ 0 0 0 0 0 0 Net Assets: Beginning of year ............................ 451,498 233,256 106,665 98,926 608,130 262,665 ---------- --------- --------- --------- ---------- --------- End of year .................................. $ 410,109 $ 451,498 $ 98,466 $ 106,665 $ 580,202 $ 608,130 ========== ========= ========= ========= ========== ========= Unit Activity: Units outstanding - beginning of year ........ 11,605 10,167 4,674 4,814 9,357 8,218 Units issued ................................. 4,570 4,823 1,327 1,538 11,606 4,977 Units redeemed ............................... (3,276) (3,385) (1,478) (1,678) (10,737) (3,838) ---------- --------- --------- --------- ---------- --------- Units outstanding - end of year .............. 12,899 11,605 4,523 4,674 10,226 9,357 ========== ========= ========= ========= ========== =========
See Notes to the Financial Statements, which is an integral part of this report. 117 WRL SERIES LIFE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED ALL AMOUNTS IN THOUSANDS
WRL WRL WRL ALGER AEGON FEDERATED AGGRESSIVE GROWTH BALANCED GROWTH & Income Subaccount Subaccount Subaccount --------------------------- ----------------------- ------------------------ December 31, December 31, December 31, --------------------------- ----------------------- ------------------------ 2000 1999 2000 1999 2000 1999 ------------- ------------- ----------- ----------- ----------- ------------ Operations: Net investment income (loss) ..................... $ 41,268 $ 35,966 $ 215 $ 213 $ 1,001 $ 1,091 Net gain (loss) on investment securities ......... (168,747) 101,488 742 105 4,230 (2,078) ---------- --------- -------- -------- -------- -------- Net increase (decrease) in net assets resulting from operations ....................... (127,479) 137,454 957 318 5,231 (987) ---------- --------- -------- -------- -------- -------- Capital Unit Transactions: Proceeds from units sold (transferred) ........... 103,588 74,699 4,955 5,997 7,863 5,627 ---------- --------- -------- -------- -------- -------- Less cost of units redeemed: Administrative charges .......................... 26,734 19,544 2,124 1,931 2,328 2,355 Policy loans .................................... 12,341 8,193 442 429 628 346 Surrender benefits .............................. 10,374 7,977 559 626 534 542 Death benefits .................................. 666 118 18 10 110 55 ---------- --------- -------- -------- -------- -------- 50,115 35,832 3,143 2,996 3,600 3,298 ---------- --------- -------- -------- -------- -------- Increase (decrease) in net assets from capital unit transactions ...................... 53,473 38,867 1,812 3,001 4,263 2,329 ---------- --------- -------- -------- -------- -------- Net increase (decrease) in net assets ........... (74,006) 176,321 2,769 3,319 9,494 1,342 Depositor's equity contribution (net redemption) ................................ 0 0 0 0 0 0 Net Assets: Beginning of year ................................ 354,178 177,857 18,183 14,864 17,389 16,047 ---------- --------- -------- -------- -------- -------- End of year ...................................... $ 280,172 $ 354,178 $ 20,952 $ 18,183 $ 26,883 $ 17,389 ========== ========= ======== ======== ======== ======== Unit Activity: Units outstanding - beginning of year ............ 7,928 6,669 1,186 990 1,117 976 Units issued ..................................... 3,925 3,640 569 637 996 714 Units redeemed ................................... (2,638) (2,381) (452) (441) (764) (573) ---------- --------- -------- -------- -------- -------- Units outstanding - end of year .................. 9,215 7,928 1,303 1,186 1,349 1,117 ========== ========= ======== ======== ======== ========
See Notes to the Financial Statements, which is an integral part of this report. 118 WRL SERIES LIFE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED ALL AMOUNTS IN THOUSANDS
WRL WRL WRL DEAN C.A.S.E. NWQ ASSET ALLOCATION GROWTH VALUE EQUITY SUBACCOUNT SUBACCOUNT SUBACCOUNT ------------------------- ------------------------ ------------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, ------------------------- ------------------------ ------------------------- 2000 1999 2000 1999 2000 1999 ------------ ------------ ------------ ----------- ------------ ------------ Operations: Net investment income (loss) ..................... $ 2,290 $ 954 $ 4,321 $ 2,402 $ 412 $ 379 Net gain (loss) on investment securities ......... 2,493 (3,414) (10,421) 3,900 2,965 1,157 -------- -------- --------- -------- -------- -------- Net increase (decrease) in net assets resulting from operations ....................... 4,783 (2,460) (6,100) 6,302 3,377 1,536 -------- -------- --------- -------- -------- -------- Capital Unit Transactions: Proceeds from units sold (transferred) ........... 1,235 1,729 5,488 7,781 2,652 3,283 -------- -------- --------- -------- -------- -------- Less cost of units redeemed: Administrative charges .......................... 3,204 3,875 2,868 2,946 2,467 2,874 Policy loans .................................... 785 991 767 668 596 713 Surrender benefits .............................. 1,058 901 885 678 660 605 Death benefits .................................. 75 89 33 12 96 32 -------- -------- --------- -------- -------- -------- 5,122 5,856 4,553 4,304 3,819 4,224 -------- -------- --------- -------- -------- -------- Increase (decrease) in net assets from capital unit transactions ...................... (3,887) (4,127) 935 3,477 (1,167) (941) -------- -------- --------- -------- -------- -------- Net increase (decrease) in net assets ........... 896 (6,587) (5,165) 9,779 2,210 595 Depositor's equity contribution (net redemption) ................................ 0 0 0 0 0 0 Net Assets: Beginning of year ................................ 33,317 39,904 27,509 17,730 26,678 26,083 -------- -------- --------- -------- -------- -------- End of year ...................................... $ 34,213 $ 33,317 $ 22,344 $ 27,509 $ 28,888 $ 26,678 ======== ======== ========= ======== ======== ======== Unit Activity: Units outstanding - beginning of year ............ 2,128 2,383 1,657 1,417 1,895 1,982 Units issued ..................................... 729 937 1,014 1,347 907 1,296 Units redeemed ................................... (976) (1,192) (958) (1,107) (1,005) (1,383) -------- -------- --------- -------- -------- -------- Units outstanding - end of year .................. 1,881 2,128 1,713 1,657 1,797 1,895 ======== ======== ========= ======== ======== ========
See Notes to the Financial Statements, which is an integral part of this report. 119 WRL SERIES LIFE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED ALL AMOUNTS IN THOUSANDS
WRL WRL WRL GE GE THIRD AVENUE INTERNATIONAL EQUITY U.S. EQUITY VALUE SUBACCOUNT SUBACCOUNT SUBACCOUNT ----------------------- ------------------------- ----------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, ----------------------- ------------------------- ----------------------- 2000 1999 2000 1999 2000 1999 ----------- ----------- ------------ ------------ ----------- ----------- Operations: Net investment income (loss) ..................... $ 1,124 $ 325 $ 1,071 $ 1,730 $ 426 $ 61 Net gain (loss) on investment securities ......... (2,405) 1,104 (1,646) 1,544 1,699 365 -------- ------- -------- -------- -------- ------- Net increase (decrease) in net assets resulting from operations ....................... (1,281) 1,429 (575) 3,274 2,125 426 -------- ------- -------- -------- -------- ------- Capital Unit Transactions: Proceeds from units sold (transferred) ........... 3,155 761 7,853 12,169 12,970 730 -------- ------- -------- -------- -------- ------- Less cost of units redeemed: Administrative charges .......................... 663 644 2,712 2,237 560 218 Policy loans .................................... 150 101 440 422 894 52 Surrender benefits .............................. 125 258 744 444 306 80 Death benefits .................................. 5 1 27 8 11 3 -------- ------- -------- -------- -------- ------- 943 1,004 3,923 3,111 1,771 353 -------- ------- -------- -------- -------- ------- Increase (decrease) in net assets from capital unit transactions ...................... 2,212 (243) 3,930 9,058 11,199 377 -------- ------- -------- -------- -------- ------- Net increase (decrease) in net assets ........... 931 1,186 3,355 12,332 13,324 803 Depositor's equity contribution (net redemption) ................................ 0 0 0 0 0 (199) Net Assets: Beginning of year ................................ 7,013 5,827 26,416 14,084 3,411 2,807 -------- ------- -------- -------- -------- ------- End of year ...................................... $ 7,944 $ 7,013 $ 29,771 $ 26,416 $ 16,735 $ 3,411 ======== ======= ======== ======== ======== ======= Unit Activity: Units outstanding - beginning of year ............ 475 489 1,468 919 322 304 Units issued ..................................... 474 672 1,064 1,292 1,432 258 Units redeemed ................................... (310) (686) (849) (743) (577) (240) -------- ------- -------- -------- -------- ------- Units outstanding - end of year .................. 639 475 1,683 1,468 1,177 322 ======== ======= ======== ======== ======== =======
See Notes to the Financial Statements, which is an integral part of this report. 120 WRL SERIES LIFE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED ALL AMOUNTS IN THOUSANDS
WRL WRL WRL J.P. MORGAN GOLDMAN SACHS GOLDMAN SACHS REAL ESTATE SECURITIES GROWTH SMALL CAP SUBACCOUNT SUBACCOUNT SUBACCOUNT ----------------------- ------------------------- -------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, ----------------------- ------------------------- -------------------- 2000 1999 2000 1999(1) 2000 1999(1) ----------- --------- ----------- ----------- --------- -------- Operations: Net investment income (loss) ..................... $ 17 $ 6 $ 7 $ (2) $ 11 $ 14 Net gain (loss) on investment securities ......... 345 (41) (156) 110 (27) 20 ------- ----- ------- ------- ------ ----- Net increase (decrease) in net assets resulting from operations ....................... 362 (35) (149) 108 (16) 34 ------- ----- ------- ------- ------ ----- Capital Unit Transactions: Proceeds from units sold (transferred) ........... 2,080 (26) 1,002 871 622 295 ------- ----- ------- ------- ------ ----- Less cost of units redeemed: Administrative charges .......................... 86 19 123 18 52 5 Policy loans .................................... 60 0 44 2 7 5 Surrender benefits .............................. 36 1 8 7 2 0 Death benefits .................................. 0 1 0 0 0 0 ------- ----- ------- ------- ------ ----- 182 21 175 27 61 10 ------- ----- ------- ------- ------ ----- Increase (decrease) in net assets from capital unit transactions ...................... 1,898 (47) 827 844 561 285 ------- ----- ------- ------- ------ ----- Net increase (decrease) in net assets ........... 2,260 (82) 678 952 545 319 Depositor's equity contribution (net redemption) ................................ (411) 0 (28) 25 (27) 25 Net Assets: Beginning of year ................................ 627 709 977 0 344 0 ------- ----- ------- ------- ------ ----- End of year ...................................... $ 2,476 $ 627 $ 1,627 $ 977 $ 862 $ 344 ======= ===== ======= ======= ====== ===== Unit Activity: Units outstanding - beginning of year ............ 78 84 87 0 31 0 Units issued ..................................... 816 67 161 106 80 41 Units redeemed ................................... (655) (73) (90) (19) (31) (10) ------- ----- ------- ------- ------ ----- Units outstanding - end of year .................. 239 78 158 87 80 31 ======= ===== ======= ======= ====== =====
See Notes to the Financial Statements, which is an integral part of this report. 121 WRL SERIES LIFE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED ALL AMOUNTS IN THOUSANDS
WRL WRL WRL T. ROWE PRICE T. ROWE PRICE SALOMON DIVIDEND GROWTH SMALL CAP ALL CAP SUBACCOUNT SUBACCOUNT SUBACCOUNT ----------------------- --------------------- ---------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, ----------------------- --------------------- ---------------------- 2000 1999(1) 2000 1999(1) 2000 1999(1) ----------- ----------- ----------- --------- ----------- ---------- Operations: Net investment income (loss) ..................... $ (4) $ (1) $ 5 $ 26 $ 57 $ 11 Net gain (loss) on investment securities ......... 87 (17) (412) 162 161 15 ------- ------- ------- ------ ------- ------ Net increase (decrease) in net assets resulting from operations ....................... 83 (18) (407) 188 218 26 ------- ------- ------- ------ ------- ------ Capital Unit Transactions: Proceeds from units sold (transferred) ........... 516 499 2,291 727 7,892 344 ------- ------- ------- ------ ------- ------ Less cost of units redeemed: Administrative charges .......................... 83 2 167 15 257 9 Policy loans .................................... 7 0 27 0 76 3 Surrender benefits .............................. 2 3 15 0 58 0 Death benefits .................................. 0 0 0 0 0 0 ------- ------- ------- ------ ------- ------ 92 5 209 15 391 12 ------- ------- ------- ------ ------- ------ Increase (decrease) in net assets from capital unit transactions ...................... 424 494 2,082 712 7,501 332 ------- ------- ------- ------ ------- ------ Net increase (decrease) in net assets ........... 507 476 1,675 900 7,719 358 Depositor's equity contribution (net redemption) ................................ (23) 25 (32) 25 (30) 25 Net Assets: Beginning of year ................................ 501 0 925 0 383 0 ------- ------- ------- ------ ------- ------ End of year ...................................... $ 985 $ 501 $ 2,568 $ 925 $ 8,072 $ 383 ======= ======= ======= ====== ======= ====== Unit Activity: Units outstanding - beginning of year ............ 55 0 75 0 36 0 Units issued ..................................... 132 65 301 161 836 58 Units redeemed ................................... (88) (10) (146) (86) (229) (22) ------- ------- ------- ------ ------- ------ Units outstanding - end of year .................. 99 55 230 75 643 36 ======= ======= ======= ====== ======= ======
See Notes to the Financial Statements, which is an integral part of this report. 122 WRL SERIES LIFE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED ALL AMOUNTS IN THOUSANDS
WRL WRL PILGRIM BAXTER DREYFUS MID CAP GROWTH MID CAP SUBACCOUNT SUBACCOUNT -------------------------- ------------------------- DECEMBER 31, DECEMBER 31, -------------------------- ------------------------- 2000 1999(1) 2000 1999(1) ------------ ----------- ----------- ----------- Operations: Net investment income (loss) ..................... $ 81 $ 5 $ 20 $ (1) Net gain (loss) on investment securities ......... (16,860) 1,268 40 16 --------- ------- ------- ------- Net increase (decrease) in net assets resulting from operations ....................... (16,779) 1,273 60 15 --------- ------- ------- ------- Capital Unit Transactions: Proceeds from units sold (transferred) ........... 55,513 3,885 1,562 297 --------- ------- ------- ------- Less cost of units redeemed: Administrative charges .......................... 2,546 37 96 0 Policy loans .................................... 1,156 18 21 0 Surrender benefits .............................. 323 30 4 0 Death benefits .................................. 72 0 0 0 --------- ------- ------- ------- 4,097 85 121 0 --------- ------- ------- ------- Increase (decrease) in net assets from capital unit transactions ...................... 51,416 3,800 1,441 297 --------- ------- ------- ------- Net increase (decrease) in net assets ........... 34,637 5,073 1,501 312 Depositor's equity contribution (net redemption) ................................ 0 (8) (27) 25 Net Assets: Beginning of year ................................ 5,065 0 337 0 --------- ------- ------- ------- End of year ...................................... $ 39,702 $ 5,065 $ 1,811 $ 337 ========= ======= ======= ======= Unit Activity: Units outstanding - beginning of year ............ 317 0 33 0 Units issued ..................................... 4,015 412 311 52 Units redeemed ................................... (1,403) (95) (185) (19) --------- ------- ------- ------- Units outstanding - end of year .................. 2,929 317 159 33 ========= ======= ======= =======
See Notes to the Financial Statements, which is an integral part of this report. 123 WRL Series Life Account Statements of Changes in Net Assets For the Year Ended All Amounts in Thousands
WRL WRL WRL WRL GREAT GREAT GREAT VALUE LINE COMPANIES - COMPANIES - COMPANIES - AGGRESSIVE GROWTH AMERICA(SM) TECHNOLOGY(SM) GLOBAL(2) SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT ------------------- -------------- -------------- ------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, ------------------- -------------- -------------- ------------- 2000(1) 2000(1) 2000(1) 2000(1) ------------------- -------------- -------------- ------------- Operations: Net investment income (loss) ..................... $ (4) $ (28) $ (13) $ (1) Net gain (loss) on investment securities ......... (185) 715 (1,437) (16) -------- -------- -------- -------- Net increase (decrease) in net assets resulting from operations ....................... (189) 687 (1,450) (17) -------- -------- -------- -------- Capital Unit Transactions: Proceeds from units sold (transferred) ........... 1,091 8,008 4,240 494 -------- -------- -------- -------- Less cost of units redeemed: Administrative charges .......................... 19 177 80 7 Policy loans .................................... 16 110 53 1 Surrender benefits .............................. 0 117 69 0 Death benefits .................................. 0 0 0 0 -------- -------- -------- -------- 35 404 202 8 -------- -------- -------- -------- Increase (decrease) in net assets from capital unit transactions ...................... 1,056 7,604 4,038 486 -------- -------- -------- -------- Net increase (decrease) in net assets ........... 867 8,291 2,588 469 Depositor's equity contribution (net redemption) ................................ 200 200 200 25 Net Assets: Beginning of year ................................ 0 0 0 0 -------- -------- -------- -------- End of year ...................................... $ 1,067 $ 8,491 $ 2,788 $ 494 ======== ======== ======== ======== Unit Activity: Units outstanding - beginning of year ............ 0 0 0 0 Units issued ..................................... 132 878 557 63 Units redeemed ................................... (13) (127) (141) (5) -------- -------- -------- --------- Units outstanding - end of year .................. 119 751 416 58 ======== ======== ======== ========
See Notes to the Financial Statements, which is an integral part of this report. 124 WRL SERIES LIFE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED ALL AMOUNTS IN THOUSANDS
WRL GABELLI GLOBAL FIDELITY VIP III FIDELITY VIP II FIDELITY VIP GROWTH GROWTH OPPORTUNITIES CONTRAFUND(R) EQUITY-INCOME SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT -------------- ---------------------- ----------------- -------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, -------------- ---------------------- ----------------- -------------- 2000(1) 2000(1) 2000(1) 2000(1) -------------- ---------------------- ----------------- -------------- Operations: Net investment income (loss) ..................... $ (1) $ (2) $ (3) $ (1) Net gain (loss) on investment securities ......... (34) (73) (48) 17 -------- ------- ------- -------- Net increase (decrease) in net assets resulting from operations ....................... (35) (75) (51) 16 -------- ------- ------- -------- Capital Unit Transactions: Proceeds from units sold (transferred) ........... 1,014 633 1,085 276 -------- ------- ------- -------- Less cost of units redeemed: Administrative charges .......................... 33 14 23 8 Policy loans .................................... 0 5 5 2 Surrender benefits .............................. 0 2 1 0 Death benefits .................................. 0 0 0 0 -------- ------- ------- -------- 33 21 29 10 -------- ------- ------- -------- Increase (decrease) in net assets from capital unit transactions ...................... 981 612 1,056 266 -------- ------- ------- -------- Net increase (decrease) in net assets ........... 946 537 1,005 282 Depositor's equity contribution (net redemption) ................................ 25 25 25 25 Net Assets: Beginning of year ................................ 0 0 0 0 -------- ------- ------- -------- End of year ...................................... $ 971 $ 562 $ 1,030 $ 307 ======== ======= ======= ======== Unit Activity: Units outstanding - beginning of year ............ 0 0 0 0 Units issued ..................................... 123 76 124 39 Units redeemed ................................... (16) (10) (14) (11) -------- ------- ------- -------- Units outstanding - end of year .................. 107 66 110 28 ======== ======= ======= ========
See Notes to the Financial Statements, which is an integral part of this report. 125 WRL SERIES LIFE ACCOUNT FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED
WRL J.P. MORGAN MONEY MARKET SUBACCOUNT -------------------------------------------------------------------------- DECEMBER 31, -------------------------------------------------------------------------- 2000 1999 1998 1997 1996 -------------- -------------- -------------- -------------- -------------- Accumulation unit value, beginning of year ......... $ 17.49 $ 16.83 $ 16.13 $ 15.45 $ 14.83 --------- --------- --------- --------- --------- Income from operations: Net investment income (loss) ..................... 0.90 0.66 0.70 0.68 0.62 Net realized and unrealized gain (loss) on investment ...................................... 0.00 0.00 0.00 0.00 0.00 --------- --------- --------- --------- --------- Net income (loss) from operations ............... 0.90 0.66 0.70 0.68 0.62 --------- --------- --------- --------- --------- Accumulation unit value, end of year ............... $ 18.39 $ 17.49 $ 16.83 $ 16.13 $ 15.45 ========= ========= ========= ========= ========= Total return ....................................... 5.17 % 3.92 % 4.36 % 4.37 % 4.17 % Ratios and supplemental data: Net assets at end of year (in thousands) .......... $ 60,279 $ 56,070 $ 24,576 $ 16,440 $ 12,740 Ratio of net investment income (loss) to average net assets ....................................... 5.05 % 3.87 % 4.24 % 4.28 % 4.07 % WRL AEGON BOND SUBACCOUNT ------------------------------------------------------------------------- DECEMBER 31, ------------------------------------------------------------------------- 2000 1999 1998 1997 1996 -------------- ------------- ------------- -------------- --------------- Accumulation unit value, beginning of year ......... $ 22.01 $ 22.89 $ 21.12 $ 19.53 $ 19.67 -------- ------- ------- --------- --------- Income from operations: Net investment income (loss) ..................... 1.04 1.13 1.01 1.01 0.99 Net realized and unrealized gain (loss) on investment ...................................... 1.14 (2.01) 0.76 0.58 (1.13) -------- ------- ------- --------- --------- Net income (loss) from operations ............... 2.18 (0.88) 1.77 1.59 (0.14) -------- ------- ------- --------- --------- Accumulation unit value, end of year ............... $ 24.19 $ 22.01 $ 22.89 $ 21.12 $ 19.53 ======== ======= ======= ========= ========= Total return ....................................... 9.90 % (3.81)% 8.34 % 8.18 % (0.75)% Ratios and supplemental data: Net assets at end of year (in thousands) .......... $ 25,935 $27,129 $24,934 $ 17,657 $ 11,585 Ratio of net investment income (loss) to average net assets ....................................... 4.58 % 5.10 % 4.58 % 5.06 % 5.34 %
See Notes to the Financial Statements, which is an integral part of this report. 126 WRL SERIES LIFE ACCOUNT FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED
WRL JANUS GROWTH SUBACCOUNT --------------------------------------------------------------------------- DECEMBER 31, --------------------------------------------------------------------------- 2000 1999 1998 1997 1996 -------------- ---------------- -------------- -------------- ------------- Accumulation unit value, beginning of year ......... $ 145.70 $ 92.07 $ 56.48 $ 48.48 $ 41.47 -------- ---------- -------- -------- -------- Income from operations: Net investment income (loss) ..................... 16.41 25.03 0.13 5.83 2.88 Net realized and unrealized gain (loss) on investment ...................................... (59.50) 28.60 35.46 2.17 4.13 -------- ---------- -------- -------- -------- Net income (loss) from operations ............... (43.09) 53.63 35.59 8.00 7.01 -------- ---------- -------- -------- -------- Accumulation unit value, end of year ............... $ 102.61 $ 145.70 $ 92.07 $ 56.48 $ 48.48 ======== ========== ======== ======== ======== Total return ....................................... (29.58)% 58.25 % 63.01 % 16.50 % 16.91 % Ratios and supplemental data: Net assets at end of year (in thousands) .......... $961,015 $1,353,957 $798,027 $450,271 $349,491 Ratio of net investment income (loss) to average net assets ....................................... 11.75 % 22.67 % 0.19 % 10.84 % 6.41 % WRL JANUS GLOBAL SUBACCOUNT --------------------------------------------------------------------------- DECEMBER 31, --------------------------------------------------------------------------- 2000 1999 1998 1997 1996 -------------- ---------------- -------------- -------------- ------------- Accumulation unit value, beginning of year ......... $ 38.91 $ 22.94 $ 17.80 $ 15.13 $ 11.95 -------- ---------- -------- -------- ------- Income from operations: Net investment income (loss) ..................... 7.93 2.44 0.82 2.30 1.50 Net realized and unrealized gain (loss) on investment ...................................... (15.05) 13.53 4.32 0.37 1.68 -------- ---------- -------- -------- ------- Net income (loss) from operations ............... (7.12) 15.97 5.14 2.67 3.18 -------- ---------- -------- -------- ------- Accumulation unit value, end of year ............... $ 31.79 $ 38.91 $ 22.94 $ 17.80 $ 15.13 ======== ========== ======== ======== ======= Total return ....................................... (18.28)% 69.58 % 28.86 % 17.69 % 26.60 % Ratios and supplemental data: Net assets at end of year (in thousands) .......... $410,109 $ 451,498 $233,256 $145,017 $83,159 Ratio of net investment income (loss) to average net assets ....................................... 20.55 % 9.07 % 3.92 % 13.39 % 11.09 %
See Notes to the Financial Statements, which is an integral part of this report. 127 WRL SERIES LIFE ACCOUNT FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED
WRL LKCM STRATEGIC TOTAL RETURN SUBACCOUNT --------------------------------- DECEMBER 31, --------------------------------- 2000 1999 ---------------- ---------------- Accumulation unit value, beginning of year ......... $ 22.82 $ 20.55 ---------- ---------- Income from operations: Net investment income (loss) ..................... 1.63 1.68 Net realized and unrealized gain (loss) on investment ..................................... (2.68) 0.59 ---------- ---------- Net income (loss) from operations .............. (1.05) 2.27 ---------- ---------- Accumulation unit value, end of year ............... $ 21.77 $ 22.82 ========== ========== Total return ....................................... (4.62)% 11.07 % Ratios and supplemental data: Net assets at end of year (in thousands) .......... $ 98,466 $ 106,665 Ratio of net investment income (loss) to average net assets ....................................... 7.43 % 7.93 % WRL LKCM STRATEGIC TOTAL RETURN SUBACCOUNT ------------------------------------------- DECEMBER 31, ------------------------------------------- 1998 1997 1996 -------------- -------------- ------------- Accumulation unit value, beginning of year ......... $ 18.91 $ 15.66 $ 13.74 -------- -------- -------- Income from operations: Net investment income (loss) ..................... 0.71 1.56 0.82 Net realized and unrealized gain (loss) on investment ..................................... 0.93 1.69 1.10 -------- -------- -------- Net income (loss) from operations .............. 1.64 3.25 1.92 -------- -------- -------- Accumulation unit value, end of year ............... $ 20.55 $ 18.91 $ 15.66 ======== ======== ======== Total return ....................................... 8.66 % 20.77 % 13.97 % Ratios and supplemental data: Net assets at end of year (in thousands) .......... $ 98,926 $ 80,753 $ 55,900 Ratio of net investment income (loss) to average net assets ....................................... 3.67 % 8.89 % 5.76 % WRL VKAM EMERGING GROWTH SUBACCOUNT -------------------------------------------------------------------------- DECEMBER 31, -------------------------------------------------------------------------- 2000 1999 1998 1997 1996 -------------- --------------- -------------- -------------- ------------- Accumulation unit value, beginning of year ......... $ 64.99 $ 31.96 $ 23.48 $ 19.51 $ 16.56 -------- ---------- -------- -------- -------- Income from operations: Net investment income (loss) ..................... 16.83 9.32 0.91 2.20 0.82 Net realized and unrealized gain (loss) on investment ...................................... (25.08) 23.71 7.57 1.77 2.13 -------- ---------- -------- -------- -------- Net income (loss) from operations ............... (8.25) 33.03 8.48 3.97 2.95 -------- ---------- -------- -------- -------- Accumulation unit value, end of year ............... $ 56.74 $ 64.99 $ 31.96 $ 23.48 $ 19.51 ======== ========== ======== ======== ======== Total return ....................................... (12.70)% 103.33 % 36.11 % 20.37 % 17.82 % Ratios and supplemental data: Net assets at end of year (in thousands) .......... $580,202 $ 608,130 $262,665 $164,702 $107,925 Ratio of net investment income (loss) to average net assets ....................................... 23.62 % 23.19 % 3.44 % 10.18 % 4.51 %
See Notes to the Financial Statements, which is an integral part of this report. 128 WRL SERIES LIFE ACCOUNT FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED
WRL ALGER AGGRESSIVE GROWTH SUBACCOUNT ------------------------------------------------------------------------ DECEMBER 31, ------------------------------------------------------------------------ 2000 1999 1998 1997 1996 -------------- -------------- -------------- ------------- ------------- Accumulation unit value, beginning of year ......... $ 44.67 $ 26.67 $ 18.10 $ 14.70 $ 13.43 -------- -------- -------- ------- ------- Income from operations: Net investment income (loss) ..................... 4.76 4.90 1.33 1.75 0.36 Net realized and unrealized gain (loss) on investment ...................................... (19.03) 13.10 7.24 1.65 0.91 -------- -------- -------- ------- ------- Net income (loss) from operations ............... (14.27) 18.00 8.57 3.40 1.27 -------- -------- -------- ------- ------- Accumulation unit value, end of year ............... $ 30.40 $ 44.67 $ 26.67 $ 18.10 $ 14.70 ======== ======== ======== ======= ======= Total return ....................................... (31.94)% 67.52 % 47.36 % 23.14 % 9.46 % Ratios and supplemental data: Net assets at end of year (in thousands) .......... $280,172 $354,178 $177,857 $94,652 $54,408 Ratio of net investment income (loss) to average net assets ....................................... 11.65 % 15.54 % 6.20 % 10.26 % 2.65 % WRL AEGON BALANCED SUBACCOUNT ------------------------------------------------------------------------- DECEMBER 31, ------------------------------------------------------------------------- 2000 1999 1998 1997 1996 --------------- -------------- -------------- ------------- ------------- Accumulation unit value, beginning of year ......... $ 15.33 $ 15.02 $ 14.17 $ 12.21 $ 11.13 --------- -------- -------- ------- ------- Income from operations: Net investment income (loss) ..................... 0.17 0.19 0.25 1.55 0.36 Net realized and unrealized gain (loss) on investment ...................................... 0.58 0.12 0.60 0.41 0.72 --------- -------- -------- ------- ------- Net income (loss) from operations ............... 0.75 0.31 0.85 1.96 1.08 --------- -------- -------- ------- ------- Accumulation unit value, end of year ............... $ 16.08 $ 15.33 $ 15.02 $ 14.17 $ 12.21 ========= ======== ======== ======= ======= Total return ....................................... 4.88 % 2.11 % 5.98 % 16.06 % 9.73 % Ratios and supplemental data: Net assets at end of year (in thousands) .......... $ 20,952 $ 18,183 $ 14,864 $10,716 $ 6,418 Ratio of net investment income (loss) to average net assets ....................................... 1.10 % 1.26 % 1.76 % 11.62 % 3.18 %
See Notes to the Financial Statements, which is an integral part of this report. 129 WRL SERIES LIFE ACCOUNT FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED
WRL FEDERATED GROWTH & Income Subaccount --------------------------------------------------------------------- December 31, --------------------------------------------------------------------- 2000 1999 1998 1997 1996 ------------- ------------- ------------- ------------- ------------- Accumulation unit value, beginning of year ......... $ 15.57 $ 16.44 $ 16.09 $ 13.03 $ 11.77 ------- ------- ------- ------- ------- Income from operations: Net investment income (loss) ..................... 0.85 1.05 0.77 2.61 0.76 Net realized and unrealized gain (loss) on investment ...................................... 3.51 (1.92) (0.42) 0.45 0.50 ------- ------- ------- ------- ------- Net income (loss) from operations ............... 4.36 (0.87) 0.35 3.06 1.26 ------- ------- ------- ------- ------- Accumulation unit value, end of year ............... $ 19.93 $ 15.57 $ 16.44 $ 16.09 $ 13.03 ======= ======= ======= ======= ======= Total return ....................................... 28.01 % (5.31)% 2.13 % 23.54 % 10.64 % Ratios and supplemental data: Net assets at end of year (in thousands) .......... $26,883 $17,389 $16,047 $ 9,063 $ 5,501 Ratio of net investment income (loss) to average net assets ....................................... 5.00 % 6.51 % 4.83 % 18.50 % 6.38 % WRL DEAN ASSET ALLOCATION SUBACCOUNT --------------------------------------------------------------------- DECEMBER 31, --------------------------------------------------------------------- 2000 1999 1998 1997 1996 ------------- ------------- ------------- ------------- ------------- Accumulation unit value, beginning of year ......... $ 15.66 $ 16.74 $ 15.60 $ 13.50 $ 11.90 ------- ------- ------- ------- ------- Income from operations: Net investment income (loss) ..................... 1.20 0.41 1.58 1.20 0.53 Net realized and unrealized gain (loss) on investment ...................................... 1.33 (1.49) (0.44) 0.90 1.07 ------- ------- ------- ------- ------- Net income (loss) from operations ............... 2.53 (1.08) 1.14 2.10 1.60 ------- ------- ------- ------- ------- Accumulation unit value, end of year ............... $ 18.19 $ 15.66 $ 16.74 $ 15.60 $ 13.50 ======= ======= ======= ======= ======= Total return ....................................... 16.16 % (6.48)% 7.36 % 15.55 % 13.40 % Ratios and supplemental data: Net assets at end of year (in thousands) .......... $34,213 $33,317 $39,904 $29,123 $17,946 Ratio of net investment income (loss) to average net assets ....................................... 7.33 % 2.50 % 9.69 % 8.14 % 4.35 %
See Notes to the Financial Statements, which is an integral part of this report. 130 WRL SERIES LIFE ACCOUNT FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED
WRL C.A.S.E. GROWTH SUBACCOUNT ------------------------------------------------------------------- DECEMBER 31, ------------------------------------------------------------------- 2000 1999 1998 1997 1996(1) ----------- ------------- ------------- ------------- ------------- Accumulation unit value, beginning of year ......... $ 16.60 $ 12.51 $ 12.32 $ 10.81 $ 10.00 -------- ------- ------- ------- -------- Income from operations: Net investment income (loss) ..................... 2.56 1.52 1.24 1.51 0.37 Net realized and unrealized gain (loss) on investment ...................................... (6.12) 2.57 (1.05) 0.00 0.44 -------- ------- ------- ------- -------- Net income (loss) from operations ............... (3.56) 4.09 0.19 1.51 0.81 -------- ------- ------- ------- -------- Accumulation unit value, end of year ............... $ 13.04 $ 16.60 $ 12.51 $ 12.32 $ 10.81 ======== ======= ======= ======= ======== Total return ....................................... (21.42)% 32.65 % 1.56 % 14.00 % 8.09 % Ratios and supplemental data: Net assets at end of year (in thousands) .......... $ 22,344 $27,509 $17,730 $11,946 $ 4,466 Ratio of net investment income (loss) to average net assets ....................................... 16.28 % 10.16 % 10.21 % 12.65 % 6.11 % WRL NWQ VALUE EQUITY SUBACCOUNT -------------------------------------------------------------------- DECEMBER 31, -------------------------------------------------------------------- 2000 1999 1998 1997 1996(1) ------------- ------------- ------------ ------------- ------------- Accumulation unit value, beginning of year ......... $ 14.08 $ 13.16 $ 13.94 $ 11.25 $ 10.00 -------- ------- ------- ------- -------- Income from operations: Net investment income (loss) ..................... 0.23 0.20 0.95 0.14 0.05 Net realized and unrealized gain (loss) on investment ...................................... 1.76 0.72 (1.73) 2.55 1.20 -------- ------- ------- ------- -------- Net income (loss) from operations ............... 1.99 0.92 (0.78) 2.69 1.25 -------- ------- ------- ------- -------- Accumulation unit value, end of year ............... $ 16.07 $ 14.08 $ 13.16 $ 13.94 $ 11.25 ======== ======= ======= ======= ======== Total return ....................................... 14.17 % 6.98 % (5.63)% 23.93 % 12.51 % Ratios and supplemental data: Net assets at end of year (in thousands) .......... $ 28,888 $26,678 $26,083 $26,714 $ 8,887 Ratio of net investment income (loss) to average net assets ....................................... 1.58 % 1.42 % 6.84 % 1.05 % 0.77 %
See Notes to the Financial Statements, which is an integral part of this report. 131 WRL SERIES LIFE ACCOUNT FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED
WRL GE INTERNATIONAL EQUITY SUBACCOUNT ---------------------------------------------------------- DECEMBER 31, ---------------------------------------------------------- 2000 1999 1998 1997(1) ------------ ------------- ------------ ------------ Accumulation unit value, beginning of year ......... $ 14.76 $ 11.92 $ 10.65 $ 10.00 -------- ------- -------- -------- Income from operations: Net investment income (loss) ..................... 2.00 0.62 (0.09) (0.03) Net realized and unrealized gain (loss) on investment ...................................... (4.33) 2.22 1.36 0.68 -------- ------- -------- -------- Net income (loss) from operations ............... (2.33) 2.84 1.27 0.65 -------- ------- -------- -------- Accumulation unit value, end of year ............... $ 12.43 $ 14.76 $ 11.92 $ 10.65 ======== ======= ======== ======== Total return ....................................... (15.75)% 23.84 % 11.84 % 6.54 % Ratios and supplemental data: Net assets at end of year (in thousands) .......... $ 7,944 $ 7,013 $ 5,827 $ 2,289 Ratio of net investment income (loss) to average net assets ....................................... 14.54 % 5.09 % (0.81)% (0.28)% WRL GE U.S. EQUITY SUBACCOUNT ------------------------------------------------------------ DECEMBER 31, ------------------------------------------------------------ 2000 1999 1998 1997(1) ------------ ------------- ------------- ------------- Accumulation unit value, beginning of year ......... $ 17.99 $ 15.33 $ 12.59 $ 10.00 -------- -------- -------- ------- Income from operations: Net investment income (loss) ..................... 0.68 1.38 0.73 0.99 Net realized and unrealized gain (loss) on investment ...................................... (0.98) 1.28 2.01 1.60 -------- -------- -------- ------- Net income (loss) from operations ............... (0.30) 2.66 2.74 2.59 -------- -------- -------- ------- Accumulation unit value, end of year ............... $ 17.69 $ 17.99 $ 15.33 $ 12.59 ======== ======== ======== ======= Total return ....................................... (1.67)% 17.35 % 21.78 % 25.89 % Ratios and supplemental data: Net assets at end of year (in thousands) .......... $ 29,771 $ 26,416 $ 14,084 $ 3,258 Ratio of net investment income (loss) to average net assets ....................................... 3.81 % 8.27 % 5.30 % 8.28 %
See Notes to the Financial Statements, which is an integral part of this report. 132 WRL SERIES LIFE ACCOUNT FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED
WRL THIRD AVENUE VALUE SUBACCOUNT --------------------------------------------- DECEMBER 31, --------------------------------------------- 2000 1999 1998(1) ------------- ------------- ------------- Accumulation unit value, beginning of year ......... $ 10.59 $ 9.23 $ 10.00 ------- -------- -------- Income from operations: Net investment income (loss) ..................... 0.60 0.19 (0.05) Net realized and unrealized gain (loss) on investment ...................................... 3.03 1.17 (0.72) ------- -------- -------- Net income (loss) from operations ............... 3.63 1.36 (0.77) ------- -------- -------- Accumulation unit value, end of year ............... $ 14.22 $ 10.59 $ 9.23 ======= ======== ======== Total return ....................................... 34.26 % 14.68 % (7.67)% Ratios and supplemental data: Net assets at end of year (in thousands) .......... $16,735 $ 3,411 $ 2,807 Ratio of net investment income (loss) to average net assets ....................................... 4.53 % 1.98 % (0.52)% WRL J.P. MORGAN REAL ESTATE SECURITIES SUBACCOUNT -------------------------------------------- DECEMBER 31, -------------------------------------------- 2000 1999 1998(1) ------------- ------------ ------------- Accumulation unit value, beginning of year ......... $ 8.06 $ 8.46 $ 10.00 -------- ------- -------- Income from operations: Net investment income (loss) ..................... 0.10 0.07 (0.05) Net realized and unrealized gain (loss) on investment ...................................... 2.20 (0.47) (1.49) -------- ------- -------- Net income (loss) from operations ............... 2.30 (0.40) (1.54) -------- ------- -------- Accumulation unit value, end of year ............... $ 10.36 $ 8.06 $ 8.46 ======== ======= ======== Total return ....................................... 28.46 % (4.63)% (15.44)% Ratios and supplemental data: Net assets at end of year (in thousands) .......... $ 2,476 $ 627 $ 709 Ratio of net investment income (loss) to average net assets ....................................... 1.07 % 0.95 % (0.90)%
See Notes to the Financial Statements, which is an integral part of this report. 133 WRL SERIES LIFE ACCOUNT FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED
WRL WRL GOLDMAN SACHS GOLDMAN SACHS GROWTH SMALL CAP SUBACCOUNT SUBACCOUNT ------------------------- -------------------------- DECEMBER 31, DECEMBER 31, ------------------------- -------------------------- 2000 1999(1) 2000 1999(1) ------------ ------------ ------------ ------------- Accumulation unit value, beginning of year .......... $ 11.29 $ 10.00 $ 10.92 $ 10.00 ------- ------- ------- -------- Income from operations: Net investment income (loss) ...................... 0.06 (0.05) 0.22 0.76 Net realized and unrealized gain (loss) on investment ...................................... (1.06) 1.34 (0.34) 0.16 ------- ------- ------- -------- Net income (loss) from operations ................ (1.00) 1.29 (0.12) 0.92 ------- ------- ------- -------- Accumulation unit value, end of year ................ $ 10.29 $ 11.29 $ 10.80 $ 10.92 ======= ======= ======= ======== Total return ........................................ (8.84)% 12.91 % (1.15)% 9.23 % Ratios and supplemental data: Net assets at end of year (in thousands) ........... $ 1,627 $ 977 $ 862 $ 344 Ratio of net investment income (loss) to average net assets ........................................ 0.59 % (0.90)% 2.00 % 15.66 % WRL T. ROWE PRICE DIVIDEND GROWTH SUBACCOUNT --------------------------- DECEMBER 31, --------------------------- 2000 1999(1) -------------- ------------ Accumulation unit value, beginning of year .......... $ 9.16 $ 10.00 ---------- ------- Income from operations: Net investment income (loss) ...................... (0.04) (0.04) Net realized and unrealized gain (loss) on investment ...................................... 0.86 (0.80) ---------- ------- Net income (loss) from operations ................ 0.82 (0.84) ---------- ------- Accumulation unit value, end of year ................ $ 9.98 $ 9.16 ========== ======= Total return ........................................ 8.89 % (8.37)% Ratios and supplemental data: Net assets at end of year (in thousands) ........... $ 985 $ 501 Ratio of net investment income (loss) to average net assets ........................................ (0.42)% (0.90)% WRL WRL T. ROWE PRICE SALOMON SMALL CAP ALL CAP SUBACCOUNT SUBACCOUNT -------------------------- --------------------------- DECEMBER 31, DECEMBER 31, -------------------------- --------------------------- 2000 1999(1) 2000 1999(1) ------------ ------------- ------------- ------------- Accumulation unit value, beginning of year ...... $ 12.31 $ 10.00 $ 10.70 $ 10.00 ------- -------- -------- -------- Income from operations: Net investment income (loss) .................. 0.04 0.41 0.23 0.40 Net realized and unrealized gain (loss) on investment .................................. (1.18) 1.90 1.62 0.30 ------- -------- -------- -------- Net income (loss) from operations ............ (1.14) 2.31 1.85 0.70 ------- -------- -------- -------- Accumulation unit value, end of year ............ $ 11.17 $ 12.31 $ 12.55 $ 10.70 ======= ======== ======== ======== Total return .................................... (9.27)% 23.09 % 17.24 % 7.02 % Ratios and supplemental data: Net assets at end of year (in thousands) ....... $ 2,568 $ 925 $ 8,072 $ 383 Ratio of net investment income (loss) to average net assets .................................... 0.29 % 8.13 % 1.91 % 8.07 % WRL PILGRIM BAXTER MID CAP GROWTH SUBACCOUNT --------------------------- DECEMBER 31 --------------------------- 2000 1999(1) ------------- ------------- Accumulation unit value, beginning of year ...... $ 15.98 $ 10.00 --------- -------- Income from operations: Net investment income (loss) .................. 0.04 0.04 Net realized and unrealized gain (loss) on investment .................................. (2.46) 5.94 --------- -------- Net income (loss) from operations ............ (2.42) 5.98 --------- -------- Accumulation unit value, end of year ............ $ 13.56 $ 15.98 ========= ======== Total return .................................... (15.16)% 59.78 % Ratios and supplemental data: Net assets at end of year (in thousands) ....... 39,702 $ 5,065 Ratio of net investment income (loss) to average net assets .................................... 0.25 % 0.62 %
See Notes to the Financial Statements, which is an integral part of this report. 134 WRL SERIES LIFE ACCOUNT FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED
WRL WRL WRL DREYFUS VALUE LINE GREAT COMPANIES - MID CAP AGGRESSIVE GROWTH AMERICA(SM) SUBACCOUNT SUBACCOUNT SUBACCOUNT ----------------------------- ------------------- ------------------ DECEMBER 31, DECEMBER 31, DECEMBER 31, ----------------------------- ------------------- ------------------ 2000 1999(1) 2000(1) 2000(1) -------------- ------------ ------------------- ------------------ Accumulation unit value, beginning of year ......... $ 10.14 $ 10.00 $ 10.00 $ 10.00 --------- ------- -------- ------- Income from operations: Net investment income (loss) ..................... 0.23 (0.04) (0.06) (0.06) Net realized and unrealized gain (loss) on investment ...................................... 0.98 0.18 (0.96) 1.37 --------- ------- -------- ------- Net income (loss) from operations ............... 1.21 0.14 (1.02) 1.31 --------- ------- -------- ------- Accumulation unit value, end of year ............... $ 11.35 $ 10.14 $ 8.98 $ 11.31 ========= ======= ======== ======= Total return ....................................... 11.91 % 1.44 % (10.24)% 13.12 % Ratios and supplemental data: Net assets at end of year (in thousands) .......... $ 1,811 $ 337 $ 1,067 $ 8,491 Ratio of net investment income (loss) to average net assets ....................................... 2.02 % (0.90)% (0.90)% (0.90)%
WRL WRL WRL GREAT COMPANIES - GREAT COMPANIES - GABELLI TECHNOLOGY(SM) GLOBAL(2) GLOBAL GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT ------------------- ------------------- -------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, ------------------- ------------------- -------------- 2000(1) 2000(1) 2000(1) ------------------- ------------------- -------------- Accumulation unit value, beginning of year .......... $ 10.00 $ 10.00 $ 10.00 -------- -------- ------- Income from operations: Net investment income (loss) ...................... (0.05) (0.03) (0.03) Net realized and unrealized gain (loss) on investment ....................................... (3.25) (1.45) (0.90) -------- -------- ------- Net income (loss) from operations ................ (3.30) (1.48) (0.93) -------- -------- ------- Accumulation unit value, end of year ................ $ 6.70 $ 8.52 $ 9.07 ======== ======== ======= Total return ........................................ (33.01)% (14.84)% (9.27)% Ratios and supplemental data: Net assets at end of year (in thousands) ........... $ 2,788 $ 494 $ 971 Ratio of net investment income (loss) to average net assets ........................................ (0.90)% (0.90)% (0.90)%
See Notes to the Financial Statements, which is an integral part of this report. 135 WRL SERIES LIFE ACCOUNT FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED
FIDELITY VIP III FIDELITY VIP II FIDELITY VIP GROWTH OPPORTUNITIES CONTRAFUND(R) EQUITY-INCOME SUBACCOUNT SUBACCOUNT SUBACCOUNT ---------------------- ----------------- -------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, ---------------------- ----------------- -------------- 2000(1) 2000(1) 2000(1) ---------------------- ----------------- -------------- Accumulation unit value, beginning of year ......... $ 10.00 $ 10.00 $ 10.00 -------- ------- ------- Income from operations: Net investment income (loss) ..................... (0.06) (0.06) (0.06) Net realized and unrealized gain (loss) on investment ...................................... (1.38) (0.56) 1.05 -------- ------- ------- Net income (loss) from operations ............... (1.44) (0.62) 0.99 -------- ------- ------- Accumulation unit value, end of year ............... $ 8.56 $ 9.38 $ 10.99 ======== ======= ======= Total return ....................................... (14.36)% (6.16)% 9.91 % Ratios and supplemental data: Net assets at end of year (in thousands) .......... $ 562 $ 1,030 $ 307 Ratio of net investment income (loss) to average net assets ....................................... (0.90)% (0.90)% (0.90)%
See Notes to the Financial Statements, which is an integral part of this report. 136 WRL SERIES LIFE ACCOUNT NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 2000 NOTE 1 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The WRL Series Life Account (the "Life Account"), was established as a variable life insurance separate account of Western Reserve Life Assurance Co. of Ohio ("WRL", or the "depositor") and is registered as a unit investment trust under the Investment Company Act of 1940, as amended. The Life Account contains thirty-one investment options referred to as subaccounts. Each subaccount invests exclusively in a corresponding Portfolio (the "Portfolio") of a fund, which collectively is referred to as the "Fund". WRL Series Life Account contains four funds (collectively referred to as the "Funds"). Each fund is a registered management investment company under the Investment Company Act of 1940, as amended. SUBACCOUNT INVESTMENT BY FUND: WRL SERIES FUND, INC. WRL J.P. Morgan Money Market WRL AEGON Bond WRL Janus Growth WRL Janus Global WRL LKCM Strategic Total Return WRL VKAM Emerging Growth WRL Alger Aggressive Growth WRL AEGON Balanced WRL Federated Growth & Income WRL Dean Asset Allocation WRL C.A.S.E. Growth WRL NWQ Value Equity WRL GE International Equity (formerly WRL GE/Scottish Equitable International Equity) WRL GE U.S. Equity WRL Third Avenue Value WRL J.P. Morgan Real Estate Securities WRL Goldman Sachs Growth WRL Goldman Sachs Small Cap WRL T. Rowe Price Dividend Growth WRL T. Rowe Price Small Cap WRL Salomon All Cap WRL Pilgrim Baxter Mid Cap Growth WRL Dreyfus Mid Cap WRL Value Line Aggressive Growth WRL Great Companies - America(SM) WRL SERIES FUND, INC. (CONTINUED) WRL Great Companies - Technology(SM) WRL Great Companies - Global(2) WRL Gabelli Global Growth VARIABLE INSURANCE PRODUCTS FUND III (VIP III) Fidelity VIP III Growth Opportunities Portfolio - Service Class 2 (Referred to as "Fidelity VIP III Growth Opportunities") VARIABLE INSURANCE PRODUCTS FUND II (VIP II) Fidelity VIP II Contrafund(R) Portfolio - Service Class 2 (Referred to as "Fidelity VIP II Contrafund(R)") VARIABLE INSURANCE PRODUCTS FUND (VIP) Fidelity VIP Equity-Income Portfolio - Service Class 2 (Referred to as "Fidelity VIP Equity-Income") The WRL Series Fund, Inc. has entered into annually renewable investment advisory agreements for each Portfolio with WRL Investment Management, Inc. ("WRL Management") as investment adviser. WRL Management is a wholly-owned subsidiary of WRL. Costs incurred in connection with the advisory services rendered by WRL Management are paid by each Portfolio. WRL Management has entered into sub-advisory agreements with various management companies ("Sub-Advisers"), some of which are affiliates of WRL. Each Sub-Adviser is compensated directly by WRL Management. The other three Funds have each entered into a participation agreement for their respective Portfolio among the Fund, its adviser, and WRL. Each period reported on within the Annual Report reflects a full twelve-month period, except as follows: SUBACCOUNT INCEPTION DATE - ---------- -------------- WRL C.A.S.E. Growth 05/01/1996 WRL NWQ Value Equity 05/01/1996 WRL GE International Equity (formerly WRL GE/Scottish Equitable International Equity) 01/02/1997 WRL GE U.S. Equity 01/02/1997 WRL Third Avenue Value 01/02/1998 WRL J.P. Morgan Real Estate Securities 05/01/1998 WRL Goldman Sachs Growth 07/01/1999 WRL Goldman Sachs Small Cap 07/01/1999 WRL T. Rowe Price Dividend Growth 07/01/1999 WRL T. Rowe Price Small Cap 07/01/1999 137 WRL SERIES LIFE ACCOUNT NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) AT DECEMBER 31, 2000 NOTE 1 -- (CONTINUED) SUBACCOUNT (CONTINUED) INCEPTION DATE - ---------------------- -------------- WRL Salomon All Cap 07/01/1999 WRL Pilgrim Baxter Mid Cap Growth 07/01/1999 WRL Dreyfus Mid Cap 07/01/1999 WRL Value Line Aggressive Growth 05/01/2000 WRL Great Companies - America(SM) 05/01/2000 WRL Great Companies - Technology(SM) 05/01/2000 WRL Great Companies - Global(2) 09/01/2000 WRL Gabelli Global Growth 09/01/2000 Fidelity VIP III Growth Opportunities 05/01/2000 Fidelity VIP II Contrafund(R) 05/01/2000 Fidelity VIP Equity-Income 05/01/2000 Effective September 1, 2000, the WRL Janus Global subaccount is not available for investment to new policy owners. The subaccount remains open to the policy owners who purchased the Policy before September 1, 2000. On May 1, 2000 and September 1, 2000, WRL made initial contributions totaling $ 675,000 and $ 50,000 to the Life Account. The respective amounts of the contributions and units received are as follows: SUBACCOUNT CONTRIBUTION UNITS - ---------- ------------ ----- MAY 1, 2000: WRL Value Line Aggressive Growth $ 200,000 20,000 WRL Great Companies - America(SM) 200,000 20,000 WRL Great Companies - Technology(SM) 200,000 20,000 Fidelity VIP III Growth Opportunities 25,000 2,500 Fidelity VIP II Contrafund(R) 25,000 2,500 Fidelity VIP Equity-Income 25,000 2,500 SEPTEMBER 1, 2000: WRL Great Companies - Global(2) 25,000 2,500 WRL Gabelli Global Growth 25,000 2,500 The Life Account holds assets to support the benefits under certain flexible premium variable universal life insurance policies (the "Policies") issued by WRL. The Life Account's equity transactions are accounted for using the appropriate effective date at the corresponding accumulation unit value. The following significant accounting policies, which are in conformity with accounting principles generally accepted in the United States, have been consistently applied in the preparation of the Life Account Financial Statements. The preparation of the Financial Statements required management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. A. VALUATION OF INVESTMENTS AND SECURITIES TRANSACTIONS Investments in the Funds' shares are valued at the closing net asset value ("NAV") per share of the underlying Portfolio, as determined by the Funds. Investment transactions are accounted for on the trade date at the Portfolio NAV next determined after receipt of sale or redemption orders without sales charges. Dividend income and capital gains distributions are recorded on the ex-dividend date. The cost of investments sold is determined on a first-in, first-out basis. B. FEDERAL INCOME TAXES The operations of the Life Account are a part of and are taxed with the total operations of WRL, which is taxed as a life insurance company under the Internal Revenue Code. Under the Internal Revenue Code law, the investment income of the Life Account, including realized and unrealized capital gains, is not taxable to WRL. Accordingly, no provision for Federal income taxes has been made. NOTE 2 -- CHARGES AND DEDUCTIONS Charges are assessed by WRL in connection with the issuance and administration of the Policies. A. POLICY CHARGES Under some forms of the Policies, a sales charge and premium taxes are deducted by WRL prior to allocation of policy owner payments to the subaccounts. Contingent surrender charges may also apply. Under all forms of the Policy, monthly charges against Policy cash values are made to compensate WRL for costs of insurance provided. B. LIFE ACCOUNT CHARGES A daily charge equal to an annual rate of .90 % of average daily net assets is assessed to compensate WRL for assumption of mortality and expense risks for administrative services in 138 WRL SERIES LIFE ACCOUNT NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) AT DECEMBER 31, 2000 connection with issuance and administration of the Policies. This charge (not assessed at the individual policy level) effectively reduces the value of a unit outstanding during the year. NOTE 3 -- DIVIDEND DISTRIBUTIONS Dividends are not declared by the Life Account, since the increase in the value of the underlying investment in the Funds is reflected daily in the accumulation unit value used to calculate the equity value within the Life Account. Consequently, a dividend distribution by the underlying Funds does not change either the accumulation unit value or equity values within the Life Account. NOTE 4 -- SECURITIES TRANSACTIONS Securities transactions for the period ended December 31, 2000 are as follows (in thousands): PURCHASES PROCEEDS OF FROM SALES SUBACCOUNT SECURITIES OF SECURITIES - ---------- ---------- ------------- WRL J.P. Morgan Money Market $ 638,618 $ 636,655 WRL AEGON Bond 4,135 6,597 WRL Janus Growth 243,926 80,714 WRL Janus Global 163,941 13,299 WRL LKCM Strategic Total Return 13,451 9,338 WRL VKAM Emerging Growth 816,363 582,058 WRL Alger Aggressive Growth 106,886 11,655 WRL AEGON Balanced 3,704 1,678 WRL Federated Growth & Income 10,936 5,680 WRL Dean Asset Allocation 5,321 6,820 WRL C.A.S.E. Growth 11,454 6,201 WRL NWQ Value Equity 5,542 6,294 WRL GE International Equity 5,524 2,162 WRL GE U.S. Equity 9,487 4,466 WRL Third Avenue Value 14,811 3,442 WRL J.P. Morgan Real Estate Securities 7,113 5,626 WRL Goldman Sachs Growth 1,393 609 WRL Goldman Sachs Small Cap 736 224 WRL T. Rowe Price Dividend Growth 1,002 595 WRL T. Rowe Price Small Cap 2,912 883 WRL Salomon All Cap 8,645 1,108 WRL Pilgrim Baxter Mid Cap Growth 56,247 4,861 WRL Dreyfus Mid Cap 2,964 1,516 WRL Value Line Aggressive Growth 1,336 84 WRL Great Companies - America(SM) 8,220 449 WRL Great Companies - Technology(SM) 4,615 394 WRL Great Companies - Global(2) 515 9 WRL Gabelli Global Growth 1,003 9 Fidelity VIP III Growth Opportunities 695 60 Fidelity VIP II Contrafund(R) 1,152 74 Fidelity VIP Equity-Income 394 104 NOTE 5 -- FINANCIAL HIGHLIGHTS Per unit information has been computed using average units outstanding throughout each period. Total return is not annualized for periods of less than one year. The ratio of net investment income (loss) to average net assets is annualized for periods of less than one year. 139 Report of Independent Auditors The Board of Directors Western Reserve Life Assurance Co. of Ohio We have audited the accompanying statutory-basis balance sheets of Western Reserve Life Assurance Co. of Ohio (an indirect wholly-owned subsidiary of AEGON N.V.) as of December 31, 2000 and 1999, and the related statutory-basis statements of operations, changes in capital and surplus, and cash flow for each of the three years in the period ended December 31, 2000. Our audits also included the statutory-basis financial statement schedules required by Regulation S-X, Article 7. These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We did not audit the "Separate Account Assets" and "Separate Account Liabilities" included in the statutory-basis balance sheet of the Company as of December 31, 1999. The Separate Account balance sheets as of December 31, 1999 were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the data included for the Separate Accounts as of December 31, 1999, is based solely on the report of the other auditors. We conducted our audits 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 audits and the report of other auditors provide a reasonable basis for our opinion. As described in Note 1 to the financial statements, the Company presents its financial statements in conformity with accounting practices prescribed or permitted by the Insurance Department of the State of Ohio, which practices differ from accounting principles generally accepted in the United States. The variances between such practices and accounting principles generally accepted in the United States also are described in Note 1. The effects on the financial statements of these variances are not reasonably determinable but are presumed to be material. In our opinion, because of the effects of the matter described in the preceding paragraph, the financial statements referred to above do not present fairly, in conformity with accounting principles generally accepted in the United States, the financial position of Western Reserve Life Assurance Co. of Ohio at December 31, 2000 and 1999, or the results of its operations or its cash flow for each of the three years in the period ended December 31, 2000. 0006-0069641 140 However, in our opinion, based on our audits and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Western Reserve Life Assurance Co. of Ohio at December 31, 2000 and 1999, and the results of its operations and its cash flow for each of the three years in the period ended December 31, 2000, in conformity with accounting practices prescribed or permitted by the Insurance Department of the State of Ohio. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic statutory-basis financial statements taken as a whole, present fairly in all material respects the information set forth therein. /s/ ERNST & YOUNG LLP Des Moines, Iowa February 15, 2001 0006-0069641 141 Western Reserve Life Assurance Co. of Ohio Balance Sheets -- Statutory Basis (Dollars in thousands, except per share amounts)
DECEMBER 31 2000 1999 ------------- ------------- Admitted assets Cash and invested assets: Cash and short-term investments $ 25,465 $ 23,932 Bonds 92,652 119,731 Common stocks: Affiliated entities (cost: 2000 and 1999 -- $243) 4,164 2,156 Other (cost: 2000 and 1999 -- $302) 352 358 Mortgage loans on real estate 14,041 9,698 Home office properties 33,571 34,066 Investment properties 10,808 11,078 Policy loans 284,335 182,975 Other invested assets 10,091 -- ----------- ----------- Total cash and invested assets 475,479 383,994 Federal income taxes recoverable 22,547 -- Premiums deferred and uncollected 908 785 Accrued investment income 1,475 1,638 Transfers from separate accounts due or accrued 480,404 463,721 Cash surrender value of life insurance policies 49,787 47,518 Other assets 5,905 6,614 Separate account assets 10,190,653 11,587,982 ----------- ----------- Total admitted assets $11,227,158 $12,492,252 =========== ===========
See accompanying notes. 0006-0069641 142
DECEMBER 31 2000 1999 ------------- ------------- Liabilities and capital and surplus Liabilities: Aggregate reserves for policies and contracts: Life $ 400,695 $ 302,138 Annuity 259,199 268,864 Policy and contract claim reserves 13,474 9,269 Other policyholders' funds 39,118 38,633 Remittances and items not allocated 21,192 20,686 Federal income taxes payable -- 5,873 Asset valuation reserve 4,726 3,809 Interest maintenance reserve 5,934 7,866 Short-term note payable to affiliate 71,400 17,100 Payable to affiliate 17,406 964 Other liabilities 62,528 49,478 Separate account liabilities 10,185,342 11,582,656 ----------- ----------- Total liabilities 11,081,014 12,307,336 Capital and surplus: Common stock, $1.00 par value, 3,000,000 shares authorized and 2,500,000 shares issued and outstanding 2,500 2,500 Paid-in surplus 120,107 120,107 Unassigned surplus 23,537 62,309 ----------- ----------- Total capital and surplus 146,144 184,916 ----------- ----------- Total liabilities and capital and surplus $11,227,158 $12,492,252 =========== ===========
See accompanying notes. 0006-0069641 143 Western Reserve Life Assurance Co. of Ohio Statements of Operations -- Statutory Basis (Dollars in thousands)
YEAR ENDED DECEMBER 31 2000 1999 1998 ------------- ------------- ------------- Revenues: Premiums and other considerations, net of reinsurance: Life $ 741,937 $ 584,729 $ 476,053 Annuity 1,554,430 1,104,525 794,841 Net investment income 47,867 39,589 36,315 Amortization of interest maintenance reserve 1,656 1,751 744 Commissions and expense allowances on reinsurance ceded 1,648 4,178 15,333 Income from fees associated with investment management, administration and contract guarantees for separate accounts 149,086 104,775 72,817 Other income 58,531 44,366 67,751 ---------- ---------- ---------- 2,555,155 1,883,913 1,463,854 Benefits and expenses: Benefits paid or provided for: Life 58,813 35,591 42,982 Surrender benefits 888,060 689,535 551,528 Other benefits 47,855 32,201 31,280 Increase (decrease) in aggregate reserves for policies and contracts: Life 98,557 70,542 42,940 Annuity (9,665) 3,446 (30,872) Other 67 (121) 32,178 ---------- ---------- ---------- 1,083,687 831,194 670,036 Insurance expenses: Commissions 316,337 246,334 205,939 General insurance expenses 120,798 112,536 102,611 Taxes, licenses and fees 23,193 19,019 15,545 Net transfers to separate accounts 1,068,213 625,598 475,435 Other expenses 36 -- 59 ---------- ---------- ---------- 1,528,577 1,003,487 799,589 ---------- ---------- ---------- 2,612,264 1,834,681 1,469,625 ---------- ---------- ---------- Gain (loss) from operations before federal income tax expense (benefit) and net realized capital gains (losses) on investments (57,109) 49,232 (5,771) Federal income tax expense (benefit) (17,470) 11,816 (347) ---------- ---------- ---------- Gain (loss) from operations before net realized capital gains (losses) on investments (39,639) 37,416 (5,424) Net realized capital gains (losses) on investments (net of related federal income taxes and amounts transferred to interest maintenance reserve) (856) (716) 1,494 ---------- ---------- ---------- Net income (loss) $ (40,495) $ 36,700 $ (3,930) ========== ========== ==========
See accompanying notes. 0006-0069641 144 Western Reserve Life Assurance Co. of Ohio Statements of Changes in Capital and Surplus -- Statutory Basis (Dollars in thousands)
TOTAL COMMON PAID-IN UNASSIGNED CAPITAL AND STOCK SURPLUS SURPLUS SURPLUS -------- ----------- ------------ ------------ Balance at January 1, 1998 $1,500 $ 88,015 $ 25,348 $ 114,863 Net loss -- -- (3,930) (3,930) Change in net unrealized capital gains -- -- 248 248 Change in non-admitted assets -- -- (1,815) (1,815) Change in asset valuation reserve -- -- (412) (412) Change in surplus in separate accounts -- -- (341) (341) Change in reserve valuation -- -- (2,132) (2,132) Capital contribution -- 32,092 -- 32,092 Settlement of prior period tax returns -- -- 353 353 Tax benefits on stock options exercised -- -- 4,654 4,654 ------ -------- --------- --------- Balance at December 31, 1998 1,500 120,107 21,973 143,580 Net income -- -- 36,700 36,700 Change in net unrealized capital gains -- -- 1,421 1,421 Change in non-admitted assets -- -- 703 703 Change in asset valuation reserve -- -- (961) (961) Change in surplus in separate accounts -- -- 451 451 Transfer from unassigned surplus to common stock (stock dividend) 1,000 -- (1,000) -- Settlement of prior period tax returns -- -- 1,000 1,000 Tax benefits on stock options exercised -- -- 2,022 2,022 ------ -------- --------- --------- Balance at December 31, 1999 2,500 120,107 62,309 184,916 Net loss -- -- (40,495) (40,495) Change in net unrealized capital gains -- -- 1,571 1,571 Change in non-admitted assets -- -- (1,359) (1,359) Change in asset valuation reserve -- -- (917) (917) Change in surplus in separate accounts -- -- (314) (314) Settlement of prior period tax returns -- -- 30 30 Tax benefits on stock options exercised -- -- 2,712 2,712 ------ -------- --------- --------- Balance at December 31, 2000 $2,500 $120,107 $ 23,537 $ 146,144 ====== ======== ========= =========
See accompanying notes. 0006-0069641 145 Western Reserve Life Assurance Co. of Ohio Statements of Cash Flow -- Statutory Basis (Dollars in thousands)
YEAR ENDED DECEMBER 31 2000 1999 1998 ------------- ------------- ------------- Operating activities Premiums and other considerations, net of reinsurance $2,356,441 $1,738,870 $1,356,732 Net investment income 51,583 44,235 38,294 Life and accident and health claims (55,030) (35,872) (44,426) Surrender benefits and other fund withdrawals (888,060) (689,535) (551,528) Other benefits to policyholders (43,721) (32,642) (31,231) Commissions, other expenses and other taxes (456,874) (382,372) (326,080) Net transfers to separate accounts (935,755) (628,762) (461,982) Federal income taxes received (paid) (8,236) (9,637) 11,956 Other, net 16,913 (21,054) (7,109) ---------- ---------- ---------- Net cash provided by (used in) operating activities 37,261 (16,769) (15,374) Investing activities Proceeds from investments sold, matured or repaid: Bonds 45,079 114,177 143,449 Mortgage loans on real estate 227 212 221 Other 345 18 -- ---------- ---------- ---------- 45,651 114,407 143,670 Cost of investments acquired: Bonds (18,005) (49,279) (68,202) Common stocks -- -- (93) Mortgage loans on real estate (5,003) (1) (5,313) Real estate (108) (286) (26,213) Policy loans (101,360) (69,993) (36,241) Other invested assets (11,203) -- -- Other -- (855) (414) ---------- ---------- ---------- (135,679) (120,414) (136,476) ---------- ---------- ---------- Net cash provided by (used in) investing activities (90,028) (6,007) 7,194 Financing activities Issuance (payment) of short-term note payable to affiliate, net 54,300 (27,100) 36,000 Capital contribution -- -- 32,092 ---------- ---------- ---------- Net cash provided by (used in) financing activities 54,300 (27,100) 68,092 ---------- ---------- ---------- Increase (decrease) in cash and short-term investments 1,533 (49,876) 59,912 Cash and short-term investments at beginning of year 23,932 73,808 13,896 ---------- ---------- ---------- Cash and short-term investments at end of year $ 25,465 $ 23,932 $ 73,808 ========== ========== ==========
See accompanying notes. 0006-0069641 146 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory-Basis (Dollars in thousands) December 31, 2000 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION Western Reserve Life Assurance Co. of Ohio ("the Company") is a stock life insurance company and is a wholly-owned subsidiary of First AUSA Life Insurance Company which, in turn, is a wholly-owned subsidiary of AEGON USA, Inc. ("AEGON"). AEGON is an indirect wholly-owned subsidiary of AEGON N.V., a holding company organized under the laws of The Netherlands. NATURE OF BUSINESS The Company operates predominantly in the variable universal life and variable annuity areas of the life insurance business. The Company is licensed in 49 states, District of Columbia, Puerto Rico and Guam. Sales of the Company's products are through financial planners, independent representatives, financial institutions and stockbrokers. The majority of the Company's new life insurance written and a substantial portion of new annuities written is done through one marketing organization; the Company expects to maintain this relationship for the foreseeable future. BASIS OF PRESENTATION The preparation of financial statements of insurance companies requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein. The accompanying financial statements have been prepared in conformity with accounting practices prescribed or permitted by the Insurance Department of the State of Ohio ("Insurance Department"), which practices differ from accounting principles generally accepted in the United States. The more significant of these differences are as follows: (a) bonds are generally reported at amortized cost rather than segregating the portfolio into held-to-maturity (reported at amortized cost), available-for-sale (reported at fair value), and trading (reported at fair value) classifications; (b) acquisition costs of acquiring new business are expensed as incurred rather than deferred and amortized over the life of the policies or over the expected gross profit stream; (c) policy reserves on traditional life products are based on statutory mortality rates and interest which may differ from reserves based on reasonable assumptions of expected mortality, interest, and withdrawals which include a provision for possible unfavorable deviation from such assumptions; (d) policy reserves on certain investment products use discounting methodologies utilizing statutory interest rates rather than full account values; (e) 0006-0069641 147 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory-Basis (continued) (Dollars in thousands) December 31, 2000 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) reinsurance amounts are netted against the corresponding asset or liability rather than shown as gross amounts on the balance sheet; (f) deferred income taxes are not provided for the difference between the financial statement amounts and income tax bases of assets and liabilities; (g) net realized gains or losses attributed to changes in the level of interest rates in the market are deferred and amortized over the remaining life of the bond or mortgage loan, rather than recognized as gains or losses in the statement of operations when the sale is completed; (h) potential declines in the estimated realizable value of investments are provided for through the establishment of a formula-determined statutory investment reserve (reported as a liability), changes to which are charged directly to surplus, rather than through recognition in the statement of operations for declines in value, when such declines are judged to be other than temporary; (i) certain assets designated as "non-admitted assets" have been charged to unassigned surplus rather than being reported as assets; (j) revenues for universal life and investment products consist of the entire premiums received rather than policy charges for the cost of insurance, policy administration charges, amortization of policy initiation fees and surrender charges assessed; (k) pension expense is recorded as amounts are paid rather than accrued and expensed during the periods in which the employers provide service; (l) stock options settled in cash are recorded as an expense of the Company's indirect parent rather than charged to current operations; (m) adjustments to federal income taxes of prior years are charged or credited directly to surplus, rather than reported as a component of income tax expense in the statement of operations; and (n) the financial statements of wholly-owned affiliates are not consolidated with those of the Company. The effects of these variances have not been determined by the Company, but are presumed to be material. The National Association of Insurance Commissioners ("NAIC") has revised the Accounting Practices and Procedures Manual in a process referred to as Codification. The revised manual is effective January 1, 2001. The State of Ohio has adopted the provisions of the revised manual. The revised manual has changed, to some extent, prescribed statutory accounting practices and will result in changes to the accounting practices that the Company uses to prepare its statutory-basis financial statements. The cumulative effect of changes in accounting principles adopted to conform to the revised Accounting Practices and Procedures Manual will be reported as an adjustment to surplus as of January 1, 2001. Management believes the effect of these changes will not result in a significant reduction in the Company's statutory-basis capital and surplus as of adoption. Other significant statutory accounting practices are as follows: 0006-0069641 148 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory-Basis (continued) (Dollars in thousands) December 31, 2000 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CASH AND CASH EQUIVALENTS For purposes of the statements of cash flows, the Company considers all highly liquid investments with remaining maturities of one year or less when purchased to be cash equivalents. INVESTMENTS Investments in bonds (except those to which the Securities Valuation Office of the NAIC has ascribed a value), mortgage loans on real estate and short-term investments are reported at cost adjusted for amortization of premiums and accrual of discounts. Amortization is computed using methods which result in a level yield over the expected life of the investment. The Company reviews its prepayment assumptions on mortgage and other asset backed securities at regular intervals and adjusts amortization rates retrospectively when such assumptions are changed due to experience and/or expected future patterns. Common stocks of unaffiliated companies are carried at market, and the related unrealized capital gains/(losses) are reported in unassigned surplus without any adjustment for federal income taxes. Common stocks of the Company's wholly-owned affiliates are recorded at the equity in net assets. Home office and investment properties are reported at cost less allowances for depreciation. Depreciation is computed principally by the straight-line method. Policy loans are reported at unpaid principal. Other invested assets consist principally of investments in various joint ventures and are recorded at equity in underlying net assets. Other "admitted assets" are valued, principally at cost, as required or permitted by Ohio Insurance Laws. Realized capital gains and losses are determined on the basis of specific identification and are recorded net of related federal income taxes. The Asset Valuation Reserve (AVR) is established by the Company to provide for potential losses in the event of default by issuers of certain invested assets. These amounts are determined using a formula prescribed by the NAIC and are reported as a liability. The formula for the AVR provides for a corresponding adjustment for realized gains and losses. Under a formula prescribed by the NAIC, the Company defers, in the Interest Maintenance Reserve (IMR), the portion of realized gains and losses on sales of fixed income investments, principally bonds and mortgage loans, attributable to changes in the general level of interest rates and amortizes those deferrals over the remaining period to maturity of the security. During 2000, 1999 and 1998, net realized capital gains (losses) of $(276), $(67) and $1,294, respectively, were credited to the IMR rather than being immediately recognized in the statements of operations. Amortization of these net gains aggregated $1,656, $1,751 and $744 for the years ended December 31, 2000, 1999 and 1998, respectively. 0006-0069641 149 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory-Basis (continued) (Dollars in thousands) December 31, 2000 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Interest income is recognized on an accrual basis. The Company does not accrue income on bonds in default, mortgage loans on real estate in default and/or foreclosure or which are delinquent more than twelve months, or real estate where rent is in arrears for more than three months. Further, income is not accrued when collection is uncertain. No investment income due and accrued has been excluded for the years ended December 31, 2000, 1999 and 1998, with respect to such practices. AGGREGATE RESERVES FOR POLICIES Life and annuity reserves are developed by actuarial methods and are determined based on published tables using statutorily specified interest rates and valuation methods that will provide, in the aggregate, reserves that are greater than or equal to the minimum required by law. Tabular interest, tabular less actual reserves released, and tabular cost have been determined by formula. Tabular interest on funds not involving life contingencies has also been determined by formula. The aggregate policy reserves for life insurance policies are based principally upon the 1941, 1958 and 1980 Commissioners' Standard Ordinary Mortality Tables. The reserves are calculated using interest rates ranging from 2.25 to 5.50 percent and are computed principally on the Net Level Premium Valuation and the Commissioners' Reserve Valuation Methods. Reserves for universal life policies are based on account balances adjusted for the Commissioners' Reserve Valuation Method. Deferred annuity reserves are calculated according to the Commissioners' Annuity Reserve Valuation Method including excess interest reserves to cover situations where the future interest guarantees plus the decrease in surrender charges are in excess of the maximum valuation rates of interest. Reserves for immediate annuities and supplementary contracts with life contingencies are equal to the present value of future payments assuming interest rates ranging from 4.00 to 11.25 percent and mortality rates, where appropriate, from a variety of tables. POLICY AND CONTRACT CLAIM RESERVES Claim reserves represent the estimated accrued liability for claims reported to the Company and claims incurred but not yet reported through the statement date. These reserves are estimated using either individual case-basis valuations or statistical analysis techniques. These estimates are subject to the effects of trends in claim severity and frequency. The estimates are continually reviewed and adjusted as necessary as experience develops or new information becomes available. 0006-0069641 150 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory-Basis (continued) (Dollars in thousands) December 31, 2000 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) SEPARATE ACCOUNTS Assets held in trust for purchases of variable universal life and variable annuity contracts and the Company's corresponding obligation to the contract owners are shown separately in the balance sheets. The assets in the separate accounts are valued at market. Income and gains and losses with respect to the assets in the separate accounts accrue to the benefit of the policyholders and, accordingly, the operations of the separate accounts are not included in the accompanying financial statements. The separate accounts do not have any minimum guarantees and the investment risks associated with market value changes are borne entirely by the policyholders. The Company received variable contract premiums of $2,336,299, $1,675,642 and $1,240,858 in 2000, 1999 and 1998, respectively. All variable account contracts are subject to discretionary withdrawal by the policyholder at the market value of the underlying assets less the current surrender charge. Separate account contractholders have no claim against the assets of the general account. STOCK OPTION PLAN AEGON N.V. sponsors a stock option plan that includes eligible employees of the Company. Pursuant to the plan, the option price at the date of grant is equal to the market value of the stock. Under statutory accounting principles, the Company does not record any expense related to this plan. However, the Company is allowed to record a deduction in the consolidated tax return filed by the Company and certain affiliates. The tax benefit of this deduction has been credited directly to surplus. RECLASSIFICATIONS Certain reclassifications have been made to the 1999 and 1998 financial statements to conform to the 2000 presentation. 0006-0069641 151 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory-Basis (continued) (Dollars in thousands) December 31, 2000 2. FAIR VALUES OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, requires disclosure of fair value information about financial instruments, whether or not recognized in the statutory-basis balance sheet, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparisons to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. Statement of Financial Accounting Standards No. 107 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements and allows companies to forego the disclosures when those estimates can only be made at excessive cost. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: CASH AND SHORT-TERM INVESTMENTS: The carrying amounts reported in the statutory-basis balance sheets for these instruments approximate their fair values. INVESTMENT SECURITIES: Fair values for fixed maturity securities are based on quoted market prices, where available. For fixed maturity securities not actively traded, fair values are estimated using values obtained from independent pricing services or (in the case of private placements) are estimated by discounting expected future cash flows using a current market rate applicable to the yield, credit quality, and maturity of the investments. The fair values for equity securities are based on quoted market prices. MORTGAGE LOANS AND POLICY LOANS: The fair values for mortgage loans are estimated utilizing discounted cash flow analyses, using interest rates reflective of current market conditions and the risk characteristics of the loans. The fair value of policy loans are assumed to equal their carrying value. INVESTMENT CONTRACTS: Fair values for the Company's liabilities under investment-type insurance contracts are estimated using discounted cash flow calculations, based on interest rates currently being offered for similar contracts with maturities consistent with those remaining for the contracts being valued. SHORT-TERM NOTE PAYABLE TO AFFILIATE: The carrying amounts reported in the statutory-basis balance sheets for these instruments approximate their fair values. 0006-0069641 152 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory-Basis (continued) (Dollars in thousands) December 31, 2000 2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED) Fair values for the Company's insurance contracts other than investment contracts are not required to be disclosed. However, the fair values of liabilities under all insurance contracts are taken into consideration in the Company's overall management of interest rate risk, which minimizes exposure to changing interest rates through the matching of investment maturities with amounts due under insurance contracts. The following sets forth a comparison of the fair values and carrying amounts of the Company's financial instruments subject to the provisions of Statement of Financial Accounting Standards No. 107:
DECEMBER 31 2000 1999 ----------------------------- ----------------------------- CARRYING CARRYING AMOUNT FAIR VALUE AMOUNT FAIR VALUE ------------- ------------- ------------- ------------- Admitted assets Cash and short-term investments $ 25,465 $ 25,465 $ 23,932 $ 23,932 Bonds 92,652 93,766 119,731 119,076 Common stocks, other than affiliates 352 352 358 358 Mortgage loans on real estate 14,041 14,422 9,698 9,250 Policy loans 284,335 284,335 182,975 182,975 Separate account assets 10,190,653 10,190,653 11,587,982 11,587,982 Liabilities Investment contract liabilities 298,279 291,457 301,403 294,342 Short-term note payable to affiliate 71,400 71,400 17,100 17,100 Separate account annuities 7,305,380 7,142,011 8,271,548 8,079,141
3. INVESTMENTS The carrying amount and estimated fair value of investments in debt securities are as follows:
GROSS GROSS ESTIMATED CARRYING UNREALIZED UNREALIZED FAIR AMOUNT GAINS LOSSES VALUE ---------- ------------ ------------ ---------- December 31, 2000 Bonds: United States Government and agencies $ 4,580 $ 78 $ 15 $ 4,643 State, municipal and other government 1,478 85 -- 1,563 Public utilities 13,061 75 159 12,977 Industrial and miscellaneous 42,482 1,673 811 43,344 Mortgage and other asset-backed securities 31,051 416 228 31,239 ------- ------ ------ ------- Total bonds $92,652 $2,327 $1,213 $93,766 ======= ====== ====== =======
0006-0069641 153 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory-Basis (continued) (Dollars in thousands) December 31, 2000 3. INVESTMENTS (CONTINUED)
GROSS GROSS ESTIMATED CARRYING UNREALIZED UNREALIZED FAIR AMOUNT GAINS LOSSES VALUE ---------- ------------ ------------ ---------- December 31, 1999 Bonds: United States Government and agencies $ 4,755 $ 4 $ 66 $ 4,693 State, municipal and other government 2,185 12 -- 2,197 Public utilities 13,134 129 368 12,895 Industrial and miscellaneous 52,997 1,213 1,208 53,002 Mortgage and other asset-backed securities 46,660 480 851 46,289 -------- ------ ------ -------- Total bonds $119,731 $1,838 $2,493 $119,076 ======== ====== ====== ========
The carrying amount and fair value of bonds at December 31, 2000 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.
ESTIMATED CARRYING FAIR AMOUNT VALUE ---------- ---------- Due in one year or less $ 3,006 $ 3,027 Due one through five years 30,022 30,264 Due five through ten years 21,811 22,273 Due after ten years 6,762 6,963 ------- ------- 61,601 62,527 Mortgage and other asset-backed securities 31,051 31,239 ------- ------- $92,652 $93,766 ======= =======
A detail of net investment income is presented below:
YEAR ENDED DECEMBER 31 2000 1999 1998 ----------- ---------- ---------- Interest on bonds $ 8,540 $ 12,094 $ 17,150 Dividends on equity investments from subsidiaries 26,453 18,555 13,233 Interest on mortgage loans 776 746 499 Rental income on real estate 6,034 5,794 2,839 Interest on policy loans 14,372 9,303 6,241 Other investment income 1 414 540 -------- -------- -------- Gross investment income 56,176 46,906 40,502 Investment expenses (8,309) (7,317) (4,187) -------- -------- -------- Net investment income $ 47,867 $ 39,589 $ 36,315 ======== ======== ========
0006-0069641 154 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory-Basis (continued) (Dollars in thousands) December 31, 2000 3. INVESTMENTS (CONTINUED) Proceeds from sales and maturities of debt securities and related gross realized gains and losses were as follows:
YEAR ENDED DECEMBER 31 2000 1999 1998 ---------- ----------- ----------- Proceeds $45,079 $114,177 $143,449 ======= ======== ======== Gross realized gains $ 117 $ 1,762 $ 4,641 Gross realized losses 480 1,709 899 ------- Net realized gains (losses) $ (363) $ 53 $ 3,742 ======= ======== ========
At December 31, 2000, bonds with an aggregate carrying value of $4,025 were on deposit with certain state regulatory authorities or were restrictively held in bank custodial accounts for benefit of such state regulatory authorities, as required by statute. Realized investment gains (losses) and changes in unrealized gains (losses) for investments are summarized below:
REALIZED ------------------------------------ YEAR ENDED DECEMBER 31 2000 1999 1998 ---------- --------- ----------- Debt securities $ (363) $ 53 $ 3,742 Other invested assets (1,115) 18 (18) -------- ------ -------- (1,478) 71 3,724 Tax benefit (expense) 346 (854) (936) Transfer to interest maintenance reserve 276 67 (1,294) -------- ------ -------- Net realized gains (losses) $ (856) $ (716) $ 1,494 ======== ====== ======== CHANGES IN UNREALIZED ------------------------------- YEAR ENDED DECEMBER 31 2000 1999 1998 --------- --------- ------- Common stocks $2,002 $1,426 $248 Mortgage loans (431) (5) -- ------ ------- ---- Change in unrealized appreciation $1,571 $1,421 $248 ====== ====== ====
0006-0069641 155 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory-Basis (continued) (Dollars in thousands) December 31, 2000 3. INVESTMENTS (CONTINUED) Gross unrealized gains (losses) on common stocks were as follows:
UNREALIZED --------------------- DECEMBER 31 2000 1999 --------- --------- Unrealized gains $4,040 $1,995 Unrealized losses (69) (26) ------ ------ Net unrealized gains $3,971 $1,969 ====== ======
During 2000, the Company issued one mortgage loan with a lending rate of 7.97%. The percentage of the loan to the value of the security at the time of origination was 69%. The Company requires all mortgages to carry fire insurance equal to the value of the underlying property. During 2000, 1999 and 1998, no mortgage loans were foreclosed and transferred to real estate. During 2000 and 1999, the Company held a mortgage loan loss reserve in the asset valuation reserve of $0 and $110, respectively. At December 31, 2000, the Company had no investments (excluding U. S. Government guaranteed or insured issues) which individually represented more than ten percent of capital and surplus and the asset valuation reserve, collectively. 4. REINSURANCE The Company reinsures portions of certain insurance policies which exceed its established limits, thereby providing a greater diversification of risk and minimizing exposure on larger risks. The Company remains contingently liable with respect to any insurance ceded, and this would become an actual liability in the event that the assuming insurance company became unable to meet its obligations under the reinsurance treaty.
YEAR ENDED DECEMBER 31 2000 1999 1998 ------------- ------------- ------------- Direct premiums $2,385,134 $1,748,265 $1,345,752 Reinsurance assumed -- -- 461 Reinsurance ceded (88,767) (59,011) (75,319) ---------- ---------- ---------- Net premiums earned $2,296,367 $1,689,254 $1,270,894 ========== ========== ==========
0006-0069641 156 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory-Basis (continued) (Dollars in thousands) December 31, 2000 4. REINSURANCE (CONTINUED) The Company received reinsurance recoveries in the amount of $8,856, $4,916 and $5,260 during 2000, 1999 and 1998, respectively. At December 31, 2000 and 1999, estimated amounts recoverable from reinsurers that have been deducted from policy and contract claim reserves totaled $2,337 and $1,557, respectively. The aggregate reserves for policies and contracts were reduced for reserve credits for reinsurance ceded at December 31, 2000 and 1999 of $5,128 and $3,487, respectively. 5. INCOME TAXES For federal income tax purposes, the Company joins in a consolidated tax return filing with certain affiliated companies. Under the terms of a tax-sharing agreement between the Company and its affiliates, the Company computes federal income tax expense as if it were filing a separate income tax return, except that tax credits and net operating loss carryforwards are determined on the basis of the consolidated group. Additionally, the alternative minimum tax is computed for the consolidated group and the resulting tax, if any, is allocated back to the separate companies on the basis of the separate companies' alternative minimum taxable income. Federal income tax expense (benefit) differs from the amount computed by applying the statutory federal income tax rate to gain (loss) from operations before federal income tax expense (benefit) and realized capital gains (losses) on investments for the following reasons:
YEAR ENDED DECEMBER 31 2000 1999 1998 ------------- ------------ ------------ Computed tax (benefit) at federal statutory rate (35%) $ (19,988) $ 17,231 $ (2,019) Deferred acquisition costs -- tax basis 14,725 11,344 9,672 Tax reserve valuation 123 (2,272) 1,513 Excess tax depreciation (426) (727) (442) Amortization of IMR (580) (613) (260) Dividend received deduction (12,805) (10,784) (6,657) Prior year under (over) accrual 560 (3,167) (2,322) Other, net 921 804 168 --------- --------- -------- Federal income tax expense (benefit) $ (17,470) $ 11,816 $ (347) ========= ========= ========
Federal income tax expense (benefit) differs from the amount computed by applying the statutory federal income tax rate to realized gains (losses) due to the differences in book and tax asset bases at the time certain investments are sold. 0006-0069641 157 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory-Basis (continued) (Dollars in thousands) December 31, 2000 5. INCOME TAXES (CONTINUED) Prior to 1984, as provided for under the Life Insurance Company Tax Act of 1959, a portion of statutory income was not subject to current taxation, but was accumulated for income tax purposes in a memorandum account referred to as the policyholders' surplus account. No federal income taxes have been provided for in the financial statements on income deferred in the policyholders' surplus account ($293 at December 31, 2000). To the extent dividends are paid from the amount accumulated in the policyholders' surplus account, net earnings would be reduced by the amount of tax required to be paid. Should the entire amount in the policyholders' surplus account become taxable, the tax thereon computed at current rates would amount to approximately $103. In 2000, the Company received $30 in interest from the Internal Revenue Service related to the 1993 tax year. In 1999, the Company received $1,000 from its former parent, an unaffiliated company, for reimbursement of prior period tax payments made by the Company but owed by the former parent. In 1998, the Company reached a final settlement with the Internal Revenue Service for 1994 and 1995 resulting in a tax refund of $300 and interest received of $53. Tax settlements for 2000, 1999 and 1998 were credited directly to unassigned surplus. 6. POLICY AND CONTRACT ATTRIBUTES A portion of the Company's policy reserves and other policyholders' funds relate to liabilities established on a variety of the Company's products, primarily separate accounts, that are not subject to significant mortality or morbidity risk; however, there may be certain restrictions placed upon the amount of funds that can be withdrawn without penalty. The amount of reserves on these products, by withdrawal characteristics are summarized as follows:
DECEMBER 31 2000 1999 ------------------------- ------------------------ PERCENT PERCENT AMOUNT OF TOTAL AMOUNT OF TOTAL ------------ ---------- ------------ --------- Subject to discretionary withdrawal with market value adjust- ment $ 11,999 0% $ 12,534 0% Subject to discretionary withdrawal at book value less surrender charge 72,456 1 73,903 1 Subject to discretionary withdrawal at market value 7,305,182 96 8,271,441 96 Subject to discretionary withdrawal at book value (minimal or no charges or adjustments) 210,648 3 217,372 3 Not subject to discretionary withdrawal provision 15,753 0 15,433 0 ---------- -- ---------- -- 7,616,038 100% 8,590,683 100% === === Less reinsurance ceded 2,145 1,581 ---------- ---------- Total policy reserves on annuities and deposit fund liabilities $7,613,893 $8,589,102 ========== ==========
0006-0069641 158 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory-Basis (continued) (Dollars in thousands) December 31, 2000 6. POLICY AND CONTRACT ATTRIBUTES (CONTINUED) A reconciliation of the amounts transferred to and from the separate accounts is presented below:
Year ended December 31 2000 1999 1998 ------------- ------------- ------------- Transfers as reported in the summary of operations of the separate accounts statement: Transfers to separate accounts $2,336,299 $1,675,642 $1,240,858 Transfers from separate accounts 1,268,865 1,056,207 774,690 ---------- ---------- ---------- Net transfers to separate accounts 1,067,434 619,435 466,168 Reconciling adjustments -- change in accruals for investment management, administration fees and contract guarantees, reinsurance and separate account surplus 779 6,163 9,267 ---------- ---------- ---------- Transfers as reported in the summary of operations of the life, accident and health annual statement $1,068,213 $ 625,598 $ 475,435 ========== ========== ==========
Reserves on the Company's traditional life insurance products are computed using mean reserving methodologies. These methodologies result in the establishment of assets for the amount of the net valuation premiums that are anticipated to be received between the policy's paid-through date to the policy's next anniversary date. At December 31, 2000 and 1999, these assets (which are reported as premiums deferred and uncollected) and the amounts of the related gross premiums and loadings, are as follows:
GROSS LOADING NET --------- --------- ------- December 31, 2000 Ordinary direct renewal business $ 991 $220 $771 Ordinary new business 133 (4) 137 ------ ----- ---- $1,124 $216 $908 ====== ==== ==== December 31, 1999 Ordinary direct renewal business $1,017 $232 $785 ------ ---- ---- $1,017 $232 $785 ====== ==== ====
In 1994, the NAIC enacted a guideline to clarify reserving methodologies for contracts that require immediate payment of claims upon proof of death of the insured. Companies were allowed to grade the effects of the change in reserving methodologies over five years. A direct charge to surplus of $2,132 was made for the year ended December 31, 1998 related to the change in reserve methodology. 0006-0069641 159 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory-Basis (continued) (Dollars in thousands) December 31, 2000 7. DIVIDEND RESTRICTIONS The Company is subject to limitations, imposed by the State of Ohio, on the payment of dividends to its parent company. Generally, dividends during any twelve month period may not be paid, without prior regulatory approval, in excess of the greater of (a) 10 percent of statutory capital and surplus as of the preceding December 31, or (b) statutory gain from operations for the preceding year. Subject to the availability of unassigned surplus at the time of such dividend, the maximum payment which may be made in 2001, without the prior approval of insurance regulatory authorities, is $14,614. 8. CAPITAL STRUCTURE During 1999, the Company's Board of Director's approved an amendment to the Company's Articles of Incorporation which increased the number of authorized capital shares to 3,000,000. The Board of Directors also authorized a stock dividend in the amount of $1,000, which was transferred from unassigned surplus. This amendment and stock dividend were in response to a change in California law which requires all life insurance companies which do business in the state to have capital stock of at least $2,500. 9. RETIREMENT AND COMPENSATION PLANS The Company's employees participate in a qualified benefit plan sponsored by AEGON. The Company has no legal obligation for the plan. The Company recognizes pension expense equal to its allocation from AEGON. The pension expense is allocated among the participating companies based on the Statement of Financial Accounting Standards No. 87 expense as a percent of salaries. The benefits are based on years of service and the employee's compensation during the highest five consecutive years of employment. Pension expense aggregated $1,224, $1,105 and $917 for the years ended December 31, 2000, 1999 and 1998, respectively. The plan is subject to the reporting and disclosure requirements of the Employee Retirement and Income Security Act of 1974. The Company's employees also participate in a contributory defined contribution plan sponsored by AEGON which is qualified under Section 401(k) of the Internal Revenue Service Code. Employees of the Company who customarily work at least 1,000 hours during each calendar year and meet the other eligibility requirements are participants of the plan. Participants may elect to contribute up to fifteen percent of their salary to the plan. The Company will match an amount up to three percent of the participant's salary. Participants may direct all of their contributions and plan balances to be invested in a variety of investment options. The plan is subject to the reporting and disclosure requirements of the Employee Retirement and Income Security Act of 1974. Expense related to this plan was $930, $816 and $632 for the years ended December 31, 2000, 1999 and 1998, respectively. 0006-0069641 160 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory-Basis (continued) (Dollars in thousands) December 31, 2000 9. RETIREMENT AND COMPENSATION PLANS (CONTINUED) AEGON sponsors supplemental retirement plans to provide the Company's senior management with benefits in excess of normal pension benefits. The plans are noncontributory and benefits are based on years of service and the employee's compensation level. The plans are unfunded and nonqualified under the Internal Revenue Code. In addition, AEGON has established incentive deferred compensation plans for certain key employees of the Company. The Company's allocation of expense for these plans for each of the years ended December 31, 2000, 1999 and 1998 was negligible. AEGON also sponsors an employee stock option plan for individuals employed at least three years and a stock purchase plan for its producers, with the participating affiliated companies establishing their own eligibility criteria, producer contribution limits and company matching formula. These plans have been accrued for or funded as deemed appropriate by management of AEGON and the Company. In addition to pension benefits, the Company participates in plans sponsored by AEGON that provide postretirement medical, dental and life insurance benefits to employees meeting certain eligibility requirements. Portions of the medical and dental plans are contributory. The expenses of the postretirement plans calculated on the pay-as-you-go basis are charged to affiliates in accordance with an intercompany cost sharing arrangement. The Company expensed $108, $81 and $157 for the years ended December 31, 2000, 1999 and 1998, respectively. 10. RELATED PARTY TRANSACTIONS The Company shares certain officers, employees and general expenses with affiliated companies. The Company receives data processing, investment advisory and management, marketing and administration services from certain affiliates. During 2000, 1999 and 1998, the Company paid $19,248, $16,905 and $12,763, respectively, for such services, which approximates their costs to the affiliates. The Company provides office space, marketing and administrative services to certain affiliates. During 2000, 1999 and 1998, the Company received $4,665, $3,755 and $5,125, respectively, for such services, which approximates their cost. Payable to affiliates and intercompany borrowings bear interest at the thirty-day commercial paper rate of 6.4% at December 31, 2000. During 2000, 1999 and 1998, the Company paid net interest of $2,262, $1,997 and $1,090, respectively, to affiliates. The Company received capital contributions of $32,092 from its parent in 1998. At December 31, 2000 and 1999, the Company had short-term note payables to an affiliate of $71,400 and $17,100, respectively. Interest on these notes ranged from 6.49% to 6.58% at December 31, 2000 and 5.15% to 5.9% at December 31, 1999. 0006-0069641 161 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory-Basis (continued) (Dollars in thousands) December 31, 2000 10. RELATED PARTY TRANSACTIONS (CONTINUED) During 1998, the Company purchased life insurance policies covering the lives of certain employees of the Company. Premiums of $43,500 were paid to an affiliate for these policies. At December 31, 2000 and 1999, the cash surrender value of these policies was $49,787 and $47,518, respectively. 11. COMMITMENTS AND CONTINGENCIES The Company is a party to legal proceedings incidental to its business. Although such litigation sometimes includes substantial demands for compensatory and punitive damages in addition to contract liability, it is management's opinion, after consultation with counsel and a review of available facts, that damages arising from such demands will not be material to the Company's financial position. The Company is subject to insurance guaranty laws in the states in which it writes business. These laws provide for assessments against insurance companies for the benefit of policyholders and claimants in the event of insolvency of other insurance companies. Assessments are charged to operations when received by the Company except where right of offset against other taxes paid is allowed by law; amounts available for future offsets are recorded as an asset on the Company's balance sheet. The future obligation has been based on the most recent information available from the National Organization of Life and Health Insurance Guaranty Association. Potential future obligations for unknown insolvencies are not determinable by the Company. The Company has established a reserve of $3,438 and $3,498 and an offsetting premium tax benefit of $777 and $837 at December 31, 2000 and 1999, respectively, for its estimated share of future guaranty fund assessments related to several major insurer insolvencies. The guaranty fund expense (credit) was $(9), $(20) and $(74) at December 31, 2000, 1999 and 1998, respectively. 12. RECONCILIATION OF CAPITAL AND SURPLUS AND NET INCOME The following table reconciles capital and surplus and net income as reported in the 1998 Annual Statement filed with the Insurance Department of the State of Ohio, to the amounts reported in the accompanying financial statements:
YEAR ENDED DECEMBER 31, 1998 DECEMBER 31, 1998 ------------------- ------------------ TOTAL CAPITAL AND SURPLUS NET INCOME/LOSS ------------------- ------------------ Amounts reported in Annual Statement $148,038 $ 528 Adjustment to federal income tax benefit (4,458) (4,458) -------- -------- Amounts reported herein $143,580 $ (3,930) ======== ========
0006-0069641 162 Western Reserve Life Assurance Co. of Ohio Summary of Investments Other Than Investments in Related Parties (Dollars in thousands) December 31, 2000 SCHEDULE I
AMOUNT AT WHICH FAIR SHOWN IN THE TYPE OF INVESTMENT COST (1) VALUE BALANCE SHEET - ---------------------------------------------------- ------------ --------- ---------------- Fixed maturities Bonds: United States Government and government agencies and authorities $ 5,029 $5,097 $ 5,029 States, municipalities and political subdivisions 11,783 11,996 11,783 Public utilities 13,061 12,977 13,061 All other corporate bonds 62,779 63,696 62,779 --------- ------ --------- Total fixed maturities 92,652 93,766 92,652 Equity securities Common stocks: Industrial, miscellaneous and all other 302 352 352 --------- ------ --------- Total equity securities 302 352 352 Mortgage loans on real estate 14,041 14,041 Real estate 44,379 44,379 Policy loans 284,335 284,335 Cash and short-term investments 25,465 25,465 Other invested assets 10,091 10,091 --------- --------- Total investments $ 471,265 $ 471,315 ========= =========
(1) Original cost of equity securities and, as to fixed maturities, original cost reduced by repayments and adjusted for amortization of premiums or accruals of discounts. 0006-0069641 163 Western Reserve Life Assurance Co. of Ohio Supplementary Insurance Information (Dollars in thousands) SCHEDULE III
BENEFITS, CLAIMS, FUTURE POLICY POLICY AND NET LOSSES AND OTHER BENEFITS AND CONTRACT PREMIUM INVESTMENT SETTLEMENT OPERATING EXPENSES LIABILITIES REVENUE INCOME* EXPENSES EXPENSES* --------------- ------------- ------------- ------------ ------------ ---------- Year ended December 31, 2000 Individual life $389,458 $13,349 $ 741,090 $13,430 $ 267,540 $310,243 Group life 11,237 100 847 936 1,413 580 Annuity 259,199 25 1,554,430 33,501 814,734 149,541 -------- ------- ---------- ------- ---------- -------- $659,894 $13,474 $2,296,367 $47,867 $1,083,687 $460,364 ======== ======= ========== ======= ========== ======== Year ended December 31, 1999 Individual life $291,106 $ 9,152 $ 583,656 $10,754 $ 178,237 $261,284 Group life 11,032 100 1,073 706 1,437 599 Annuity 268,864 17 1,104,525 28,129 651,520 116,006 -------- ------- ---------- ------- ---------- -------- $571,002 $ 9,269 $1,689,254 $39,589 $ 831,194 $377,889 -------- ------- ---------- ------- ---------- -------- Year ended December 31, 1998 Individual life $221,050 $ 8,624 $ 474,120 $ 9,884 $ 122,542 $230,368 Group life 10,546 100 1,933 723 1,962 2,281 Annuity 265,418 509 794,841 25,708 545,532 91,505 -------- ------- ---------- ------- ---------- -------- $497,014 $ 9,233 $1,270,894 $36,315 $ 670,036 $324,154 ======== ======= ========== ======= ========== ========
* Allocations of net investment income and other operating expenses are based on a number of assumptions and estimates, and the results would change if different methods were applied. 0006-0069641 164 Western Reserve Life Assurance Co. of Ohio Reinsurance (Dollars in thousands) SCHEDULE IV
ASSUMED PERCENTAGE CEDED TO FROM OF AMOUNT GROSS OTHER OTHER NET ASSUMED AMOUNT COMPANIES COMPANIES AMOUNT TO NET -------------- -------------- ----------- -------------- ----------- Year ended December 31, 2000 Life insurance in force $76,903,969 $14,753,778 $ -- $62,150,191 0.0% =========== =========== ==== =========== === Premiums: Individual life $ 774,550 $ 33,460 $ -- $ 741,090 0.0% Group life 1,100 253 -- 847 0.0 Annuity 1,609,484 55,054 -- 1,554,430 0.0 ----------- ----------- ---- ----------- --- $ 2,385,134 $ 88,767 $ -- $ 2,296,367 0.0% =========== =========== ==== =========== === Year ended December 31, 1999 Life insurance in force $63,040,741 $11,297,250 $ -- $51,743,491 0.0% =========== =========== ==== =========== === Premiums: Individual life $ 604,628 $ 20,972 $ -- $ 583,656 0.0% Group life 1,383 310 -- 1,073 0.0 Annuity 1,142,254 37,729 -- 1,104,525 0.0 ----------- ----------- ---- ----------- --- $ 1,748,265 $ 59,011 $ -- $ 1,689,254 0.0% =========== =========== ==== =========== === Year ended December 31, 1998 Life insurance in force $51,064,173 $ 9,862,460 $ -- $41,201,713 0.0% =========== =========== ==== =========== === Premiums: Individual life $ 493,633 $ 19,512 $ -- $ 474,121 0.0% Group life 1,691 220 461 1,932 23.8 Annuity 850,428 55,587 -- 794,841 0.0 ----------- ----------- ---- ----------- ---- $ 1,345,752 $ 75,319 $461 $ 1,270,894 .03% =========== =========== ==== =========== ====
0006-0069641 165 PART II. OTHER INFORMATION UNDERTAKING TO FILE REPORTS Subject to the terms and conditions of Section 15(d) of the Securities Exchange Act of 1934, the undersigned registrant hereby undertakes to file with the Securities and Exchange Commission such supplementary and periodic information, documents, and reports as may be prescribed by any rule or regulation of the Commission heretofore or hereafter duly adopted pursuant to authority conferred in that Section. REPRESENTATION PURSUANT TO SECTION 26(E) (2) (A) Western Reserve Life Assurance Co. of Ohio ("Western Reserve") hereby represents that the fees and charges deducted under the Contracts, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by Western Reserve. STATEMENT WITH RESPECT TO INDEMNIFICATION Provisions exist under the Ohio General Corporation Law, the Second Amended Articles of Incorporation of Western Reserve and the Amended Code of Regulations of Western Reserve whereby Western Reserve may indemnify certain persons against certain payments incurred by such persons. The following excerpts contain the substance of these provisions. OHIO GENERAL CORPORATION LAW SECTION 1701.13 AUTHORITY OF CORPORATION. (E)(1) A corporation may indemnify or agree to indemnify any person who was or is a party or is threatened to be made a party, to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, other than an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, trustee, officer, employee, or agent of another corporation (including a subsidiary of this corporation), domestic or foreign, nonprofit or for profit, partnership, joint venture, trust, or other enterprise, against expenses, including attorneys' fees, judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit, or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful. (2) A corporation may indemnify or agree to indemnify any person who was or is a party, or is threatened to be made a party to any threatened, pending, or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, trustee, officer, employee, or agent of another corporation, domestic or foreign, nonprofit or for profit, partnership, joint venture, trust, or other enterprise, against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best I-1 interests of the corporation, except that no indemnification shall be made in respect of any of the following: (a) Any claim, issue, or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless, and only to the extent that the court of common pleas, or the court in which such action or suit was brought determines upon application that, despite the adjudication of liability, but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court of common pleas or such other court shall deem proper; (b) Any action or suit in which the only liability asserted against a director is pursuant to section 1701.95 of the Revised Code. (3) To the extent that a director, trustee, officer, employee, or agent has been successful on the merits or otherwise in defense of any action, suit, or proceeding referred to in divisions (E)(1) and (2) of this section, or in defense of any claim, issue, or matter therein, he shall be indemnified against expenses, including attorneys' fees, actually and reasonably incurred by him in connection therewith. (4) Any indemnification under divisions (E)(1) and (2) of this section, unless ordered by a court, shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, trustee, officer, employee, or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in divisions (E)(1) and (2) of this section. Such determination shall be made as follows: (a) By a majority vote of a quorum consisting of directors of the indemnifying corporation who were not and are not parties to or threatened with any such action, suit, or proceeding; (b) If the quorum described in division (E)(4)(a) of this section is not obtainable or if a majority vote of a quorum of disinterested directors so directs, in a written opinion by independent legal counsel other than an attorney, or a firm having associated with it an attorney, who has been retained by or who has performed services for the corporation, or any person to be indemnified within the past five years; (c) By the shareholders; (d) By the court of common pleas or the court in which such action, suit, or proceeding was brought. Any determination made by the disinterested directors under division (E)(4)(a) or by independent legal counsel under division (E)(4)(b) of this section shall be promptly communicated to the person who threatened or brought the action or suit by or in the right of the corporation under division (E)(2) of this section, and within ten days after receipt of such notification, such person shall have the right to petition the court of common pleas or the court in which such action or suit was brought to review the reasonableness of such determination. (5) (a) Unless at the time of a director's act or omission that is the subject of an action, suit or proceeding referred to in divisions (E)(1) and (2) of this section, the articles or the regulations of a corporation state by specific reference to this division that the provisions of this division do not apply to the corporation and unless the only liability asserted against a director in an action, suit, or proceeding referred to in divisions (E)(1) and (2) of this section is pursuant to section 1701.95 of the Revised Code, expenses, including attorney's fees, incurred by a director in defending the action, suit, or proceeding shall be paid by the corporation as they are incurred, in advance of the final disposition of the action, suit, or proceeding upon receipt of an undertaking by or on behalf of the director in which he agrees to do both of the following: II-2 (i) Repay such amount if it is proved by clear and convincing evidence in a court of competent jurisdiction that his action or failure to act involved an act or omission undertaken with deliberate intent to cause injury to the corporation or undertaken with reckless disregard for the best interests of the corporation; (ii) Reasonably cooperate with the corporation concerning the action, suit, or proceeding. (b) Expenses, including attorneys' fees incurred by a director, trustee, officer, employee, or agent in defending any action, suit, or proceeding referred to in divisions (E)(1) and (2) of this section, may be paid by the corporation as they are incurred, in advance of the final disposition of the action, suit, or proceeding as authorized by the directors in the specific case upon receipt of an undertaking by or on behalf of the director, trustee, officer, employee, or agent to repay such amount, if it ultimately is determined that he is entitled to be indemnified by the corporation. (6) The indemnification authorized by this section shall not be exclusive of, and shall be in addition to, any other rights granted to those seeking indemnification under the articles or the regulations or any agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, trustee, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person. (7) A corporation may purchase and maintain insurance or furnish similar protection, including but not limited to trust funds, letters of credit, or self-insurance on behalf of or for any person who is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, trustee, officer, employee, or agent of another corporation, domestic or foreign, nonprofit or for profit, partnership, joint venture, trust, or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under this section. Insurance may be purchased from or maintained with a person in which the corporation has a financial interest. (8) The authority of a corporation to indemnify persons pursuant to divisions (E)(1) and (2) of this section does not limit the payment of expenses as they are incurred, indemnification, insurance, or other protection that may be provided pursuant to divisions (E)(5), (6), and (7) of this section. Divisions (E)(1) and (2) of this section do not create any obligation to repay or return payments made by the corporation pursuant to divisions (E)(5), (6), or (7). (9) As used in this division, references to "corporation" include all constituent corporations in a consolidation or merger and the new or surviving corporation, so that any person who is or was a director, officer, employee, or agent of such a constituent corporation, or is or was serving at the request of such constituent corporation as a director, trustee, officer, employee or agent of another corporation, domestic or foreign, nonprofit or for profit, partnership, joint venture, trust, or other enterprise, shall stand in the same position under this section with respect to the new or surviving corporation as he would if he had served the new or surviving corporation in the same capacity. SECOND AMENDED ARTICLES OF INCORPORATION OF WESTERN RESERVE ARTICLE EIGHTH EIGHTH: (1) The corporation may indemnify or agree to indemnify any person who was or is a party or is threatened to be made a party, to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, other than an action by or in the right II-3 of the corporation, by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, trustee, officer, employee, or agent of another corporation (including a subsidiary of this corporation), domestic or foreign, nonprofit or for profit, partnership, joint venture, trust, or other enterprise, against expenses, including attorneys' fees, judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit, or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful. (2) The corporation may indemnify or agree to indemnify any person who was or is a party, or is threatened to be made a party to any threatened, pending, or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, trustee, officer, employee, or agent of another corporation (including a subsidiary of this corporation), domestic or foreign, nonprofit or for profit, partnership, joint venture, trust, or other enterprise against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made in respect of any claim, issue, or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless, and only to the extent that the court of common pleas, or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability, but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court of common pleas or such other court shall deem proper. (3) To the extent that a director, trustee, officer, employee, or agent has been successful on the merits or otherwise in defense of any action, suit, or proceeding referred to in sections (1) and (2) of this article, or in defense of any claim, issue, or matter therein, he shall be indemnified against expenses, including attorneys' fees, actually and reasonably incurred by him in connection therewith. (4) Any indemnification under sections (1) and (2) of this article, unless ordered by a court, shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, trustee, officer, employee, or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in sections (1) and (2) of this article. Such determination shall be made (a) by a majority vote of a quorum consisting of directors of the indemnifying corporation who were not and are not parties to or threatened with any such action, suit, or proceeding, or (b) if such a quorum is not obtainable or if a majority vote of a quorum of disinterested directors so directs, in a written opinion by independent legal counsel other than an attorney, or a firm having associated with it an attorney, who has been retained by or who has performed services for the corporation, or any person to be indemnified within the past five years, or (c) by the shareholders, or (d) by the court of common pleas or the court in which such action, suit, or proceeding was brought. Any determination made by the disinterested directors under section (4)(a) or by independent legal counsel under section (4)(b) of this article shall be promptly communicated to the person who threatened or brought the action or suit by or in the right of the corporation under section (2) of this article, and within ten days after receipt of such notification, such person shall have the right to petition the court of common pleas or the court in which such action or suit was brought to review the reasonableness of such determination. II-4 (5) Expenses, including attorneys' fees incurred in defending any action, suit, or proceeding referred to in sections (1) and (2) of this article, may be paid by the corporation in advance of the final disposition of such action, suit, or proceeding as authorized by the directors in the specific case upon receipt of a written undertaking by or on behalf of the director, trustee, officer, employee, or agent to repay such amount, unless it shall ultimately be determined that he is entitled to be indemnified by the corporation as authorized in this article. If a majority vote of a quorum of disinterested directors so directs by resolution, said written undertaking need not be submitted to the corporation. Such a determination that a written undertaking need not be submitted to the corporation shall in no way affect the entitlement of indemnification as authorized by this article. (6) The indemnification provided by this article shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under the articles or the regulations or any agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, trustee, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person. (7) The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, trustee, officer, employee, or agent of another corporation (including a subsidiary of this corporation), domestic or foreign, nonprofit or for profit, partnership, joint venture, trust, or other enterprise against any liability asserted against him and incurred by him in any such capacity or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under this section. (8) As used in this section, references to "the corporation" include all constituent corporations in a consolidation or merger and the new or surviving corporation, so that any person who is or was a director, officer, employee, or agent of such a constituent corporation, or is or was serving at the request of such constituent corporation as a director, trustee, officer, employee or agent of another corporation (including a subsidiary of this corporation), domestic or foreign, nonprofit or for profit, partnership, joint venture, trust, or other enterprise shall stand in the same position under this article with respect to the new or surviving corporation as he would if he had served the new or surviving corporation in the same capacity. (9) The foregoing provisions of this article do not apply to any proceeding against any trustee, investment manager or other fiduciary of an employee benefit plan in such person's capacity as such, even though such person may also be an agent of this corporation. The corporation may indemnify such named fiduciaries of its employee benefit plans against all costs and expenses, judgments, fines, settlements or other amounts actually and reasonably incurred by or imposed upon said named fiduciary in connection with or arising out of any claim, demand, action, suit or proceeding in which the named fiduciary may be made a party by reason of being or having been a named fiduciary, to the same extent it indemnifies an agent of the corporation. To the extent that the corporation does not have the direct legal power to indemnify, the corporation may contract with the named fiduciaries of its employee benefit plans to indemnify them to the same extent as noted above. The corporation may purchase and maintain insurance on behalf of such named fiduciary covering any liability to the same extent that it contracts to indemnify. II-5 AMENDED CODE OF REGULATIONS OF WESTERN RESERVE ARTICLE V INDEMNIFICATION OF DIRECTORS AND OFFICERS Each Director, officer and member of a committee of this Corporation, and any person who may have served at the request of this Corporation as a Director, officer or member of a committee of any other corporation in which this Corporation owns shares of capital stock or of which this Corporation is a creditor (and his heirs, executors and administrators) shall be indemnified by the Corporation against all expenses, costs, judgments, decrees, fines or penalties as provided by, and to the extent allowed by, Article Eighth of the Corporation's Articles of Incorporation, as amended. RULE 484 UNDERTAKING Insofar as indemnification for liability arising under the Securities Act of 1933 (the "Act") 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 director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel, the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. CONTENTS OF REGISTRATION STATEMENT This registration statement comprises the following papers and documents: The facing sheet The Prospectus, consisting of 167 pages The undertaking to file reports Representation Pursuant to Section 26(e) (2) (A) The statement with respect to indemnification The Rule 484 undertaking The signatures Written consent of the following persons: (a) Sutherland Asbill & Brennan LLP (b) Ernst & Young LLP (c) PricewaterhouseCoopers LLP The following exhibits: 1. The following exhibits correspond to those required by paragraph A to the instructions as to exhibits in Form N-8B-2: A. (1) Resolution of the Board of Directors of Western Reserve establishing the Series Account (3) (2) Not Applicable (3) Distribution of Policies: (a) Master Service and Distribution Compliance Agreement (4) II-6 (b) Amendment to Master Service and Distribution Compliance Agreement (5) (c) Form of Broker/Dealer Supervisory and Service Agreement (5) (d) Principal Underwriting Agreement (5) (e) First Amendment to Principal Underwriting Agreement (5) (4) Not Applicable (5) (a) Specimen Flexible Premium Variable Life Insurance Policy (b) Endorsement (EL101) (5) (c) Living Benefit Rider (d) Other Insured Rider (e) Primary Insured Rider and Primary Insured Rider Plus (6) (a) Second Amended Articles of Incorporation of Western Reserve (2) (b) Amended Code of Regulations (By-Laws) of Western Reserve (2) (c) Certificate of First Amendment to the Second Amended Articles of Incorporation of Western Reserve (9) (7) Not Applicable (8) (a) Investment Advisory Agreement with the Fund (3) (b) Sub-Advisory Agreement (3) (c) Participation Agreement Among Variable Insurance Products Fund, Fidelity Distributors Corporation and Western Reserve Life Assurance Co. of Ohio dated June 14, 1999 (6) (d) Amendment No.1 dated March 15, 2000 to Participation Agreement - Variable Insurance Products Fund (7) (e) Participation Agreement Among Variable Insurance Products Fund II, Fidelity Distributors Corporation and Western Reserve Life Assurance Co. of Ohio dated June 14, 1999 (6) (f) Amendment No.1 dated March 15, 2000 to Participation Agreement - Variable Insurance Products Fund II (7) (g) Participation Agreement Among Variable Insurance Products Fund III, Fidelity Distributors Corporation and Western Reserve Life Assurance Co. of Ohio dated June 14, 1999 (6) (h) Amendment No. 1 dated March 15, 2000 to Participation Agreement - Variable Insurance Products Fund III (7) (9) Not Applicable (10) Application for Flexible Premium Variable Life Insurance Policy (11) Memorandum describing issuance, transfer and redemption procedures (10) 2. See Exhibit 1.A. (1) 3. Opinion of Counsel as to the legality of the securities being registered (10) 4. No financial statement will be omitted from the Prospectus pursuant to Instruction 1(b) or (c) of Part I 5. Not Applicable 6. Opinion and consent of Alan Yaeger as to actuarial matters pertaining to the securities being registered (10) 7. Consent of Thomas E. Pierpan, Esq. (10) 8. Consent of Sutherland Asbill & Brennan LLP (10) 9. Consent of Ernst & Young LLP (10) II-7 10. Consent of PricewaterhouseCoopers LLP (10) 11. Powers of Attorney (8) - ---------------------------------------- (1) This exhibit was previously filed on Post-Effective Amendment No. 1 to Form S-6 Registration Statement dated December 19, 1997 (File No. 333-23359) and is incorporated herein by reference. (2) This exhibit was previously filed on Post-Effective Amendment No. 11 to Form N-4 Registration Statement dated April 20, 1998 (File No. 33-49556) and is incorporated herein by reference. (3) This exhibit was previously filed on Post-Effective Amendment No. 28 to Form N-1A Registration Statement dated April 28, 1997 (File No. 33-507) and is incorporated herein by reference. (4) This exhibit was previously filed on Post-Effective Amendment No. 11 to Form N-4 Registration Statement dated April 20, 1998 (File No. 33-49556) and is incorporated herein by reference. (5) This exhibit was previously filed on Post-Effective Amendment No. 4 to Form S-6 Registration Statement dated April 21, 1999 (File No. 333-23359) and is incorporated herein by reference. (6) This exhibit was previously filed on the Initial Registration Statement to Form S-6 dated September 23, 1999 (File No. 333-57681) and is incorporated herein by reference. (7) This exhibit was previously filed on Pre-Effective Amendment No. 1 to Form N-4 Registration Statement dated April 10, 2000 (File No. 333-93169) and is incorporated herein by reference. (8) This exhibit was previously filed on Pre-Effective Amendment No. 1 to Form N-4 Registration Statement dated July 28, 2000 (File No. 333-31228) and is incorporated herein by reference. (9) This exhibit was previously filed on Post-Effective Amendment No. 5 to Form S-6 Registration Statement dated April 19, 2000 (File No. 333-23359) and is incorporated herein by reference. (10) To be filed by amendment. II-8 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant, WRL Series Life Account, has duly caused this Initial Registration Statement to be signed on its behalf by the undersigned thereunto duly authorized, and its seal to be hereunto affixed and attested, all in the City of St. Petersburg, County of Pinellas, Florida on this 4th day of April, 2001. (SEAL) WRL SERIES LIFE ACCOUNT ----------------------- Registrant WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO ------------------------------ Depositor ATTEST: /s/ PRISCILLA I. HECHLER By: /s/ JOHN R. KENNEY - -------------------------------------- ------------------------------ Priscilla I. Hechler John R. Kenney Assistant Vice President Chairman of the Board and and Assistant Secretary Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Initial Registration Statement has been signed below by the following persons in the capacities and on the dates indicated. SIGNATURE AND TITLE DATE - ------------------- ---- /s/ JOHN R. KENNEY April 4, 2001 - -------------------------------------- John R. Kenney, Chairman of the Board and Chief Executive Officer /s/ ALLAN J. HAMILTON April 4, 2001 - -------------------------------------- Allan J. Hamilton, Vice President, Treasurer and Controller /s/ ALAN M. YAEGER April 4, 2001 - -------------------------------------- Alan M. Yaeger, Executive Vice President, Actuary and Chief Financial Officer* - -------- *Principal Financial Officer /s/ JEROME C. VAHL April 4, 2001 - -------------------------------------- Jerome C. Vahl, Director and President /s/ JAMES R. WALKER April 4, 2001 - -------------------------------------- James R. Walker, Director **/ /s/ JACK E. ZIMMERMAN April 4, 2001 - -------------------------------------- Jack E. Zimmerman, Director **/ **/ /s/ PRISCILLA I. HECHLER ---------------------------------- Signed by: Priscilla I. Hechler As Attorney-in-fact EXHIBIT INDEX EXHIBIT DESCRIPTION NO. OF EXHIBIT - ------- ----------- (5)(a) Specimen Flexible Premium Variable Life Insurance Policy (5)(c) Living Benefit Rider (5)(d) Other Insured Rider (5)(e) Primary Insured Rider and Primary Insured Rider Plus (10) Application for Flexible Premium Variable Life Insurance Policy EX-99.A7 2 0002.txt Exhibit (5)(a) Specimen Flexible Premium Variable Life Insurance Policy WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO (A STOCK COMPANY) Home Office: Columbus, Ohio Administrative Office: P.O.Box 5068 Clearwater, Florida 33758-5068 727-299-1800 - -------------------------------------------------------------------------------- IN THIS POLICY the Primary Insured is named on the Policy Schedule Page. The Primary Insured will be referred to as YOU or YOUR. Western Reserve Life Assurance Co. Of Ohio will be referred to as WE, OUR or US. IF YOU DIE before the Maturity Date and while this Policy is In Force, WE WILL PAY the Death Benefit Proceeds to the Beneficiary upon receipt of due proof of Your death. THE AMOUNT OF THE DEATH BENEFIT PROCEEDS WILL INCREASE OR DECREASE DEPENDING ON THE INVESTMENT EXPERIENCE OF THE SUBACCOUNTS IN THE SEPARATE ACCOUNT AND ON THE DEATH BENEFIT OPTION SELECTED AS DESCRIBED IN THE DEATH BENEFIT PROVISIONS. IF YOU ARE ALIVE on the Maturity Date and this Policy is In Force, WE WILL PAY the Net Surrender Value as of the Maturity Date. CASH VALUES WILL INCREASE OR DECREASE IN ACCORDANCE WITH THE POLICY VALUE PROVISIONS AND THE INVESTMENT EXPERIENCE OF THE SUBACCOUNTS IN THE SEPARATE ACCOUNT. CASH VALUES ARE NOT GUARANTEED AS TO DOLLAR AMOUNT. THE PROVISIONS on the following pages are part of this Policy. This policy is a legal contract between the Owner and Us. READ YOUR CONTRACT CAREFULLY. IN WITNESS WHEREOF, We have signed this Policy at Our Office in Clearwater, Florida as of the Policy Date. ABC ABC - -------------------------------------------------------------------------------- RIGHT TO EXAMINE POLICY The Owner may cancel this Policy by returning it to Us at P.O. Box 5068, Clearwater, Florida 33758 or to the representative through whom it was purchased within 10 days after receipt. If the Policy is returned within this period, it will be void from the beginning and a refund will be made to the Owner. The refund will equal the sum of: 1. The difference between the premiums paid and the amounts allocated to any Accounts under the Policy; plus 2. The total amount of monthly deductions made and any other charges imposed on amounts allocated to the Accounts; plus 3. The value of amounts allocated to the Accounts on the date We or Our agent receive the returned Policy. If state law prohibits the calculation above, the refund will be the total of all premiums paid for this Policy. - -------------------------------------------------------------------------------- Flexible Premium Variable Life Insurance Policy Death Benefit Proceeds Payable at Death of Insured Prior to Maturity Date Net Surrender Value Payable at Maturity Date Flexible Premiums Payable During Lifetime of Insured Until the Maturity Date Non-Participating - No Dividends Some Benefits Reflect Investment Results VL95 ================================================================================ POLICY GUIDE ================================================================================ CONTRACT SCHEDULE...................................... 3 DEATH BENEFIT PROVISIONS (continued) DEFINITIONS............................................ 5 Option Type...................................... 10 Accounts............................................ 5 Limitation Percentage............................ 10 Age................................................. 5 Changes.......................................... 11 Anniversary ........................................ 5 Death Benefit Proceeds........................... 12 Beneficiary ........................................ 5 PREMIUM PROVISIONS................................. 12 Death Benefit Proceeds.............................. 5 Payment.......................................... 12 Fixed Account....................................... 5 Premiums......................................... 12 In Force ........................................... 5 Grace Period..................................... 13 Initial Premium..................................... 5 Reinstatement.................................... 13 Internal Revenue Code............................... 5 SEPARATE ACCOUNT PROVISIONS........................ 13 Maturity Date....................................... 5 The Separate Account............................. 13 Monthiversary....................................... 5 Subaccounts...................................... 14 Net Premium ........................................ 5 Transfers........................................ 14 Net Surrender Value................................. 6 Addition, Deletion or Substitution of No Lapse Date....................................... 6 Investments................................... 14 Office.............................................. 6 Change of Investment Objective................... 15 Policy Date......................................... 6 Unit Value....................................... 15 Record Date ........................................ 6 POLICY VALUE PROVISIONS............................ 15 Reallocation Date................................... 6 Net Premium...................................... 15 Rider............................................... 6 Allocation of Net Premiums....................... 16 SEC................................................. 6 Monthly Deductions............................... 16 Separate Account.................................... 6 Monthly Policy Charge............................ 16 Series Fund......................................... 6 Monthly Cost of Insurance........................ 16 Subaccount.......................................... 6 Monthly Cost of Insurance Rates.................. 17 Surrender........................................... 6 Subaccount Value................................. 17 Termination......................................... 6 Fixed Account Value.............................. 17 Valuation Date...................................... 7 Cash Value....................................... 18 Valuation Period.................................... 7 Surrender ....................................... 18 Written Notice...................................... 7 Net Surrender Value.............................. 18 GENERAL PROVISIONS..................................... 7 Surrender Charge................................. 18 The Policy.......................................... 7 Surrender Charge Upon Decrease in Ownership .......................................... 7 Specified Amount.............................. 19 Beneficiary ........................................ 7 Withdrawals...................................... 19 Assignment.......................................... 8 Continuation of Insurance........................ 20 Extended Maturity Date.............................. 8 Insufficient Value............................... 20 Incontestability.................................... 8 Basis of Computations............................ 20 Suicide............................................. 9 Policy Loans..................................... 20 Issue Age and Sex................................... 9 SETTLEMENT OPTIONS................................. 21 Annual Report....................................... 9 Effective Date and First Payment Due.............. 21 Termination......................................... 9 Betterment of Monthly Annuity..................... 21 Policy Payment...................................... 9 Availability...................................... 21 Conversion Rights................................... 9 Age............................................... 21 Protection of Proceeds.............................. 10 Proof of Age and Sex.............................. 21 DEATH BENEFIT PROVISIONS............................... 10 Proof of Survival................................. 22 Death Benefit........................................ 10 Interest.......................................... 22 Specified Amount..................................... 10 Table of Optional Methods of Settlement........... 22
VL95 PAGE 2 WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO Clearwater, Florida POLICY SCHEDULE ================================================================================ Primary Insured: JOHN DOE Issue Age And Sex: 35 - Male Policy Number: 0112345678 Specified Amount: $ 250,000.00 Policy Date: December 01, 2000 Option Type: B Record Date: December 01, 2000 Planned Premium: $2,000.00 No Lapse Date: December 01, 2020 Payment Frequency: Annually Maturity Date: December 01, 2065 Initial Payment Notice: Direct Pay Notice Reallocation Date: December 21, 2000 Initial Premium: $2,000.00 Minimum Monthly Guarantee Premium: $ 128.75
Rate Class: Ultimate Standard Rate Band: Band 2 Minimum Specified Amount: Band 1 Issue Age 0-49: $ 100,000.00 Issue Age 50 and Over: $ 50,000.00 Band 2 $ 250,000.00 Band 3 $ 500,000.00 Band 4 $1,000,000.00 Separate Account Provisions Separate Account: WRL Series Life Account Mortality and Expense Risk Charge: Policy Years 1-15: .90% (Annually) Policy Years 16+: Current: .30% (Annually) Guaranteed: .60% (Annually) Reallocation Account: Fixed Account Policy Value Provisions Net Premium Factor Band 1 Policy Years 1-10 94.00% Policy Years 11+ 97.50% Band 2 Policy Years 1-10 96.00% Policy Years 11+ 97.50% Band 3 All Policy Years 100% Band 4 All Policy Years 100% Collection Fee: Direct Pay Notice: $ 3.00 Per Payment All Other Payment Notices: $ 0.00 Monthly Policy Charge Initial (Guaranteed for the First Policy Year): $5.00 Guaranteed: $7.50
VL95 PAGE 3 WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO Clearwater, Florida POLICY SCHEDULE (CONTINUED) POLICY NUMBER: 0112345678 TABLE OF SURRENDER CHARGES PER $1000 OF SPECIFIED AMOUNT AS OF THE POLICY DATE (APPLICABLE SPECIFIED AMOUNT EQUALS $250,000)
End of Year* Surrender Charge End of Year Surrender Charge AT ISSUE $16.48 9 $ 9.89 1 $16.48 10 $ 8.24 2 $16.48 11 $ 6.59 3 $16.48 12 $ 4.94 4 $16.48 13 $ 3.30 5 $16.48 14 $ 1.65 6 $14.83 15 $ 0.00 7 $13.18 16+ $ 0.00 8 $11.54
*The surrender charge on any date other than an end of year will be interpolated between the two end of year charges. VL95 Page 4 WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO Clearwater, Florida RIDER INFORMATION ================================================================================ Rider Monthly Deduction - -------------------------------------------------------------------------------- NONE Number: 0112345678 The monthly deductions shown above are applicable for the first policy month. For monthly deductions after the first policy month, refer to the rider form. VL95 Page 4 WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO Clearwater, Florida POLICY SCHEDULE ================================================================================ Policy Number: 0112345678 TABLE OF GUARANTEED MAXIMUM LIFE INSURANCE RATES Guaranteed Rate Basis for Initial Specified Amount on Primary Insured Commissioners 1980 Standard Ordinary Tobacco Smoker and Non-Tobacco Smoker Mortality Table Insured Name Male Lives Tobacco User Classification Monthly Cost of Insurance Rates Per $ 1,000
Attained Age Monthly Rate Attained Age Monthly Rate 35 .21916 68 3.87916 36 .23416 69 4.19333 37 .25333 70 4.54000 38 .27500 71 4.92416 39 .30000 72 5.36083 40 .32833 73 5.85250 41 .36166 74 6.38833 42 .39583 75 6.98083 43 .43500 76 7.59166 44 .47583 77 8.21000 45 .52250 78 8.82583 46 .56916 79 9.45750 47 .62000 80 10.13250 48 .67333 81 10.86750 49 .73333 82 11.68333 50 .79166 83 12.58583 51 .87000 84 13.54083 52 .95166 85 14.51666 53 1.04500 86 15.48166 54 1.15000 87 16.42166 55 1.26166 88 17.44750 56 1.38250 89 18.46000 57 1.50750 90 19.47416 58 1.64083 91 20.51000 59 1.77916 92 21.61083 60 1.93250 93 23.02500 61 2.10500 94 24.84583 62 2.29916 95 27.49666 63 2.51916 96 32.04583 64 2.76166 97 40.01666 65 3.02416 98 54.83166 66 3.29750 99 83.33333 67 3.58416
VL95 Page 4A DEFINITIONS ================================================================================ ACCOUNTS Allocation options including the Fixed Account and the Subaccounts of the Separate Account. AGE Issue Age refers to the Age on Your birthday nearest the Policy Date. Attained Age refers to the Issue Age plus the number of completed policy years. ANNIVERSARY The same day and month as the Policy Date for each succeeding year the Policy remains In Force. BENEFICIARY The person or persons specified by the Owner to receive the Death Benefit Proceeds upon Your death. DEATH BENEFIT The amount payable upon Your death in accordance PROCEEDS with the Death Benefit Provisions. FIXED ACCOUNT An allocation option(s) other than the Separate Account. IN FORCE Condition under which the coverage under this Policy or Rider, if any, is active and Your life remains insured. INITIAL PREMIUM The amount which must be paid before coverage begins. The amount is shown on the Policy Schedule Page. INTERNAL REVENUE CODE The Internal Revenue Code of 1986, as amended. MATURITY DATE The Anniversary nearest Your 100th birthday on which coverage under this Policy will terminate if You are living and this Policy is In Force. The Maturity Date may be extended as provided in the Extension of Maturity Date section of the General Provisions. MONTHIVERSARY The day of each month coinciding with the Policy Date. If there is no day in a calendar month which coincides with the Policy Date, the Monthiversary will be the first day of the next month. NET PREMIUM The portion of the premium available for allocation as set forth in the Policy Value Provisions. VL95 Page 5 NET SURRENDER VALUE The amount payable upon Surrender in accordance with the Policy Value Provisions of this Policy. NO LAPSE DATE The date, as set forth on the Policy Schedule Page, prior to which this Policy will not lapse if certain conditions are met, even though the Net Surrender Value is insufficient to meet the monthly deduction. OFFICE Refers to Our administrative Office located in Clearwater, Florida. POLICY DATE The date coverage is effective and monthly deductions commence under the Policy. Policy months, years and anniversaries are measured from the Policy Date, as shown on the Policy Schedule Page. RECORD DATE The date the Policy is recorded on Our books as an In Force Policy. The Record Date is shown on the Policy Schedule Page. REALLOCATION DATE The date on which any premiums are reallocated from the Reallocation Account to the Accounts as elected by the Owner on the application. The Reallocation Date is shown on the Policy Schedule Page. RIDER Any attachment to this Policy which provides additional coverages or benefits. SEC The United States Securities and Exchange Commission. SEPARATE ACCOUNT A separate investment account shown on the Policy Schedule Page which is composed of several Subaccounts established to receive and invest Net Premiums under the Policy. SERIES FUND A designated mutual fund from which each Subaccount of the Separate Account will buy shares. SUBACCOUNT A sub-division of the Separate Account. Each Subaccount invests exclusively in the shares of specified Series Fund portfolio. SURRENDER The Termination of this Policy at the option of the Owner. TERMINATION Condition under which coverage under the Policy or any Rider is no longer In Force and Your life is no longer insured. VL95 Page 6 VALUATION DATE Any day We are required by law to value the assets of the Separate Account. VALUATION PERIOD The period commencing at the end of one Valuation Date and continuing to the end of the next succeeding Valuation Date. WRITTEN NOTICE Written Notice means a notice by the Owner to Us requesting or exercising a right of the Owner as provided in the Policy provisions. In order for a notice to be considered a Written Notice, it must: be in writing, signed by the Owner; be in a form acceptable to Us; and contain the information and documentation, as determined in Our sole discretion, necessary for Us to take the action requested or for the Owner to exercise the right specified. A Written Notice will not be considered complete until all necessary supporting documentation required or requested by Us has been received by Us at Our administrative Office. GENERAL PROVISIONS ================================================================================ THE POLICY This Policy is issued in consideration of the attached application and payment of the Initial Premium. This Policy, the attached application and any additional applications at the time of reinstatement constitute the entire contract. All statements in these applications, in the absence of fraud, will be deemed representations and not warranties. No statement can be used to void this Policy or be used in defense of a claim unless it is contained in the written application. No Policy provision can be waived or changed except by endorsement. Such endorsement must be signed by Our President or Secretary. OWNERSHIP This Policy belongs to the Owner. The Owner, as named in the application or subsequently changed, may exercise all rights under this Policy during Your lifetime including the right to transfer ownership. If the Owner should die during Your lifetime, ownership of this Policy will pass to the Owner's estate if no contingent Owner is named. We will not be bound by any change in the ownership designation unless it is made by Written Notice. The change will be effective on the date the Written Notice is accepted by Us. If We request, this Policy must be returned to Our administrative Office for endorsement. BENEFICIARY The Beneficiary, as named in the application or subsequently changed, will receive the benefits payable at Your death. If the Beneficiary dies before You, the Contingent Beneficiary, if named, becomes the Beneficiary. If no Beneficiary or Contingent Beneficiary survives You, the benefits payable at Your death will be paid to the Owner or the Owner's estate. VL95 Page 7 We will not be bound by any change in the Beneficiary designation unless it is made by Written Notice. The change will be effective on the date the Written Notice was signed; however, no change will apply to any payment We made before the Written Notice is received. If We request, this Policy must be returned to Our Office for endorsement. ASSIGNMENT This Policy may be assigned. We will not be bound by any assignment unless made by Written Notice and received at Our Office. The assignment will be effective on the date it was signed; however, no change will apply to any payment We made before Written Notice was received. We assume no responsibility for the validity of any assignment. EXTENDED MATURITY DATE The Owner may request that the Maturity Date shown on the Policy Schedule page be extended. The request must be in writing and received by Us at least 90 days, but no more than 180 days, prior to the scheduled Maturity Date. Any Riders In Force on the scheduled Maturity Date will terminate on that date and will not be extended. Interest on any outstanding policy loan will continue to accrue during the period for which the Maturity Date is extended. The Maturity Date will be extended in accordance with either (1) or (2) below, as elected by the Owner at the time the request is made. If (2) is chosen, the Owner may elect to change to (1) at any time. Changes from (1) to (2) are not permitted. (1) If the death benefit Option Type is other than Option A, the Option Type will be changed to Option A. Subsequent changes to the Option Type will not be allowed. On each Valuation Date, the Specified Amount will be adjusted to equal the Cash Value, and the Limitation Percentage will be 100%. No additional Premium payments will be permitted. All future monthly deductions will be waived. (2) The Maturity Date will be automatically extended until the next Policy Anniversary. At least 90 days, but no more than 180 days, prior to each subsequent Policy Anniversary, the Owner must request that the Maturity Date be extended each Policy year. All benefits and charges will continue as set forth in this Policy. Monthly Cost of Insurance Rates will be the then current cost of insurance rates. INCONTESTABILITY This Policy shall be incontestable after it has been In Force, while You are still alive, for two years from the Policy Date. A new two year contestability period shall apply to each increase in insurance amount beginning on the effective date of each increase and will apply only to statements made in the application for the increase. If this Policy is reinstated, a new two year contestability period (apart from any remaining contestability period) shall apply from the date of the application for reinstatement and will apply only to statements made in the application for reinstatement. VL95 Page 8 SUICIDE If You die by suicide, while sane or insane, within two years from the Policy Date, or two years from the effective date of any reinstatement of this Policy, this Policy shall terminate and Our total liability, including all Riders attached to this Policy, will be limited to the total premiums paid, less any loans and prior withdrawals, during such period. If You die by suicide, while sane or insane, within two years from the effective date of any increase in insurance, Our total liability with respect to such increase will be its cost of insurance. ISSUE AGE If Your date of birth or sex is not correctly AND SEX stated, the death benefit will be adjusted. The death benefit will be adjusted based on what the cost of insurance charge for the most recent monthly deduction would have purchased based on Your correct date of birth and sex. ANNUAL REPORT We will send a report to the Owner at least once each year. It will show for the Policy: 1. The current cash value; 2. The current Net Surrender Value; 3. The current death benefit; 4. Any current policy loans; 5. Activity since the last report; 6. Projected values. Additional activity within each Subaccount showing investment experience will also be provided. TERMINATION This Policy will terminate on the earliest of: 1. The Maturity Date unless extended; 2. The date of Your death; 3. The end of the grace period; 4. The date of Surrender. POLICY PAYMENT All proceeds to be paid upon Termination will be paid in one sum unless otherwise elected under the Settlement Options of this Policy. All payments and transfers from the Subaccounts will be processed as provided in this Policy unless one of the following situations exists: 1. The New York Stock Exchange is closed; or 2. The SEC requires that trading be restricted or declares an emergency; or 3. The SEC allows Us to defer payments to protect Our policyowners. We reserve the right to defer the payment of any Fixed Account values for the period permitted by law, but not for more than six months. CONVERSION RIGHTS At any time upon written request within the first two policy years, the Owner may elect to transfer all Subaccount Values to the Fixed Account without a transfer charge. VL95 Page 9 PROTECTION OF Unless the Owner directs by filing Written PROCEEDS Notice, no Beneficiary may assign any payments under this Policy before the same are due. To the extent permitted by law, no payments under this Policy will be subject to the claims of creditors of any Beneficiary. DEATH BENEFIT PROVISIONS ================================================================================ DEATH BENEFIT The death benefit is based upon the Specified Amount, Option Type and the Limitation Percentage applicable at time of death. SPECIFIED AMOUNT The Specified Amount is as shown on the Policy Schedule Page, unless changed in accordance with the Changes section or reduced by a cash withdrawal. OPTION TYPE The Option Type is as shown on the Policy Schedule Page, unless changed in accordance with the Changes section of this provision. If Option Type A is in effect, the death benefit is the greater of: 1. the Specified Amount; or 2. the Limitation Percentage multiplied by the cash value of this Policy on the date of Your death. If Option Type B is in effect, the death benefit is the greater of: 1. the Specified Amount plus the cash value of this Policy on the date of Your death; or 2. the Limitation Percentage multiplied by the cash value of this Policy on the date of Your death. If Option Type C is in effect, the death benefit is the greater of: 1. the Option Type A benefit; or 2. the Specified Amount multiplied by the factor K plus the cash value of this Policy on the date of Your death, where the factor K is equal to the lesser of: a. 1; or b. .04 multiplied by (95 minus Your Attained Age at death). The factor K will never be less than zero. LIMITATION PERCENTAGE The Limitation Percentage is a percentage based on Your Attained Age at the beginning of the policy year equal to: VL95 Page 10 Attained Age Limitation Percentage --------------------------------------------------------------- 40 and under 250% 41 through 45 250% minus 7% for each Age over Age 40 46 through 50 215% minus 6% for each Age over Age 45 51 through 55 185% minus 7% for each Age over Age 50 56 through 60 150% minus 4% for each Age over Age 55 61 through 65 130% minus 2% for each Age over Age 60 66 through 70 120% minus 1% for each Age over Age 65 71 through 75 115% minus 2% for each Age over Age 70 76 through 90 105% 91 through 95 105% minus 1% for each Age over Age 90 96 through 99 100% CHANGES After the third policy year, the Owner may change the Option Type by Written Notice. Changes will be effective on the first Monthiversary on or next following the day We receive Written Notice. No change in the Option Type will be allowed if the resulting Specified Amount would be less than the Band 1 Minimum Specified Amount shown on the Policy Schedule Page. On the effective date of change to a new Option Type, the Specified Amount will be adjusted so that the amount determined under 1 and 2 of the Monthly Cost of Insurance provision will be equal to that determined under the prior Option Type. The Specified Amount may be increased or decreased at any time after the third Policy year by Written Notice. We reserve the right to limit any decrease to no more than 20% of the then current Specified Amount. All changes to the Specified Amount are subject to the following: 1. Any decrease will become effective on the first Monthiversary on or next following the date We receive Written Notice. Any such decrease will reduce the Specified Amount in the following order: a) against insurance provided by the most recent increase; b) against the next most recent increases successively; and c) against insurance provided under the original application. No decrease will be allowed if: a) the Specified Amount after any requested decrease would be less than the Band 1 Minimum Specified Amount shown on the Policy Schedule Page; b) the requested decrease would force a cash withdrawal in order to maintain compliance with the definition of a life insurance contract as defined by the United States Internal Revenue Code and applicable regulations; or c) the decrease would cause the Policy to enter the grace period. VL95 Page 11 2. Any request for an increase in Specified Amount must be applied for on a supplemental application and must include evidence of insurability satisfactory to Us. Such increase, if approved by Us, will be effective on the first Monthiversary on or next following Our Written Approval. We reserve the right to require any requested increase to be at least $50,000. Only one change in the Option Type or to the Specified Amount will be allowed within each policy year. If the Specified Amount is changed and the resulting Specified Amount causes a change in the Rate Band, the Net Premium Factor for the new band will be applied to all subsequent premiums received following the effective date of change. DEATH BENEFIT PROCEEDS The Death Benefit Proceeds is the amount payable by Us under this Policy provided this Policy has not terminated prior to Your death. Except as provided in the Suicide section of the General Provisions, the Death Benefit Proceeds will be equal to: 1. The death benefit; minus 2. Any monthly deductions due during the grace period; minus 3. Any outstanding policy loan; minus 4. Any accrued loan interest. PREMIUM PROVISIONS ================================================================================ PAYMENT The Initial Premium shown on the Policy Schedule Page must be paid on or before the Policy Date. All premiums after the Initial Premium are payable at Our Office. PREMIUMS The amount and frequency of Planned Premiums are shown on the Policy Schedule Page. The amount and frequency may be changed upon request, subject to Our approval. While this Policy is In Force, additional premiums may be paid at any time prior to the Maturity Date. We reserve the right to limit or refund any premium if: 1. The amount is below Our current minimum payment requirement; or 2. The premium would increase the death benefit by more than the amount of the premium; or 3. The premium would disqualify this Policy as a life insurance contract as defined by the United States Internal Revenue Code and applicable regulations. VL95 Page 12 GRACE PERIOD If the Net Surrender Value on any Monthiversary is not sufficient to cover the monthly deductions on such day, We will mail a notice to the last known address of the Owner and any assignee of record. A grace period of 61 days after the mailing date of the notice will be allowed for the payment of premiums. The notice will specify the minimum payment and the final date on which such payment must be received by Us to keep the Policy In Force. The Policy will remain In Force during the grace period. If the amount due is not received by Us within the grace period, all coverage under the Policy and any Riders will terminate without value at the end of the grace period. Until the No Lapse Date shown on the Policy Schedule Page, no grace period will begin provided the total premiums received (minus any withdrawals, minus any outstanding loans, minus any accrued loan interest, and minus any Surrender Charge assessed upon a decrease in the Specified Amount that has been deducted from the cash value) equals or exceeds the Minimum Monthly Guarantee Premium times the number of months since the Policy Date, including the current month. The Minimum Monthly Guarantee Premium is as shown on the Policy Schedule Page unless changed due to a requested change under the Policy. Upon such change, the Owner will be notified of the new Minimum Monthly Guarantee Premium and the effective date for the new premium. REINSTATEMENT If this Policy terminates, as provided in the Grace Period section, it may be reinstated. The reinstatement is subject to: 1. Receipt at Our Office of a Written Notice. Such notice must be within 5 years after the date of Termination and prior to the Maturity Date; and 2. Receipt of evidence of insurability satisfactory to Us; and 3. Payment of a minimum premium sufficient to provide a Net Premium to cover (a) one monthly deduction at the time of Termination, plus (b) the next two monthly deductions which will become due after the time of reinstatement; and 4. Payment of an additional amount sufficient to cover any Surrender Charge as of the date of reinstatement. The effective date of a reinstatement shall be the first Monthiversary on or next following the day We approve the application for reinstatement. Any policy loan as of the date of Termination will not be reinstated. Any cash value equal to the policy loan on the date of reinstatement will also not be reinstated. SEPARATE ACCOUNT PROVISIONS ================================================================================ THE SEPARATE ACCOUNT The variable benefits under this Policy are provided through the Separate Account as shown on the Policy Schedule Page. The assets of the Separate Account are Our property. Assets equal to the reserve and other contractual liabilities under all policies issued in connection with the Separate Account will not be charged with liabilities arising out of any other business We may conduct. If the assets of the Separate Account exceed the liabilities arising under the policies supported by the Separate Account, then the excess may be used to cover the liabilities of Our general account. The assets of the Separate Account shall be valued as often as any policy benefits vary, but at least monthly. VL95 Page 13 SUBACCOUNTS The Separate Account has various Subaccounts with different investment objectives. We reserve the right to add or remove any Subaccount of the Separate Account. Income, if any, and any gains or losses, realized or unrealized, from assets in each Subaccount are credited to, or charged against, the amount allocated to that Subaccount without regard to income, gains, or losses in other Subaccounts. Any amount charged against the investment base for federal or state income taxes will be deducted from that Subaccount. The assets of each Subaccount are invested in shares of a corresponding Series Fund portfolio. The value of a portfolio share is based on the value of the assets of the portfolio determined at the end of each Valuation Period in accordance with applicable law. TRANSFERS The Owner may transfer all or a portion of this Policy's value in each Subaccount to other Subaccounts or the Fixed Account. We reserve the right to charge a $25 fee for each transfer in excess of one per policy month or twelve per policy year. This charge will be deducted from the funds transferred. A request for a transfer must be made in a form satisfactory to Us. The transfer will ordinarily take effect on the first Valuation Date on or following the date the request is received at Our Office. ADDITION, DELETION We reserve the right to transfer assets of the OR SUBSTITUTION OF Separate Account, which We determine to be INVESTMENTS associated with the class of contracts to which this Policy belongs, to another Separate Account. If this type of transfer is made, the term "Separate Account", as used in this Policy, shall then mean the Separate Account to which the assets were transferred. We also reserve the right to add, delete, or substitute investments held by any Subaccount. We reserve the right, when permitted by law, to: 1. Deregister the Separate Account under the Investment Company Act of 1940; 2. Manage the Separate Account under the direction of a committee at any time; 3. Restrict or eliminate any voting privileges of owners or other persons who have voting privileges as to the Separate Account; 4. Combine the Separate Account or any Subaccount(s) with one or more other Separate Accounts or Subaccounts; 5. Operate the Separate Account as a management investment company; 6. Establish additional Subaccounts to invest in either a new series of the Series Fund, or in shares of another diversified, open-end registered investment company; and 7. Fund additional classes of variable life insurance contracts through the Separate Account. VL95 Page 14 CHANGE OF We reserve the right to change the investment INVESTMENT objective of a Subaccount. If required by law or OBJECTIVE regulation, an investment objective of the Separate Account, or of a Series Fund portfolio designated for a Subaccount, will not be materially changed unless a statement of the change is filed with and approved by the appropriate insurance official of the state of Our domicile or deemed approved in accordance with such law or regulation. If required, approval of or change of any investment objective will be filed with the Insurance Department of the state where this Policy is delivered. UNIT VALUE Some of the policy values fluctuate with the investment results of the Subaccounts. In order to determine how investment results affect the policy values, a unit value is determined for each Subaccount. The unit value of each Subaccount was originally established at $10 per unit. The unit value may increase or decrease from one Valuation Period to the next. Unit values also will vary between Subaccounts. The unit value of any Subaccount at the end of a Valuation Period is the result of: 1. The total value of the assets held in the Subaccount. This value is determined by multiplying the number of shares of the designated Series Fund portfolio owned by the Subaccount times the net asset value per share; minus 2. The accrued risk charge for adverse mortality and expense experience. The daily amount of this charge is equal to the daily net assets of the Subaccount multiplied by the daily equivalent of the Mortality and Expense Risk Charge. The maximum annual factor for the Mortality and Expense Risk Charge is shown on the Policy Schedule Page; minus 3. The accrued amount of reserve for any taxes or other economic burden resulting from the application of tax laws that are determined by Us to be properly attributable to the Subaccount; and the result divided by 4. The number of outstanding units in the Subaccount. The use of the unit value in determining contract values is described in the Policy Value Provisions. POLICY VALUE PROVISIONS ================================================================================ NET PREMIUM The applicable Net Premium equals the premium paid multiplied by the Net Premium Factor shown on the Policy Schedule Page minus the Collection Fee, if any, shown on the Policy Schedule Page. VL95 Page 15 ALLOCATION OF Net Premiums will be allocated to the NET PREMIUMS Subaccounts of the Separate Account and the Fixed Account on the first Valuation Date on or following the date the premium is received at Our Office; except any Net Premium received prior to the Policy Date will be allocated on the first Valuation Date on or following the Policy Date. All Net Premiums allocated prior to the Reallocation Date will be allocated to the Reallocation Account. On the first Valuation Date on or following the Reallocation Date, the values in the Reallocation Account will be transferred in accordance with the Owner's allocation as shown in the application. We reserve the right to limit any allocation to any Account to no less than 1%. No fractional percentages may be permitted. The allocation may be changed by the Owner. We reserve the right to impose a charge of $25 for each change of allocation in excess of one per policy year quarter. The request for change of allocations must be in a form satisfactory to Us. The allocation change will be effective on the date the request for change is recorded by Us. MONTHLY DEDUCTIONS On each Monthiversary, a monthly deduction for this Policy will be made equal to the sum of the following: 1. The Monthly Policy Charge as shown on the Policy Schedule Page; 2. The Monthly Cost of Insurance for this Policy; 3. The charge for benefits provided by Riders attached to this Policy; 4. The Surrender Charge upon a decrease in the Specified Amount, on the effective date of the decrease. Deductions will be withdrawn from each account in proportion to the value each bears to the Cash Value. MONTHLY POLICY CHARGE Both the Initial and Guaranteed Monthly Policy Charge are shown on the Policy Schedule Page. It is Our intention to charge the Initial Monthly Policy Charge each month; however, We reserve the right to increase the Monthly Policy Charge up to the Guaranteed Monthly Policy Charge after the first policy year. Any change in this charge will be applied uniformly to all policies in effect for the same length of time. MONTHLY COST OF INSURANCE The Monthly Cost of Insurance on each Monthiversary is determined as follows: 1. divide the death benefit on the Monthiversary by 1.0024663; and 2. reduce the result by the cash value on the Monthiversary in the following order until all cash value has been applied: VL95 Page 16 a) against the insurance provided under the original application; b) against the insurance provided by the oldest increase; c) against the insurance provided by the next oldest increase and each successive increase; d) against the insurance provided by the most recent increase; 3. multiply the appropriate Monthly Cost of Insurance rate(s) by each amount of insurance provided under 2 above and sum. MONTHLY COST OF The Monthly Cost of Insurance rates will vary INSURANCE RATES by Your sex, Age at issue, Age at the time of any increase in Specified Amount, Rate Band, plan of insurance, Rate Class, and the duration from the Policy Date or the date of any increase in Specified Amount. Different Monthly Cost of Insurance rates may apply to increases in the Specified Amount following the Policy Date. Monthly Cost of Insurance rates may be changed by Us from time to time. A change in the cost of insurance rates will apply to all persons of the same Attained Age, sex, plan of insurance, Rate Band, Rate Class, and whose policies or increases have been in effect for the same length of time. The rates will not exceed those shown in the Table of Guaranteed Maximum Life Insurance Rates. SUBACCOUNT VALUE At the end of any Valuation Period, the Subaccount Value is equal to the number of units that the Policy has in the Subaccount, multiplied by the unit value of that Subaccount. The number of units that the Policy has in each Subaccount is equal to: 1. The initial units purchased on the Policy Date; plus 2. Units purchased at the time additional Net Premiums are allocated to the Subaccount; plus 3. Units purchased through transfers from another Subaccount or the Fixed Account; minus 4. Those units that are redeemed to pay for monthly deductions as they are due; minus 5. Any units that are redeemed to pay for cash withdrawals; minus 6. Any units that are redeemed as part of a transfer to another Account. FIXED ACCOUNT VALUE At the end of any Valuation Period, the Fixed Account value is equal to: 1. The sum of all Net Premiums allocated to the Fixed Account; plus 2. Any amounts transferred from a Subaccount to the Fixed Account; plus 3. Total interest credited to the Fixed Account; minus 4. Any amounts charged to pay for monthly deductions as they are due; minus 5. Any amounts withdrawn from the Fixed Account to pay for cash withdrawals; minus 6. Any amounts transferred from the Fixed Account to a Subaccount. VL95 Page 17 Interest on the Fixed Account will be compounded daily at a minimum guaranteed effective annual interest rate of 3% per year. We may declare from time to time various higher current interest rates on the unloaned portion of the Fixed Account. On transfers from the Fixed Account to a Subaccount, We reserve the right to impose the following limitations: 1. Written Notice be received by Us within 30 days after an Anniversary. 2. The transfer will take place on the date We receive such Written Notice. 3. The maximum amount that may be transferred is the greater of (a) 25% of the amount in the Fixed Account; or (b) the amount transferred in the prior policy year from the Fixed Account. We further reserve the right to defer payment of any amounts from the Fixed Account for no longer than six months after We receive such Written Notice. CASH VALUE At the end of any Valuation Period, the cash value of the Policy is equal to the sum of the Subaccount Values plus the Fixed Account value. SURRENDER While this Policy is In Force, the Owner may Surrender this Policy for the Net Surrender Value. Payment will usually be made within seven days of Written Notice, subject to the Policy Payment section of the General Provisions. NET SURRENDER VALUE The Net Surrender Value is the amount payable upon Surrender of this Policy. The Net Surrender Value as of any date is equal to: 1. the cash value as of such date; minus 2. any Surrender Charge as of such date; minus 3. any outstanding policy loan; minus 4. any accrued loan interest. SURRENDER CHARGE During the first 15 policy years, a Surrender Charge will be incurred upon Surrender of this Policy. This charge will be based upon the Table of Surrender Charges shown on the Policy Schedule Page. During the first 15 years following each increase in the Specified Amount, an additional Surrender Charge will be based upon the Table of Surrender Charges shown on the supplemental Policy Schedule Page provided at the time We approve the requested increase. VL95 Page 18 SURRENDER CHARGE During the first 15 policy years, or during the UPON DECREASE 15 year period subsequent to each increase in IN SPECIFIED AMOUNT Specified Amount, Surrender Charges will be assessed against the cash value upon a requested decrease in coverage. For decreases which reduce any increase in its entirety, the full Surrender Charge as determined under the Surrender Charge provisions above will be assessed against that portion of the decrease equal to the increase. For decreases which partially reduce any previous increase in Specified Amount or the amount in (d) below, a partial Surrender Charge will be assessed. This partial Surrender Charge will be equal to: 1. the amount of the Specified Amount decrease; multiplied by 2. the Surrender Charge shown on the Table of Surrender Charges applicable to that portion of the reduction in Specified Amount. Surrender Charges upon a decrease in Specified Amount will be charged in the following order: (a) the Surrender Charges for the insurance provided by the most recent increase; (b) the Surrender Charges for insurance provided by the next most recent increase and each next most recent increase; (c) the Surrender Charges for insurance provided by the oldest increase; (d) the Surrender Charges for the insurance provided under the original application. A Surrender Charge will not be deducted from the cash value when a Specified Amount decrease results from (a) a change in Option Type, or (b) a withdrawal when the death benefit is Option Type A, as described in the Withdrawals Provision below. If a Surrender Charge is deducted due to a decrease in Specified Amount, any future Surrender Charges incurred during the Surrender Charge period will be based on the reduced Specified Amount. WITHDRAWALS Cash withdrawals may be made any time after the first policy year and while this Policy is In Force. Only one withdrawal is allowed during a policy year. The amount of a withdrawal may be limited to no less than $500 and to no more than 10% of the Net Surrender Value. The remaining Net Surrender Value following a withdrawal may not be less than $500. The request for a withdrawal must be by Written Notice. A processing fee of the lesser of 2% of the amount withdrawn or $25 will be deducted from each withdrawal amount and the balance paid to the Owner. When a withdrawal is made, the cash value shall be reduced by the amount of the withdrawal. If the death benefit is Option Type A, the Specified Amount shall also be reduced by the amount of the withdrawal. These reductions will result in a reduction in the death benefit, which may be determined from the Death Benefit section. If the Specified Amount following the withdrawal results in a change in the Rate Band, the Net Premium factors for the new band will be applied to all subsequent premiums received following the date of the withdrawal. No withdrawal will be allowed if the resulting Specified Amount would be less than the Band 1 minimum Specified Amount shown on the Policy Schedule Page. VL95 Page 19 The Accounts from which the withdrawal will be made may be specified in the Written Notice. If no Account is specified, the withdrawal amount will be withdrawn from each Account in accordance with the Owner's current premium allocation instructions. Payment will usually be made within seven days of Written Notice, subject to the Policy Payment section of the General Provisions of this Policy. CONTINUATION OF INSURANCE Subject to the Grace Period section of the Premium Provisions, insurance coverage under this Policy and any benefits provided by Rider will be continued In Force until the Net Surrender Value is insufficient to cover the monthly deductions. This provision shall not continue this Policy beyond the Maturity Date nor continue any Rider beyond the date for its Termination, as provided in the Rider. INSUFFICIENT VALUE If the Net Surrender Value on any Monthiversary is not sufficient to cover the monthly deductions then due, this Policy shall terminate subject to the Grace Period section of the Premium Provisions. BASIS OF COMPUTATIONS Policy values and reserves are at least equal to those required by law. A detailed statement of the method of computation of values and reserves has been filed with the insurance department of the state in which this Policy was delivered. POLICY LOANS After the first policy year and during the continuance of this Policy, the Owner can borrow against this Policy an amount which is not greater than 90% of the cash value, less any Surrender Charges and any outstanding policy loan, including accrued interest. The amount of any policy loan may be limited to no less than $500, except as noted below. When a loan is made, an amount equal to the loan will be withdrawn from the Accounts and transferred to the loan reserve. The loan reserve is a portion of the Fixed Account used as collateral for any policy loan. The Owner may specify the Account or Accounts from which the withdrawal will be made. If no Account is specified, the withdrawal will be made from each Account in accordance with the Owner's current premium allocation instructions. The loan date is the date We process a loan request. Payment will usually be made within seven days of the date We receive proper loan request, subject to the Policy Payment section of the General Provisions of this Policy. This Policy will be the sole security for the loan. While this Policy is In Force, any loan may be repaid. Any amounts received on this Policy will be considered premiums unless clearly marked as loan repayments. VL95 Page 20 Interest on any loan will be at the maximum policy loan rate of 4%, payable in arrears. We may declare from time to time various lower policy loan interest rates. We may also apply different loan interest rates to different parts of the loan. Interest is due at each Anniversary. Interest not paid when due will be added to the loan and will bear interest up to the maximum policy loan rate. At each Anniversary, We will compare the amount of the outstanding loan to the amount in the loan reserve. At each such time, if this amount plus any accrued loan interest exceeds the amount in the loan reserve, We will withdraw the difference from the Accounts and transfer it to the loan reserve, in the same fashion as when a loan is made. If the amount in the loan reserve exceeds the amount of the outstanding loan, plus any accrued loan interest, We will withdraw the difference from the loan reserve and transfer it to the Accounts in accordance with the Owner's current allocation instructions. However, We reserve the right to require that the transfer be directed to the Fixed Account if such loans were originally transferred from the Fixed Account. SETTLEMENT OPTIONS ================================================================================ EFFECTIVE DATE AND FIRST The effective date of a settlement provision PAYMENT DUE will be either the date of Surrender or the date of death. The first payment due will be on the effective date of the settlement provision. BETTERMENT OF MONTHLY ANNUITY The payee will receive the greater of: 1. The income rate guaranteed in this Policy; or 2. The income rates in effect for Us at the time income payments are made. AVAILABILITY If the payee is not a natural person, an optional method of settlement is only available with Our permission. No optional method of settlement is available if: 1. The payee is an assignee; or 2. The periodic payment is less than $100. AGE Age, when required, means age nearest birthday on the effective date of the option. We will furnish rates for other ages and for two males or two females upon request. PROOF OF AGE Prior to making the first payment under this AND SEX Policy, We reserve the right to require satisfactory evidence of the birthdate and sex of any payee. If required by law to ignore the differences in sex of any payee, annuity payments will be determined using unisex rates. VL95 Page 21 PROOF OF SURVIVAL Prior to making any payment under this Policy, We reserve the right to require satisfactory evidence that any payee is alive on the due date of such payment. INTEREST All settlement options are based on the Annuity 2000 Mortality Table, if applicable, and a guaranteed annual interest rate of 3%. TABLE OF OPTIONAL METHODS OF SETTLEMENT DESCRIPTION AND TABLES OF MONTHLY INSTALLMENT PER $1,000 OF PROCEEDS. Option A - Fixed Period The proceeds will be paid in equal installments. The installments will be paid over a fixed period determined from the following table: Fixed Period (in months) Factor --------------------------- 60 17.91 120 9.61 180 6.87 240 5.51 Option B - Life Income The proceeds will be paid in equal installments determined from the following table. Such installments are payable: 1. during the payee's lifetime only (Life Annuity); or 2. during a 10-year fixed period certain and for the payee's remaining lifetime (Certain Period); or 3. until the sum of installments paid equals the annuity proceeds applied and for the payee's remaining lifetime (Installment Refund).
============== =================================== ===================================== =================================== Payee's Life Annuity Certain Period Installment Refund Age Male Female Unisex Male Female Unisex Male Female Unisex ----------- ------------ ---------- ------------ ----------- ------------ ----------- ------------ ---------- 55 4.18 4.01 4.06 4.13 3.99 4.03 3.99 3.89 3.92 60 4.64 4.42 4.49 4.57 4.38 4.44 4.36 4.23 4.27 65 5.30 4.98 5.08 5.14 4.89 4.97 4.83 4.67 4.72 70 6.21 5.78 5.90 5.86 5.58 5.66 5.43 5.26 5.31 75 7.46 6.94 7.09 6.70 6.45 6.53 6.22 6.04 6.09 80 9.23 8.66 8.83 7.61 7.46 7.51 7.24 7.08 7.13 85 11.72 11.24 11.38 8.44 8.40 8.41 8.55 8.45 8.48 90 15.16 14.94 15.00 9.06 9.05 9.05 10.22 10.19 10.20 ============== =========== ============ ========== ============ =========== ============ =========== ============ ==========
VL95 Page 22 Option C - Joint and Survivor The proceeds will be paid in equal installments Life Income during the joint lifetime of two payees: 1. continuing upon the death of the first payee for 2. reduced by one-third upon the death of the the remaining lifetime of the survivor; or first payee and continuing for the remaining lifetime of the survivor. Joint Life Income with Full Joint Life Income with 2/3 Amount to Survivor to Survivor
=========== =========== ========= ======== ========= ========= ==== ======= ============ ========= ======== ========= ======== FEMALE FEMALE MALE 55 60 65 70 75 MALE 55 60 65 70 75 ---- ----------- --------- -------- --------- --------- ---- ------------ --------- -------- --------- -------- 55 3.61 3.74 3.86 3.96 4.04 55 3.91 4.09 4.29 4.51 4.75 60 3.72 3.91 4.09 4.26 4.39 60 4.08 4.30 4.54 4.81 5.11 65 3.81 4.06 4.32 4.57 4.80 65 4.28 4.53 4.83 5.17 5.54 70 3.88 4.18 4.52 4.89 5.25 70 4.49 4.79 5.15 5.57 6.05 75 3.93 4.27 4.69 5.17 5.70 75 4.70 5.05 5.47 5.99 6.61 =========== =========== ========= ======== ========= ========= ==== ======= ============ ========= ======== ========= ========
VL95 Page 23 WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO - -------------------------------------------------------------------------------- Flexible Premium Variable Life Insurance Policy Death Benefit Proceeds Payable at Death of Insured Prior to Maturity Date Net Surrender Value Payable at Maturity Date Flexible Premiums Payable During Lifetime of Insured Until the Maturity Date Non-Participating - No Dividends Some Benefits Reflect Investment Results VL95 EX-99.LBR 3 0003.txt Exhibit (5)(c) Living Benefit Rider WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO (A STOCK COMPANY) Home Office: Columbus, Ohio Administrative Office: Clearwater, Florida LIVING BENEFIT RIDER (AN ACCELERATED DEATH BENEFIT) DEATH BENEFITS, CASH VALUES AND LOAN VALUES WILL BE REDUCED IF AN ACCELERATED DEATH BENEFIT IS PAID. AN ACCELERATED DEATH BENEFIT MAY BE TAXABLE. AS WITH ALL TAX MATTERS, A PERSONAL TAX ADVISOR SHOULD BE CONSULTED. The Owner may elect to receive a portion of this Policy's Death Benefit, in a Single Sum, when the Insured has incurred a Terminal Condition, subject to the terms and conditions defined below. DEFINITIONS ================================================================================ In addition to the definitions contained in this Policy, the following definitions apply to this Rider: DEATH BENEFIT For purposes of this Rider, Death Benefit means the amount payable upon the death of the Insured under the base Policy, plus: (a) in the case of a single life policy, the benefit payable under a Primary Insured Rider, if any; or (b) in the case of a joint last survivor policy, the benefit payable under a Joint Insured Term Rider, if any. Death Benefit does not include amounts payable under any other Riders not expressly named above, including, but not limited to, any Individual Insured Rider, Accidental Death Benefit Rider, Other Insured Rider or Disability Waiver Rider. ELECTION PERCENTAGE A percentage, selected by the Owner, not to exceed 100% of this Policy's Death Benefit. In no event will the Election Percentage result in a Single Sum Benefit greater than $500,000. IMMEDIATE FAMILY A spouse, child, brother, sister, parent, grandparent or grandchild of the Insured or Owner. INSURED The Insured for a single life policy will be the Insured as shown on the Policy Schedule page of the Policy. The Insured for a joint last survivor policy will be the Surviving Insured of the two Insureds shown on the Policy Schedule page of the Policy. PHYSICIAN A Doctor of Medicine or a Doctor of Osteopathy licensed to practice medicine and treat injury or illness in the state in which treatment is received and who is acting within the scope of that license. A Physician must be someone other than: (a) the Insured; (b) the Owner; (c) a person who lives with the Insured or Owner; or (d) a person who is part of the Insured's or Owner's Immediate Family. PHYSICIAN'S STATEMENT A written statement acceptable to Us and signed by a Physician which: (a) provides the Physician's diagnosis and prognosis of the Insured's noncorrectable medical condition; and (b) states with reasonable medical certainty that the noncorrectable medical condition will result in the death of the Insured within 12 months from the date of the Physician's Statement. This statement must take into consideration the ordinary and reasonable medical care, advice and treatment available in the same or similar communities. TERMINAL CONDITION A condition resulting from injury or illness which, as determined by a Physician, has reduced life expectancy to not more than 12 months from the date of the Physician's statement BENEFITS ================================================================================ SINGLE SUM BENEFIT We will pay the Single Sum Benefit to the Owner when We receive proof satisfactory to Us that the Insured has incurred a Terminal Condition while this Policy and Rider are In Force. We will make payment when all of the terms and conditions have been met, subject to the conditions and limitations contained in this Rider. The Single Sum Benefit provided by this Rider may only be elected once. Page 2 The Single Sum Benefit is equal to: (a) the Death Benefit in effect on the date the Single Sum Benefit is paid; multiplied by (b) the Election Percentage; divided by (c) (1+i) where i equals the greater of: (1) the current yield on 90 day Treasury Bills; or (2) the policy loan interest rate; minus d) Indebtedness, if any, at the time the Single Sum Benefit is paid, multiplied by the Election Percentage. BENEFIT AND VALUE REDUCTION This Policy's benefits and values, as those amounts exist on the date the Single Sum Benefit is paid, will be reduced by the Election Percentage. If the Election Percentage is 100%, this Policy will terminate without further value. At the time of payment, We will provide the Owner with revised Policy Specification pages and any other pertinent information which reflect the reduction of all values applicable to this Policy and all benefits it provides. RIDER CLAIMS PROVISIONS ================================================================================ NOTICE OF CLAIM The Owner may give Us written notice of a claim for this Benefit any time after the Insured incurs a Terminal Condition as defined in this Rider. Notice of Claim must be signed by the Owner, identify the Insured, the Policy and the Election Percentage and be sent to Us at Our Administrative Office. Page 3 CLAIM FORMS We will send the Owner claim forms within 15 days of the date We receive written notice of claim. If We do not do so, the Owner will be considered to have complied with the Proof of Terminal Condition requirements by giving Us a Physician's Statement acceptable to Us and a written statement of the nature and extent of the Terminal Condition. PROOF OF TERMINAL CONDITION Written proof of the Insured's Terminal Condition must be received by Us at Our Administrative Office before We will make a Single Sum Benefit payment. This proof must include a properly completed claim form and a Physician's Statement acceptable to Us. We may request additional medical information from the Physician submitting the statement. PHYSICAL EXAMINATION At Our expense, We reserve the right to have a Physician of Our choosing examine the Insured prior to making a Single Sum Benefit payment. In the event the Physician We choose provides a different prognosis of the Insured's medical condition, We reserve the right to rely on the statement from the Physician of Our choosing for claim purposes. TIME PAYMENT OF CLAIMS All benefits described in this Rider will be available as soon as We receive satisfactory Proof of Terminal Condition. CONSENT FOR BENEFIT PAYMENT We must obtain consent of any irrevocable beneficiary and any assignee of record before the Single Sum Benefit is paid. An assignee's consent is required only to the extent that benefits paid would reduce this Policy's values and benefits below the amounts assigned. RIDER GENERAL PROVISIONS ================================================================================ ANNUAL STATEMENT The Annual Statement for this Policy will reflect payment of the Single Sum Benefit, if paid during the prior year, as well as resulting reductions and remaining benefits and values. CONTESTABILITY This Rider will be contestable, on the same basis as the Policy, during the lifetime of the Insured, for two years from the Rider Effective Date. CHARGES No charges are payable for this Rider. Page 4 SELF-INFLICTED INJURY If the Insured suffers a Terminal Condition which results from a bodily injury which was intentionally self-inflicted, within the period specified in the Suicide Provision of this Policy, no benefits will be payable under this Rider. TERMINATION This Rider will terminate at the earliest of: (a) the date the Policy terminates; (b) the effective date of a settlement option elected under the Policy; (c) the date the Single Sum Benefit is paid; or (d) the date the Owner elects to terminate this Rider. RIDER EFFECTIVE DATE Rider months, years and anniversaries are measured from the Rider Effective Date. The Rider Effective Date is the Policy effective date unless a different Rider Effective Date is shown here. WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO /s/ WILLIAM H. GEIGER EX-99.OIR 4 0004.txt Exhibit (5)(d) Other Insured Rider WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO (A STOCK COMPANY) Home Office: Columbus, Ohio Administrative Office: Clearwater, Florida OTHER INSURED RIDER ================================================================================ IN THIS RIDER, the Primary Insured is named on Page 4 of the Policy. The Primary Insured will be referred to as YOU or YOUR. Western Reserve Life Assurance Co. of Ohio will be referred to as WE, OUR or US. ================================================================================ BENEFIT We will pay the Face Amount of this Rider as shown on Page 4 of the Policy to the Primary Insured when We receive due proof that Your death occurred while this Rider was In Force. CONSIDERATION This Rider is issued in consideration of: 1. the application for this Rider; and 2. the payment of the Initial Premium. INCONTESTABILITY This Rider shall be incontestable after it has been In Force while You are still alive, for two years after the effective date of this Rider. SUICIDE If this Rider is issued on the same date as the Policy, the Suicide Provision of the Policy is applicable to this Rider. If this Rider is issued after the Policy and if You die by suicide, while sane or insane, within two years after the effective date of this Rider, Our liability for this Rider shall be limited to an amount equal to the total monthly deductions for coverage under this Rider. ISSUE AGE AND SEX If Your date of birth or sex is not correctly stated, We will adjust the death benefit to the amount payable had Your date of birth and sex been correctly stated. CONVERSION PRIVILEGE On any Monthiversary while this Rider is In Force, the Owner may exchange this Rider without evidence of insurability for a new policy on Your life. Such new policy will be issued upon written request subject to the following: 1. the Rider has not reached the Anniversary nearest Your 70th birthday; and 2. the new policy is on any permanent plan of insurance then offered by Us; and 3. the amount of insurance upon conversion will equal the Face Amount then In Force under this Rider; and 4. the payment of the Premium based on Your rate class under this Rider. TERMINATION This Rider will terminate on the earliest of: 1. the Maturity Date of the Policy; 2. the Anniversary nearest Your 100th birthday; 3. the date this Policy terminates for any reason except for death of the Primary Insured; 4. 31 days after the death of the Primary Insured; 5. the date of conversion of this Rider; 6. the Monthiversary on which this Rider is terminated on written request by the Owner. GENERAL This Rider is part of the Policy. It is subject to all the terms of this Rider and the Policy. This Rider has no cash value. The monthly deduction for this Rider, for each of the first 12 policy months, is shown on Page 4 of the Policy. Monthly deductions after the first policy year will be calculated consistent with the Monthly Cost of Insurance and Monthly Cost of Insurance Rates provisions of the Policy to which this Rider is attached. EFFECTIVE DATE This Rider becomes effective on the same date as the Policy unless a later date is shown here. WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO /s/ WILLIMA H. GEIGER Page 2 EX-99.PIR 5 0005.txt Exhibit (5)(e) Primary Insured Rider and Primary Insured Rider Plus WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO (A STOCK COMPANY) Home Office: Columbus, Ohio Administrative Office: Clearwater, Florida PRIMARY INSURED RIDER ================================================================================ IN THIS RIDER, the Primary Insured is named on Page 3 of the Policy. The Primary Insured will be referred to as YOU or YOUR. Western Reserve Life Assurance Co. of Ohio will be referred to as WE, OUR or US. ================================================================================ BENEFIT We will pay the Face Amount of this Rider as shown on Page 4 of the Policy when We receive due proof that Your death occurred while this Rider was In Force. CONSIDERATION This Rider is issued in consideration of: 1. the application for this Rider; and 2. the payment of the Initial Premium. INCONTESTABILITY This Rider shall be incontestable after it has been In Force while You are still alive, for two years after the effective date of this Rider. SUICIDE If this Rider is issued on the same date as the Policy, the Suicide Provision of the Policy is applicable to this Rider. If this Rider is issued after the Policy and if You die by suicide, while sane or insane, within two years after the effective date of this Rider, Our liability for this Rider shall be limited to an amount equal to the excess of the total monthly deductions for this Rider less any premiums being refunded under the Suicide Provision of the Policy to which this Rider is attached. CONVERSION PRIVILEGE On any Monthiversary while this Rider is In Force, the Owner may exchange this Rider, without evidence of insurability, for a new policy on Your life. Such new policy will be issued upon written request subject to the following: 1. The Rider has not reached the Anniversary nearest Your 70th birthday; and 2. The new policy is on any permanent plan of insurance then offered by Us; and 3. The amount of insurance upon conversion will equal the Face Amount then In Force under this Rider; and 4. The payment of the premium based on Your rate class under this Rider. TERMINATION This Rider will terminate on the earliest of: 1. The Anniversary nearest Your 95th birthday; 2. The date this Policy terminates; 3. The date of conversion of this Rider; 4. The Monthiversary on which this Rider is terminated on written request by the Owner. GENERAL This Rider is part of the Policy. It is subject to all the terms of this Rider and the policy. This Rider has no cash value. The monthly deduction for this Rider, for each of the first 12 policy months, is shown on Page 4 of the Policy. Monthly deductions after the first policy year will be calculated consistent with the monthly cost of insurance and monthly cost of insurance rates provisions of the Policy to which this Rider is attached. EFFECTIVE DATE This Rider becomes effective on the same date as the Policy unless a later date is shown here. WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO /s/ WILLIAM H. GEIGER Page 2 WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO (A STOCK COMPANY) Home Office: Columbus, Ohio Administrative Office: Clearwater, Florida PRIMARY INSURED RIDER PLUS =============================================================================== IN THIS RIDER, the Primary Insured is named on Page 3 of the Policy. The Primary Insured will be referred to as YOU or YOUR. Western Reserve Life Assurance Co. of Ohio will be referred to as WE, OUR or US. =============================================================================== BENEFIT We will pay the Face Amount of this Rider as shown on Page 4 of the Policy when We receive due proof that Your death occurred while this Rider was In Force. CONSIDERATION This Rider is issued in consideration of: 1. the application for this Rider; and 2. the payment of the Initial Premium. INCONTESTABILITY This Rider shall be incontestable after it has been In Force while You are still alive, for two years after the effective date of this Rider. SUICIDE If this Rider is issued on the same date as the Policy, the Suicide Provision of the Policy is applicable to this Rider. If this Rider is issued after the Policy and if You die by suicide, while sane or insane, within two years after the effective date of this Rider, Our liability for this Rider shall be limited to an amount equal to the excess of the total monthly deductions for this Rider less any premiums being refunded under the Suicide Provision of the Policy to which this Rider is attached. CONVERSION PRIVILEGE On any Monthiversary while this Rider is In Force, the Owner may exchange this Rider, without evidence of insurability, for a new policy on Your life. Such new policy will be issued upon written request subject to the following: 1. The Rider has not reached the Anniversary nearest Your 70th birthday; and 2. The new policy is on any permanent plan of insurance then offered by Us; and 3. The amount of insurance upon conversion will equal the Face Amount then In Force under this Rider; and 4. The payment of the premium based on Your rate class under this Rider. TERMINATION This Rider will terminate on the earliest of: 1. The Anniversary nearest Your 90th birthday; 2. The date this Policy terminates; 3. The date of conversion of this Rider; 4. The Monthiversary on which this Rider is terminated on written request by the Owner. GENERAL This Rider is part of the Policy. It is subject to all the terms of this Rider and the policy. This Rider has no cash value. The monthly deduction for this Rider, for each of the first 12 policy months, is shown on Page 4 of the Policy. Monthly deductions after the first policy year will be calculated consistent with the monthly cost of insurance and monthly cost of insurance rates provisions of the Policy to which this Rider is attached. EFFECTIVE DATE This Rider becomes effective on the same date as the Policy unless a later date is shown here. WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO /s/ WIILIAM H. GEIGER EX-99.APP 6 0006.txt Exhibit (10) Application for Flexible Premium Variable Life Insurance Policy ______________________________ A History of Performance(R) WRL PRIORITY: [LOGO] P.O. BOX 9009 Western Reserve Life Assurance Co. of Ohio CLEARWATER, FL 33758-9009 STREET ADDRESS-USE FOR CARRIER OTHER THAN POST OFFICE: 8550 ULMERTON ROAD, SUITE 101 LARGO, FL 33771 1-800-443-9975 (X6582) ______________________________ Application for Life Insurance _______________________________________________________________________________ FOR USE BY WMA REGISTERED REPRESENTATIVE _______________________________________________________________________________ Agent Name: ___________________________________________________________________ Agent Number:___________________________________________________________________ Marketing Director:_________________________________ MD Code#:________________ Branch Manager _______________________________________ Branch#:______________ CEO:_________________________________________________ CEO Code#:______________ Amount of initial premium with application $_______________________ Amount to be applied to application ______________________________ _______________________________ $_______________________ ______________________________ _______________________________ $_______________________ DO: [ ] Complete the entire application (front and back). [ ] Print application in black ink. [ ] Have applicant initial all changes. [ ] Obtain all required signatures. [ ] Complete and sign the Agents Report. [ ] Use supplement if more than one Other Insured Rider is required. [ ] Include certification if a trust is owner of the policy. [ ] Section 7, Page 2: Enter the proposed plan of insurance In #1 as shown below. [ ] Section 8: All Death Benefit Options are available for the FFA Death Benefit Option C is not available for the FEP Elite. [ ] Section 5,6 & 13, Page 2: If additional space is required firmly attach a separate page. DON'T: [ ] Do not use pencil or whiteout. [ ] Do not accept or send money on applications that total more than $1,000,000.00 [ ] Do not submit an agent check as the initial premium. [ ] Do not submit starter checks or deposit slips for checkomatic withdrawals. For Non-Variable & Term Products: Do Not Complete Section 11: Sub-Account Allocations Section 12: Investment Objective Section 22: Suitability Section 23: To Be Completed by Applicant/Owner For Term Products Only: Do Not Complete Section 8: No Death Benefit Options are available for the Term 10 or Term 20. ________________________________________________ Freedom Elite Builder - CIR Coverage Limited to: $5,000 Minimum and $20,000 Maximum All Other Prodicet - CIR Coverage Limited to: $2,000 Minimum and $10,000 Maximum _________________________________________________ U000289 WMA REV.301 CMC________ AUTHORIZATION AGREEMENT FOR PREAUTHORIZED PAYMENTS ATTACH VOIDED SAMPLE OF YOUR PERSONAL CHECK HERE So that you may comply with your depositor's authorization and direction as set forth on the reverse side hereof, this Company agrees: 1. To indemnify you and hold you harmless from any loss you may suffer as a consequence of your actions resulting from or in connection with the execution and issuance of any check or draft, whether or not genuine, or payment of any preauthorized ACH electronic fund transfer debit received by you in the regular course of business for the purpose of payment to this Company, including any cost or expenses reasonably incurred in connection therewith. 2. In the event that any such check, draft or debit shall be dishonored whether with or without cause, and whether intentionally or inadvertently, to indemnify you for any loss even though dishonor results in a forfeiture of the insurance. 3. To defend at our own cost and expense any action which might be brought by any depositor or any other persons because of your actions taken pursuant to the foregoing request, or in any manner arising by reason of your participation in the foregoing plan of premium collections. Authorized in a resolution adopted by the Executive Committee of the Board of Directors of the Western Reserve Life Assurance Co. of Ohio on October 29, 1991. Western Reserve Life Assurance Co. of Ohio /signature/ Secretary TO: WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO As a convenience to me, I hereby request and authorize you to obtain payment of amounts becoming due you by initiating charges in the form of check, drafts or debits via ACH electronic fund transfers on my account maintained at the ________________________________________ _______________________________________ (Name of Bank) (Address of Bank) for the payment of each monthly premium under Policy No.____________________ on the life of ___________________________ This authority is to remain in effect until revoked by me in writing, and until you actually receive such notice, I agree that you shall be fully protected in drawing any such check or draft or initiating such debit. I understand that if any such check, draft or debit be dishonored by my Bank and any monthly amount due the Western Reserve Life Assurance Co. of Ohio is not paid within the time stipulated in the policy, said policy shall become null and void except as otherwise provided therein. LIST ANY OTHER POLICIES TO BE PAID BY SAME CHECK, DRAFT OR DEBIT ____________________________________________ ____________________________________________ ____________________________________________ I elect _______ day (select 1 to 27) of each month to have the payment of $________ taken from my account. If no date is indicated the draft date will be the policy issue date. AUTHORIZATION FOR PREAUTHORIZED PAYMENTS TO: WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO P.O.BOX 5068, CLEARWATER, FL 33758-5068 As a convenience to me, I hereby request and authorize you to pay and charge to my bank checking account checks or drafts drawn by and payable to the order of Western Reserve Life Assurance Co. of Ohio or to debit my account identified below via ACH electronic fund transfers provided there are sufficient collected funds in said account to pay the same upon presentation. This authority is to remain in effect until revoked by me in writing, and until you actually receive such notice I agree that you shall be fully protected in honoring any such check, draft or debit. I further agree that if any such check, draft or debit be dishonored, whether with or without cause and whether intentionally or inadvertently, you shall be under no liability whatsoever even though such dishonor results in the forfeiture of insurance. _______________ 1 (X)______________________________________ _______________ 2 (X)______________________________________ Both Authorized Signatures Required on Joint Accts. PLEASE NOTE: There is an Indemnification Agreement stated above. U000289 LIFE APPLICATION-PART 1 WRL -- Western Reserve Life Assurance Co. of Ohio ________________________________________________________________________________ SECTION 1. PROPOSED PRIMARY INSURED ________________________________________________________________________________ 1. Last Name First Name M.I. ________________________________________________________________________________ 2. Address Apt# City ________________________________________________________________________________ State Zip Code 3. Years 4. Home 5. Driver State at Phone License Address Number ( ) ________________________________________________________________________________ 6. Sex 7. Date 8. Insurable 9. Place 10. Social [ ] Male of Age of Security [ ] Female Birth Birth - Number State/County ________________________________________________________________________________ 11. Height 12. Weight 13. Marital Status 14. Employer Years ________________________________________________________________________________ 15. Occupation & Duties ________________________________________________________________________________ 16. Employer's Address 17. Business Phone Number ( ) ________________________________________________________________________________ 18. Have you used TOBACCO or any other product containing NICOTINE in the last 12 months? [ ] Yes [ ] No 19. Rate Class Quoted: [ ] Ult Select [ ] Select [ ] Ult Standard [ ] Standard [ ] Juvenile ________________________________________________________________________________ SECTION 2. PROPOSED OTHER/JOINT INSURED RIDER - IF MORE THAN ONE PLEASE USE A SUPPLEMENTAL APPLICATION ________________________________________________________________________________ 1. Last Name First Name M.I. ________________________________________________________________________________ 2. Address Apt# City ________________________________________________________________________________ State Zip Code 3. Years 4. Home 5. Driver State at Phone License Address Number ( ) ________________________________________________________________________________ 6. Sex 7. Date 8. Insurable 9. Place 10. Social [ ] Male of Age of Security [ ] Female Birth Birth - Number State/County ________________________________________________________________________________ 11. Height 12. Weight 13. Marital Status 14. Employer Years ________________________________________________________________________________ 15. Occupation & Duties ________________________________________________________________________________ 16. Employer's Address 17. Business Phone Number ( ) ________________________________________________________________________________ 18. Have you used TOBACCO or any other product containing NICOTINE in the last 12 months? [ ] Yes [ ] No 19. Rate Class Quoted: [ ] Ult Select [ ] Select [ ] Ult Standard [ ] Standard [ ] Juvenile ________________________________________________________________________________ SECTION 3. APPLICANT/OWNER IF OTHER THAN THE PROPOSED PRIMARY INSURED ________________________________________________________________________________ 1. Last Name First Name M.I. ________________________________________________________________________________ 2. Address Apt# City ________________________________________________________________________________ State Zip Code 3. Home Phone 4. Social Security Number/Tax ID# ( ) 5. Date of Birth/Trust Date ____________________________________________________ 6. Relationship to the Proposed Primary Insured:________________________________ ________________________________________________________________________________ SECTION 4. CHILDREN'S INSURANCE RIDER ________________________________________________________________________________ COVERAGE AMOUNT ________________________________________________________________________________ Name Relationship Date of Birth Height Weight ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ Are all children listed? [ ] Yes [ ] No Are all children living with proposed primary insured? [ ] Yes [ ] No If not, explain why: ___________________________________________________________ U000289 1
LIFE APPLICATION ____________________________________________________________________________________________________________________________________ SECTION 5. PRIMARY BENEFICIARY - If percentage shares are not given they wull be equal, or to the survivor _____________________________ ________________________ _____________________________ ________________________________________ Name Percent Relationship Social Security Number/Tax ID# _____________________________ ________________________ _____________________________ ________________________________________ -- -- _____________________________ ________________________ _____________________________ ________________________________________ -- -- _____________________________ ________________________ _____________________________ ________________________________________ ____________________________________________________________________________________________________________________________________ SECTION 6. CONTINGENT BENEFICIARY - If percentage shares are not given, they will be equal, or to the survivor _____________________________ ________________________ _____________________________ ________________________________________ Name Percent Relationship Social Security Number/Tax ID# _____________________________ ________________________ _____________________________ ________________________________________ -- -- _____________________________ ________________________ _____________________________ ________________________________________ -- -- _____________________________ ________________________ _____________________________ ________________________________________ ____________________________________________________________________________________________________________________________________ SECTION 7. PROPOSED PLAN OF INSURANCE SECTION 8. DEATH BENFIT OPTION 1. [ ] FEB [ ] FWP [ ] OTHER: _____________________________ [ ] A) Level Benefit [ ] B) Increasing Benefit 2. Specified Amount: $______ $______ $______ [ ] C) Option B To Age 70 Then Grading Down 3. Primary Insured Rider $______ $______ $______ (Option C for FEB only) 4. Primary Insured Rider Plus $______ $______ $______ ________________________________________________________________ SECTION 9. ADDITIONAL BENEFITS-PRIMARY INSURED ONLY 5. Other Insured Rider [ ] Disability Waiver Rider __________________________________ $______ $______ $______ [ ] Disability Waiver and Income Rider ($300 per month maximum) $__________ 6. ARE YOU APPLYING FOR MORE THAN ONE OTHER INSURED RIDER? [ ] Accidental Death Benefit [ ] YES [ ] NO ($150,000 maximum) $__________ __________ IF YES PLEASE USE SUPPLEMENTAL APPLICATION #U000289-supp _________________________________________________________________ FWP POLICIES ONLY SECTION 10. PREMIUMS PAYABLE 7. No Lapse Guarantee Option: [ ] A) 5YR [ ] B) 10YR Planned Premium $___________ ___________ ___________ 8. Wealth Protector Rider $ ________ $ _________ $ _________ [ ] Checkomatic ________ Draft Date (1ST thru 27TH) 9. Joint Insured Rider $ ________ $ _________ $ _________ [ ] Direct Bill [ ] Single Premium [ ] Quarterly 10. INDIVIDUAL INSURED RIDER(S) [ ] Annual [ ] Monthly [ ] Semi-annual [ ] Other _______________ [ ] Proposed Primary Insured $ ________ $ _________ $ _________ [ ] Proposed Joint Insured $ ________ $ _________ $ _________ ____________________________________________________________________________________________________________________________________ SECTION 11. SUB-ACCOUNT ALLOCATIONS - (For Variable Plans Only) Must equal 100% and a whole number. WRL VKAM EMERGING GROWTH ____% WRL JANUS GROWTH ____% WRL LKCM STRAT. TOTAL RET. ____% WRL T. ROWE PRICE SMALL CAP ____% WRL LKCM CAPITAL GROWTH ____% WRL J.P. MOGAN REAL ESTATE SE. ____% WRL MUNDER NET50 ____% WRL GOLDMAN SACHS GROWTH ____% WRL FEDERATED GROWTH & INCOME ____% WRL PILGRIM BAXTER MID CAP GROWTH ____% WRL GE U.S. EQUITY ____% WRL AEGON BALANCED ____% WRL ALGER AGGRESSIVE GROWTH ____% WRL GREAT COMPANIES-AMERICA(SM) ____% WRL AEGON BOND ____% WRL THRID AVENUE VALUE ____% WRL SALOMON ALL CAP ____% WRL J.P. MORGAN MONEY MARKET ____% WRL VALUE LINE AGGRESSIVE GROWTH ____% WRL C.A.S.E. GROWTH ____% FIDELITY VIP III GROWTH OPPORTUNITIES ____% WRL GE INTERNATIONAL EQUITY ____% WRL DREYFUS MID CAP ____% FIDELITY VIP II CONTRAFUND ____% WRL GABELLI GLOBAL GROWTH ____% WRL NWQ VALUE EQUITY ____% FIDELITY VIP EQUITY-INCOME ____% WRL GREAT COMPANIES-GLOBAL(2) ____% WRL T. ROWE PRICE DIVIDEND GROWTH ____% FIXED ACCOUNT ____% WRL GREAT COMPANIES-TECHNOLOGY(SM) ____% WRL DEAN ASSET ALLOCATION ____% OTHER ____% ____________________________________________________________________________________________________________________________________ 12. INVESTMENT OBJECTIVE [ ] Safety of Principal [ ] Income [ ] Long-Term Growth [ ] Trading Profits [ ] Other _____________________________ ____________________________________________________________________________________________________________________________________ SECTION 13. OTHER INSURANCE IN FORCE FOR ALL PROPOSED INSUREDS [ ] NONE ___________________________ ______________________ ___________________________ ________________________ ____________________ Proposed Insured Name Company Amount of Insurance Year Issued Replacement? ___________________________ ______________________ ___________________________ ________________________ ____________________ Yes No ___________________________ ______________________ ___________________________ ________________________ ____________________ Yes No ___________________________ ______________________ ___________________________ ________________________ ____________________ Yes No ___________________________ ______________________ ___________________________ ________________________ ____________________ IS THIS INTENDED TO BE A 1035 EXCHANGE? [ ] Yes [ ] No Anticipated Cash Value Transfer $________ ________ ________ 1) Has any proposed insured ever had life, disability or health insurance declined, rated, modified, issued with an exclusion rider, canceled, or not renewed? If yes please explain in REMARKS. [ ] Yes [ ] No 2) Will the insurance applied for on any proposed insured replace or change any existing life or annuity policy? [ ] Yes [ ] No If yes, complete replacement forms, if appropriate. 3) Is there an application for life, accident or sickness insurance now pending or contemplated on any proposed insurance in this or any other company? If yes, give details in Agent's Report, Question 3. [ ] Yes [ ] No ____________________________________________________________________________________________________________________________________
2
LIFE APPLICATION-PART 2 ____________________________________________________________________________________________________________________________________ SECTION 14. PERSONAL FINANCIAL STATEMENT 15. COMPLETE FOR CORPORATION, PARTNERSHIP, PENSION OR TRUST FOR PROPOSED PRIMARY INSURED A) Gross Income Current Yr $______ $______ $______ A) Current Estimated Market Value $______ $______ $______ B) Gross Income Previous Yr $______ $______ $______ B) Assets LIQUID $______ $______ $______ C) Net Worth $______ $______ $______ NONLIQUID $______ $______ $______ C) Liabilities $______ $______ $______ For over $1 million applied coverage complete D) Net Worth $______ $______ $______ a separate financial questionnaire ____________________________________________________________________________________________________________________________________ SECTION 16. MEDICAL QUESTIONS - Each question must be individually asked and answered. Give the details of "Yes" answers below. Identify question number; state signs symptoms and dianosis of each illness or injury. List the details and results of any treatment; List the name, full address and dates of each health care provider consulted. To the best of your knowledge, has any Proposed Insured within the last 10 yrs had or been told by a member of the medical profession that he or she had, or has been treated for: 1) Heart murmur, high blood pressure, chest pain, heart attack, stroke, or other disorder of the heart or circulatory system? [ ] Yes [ ] No 2) Asthma, Emphysema, Chronic Bronchitis, Tuberculosis, or any other Respiratory disorder; colitis, ulder or any other gastrointestinal disorder, jaundice, hepatitis, liver or kidney disorder? [ ] Yes [ ] No 3) Cancer, tumor, polyp, breast, prostate or any other reproductive disorder, or any thyroid or endorcrine disorder? [ ] Yes [ ] No 4) Brain, mental, anxiety, depression, suicide attempt, or seizure disorder; or any paralysis? [ ] Yes [ ] No 5) Diabetes, anemia, or any disorder of the blood; sugar, protein, or blood in the urine? [ ] Yes [ ] No 6) Used amphetamines, heroin, cocaine, marijuana, or any other illegal or controlled substance except as prescribed by a physician? [ ] Yes [ ] No 7) Sought or been advised to seek treatment, limit or discontinue use of alcohol? [ ] Yes [ ] No 8) Been on or are now on prescribed medication or diet? [ ] Yes [ ] No 9) Has any Proposed Insured been told by a member of the medical profession that he or she had a diagnosis of AIDS, ARC or the HIV infection? [ ] Yes [ ] No 10) Had or been advised to have any hospitalization, surgery, or any diagnostic test including, but not limited to, electrocardiograms, blood studies, scans, MRI's or other test? [ ] Yes [ ] No 11) An examination, treatment or consulation with a doctor or health care provider other than above? [ ] Yes [ ] No 12) Have or have had a parent, brother or sister who has/had coronary artery death or disease prior to age 60? [ ] Yes [ ] No ____________________________________________________________________________________________________________________________________ SECTION 17. DETAILS TO "YES" ANSWERS FOR MEDICAL QUESTIONS SECTION ___________ _________________________ ______________________________________________________ ________________________________ Name, Address and Phone # of Question # Proposed Insured's Name Date, Diagnosis, Treatment, Results, and Duration Attending Doctor and Hospital ___________ _________________________ ______________________________________________________ ________________________________ ___________ _________________________ ______________________________________________________ ________________________________ ___________ _________________________ ______________________________________________________ ________________________________ ___________ _________________________ ______________________________________________________ ________________________________ ___________ _________________________ ______________________________________________________ ________________________________ ___________ _________________________ ______________________________________________________ ________________________________ ___________ _________________________ ______________________________________________________ ________________________________ ___________ _________________________ ______________________________________________________ ________________________________ ___________ _________________________ ______________________________________________________ ________________________________ ___________ _________________________ ______________________________________________________ ________________________________ ____________________________________________________________________________________________________________________________________ SECTION 18. Name and address of personal physician (if none, so state) __________________________________________ __________________________________________ __________________________________________ Primary Insured Joint of Other Insured Children ______________________________________ ______________________________________________________ ________________________________ ______________________________________ ______________________________________________________ ________________________________ ______________________________________ ______________________________________________________ ________________________________ ______________________________________ ______________________________________________________ ________________________________ __________________________________________ __________________________________________ __________________________________________ Date and reason last consulted a physician Date and reason last consulted a physician Date and reason last consulted a physician __________________________________________ __________________________________________ __________________________________________ __________________________________________ __________________________________________ __________________________________________ __________________________________________ __________________________________________ __________________________________________ ____________________________________________________________________________________________________________________________________
3 LIFE APPLICATION ________________________________________________________________________________ SECTION 19. RESIDENCY A) Proposed Primary Insured is a citizen of [ ] USA [ ] Other Country __________ ______________ Type of VISA___________________ B) How many years has the proposed insured resided in the USA?________ C) Does any proposed insured travel outside the USA? [ ] Yes [ ] No If yes, provide details: include destination, number of trips, duration of each trip, purpose of trip, plans for the next year. ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ SECTION 20. DRIVING RECORD A) Has any Proposed Insured had their drivers license suspended, restricted, revoked, or been cited for a moving violation in the last 5 years? [ ] Yes [ ] No If yes, give reason: ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ B) Has any Proposed Insured in the last ten years been convicted of a misdemeanor (other than a minor traffic violation) or felony? [ ] Yes [ ] No If yes, give reason: ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ SECTION 21. SPECIAL ACTIVITIES A) Except as a passenger on a regularly scheduled flight, has any proposed insured flown within the past 3 years, or does any proposed insured have plans to fly in the future? If yes, complete Aviation Questionnaire. [ ] Yes [ ] No B) In the past 3 years has any proposed insured participated in racing (automobile, motorcycle, or boat), underwater or sky diving, hang gliding, mountain or rock climbing? If yes, complete an Avocation Questionnaire. [ ] Yes [ ] No ________________________________________________________________________________ SECTION 22. SUITABILITY FOR VARIABLE LIFE INSURANCE POLICY -- COMPLETE FOR ALL VARIABLE PLANS A) Have you, the Proposed Insured, and Purchaser, if other than the Proposed Insured, received the current Prospectus for the policy? [ ] Yes [ ] No B) Do you understand that under the policy applied for (exclusive of any optional benefits),the amount of death benefit and the entire amount of the policy cash value may increase or decrease depending upon the investment experience? [ ] Yes [ ] No C) With this in mind, is the policy in accord with your insurance objectives and your anticipated financial needs? [ ] Yes [ ] No ________________________________________________________________________________ SECTION 23. TO BE COMPLETED BY APPLICANT/OWNER Telephone Transfer Authorization: (See Prospectus for telephone transfer procedures.) Your policy applied for, if issued, will automatically receive telephone transfer privileges described in the applicable prospectus unless instructions to the contrary are indicated below. These privileges allow you to give the registered representative/agent of record for this policy authority to make telephone transfers and to change the allocation of future payments among the Sub-Accounts and the Fixed Account on your behalf according to your instructions. [ ] I do NOT want telephone transfer privileges. Western Reserve Life will not be liable for complying with telephone instructions it reasonably believes to be authentic, nor for any loss, damage, costs or expense in acting on such telephone instructions, and Policyowners will bear the risk of any such loss. Western Reserve Life will employ reasonable procedures to confirm that telephone instructions are genuine. If Western Reserve Life does not employ such procedures, it may be liable for losses due to unauthorized or fraudulent instructions. Such requiring forms of personal identification prior to acting upon such telephone instruction, providing written confirmation of such transactions to Policyowners and/or tape recording of telephone transfer request instructions received. ________________________________________________________________________________ SECTION 24. CERTIFICATION Under penalty of perjury, I (the owner) certify (1) that the number shown in Section 1of page 1or the number shown in Section 3 on page 1 (if the owner is other than the primary insured) is my correct Taxpayer Identification Number, and (2) that I am not subject to backup withholding because (a) I have not been notified by the IRS that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (b) if I ever was so notified, the IRS has notified me that I am no longer subject to backup withholding. (If the Internal Revenue Service has notified you that you are subject to backup withholding and you have not received notice from the Service that backup withholding has terminated, you should strike out the language in (2) above that you are not subject to backup withholding due to notified payee underreporting.) U000289 4 LIFE APPLICATION ________________________________________________________________________________ SECTION 25. AUTHORIZATION TO OBTAIN INFORMATION ________________________________________________________________________________ I authorize any physician, medical professional, hospital, clinic, other medical care institution, the Medical Information Bureau, Inc., insurance company, consumer reporting agency, or employer having information available as to employment, other insurance coverage, medical care, advice or treatment with respect to any physical or mental condition regarding me or my children who are to be insured, to give such information to Western Reserve Life Assurance Co. of Ohio, its reinsurers, or any consumer reporting agency including the Medical Information Bureau acting on Western Reserve Lifes behalf. I authorize Western Reserve Life to obtain an investigative consumer report on me. I understand that this information will be used by Western Reserve Life or its reinsurers, to determine eligibility for life insurance. I agree that this authorization is valid for two and one-half years from the date signed. I know that I have the right to receive a copy of this authorization upon request. I agree that a photographic copy of this authorization is as valid as the original. I have received a copy of this Notice of Information Practices attached to this application. I also hereby authorize Western Reserve Life to provide its affiliated companies any and all information provided herein and obtained hereafter on me. This authorization shall be valid from the date signed below until affirmatively withdrawn in writing by myself. [ ] I elect not to have personal information disclosed to non-affiliates of Western Reserve Life for marketing purposes. [ ] I elect to be interviewed if an investigative consumer report is prepared in connection with this application. ________________________________________________________________________________ SECTION 26. OTHER INSURANCE TO BE COMPLETED BY THE REGISTERED REPRESENTATIVE ________________________________________________________________________________ 1. Will the policy applied for replace or change any existing life insurance policy or annuity? [ ] Yes [ ] No 2. If replacement of existing insurance is involved, have you complied with all state requirements, including any Disclosure and Comparison Statements? [ ] Yes [ ] No [ ] N/A If No, explain ____________________________________________________________________________ ________________________________________________________________________________ SECTION 27. REPRESENTATIONS ________________________________________________________________________________ I represent that the statements and answers in this application are true and complete to the best of my knowledge. I understand that I should consult my own tax and/or legal counsel as to the consequences of using this product in conjunction with my own particular tax or financial plan. It is agreed that: (a) the statements and answers given in this application, and any amendments or application supplements to it or statements made to the medical examiner, will be the basis of any insurance issued; (b) no agent or medical examiner has the authority to make or alter any contract for the Company; (c) if a premium deposit is given in exchange for the Conditional Receipt, no insurance shall take effect unless all of the conditions set out in that receipt are satisfied; (d) if a premium deposit is not given, no insurance shall take effect unless all of the following conditions are satisfied; (1) a policy issued by the Company is delivered to and accepted by the owner during the lifetime of each person to be covered by such policy, (2) the full first premium is paid, and (3) the health and insurability of each person proposed for insurance has not changed since the date of this application
Signed at _____________________________________ ______________ on_____ ________ _____________________ (city) (state) (date) _______________________________________________________________ _____________________________________________ Signature of proposed insured (Child over age 15 must sign) Print Agent Name Social Security # of Agent ________________________________________________________________ ______________________________________________ Signature of applicant (owner) other than the Signature of Agent State License # proposed insured (If business insurance, show title of officer and name of firm) __________________________________________________________________ _____________________ Signature of parent or legal guardian for insured(s) 15 and under Agent # _____________________________________________ Signature of Joint Insured or OIR
U000289 5 This Page is Intentionally Blank 6 WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO P.O. BOX 5068 CLEARWATER, FLORIDA 33758 FRAUD WARNING The following states require that insurance applicants acknowledge a fraud warning statement. Please refer to the fraud warning statement for your state as indicated below. For applicants in ARKANSAS Any person who knowingly presents a false or fraudulent claim for payment of a loss or benefit or knowingly presents false information in an application for insurance is guilty of a crime and may be subject to fines and confinement in prison. _____________________________________________ _______________ Applicants Signature Date For applicants in COLORADO It is unlawful to knowingly provide false, incomplete, or misleading facts or information to an insurance company for the purpose of defrauding or attempting to defraud the company. Penalties may include imprisonment, fines, denial of insurance, and civil damages. Any insurance company or agent of an insurance company who knowingly provides false, incomplete, or misleading facts or information to a policyholder or claimant for the purpose of defrauding or attempting to defraud the policyholder or claimant with regard to a settlement or award payable from insurance proceeds shall be reported to the Colorado Division of Insurance within the Department of Regulatory Agencies. _____________________________________________ _______________ Applicants Signature Date For applicants in FLORIDA Any person who knowingly and with intent to injure, defraud, or deceive any insurer files a statement of claim or an application containing any false, incomplete, or misleading information is guilty of a felony in the third degree. _____________________________________________ _______________ Applicants Signature Date For applicants in KENTUCKY, OHIO, and PENNSYLVANIA Any person who knowingly and with intent to defraud any insurance company or other person files an application for insurance or a statement of claim containing any materially false information or conceals for the purpose of misleading, information concerning any fact material thereto commits a fraudulent insurance act, which is a crime and subjects such person to criminal and civil penalties. _____________________________________________ _______________ Applicants Signature Date For applicants in NEW JERSEY Any person who includes any false or misleading information on an application for an insurance policy is subject to criminal and civil penalties. _____________________________________________ _______________ Applicants Signature Date For applicants in NEW MEXICO Any person who knowingly presents a false or fraudulent claim for payment of a loss or benefit or knowingly presents false information in an application for insurance is guilty of a crime and may be subject to fines and criminal penalties. _____________________________________________ _______________ Applicants Signature Date For applicants in VIRGINIA AND MAINE It is a crime to knowingly provide false, incomplete or misleading information to an insurance company for the purpose of defrauding the company. Penalties include imprisonment, fines and denial of insurance benefits. _____________________________________________ _______________ Applicants Signature Date U000289 7 AGENT'S REPORT 1. a) How long have you known the Proposed Insured? ____________________________________________________________________ ____________________________________________________________________ b) Relationship to Proposed Primary Insured: ____________________________________________________________________ c) Are you financially responsible for the Proposed Primary Insured: [ ] Yes [ ] No 2. Did you give the "Notice of Information Practices" to the Proposed Insured(s)? [ ] Yes [ ] No 3. Are you submitting or do you plan to submit an application on any Proposed Insured on this application to any other company? [ ] Yes [ ] No Company Name___________________________________________________ Face amount $__________________________________________________ Total face amount to be placed with all companies $______________________________________________________________ 4. Medical Examination Are you arranging for the Medical Requirements? [ ] Yes Paramedical Service used:___________________________________ [ ] No Request Western Reserve Life order medical reqs. 5. Was money taken with the application? [ ] Yes [ ] No If "yes" was the Conditional Receipt completed and given to the applicant? [ ] Yes [ ] No 6. Did you ask all questions in the presence of the Proposed Insured(s)? [ ] Yes [ ] No 7. Are you aware of anything about the health, habits, avocation, environment or mode of living, except as may be related directly or indirectly to sexual orientation, which may affect the insurability of any person proposed for insurance? [ ] Yes [ ] No 8. If Proposed Insured is a juvenile (ages 0 through 15): (a) Did you personally see child? [ ] Yes [ ] No (b) Does child live with parents? [ ] Yes [ ] No (If "No," explain)______________________________________________ ________________________________________________________________ (c) Life insurance in force on parent's life? ________________________________________________________________ (d) Life insurance applied for or in force on brothers and sisters? ________________________________________________________________ Remarks:________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ 9. Is Proposed Primary Insured or Owner related to any InterSecurities, Inc. officer or employee? [ ] Yes [ ] No 10. Is Proposed Primary Insured or Owner a licensed Representative of any Broker/Dealer? [ ] Yes [ ] No If "Yes" Name and Address of Broker/Dealer ____________________________________________________________________ 11. Type of Sale (check two) [ ]Direct [ ]Pension or Profit Sharing [ ]Personal Needs Analysis [ ]Salary Savings (EICS) [ ]Estate Planning [ ]Gift [ ]Business Insurance [ ]Salary Allotment Purpose of Policy [ ]Personal Insurance [ ]Business Insurance [ ]Mortgage [ ]Key Employee [ ]Retirement [ ]Executive Bonus [ ]Education [ ]Deferred Compensation [ ]Estate Liquidity [ ]Split Dollar [ ]Income to Family [ ]Reverse Split Dollar [ ]Cash Accumulation [ ]Other [ ]Wealth Replacement [ ]Buy/Sell - Is Partner applying for similar amount? [ ] Yes [ ] No Name of Partner _______________________________________________ 12. Was this plan sold, presented or illustrated as a VEBA, welfare benefit concept as defined under IRC Section 419, Charitable Legacy Plan, Charitable Retirement Plan, Charitable Remainder Life Program, or other similar arrangement? [ ] Yes [ ] No If "Yes", have you completed and attached the required Disclosure, Acknowledgement and Release Form and the accompanying Attorney's Statement? [ ] Yes [ ] No 13. Did you comply with all requirements relative to obtaining Informed Consent for HIV and AIDS testing? [ ] Yes [ ] No Writing Agent Name ____________________________________________________ Agent No.______________________________________________________________ Agent's Telephone Number ______________________________________________ Agent's Social Security Number ________________________________________ Agent's Fax Number ____________________________________________________ Percent of Agent's Split ______________________________________________ Split Agent Name ______________________________________________________ Agent No._______________________Percent of Agent's Split____________ Split Agent Name Agent No._______________________Percent of Agent's Split____________ I submit this application assuming full responsibility for delivery of any coverage issued and for immediate transmittal to the Company of the first premium when collected. I know of no condition affecting the insurability of any person proposed for insurance not fully set forth herein. I certify that a Notice of Information Practices statement was given to the Applicant when this application was taken. (If applicable)
$ ___________ has been paid by the Applicant with this application __________________________ Signature of Writing Agent
U000239 8 WRL CONDITIONAL RECEIPT If, within the last 12 months, any person proposed for coverage has been treated for or had heart trouble, stroke or cancer no payment may be accepted with the application. Received from __________________________________________ Totaling $_____________ NO COVERAGE WILL BECOME EFFECTIVE PRIOR TO DELIVERY OF THE POLICY APPLIED FOR UNLESS AND UNTIL ALL THE CONDITIONS OF THIS RECEIPT HAVE BEEN FULFILLED EXACTLY. CONDITIONS: (1) The amount of payment taken with the application must be at least the first full premium for the mode of payment selected for the amount of insurance stated on page 2 in the application. If the check or draft submitted as the first mode premium is not honored by the bank, upon first presentation, this Conditional receipt will be VOID. (2) All medical examinations, tests, x-rays, electrocardiograms and reports required by the company must be completed and received at its home office. If the above requirements are not received within 60 days, from the date this application was completed, this Conditional Receipt will be VOID. (3) As of the effective date, as defined below, each person proposed for insurance in this application must be a risk insurable in accordance with the companys rules, limits and standards for the plan, amount and rate class shown. If any modification is made by the Company to the plan, amount, riders, and/or the premium rate class or supplemental agreements this conditional receipt will be VOID. (4) As of the effective date, the state of health and all factors affecting the insurability of each person proposed for insurance must be as stated in the application. EFFECTIVE DATE, AS USED IN THIS CONDITIONAL RECEIPT IS THE LATER OF: A. the date of completion of the Part I of the application having the same date as this Receipt, or; B. the date of completion of all medical examinations, tests, x-rays, electrocardiograms and reports required by the Company, or; C. the date of issue if any, requested in the application. COVERAGE NOT TO EXCEED $300,000. MAXIMUM ALL APPLICATIONS OR RECEIPTS. If the Company or its Authorized Agent accepts the first mode premium for this application of life insurance and any person Proposed for insurance dies while this Conditional Receipt is in effect, the Company will pay to the beneficiary or the Applicant the LESSER of: (a) the death benefit applied for on that Proposed Insured, as shown on page 2 of the Application, or: (b) $300,000. This total benefit limit is applicable to all insurance applied for under this Application and any other application now pending with the Company, including any other Conditional Receipts, for each person proposed for insurance. DATE COVERAGE ENDS -- 60 DAY MAXIMUM Coverage under the Conditional Receipt ends automatically on the earliest of: (a) the date the insurance applied for under this application takes effect, or (b) the date the company mails notice of the ending of coverage and refunds the first mode premium to the applicant at the address shown on Part 1 of the Application. (c) 60 days from the date of this conditional receipt SPECIAL LIMITATIONS This Conditional Receipt will be void if not signed by an authorized agent of the company. This Conditional Receipt will be VOID in the event of fraud or material misrepresentation in the Application This Conditional Receipt will be VOID if, on the date of this receipt, any person proposed for insurance is under 15 days of age or over 80 years of age. This Conditional Receipt does not provide benefits for Disability or Accidental Death Benefits. This Conditional Receipt does not provide benefits if any person proposed for insurance dies by suicide. The liability of the Company will be limited to return of the first mode premium paid with the application. NO AGENT IS AUTHORIZED TO WAIVE OR MODIFY ANY OF THE PROVISIONS OF THE CONDITIONAL RECEIPT. MAKE ALL CHECKS PAYABLE TO WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO. I acknowledge possession of the receipt and I certify that I have read it and the agreement in the application. The conditions and terms of this receipt have been explained to me fully by the agent and I understand them. Signed at ___________________________ this ___ day of _________, (year) ________ Signature of Applicant (If other than Proposed Insured) ________________________ Signature of Agent _____________________________________________________________ THIS RECEIPT IS TO BE DETACHED AND GIVEN TO THE APPLICANT AT THE TIME OF APPLICATION ONLY IF ANY MONEY IS TAKEN If all the conditions of this receipt are not fulfilled exactly, the insurance will take effect only when the policy is delivered to the owner stated in the application and there has been no change in insurability of any proposed insured as represented in the application. U000289 9 This Page is Intentionally Blank 10 Western Reserve Life Assurance Co. of Ohio NOTICE OF INFORMATION PRACTICES IMPORTANT: THIS NOTICE MUST BE GIVEN TO THE PROPOSED INSURED(S) WHENEVER AN APPLICATION IS COMPLETED. SOURCES OF INFORMATION We value your privacy. Your application is our main source of information. As a part of this application, we may, at our expense: o ask you to have an examination, which may include special tests such as an electrocardiogram, chest x-ray, blood studies, or urinalysis; o ask physicians, medical practitioners, clinics, hospitals, or other health care providers for information about you; o obtain information from the Medical Information Bureau and/or a consumer reporting agency. Please refer to the lower portion of this notice for further details about this procedure; o obtain information from other insurance companies you have applied to in the past. We use this information only for evaluating your insurance application. SAFEGUARDING YOUR PRIVACY We treat all information about you confidentially. Ordinarily, it will be provided to third parties only if you authorize us in writing to do so. In rare instances, we may be required to provide some or all of the information without your consent. We may send information to state insurance departments at their request as part of their regulatory duties, or to law enforcement facilities in response to a summons or subpoena. We may also release information in our files to our reinsurers and to other life insurance companies to whom you have applied for life and health insurance or to whom a claim for benefits may be submitted. On your written request, we will send you a summary or copy of the relevant information obtained in connection with your application. Confidential or detailed medical information will only be disclosed through the physician of your choice, with whom you may discuss it. Also, on your request, a copy of any consumer report we obtain on you will be provided to you by the responsible agency. We will not send you information we might collect in expectation of or in connection with any claim or civil or criminal proceeding such as information relating to suspected fraud or material misrepresentation. We may gather information from you which is used for statistical purposes or marketing research, which will not identify you individually. CORRECTING INFORMATION If you feel any information in our file is incorrect or incomplete, you may ask us to review it. If we agree, we will make any necessary corrections and inform anyone who received such information within the past two years. If we do not agree, you may file a statement of dispute with us. We will send that statement to anyone receiving such information in the past two years. We will also include it in any future disclosure of the disputed information. FAIR CREDIT REPORTING ACT A routine investigative consumer report may possibly be made regarding your general reputation, character, mode of living and personal characteristics. This information may be obtained through personal interviews with your friends, neighbors and associates. Should you desire additional information on the nature and scope of such a report, you may write the Underwriting Department, Western Reserve Life Assurance Co. of Ohio, PO Box 5068, Clearwater, FL 33758. You may also request information concerning the nature and scope of the investigation to be performed. A summary of your rights is set forth on the attached Notice to Consumer. THE MEDICAL INFORMATION BUREAU PRE-NOTICE The Medical Information Bureau (MIB) is a non-profit organization of life insurance companies which operates as an information exchange for its members. We may make reports to the MIB regarding factors affecting your insurability. Underwriting decisions, however, are not reported to the MIB. If you apply to another Bureau member company for life or health insurance or submit a claim for benefits, the MlB will, upon request, provide that company with information in its file. Upon your written request, the MIB will arrange for disclosure to you of any information it has in your file. If you feel the information in the MIBs file is incorrect, you may contact the MIB and seek a correction in accordance with procedures outlined in the Federal Fair Credit Reporting Act. The address of the MIBs office is: MIB, Inc.; P.O. Box 105, Essex Station; Boston, MA 02112. MIBs telephone number: (617) 426-3660 If you would like to know more about how we collect, evaluate and control information about you as one of our applicants for insurance, our sales representatives will be happy to assist you or you may contact us at our office: ANY OTHER Western Reserve Life Assurance Co. of Ohio QUESTIONS? P.O. Box 5068 Clearwater, Florida 33758-5068 U000289 727-299-1800 11 NOTICE TO CONSUMER A SUMMARY OF YOUR RIGHTS UNDER THE FAIR CREDIT REPORTING ACT: The Fair Credit Reporting Act (FCRA) is designed to promote accuracy, fairness, and privacy of information in the files of every consumer reporting agency. Most consumer reporting agencies are credit bureaus that gather and sell information about yousuch as where you work and live, if you pay your bills on time, and whether youve been sued, arrested, or filed for bankruptcyto creditors, employers, and other businesses. The FCRA gives you specific rights in dealing with consumer reporting agencies, and requires them to provide you with a summary of these rights as listed below. You can find the complete text of the FCRA, 15 U.S.C. 1681 et. seq., at the Federal Trade Commissions web site (http://www.ftc.gov). You may have additional rights under state law. You may contact a state or local consumer protection agency or a state attorney general to learn those rights. o You must be told if information in your file has been used against you. Anyone who uses information from consumer reporting agencies to take action against yousuch as denying an application for credit, insurance, or employmentmust give you the name, address, and phone number of the consumer reporting agency that provided the report. o You can find out what is in your file. A consumer reporting agency must give you all the information in your file, and a list of everyone who has requested it recently. However, you are not entitled to a risk score or credit score that is based on information in your file. There is no charge for the report if your application was denied because of information supplied by the consumer reporting agency, and if you request the report within 60 days of receiving the denial notice. You are also entitled to one free report a year if you certify that (1) you are unemployed and plan to seek employment within 60 days, (2) you are on welfare, or (3) your report is inaccurate due to fraud. Otherwise a consumer reporting agency may charge you a fee up to $8.00 for a copy of your file. o You can dispute inaccurate information with the credit reporting agency. If you tell a credit reporting agency that your file contains inaccurate information, the credit reporting agency must investigate the items (usually within 30 days) by presenting to its information source all relevant evidence you submit, unless your dispute is frivolous. The source must review your evidence and report its findings to the credit reporting agency. (The source must advise national credit reporting agenciesto which it provides dataof any error.) The credit reporting agency must give you a written report of the investigation and a copy of your report if the investigation results in any change. If the credit reporting agencys investigation does not resolve the dispute, you may add a brief statement to your file. The credit reporting agency must normally include a summary of your statement in future reports. If an item is deleted or a disputed statement is filed, you may ask that anyone who has recently received your report be notified of the change. o Inaccurate information must be corrected or deleted. A consumer reporting agency must remove or correct inaccurate information from its files, usually within 30 days after you dispute it. However, consumer reporting agencies are not required to remove data from your file that is accurate unless it is outdated or cannot be verified. If our dispute results in any change to your report, the CRA cannot reinsert into your file a disputed item unless the information source verifies its accuracy and completeness. In addition, the CRA must give you a written notice telling you it has reinserted the item. The notice must include the name, address, and phone number of the information source. o You can dispute inaccurate items with the source of the information. If you tell anyonesuch as a creditor who reports to a consumer reporting agency that you dispute the item, they may not then report the information to a consumer reporting agency without including a notice of your dispute. In addition, once youve been notified the source of the error in writing, they may not continue to report it if it is in fact an error. If you have questions or believe your file contains errors, call the toll-free number of the consumer reporting agency. o Outdated information may not be reported. In most cases, consumer reporting agencies may not report negative information that is more than seven years old; ten for bankruptcies. o Access to your file is limited. Consumer reporting agencies may provide information about you only to those who have a need recognized by the FCRAusually to consider an application you have submitted to a creditor, insurer, employer, landlord, or other business. o Your consent is required for reports that are provided to employers or that contain medical information. Consumer reporting agencies may not report to your employer, or prospective employer, about you without your written consent. Consumer reporting agencies may not divulge medical information about you without your permission. o You can stop a consumer reporting agency from including you on lists for unsolicited credit and insurance offers. Creditors and insurers may use file information as the basis for sending you unsolicited offers of credit or insurance. Such offers must include a toll-free number for you to call and tell the consumer reporting agency if you want your name and address excluded from future lists or offers. If you notify the consumer reporting agency through the toll-free number, it must keep you off the lists for two years. If you request and complete the consumer reporting agency form provided for this purpose, you can have your name and address removed indefinitely. o You may have additional rights under state law. You may wish to contact a state or local consumer protection agency or a state attorney general to learn those rights. U000289 12 NOTICE TO CONSUMER The FCRA gives several different federal agencies authority to enforce the FCRA. The agencies listed below can assist you with questions and concerns concerning the following types of businesses: FOR QUESTIONS OR CONCERNS REGARDING THE FOLLOWING, PLEASE CONTACT: CRAs, creditors and others not listed below, contact the Federal Trade Commission Bureau of Consumer Protection - FCRA Washington, DC 20580. 202-326-3761. National Banks, federal branches/agencies of foreign banks (word "National" or initials "N.A." appear in or after bank's name), contact the Office of the Comptroller of the Current Compliance Management, Mail Stop 6-6 Washington, DC 20219. 800-613-6743. Federal Reserve System member banks (except national banks, and federal branches/agencies of foreign banks), contact the Federal Reserve Board Division of Consumer & Community Affairs Washington, DC 20551. 202-452-3693. Savings associations and federally chartered savings banks (word "Federal" or initials "F.S.B." appear in federal institution's name), contact the Office of Thrift Supervision Consumer Programs Washington, DC 20552. 800-842-6929. Federal credit unions (words "Federal Credit Union" appear in institution's name), contact the National Credit Union Administration, 1775 Duke Street, Alexandria, VA 22314. 703-518-6360. Banks that are state-chartered, or are not Federal Reserve System members, contact the Federal Deposit Insurance Corporation Division of Compliance & Consumer Affairs, Washington, DC 20429 . 800-934-FDIC. Air, surface, or rail common carriers regulated by former Civil Aeronautics Board or Interstate Commerce Commission, contact the Department of Transportation Office of Financial Management, Washington DC 20590. 202-366-1306. Activities subject to the Packers and Stockyards Act 1921, contact the Department of Agriculture, Office of Deputy Administrator-GIPSA, Washington, DC 20250. 202-720-7051. U000289 13
ON THE LIFE OF________________________________ Supplement to Application Number This supplement amends the above captioned application _______________________________ for life insurance and becomes part of it as follows. ADDITION OF OTHER INSURED RIDERS Dated ________________________ __________________________________________________________________________________________________________________________ SECTION 1. PROPOSED OTHER INSURED RIDER __________________________________________________________________________________________________________________________ 1. Last Name _____________________________________________ First Name ___________________________ M.I.________________ 2. Address Apt# City __________________________________________________________________________________________________________________________ State Zip Code 3. Years at Address 4. Home Phone 5. Driver License Number State __________________________________________________________________________________________________________________________ 6. Sex 7. Date of Birth 8. Insurable Age 9. Place of Birth - State/Country 10. Social Security Number [ ] Male [ ] Female __________________________________________________________________________________________________________________________ 11. Height 12. Weight 13. Marital Status 14. Relationship to Proposed Insured 15. Employer Years __________________________________________________________________________________________________________________________ 16. Occupation & Duties 18. Business Phone Number ______________________________________________________________________________________________ 17. Employers Address __________________________________________________________________________________________________________________________ 19. Have you used tobacco or any other product containing NICOTINE in the last 12 months? [ ] Yes [ ] No 20. Rate Class Quoted: [ ] Ult Select [ ] Select [ ] Ult Standard [ ] Standard [ ] Juvenile __________________________________________________________________________________________________________________________ SECTION 2. PROPOSED OTHER INSURED RIDER __________________________________________________________________________________________________________________________ 1. Last Name _____________________________________________ First Name ___________________________ M.I.________________ 2. Address Apt# City __________________________________________________________________________________________________________________________ State Zip Code 3. Years at Address 4. Home Phone 5. Driver License Number State __________________________________________________________________________________________________________________________ 6. Sex 7. Date of Birth 8. Insurable Age 9. Place of Birth - State/Country 10. Social Security Number [ ] Male [ ] Female __________________________________________________________________________________________________________________________ 11. Height 12. Weight 13. Marital Status 14. Relationship to Proposed Insured 15. Employer Years __________________________________________________________________________________________________________________________ 16. Occupation & Duties 18. Business Phone Number ______________________________________________________________________________________________ 17. Employers Address __________________________________________________________________________________________________________________________ 19. Have you used tobacco or any other product containing NICOTINE in the last 12 months? [ ] Yes [ ] No 20. Rate Class Quoted: [ ] Ult Select [ ] Select [ ] Ult Standard [ ] Standard [ ] Juvenile __________________________________________________________________________________________________________________________ SECTION 3. PROPOSED OTHER INSURED RIDER __________________________________________________________________________________________________________________________ 1. Last Name _____________________________________________ First Name ___________________________ M.I.________________ 2. Address Apt# City __________________________________________________________________________________________________________________________ State Zip Code 3. Years at Address 4. Home Phone 5. Driver License Number State __________________________________________________________________________________________________________________________ 6. Sex 7. Date of Birth 8. Insurable Age 9. Place of Birth - State/Country 10. Social Security Number [ ] Male [ ] Female __________________________________________________________________________________________________________________________ 11. Height 12. Weight 13. Marital Status 14. Relationship to Proposed Insured 15. Employer Years __________________________________________________________________________________________________________________________ 16. Occupation & Duties 18. Business Phone Number ______________________________________________________________________________________________ 17. Employers Address __________________________________________________________________________________________________________________________ 19. Have you used tobacco or any other product containing NICOTINE in the last 12 months? [ ] Yes [ ] No 20. Rate Class Quoted: [ ] Ult Select [ ] Select [ ] Ult Standard [ ] Standard [ ] Juvenile __________________________________________________________________________________________________________________________ U000289-Supp
1 SECTION 4. PROPOSED OTHER INSURED RIDER ________________________________________________________________________________ 1. Last Name First Name M.I. ________________________________________________________________________________ 2. Address Apt# City ________________________________________________________________________________ State Zip Code 3. Years 4. Home 5. Driver State at Phone License Address ( ) Number ________________________________________________________________________________ 6. Sex 7. Date 8. Insurable 9. Place 10. Social Security of Age of Birth Number Birth - State/ Country ________________________________________________________________________________ 11. Height 12. Weight 13. Marital 14. Relationship 15. Employer Years Status to Proposed Insured ________________________________________________________________________________ 16. Occupation & Duties 18. Business Phone Number _____________________________________________________ ( ) 17. Employer's Address ________________________________________________________________________________ 19. Have you used tobacco or any other product containing nicotine in the last 12 months? [ ] Yes [ ] No 20. Rate Class Quoted: [ ] Ult Select [ ] Select [ ] Ult Standard [ ] Standard [ ] Juvenile ________________________________________________________________________________ SECTION 5. CONTINUATION OF CHILDREN COVERED UNDER THE CHILDREN'S INSURANCE RIDER ________________________________________________________________________________ COVERAGE AMOUNT ________________________________________________________________________________ Name Relationship Date of Birth Height Weight ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ Are all children listed? [ ] Yes [ ] No Are children living with proposed primary insured? [ ] Yes [ ] No If not, explain why: ___________________________________________________________ ________________________________________________________________________________ SECTION 6. CONTINUATION OF OTHER INSURANCE ________________________________________________________________________________ Proposed Amount Insured of Year Name Company insurance issued Replacement? ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ SECTION 7. CONTINUATION OF MEDICAL EXPLANATIONS ________________________________________________________________________________ Date Name, Address and Proposed Diagnosis, Phone # of Insured's Treatment, Attending Question # Name Results, and Duration Doctor and Hospital ________________________________________________________________________________ SECTION 8. DECLARATIONS ________________________________________________________________________________ I (We) represent that all statements and answers made in this supplement are full, complete and true to the best of my (our) knowledge and belief. It is agreed that this statement shall be made part of the application, and is subject to all terms and conditions contained in the application. sec. 1 _____________________________________________________________ Signature of proposed other insured (Child over 15 must sign) sec. 2 _____________________________________________________________ Signature of proposed other insured (Child over 15 must sign) sec. 3 _____________________________________________________________ Signature of proposed other insured (Child over 15 must sign) sec. 4 _____________________________________________________________ Signature of proposed other insured (Child over 15 must sign) ______________________________________ _________________________________________ Witness (Registered Representative) Name of Broker/Dealer ______________________________________ _________________________________________ Witness (Registered Representative) Name of Broker/Dealer ______________________________________ Signed at (City/State) ______________________________________ Signature of Applicant/Owner, if other than the proposed insured U000289-Supp 2 -----END PRIVACY-ENHANCED MESSAGE-----